Axial - Regeneron
Surveying great inventors and businesses
Regeneron is one of the world’s greatest drug developers. Pioneering the use of human genetics and more efficiently bringing drugs to patients than peers, the company is a great example of how to build a unique culture and translate biological discoveries and inventions. As a long-time personal shareholder, Regeneron has a strong owner mentality where the founders are significant owners and are incentivized to build a large business, unlike a lot of public biotechnology companies (Gilead had it for awhile), and is often a contrarian in the field.
This case study is less focused on Regeneron’s pipeline and competition for its approved products, but more on its history, culture, and process. The business is an excellent example for other life science companies to follow. The two main takeaways from Regeneron for other life science companies:
The value of an owner culture - not that many companies in life sciences really try to create strong cultures or design the right incentives. The few enduring ones have done so.
Using new technologies to improve the odds of drug development. For Regeneron, they took a contrarian position on the value of human genetics in drug development early on and are doing something similar today within immuno-oncology.
To set the stage, a simple timeline is valuable:
1988 - Regeneron founded
1990 - Publication in Science around the development of neurotrophic factors
1995 - Roy Vagelos (a legend) from Merck becomes chairman
1996 - Began development of Trap technology
1997 - Phase 3 trial for neurotrophic factor does not meet primary endpoint
2000 - Initiation of Arcalyst in the clinic based on the Trap technology
2003-2007 - Collaboration with Aventis then Sanofi to develop fully human antibodies
2008 - FDA approved Regeneron’s first drug, Arcalyst for rare autoinflammatory disorders
2011 - Approval of Eylea for wet age-related macular degeneration (AMD)
2015 - Approval of Praluent for the treatment of high cholesterol
2019 - By this time, has brought seven new medicines to patients:
Coming out of New York with all of its toughness and grit, Leonard Schleifer founded Regeneron in 1988. Seeing Genentech transforming drug development with molecular biology, Leonard saw an opportunity to use the same toolkit for neurological indications. With a strong background in neurology mainly as a doctor, he set off to generate neurotrophic factors to regenerate neurons to go after diseases like ALS. With pushing and pulling from academia, Leonard found an investor in George Sing from Merrill Lynch who still sits on Regeneron’s board and recruited George Yancopoulos as a co-founder to the company. The latter was a transformational decision for the company.
The most important position in a life science business after CEO is the CSO, CTO, and/or head of research. Leonard found a special person in George who could translate discoveries into useful tools and scale up research while still retaining the ability to adapt. George was running a very successful lab at Columbia working on problems in immunology particularly humanized mice and was initially skeptical of joining Regeneron. After a lot of selling and with Leonard and George both growing up in New York, George had enough rapport with Leonard to leave his academic position to join the company. However, at the time, joining a high-risk biotech startup was not a traditional route - the members of George’s lab decided to not join. Hiring was slow for the duo but they finally found a theoretical physicist interested in biology to be their first employee.
Two years later in 1990, the company published an important paper in Science on cloning a neurotrophic factor. Despite the scientific traction, their programs in ALS and obesity did not work out. As the company began to realize that they were on the wrong path, Leonard recruited one of his heroes, Roy Vagelos, the CEO of Merck at the time, to become the chairman of Regeneron. Thereafter, the company centered around indications where the underlying biology was well characterized. Along the way toward trying to treat ALS with growth factors, Regeneron’s team had inadvertently invented a tool to catch growth factors and effectively block their activity. So it became obvious to the team to use this trap technology toward more tractable problems. This realization that their path with neurotrophic factors wasn’t going to work anytime soon combined with an open mindedness to point their engine and tools to other problems, was the major turning point for Regeneron. Without strong founders and a culture around ownership, the company would’ve died. Most of the time in biotech, the team closes up shop or just doubles down on failed experiments. In times of struggle, bringing on the board the right partner or advisor can make or break a great business. The trap technology generated most of Regeneron’s top medicines.
In combination with this tool, the company wasn’t done just yet. Most life science companies invent one tool or make one discovery and try to stick with it as long as possible. The enduring companies invent something new. Regeneron had a unique ability to trap growth factors but was still limited by the bottleneck of converting molecules useful in mice to ones useful in humans. Led by George, Regeneron created a set of humanized mice, parts of the mouse immune system are modified to mimic the human immune system, that would generate leads that could be more easily put into humans. In 2003, Regeneron used these two technologies to begin collaboration with Aventis to create a trap for VEGF to treat wet AMD that led to Eylea. The collaboration led to a decade long partnership between Regeneron and Sanofi (Aventis merged with them) to develop several new medicines.
No matter how awesome your technology is, Regeneron learned the lesson the hard way to focus on disease with well-understood biology. With its trap technology and humanized mice, Regeneron brought it all together with human genetics. The company could build on top of genomics work done by others - the sequence of the first human genome finally done in 2001. For example, in 2003, mutations in the gene PCSK9 in French patients were discovered and characterized to lead to very high cholesterol levels. This subsequently led to the discovery that mutations that reduced PCSK9 activity led to significant reductions in cholesterol levels and heart disease. With the combination of this discovery in human genetics with Regeneron’s toolkit, led to the approval of Praluent, a PCSK9 inhibitor that is likely to become a blockbuster drug. What’s exciting is what else is in the pipeline - with a shift toward antibodies and the sequences of hundreds of thousands of patients through its prestigious Genetics Center, Regeneron is positioned to use the power of large-scale forward genetic screens in humans to develop many more medicines. The future for them is very exciting.
Long-term, Regeneron has built up an incredible culture. All defined by the founders with a focus on scientific integrity. Despite the hard times and many doubters, the company figured out a way to translate their work into valuable medicines. Merck went through a similar arc and came out of a massive struggle with Keytruda; similarly, they have just as strong of a culture. Now with Leonard dealing with Wall Street and George handling the science, the company is constantly bringing new technologies into its fold. What’s amazing is that the owner culture and openness to new tools has led to an incredibly effective business - Regeneron has needed about $800M per approved drug while its peers often need billions of dollars to do the same. What Hilleman or Sternbach would teach you, letting data guide decision making instead of financing does most of the work. It takes emotional control rather than genius most of the time to figure out the best path forward in drug development and business in general. Regeneron is persisting with that strategy. With whatever short-term struggles that will surely come Regeneron’s way whether it’s competition with Praluent or Eylea going off-patent, a culture based on scientific integrity will keep the company growing and helping patients. For example, even amongst the hype of CAR-T and cell therapies, Regeneron has taken a contrarian but scientifically sound position to focus on bispecifics in immuno-oncology (image below). Many others like Gilead and Celgene fell into the trend and met the various difficulties of cell therapies head-on that have yet to be solved. This short case study shows the power of great founders guided by science can create an enduring business. Regeneron will do well but new businesses emerging that internalize these lessons have the chance to be much larger.