Yelling Yellen and The Least Licensable Unit (LLU)

In grad school we laughed about the LPU (Least Publishable Unit), those 2 or 3 crappy papers that should have been one better paper.

Today lets introduce the Least Licensable Unit, the LLU. Amidst all the angst and anger directed at the Fed chair yesterday it occurred to me that excessive valuation has a trickle-down effect. When anything is worth too much, almost nothing is still worth a little. That almost-nothing is an LLU. When we look at the current state of asset acquisition in the immuno-oncology (IO) space we see this clearly. Very early stage assets are being land-grabbed by very large companies, and a certain sly sense of glee has crept up the brainstems of savvy biotech entrepreneurs who are rightly looking at looking at IO assets as the rarest of gemstones. Even the mere hint of sparkle in an otherwise dirt sample has prospectors racing to the wilds of Waltham and the coffee shops of Cambridge looking for LLUs.

Why is this? A few years ago (a very few) you would need to drag a program right up to the threshold of IND enablement in order to attract any attention at all. Your IP would have to be rock solid and be good for 30 years (with extensions, I know I know). Preclinical pharmacology? check. Repeat dose toxicology? check. Non-human primates? of course. A validated biomarker program? well underway!

What changed? Pretty simply, IO creates a paradigm shift in the way oncology (and many other diseases) are treated. Think rheumatoid arthritis, psoriasis and Crohn’s disease before anti-TNFs. Multiple sclerosis before beta-interferons. HCV before Vertex, Gilead and Abbvie. We are looking at a similar level of evolution in clinical practice across the whole of oncology – meaning massive disruption. With the stakes this high you have to get out, or go big. And so we see that big bets and lots of them are the order of the day. But now, a few years in, the hunt for quality is harder, and programs are taken early. The hunt for assets is so intense that the academic licensing groups at our top tier universities and medical centers are overwhelmed with inquiries. The beautiful thing here is that such leaps of faith (lets face it) are now less risky in part because technologies are rapidly differentiating. Are you in danger of stumbling into patents that block your CAR T designs? Bolt on a gene editing company and tinker so you can move into new ip. No room for your new PD-1 antibody? Blaze trail to a newly defined epitope and defend your little patch. With so many companies applying technology to assets, novel composition is easier to define. You might be able to fix an LLU, make it better, make it into a drug.

All such asset stampedes eventually run into a wall of diminishing returns as the front runners take off and the leftovers get trampled by too many competitors. That is starting to happen now in IO. Yes, it is. So what do we do now? I have a few ideas:

1) Sifting through LLUs take hard-core due diligence, so let us know if we can help

2) It is going to be harder to partner “me too” assets – programs need to differentiate or better yet track novel biology

3) In IO the T cell space is not played out yet, but we should be looking at NK cells and myeloid lineages for extra traction, and watch for the development of novel immune checkpoint pathways and better agonist antibodies (or both)

4) The CAR T space seems overwrought – I think this has to settle out over a few years – but despite this I also expect to see a big wave of new companies emerge from stealth in the next 0 – 18 months

5) Bispecific antibodies and ADCs will quietly advance to capture a dominant position in IO

6) Finally if you are looking for or have a beautiful asset, seek help in partnering – you’ll save time and wind up in a better partnership (sure, call me, this is what we do best)

cheers all, and stay tuned