The Biotech Pulse S1E2 - Navigating the M&A Landscape for Biotech Success

An edited transcript of the podcast follows below.

Nanna:
Welcome to the second episode of the Forbion podcast, the Biotech Pulse. My name is Nanna Lüneborg, and I am a General Partner at Forbion. At Forbion, I have a leading role in sourcing and evaluating new investment opportunities focusing on late stage biopharma investments. I am delighted to introduce today's guest, Francois Ravenelle, CEO of Inversago. Pharma.

Francois:
Hi, Nanna, thanks for having me. And thanks for the invitation. Really happy to be here.

Nanna:
So Inversago is a clinical stage biopharma company dedicated to developing therapies for patients suffering from metabolic and fibrotic disease. And Francois you are with me here today to discuss how biotechs can ensure that they're set up for future M&A success. And I cannot think of a better guest to discuss this topic with me because in August this year, Novo Nordisk agreed to acquire Inversago for more than $1 billion dollars. Inversago is developing a pipeline of small molecule drugs that block the CB1 receptor, and at the time of the acquisition, Inversago was enrolling a Ph2 study in diabetic kidney disease, or DKD, and had also produced Ph1b data in obesity.

Nanna:
Before we get into the discussion, let me start by saying congratulations again, to you Francois and the whole of the Inversago team. What a tremendous achievement.

Francois:
Thank you, Nana. It is really a testament of the hard work of the entire team, for sure. And you know, it is great to build this pipeline and seen this deal done.

Nanna:
Yeah, wonderful, I think this will be really an exciting outcome with potential to really have a lot of positive impact for the lives of patients with cardio metabolic disease.

Nanna:
Great. So Francois, perhaps you can start by telling us a bit more about the journey you have taken at Inversago, and maybe take a step back and tell us about why you chose to pursue development of CB one receptor blockers?

Francois:
No, absolutely. I think there is a little bit of a being naive and you know, 15 years into drug development, I feel I had the right experience to take something from the lab and bring it into the clinic. And I felt taking CB one blocker that was meant to not permeate the blood brain barrier was, a pretty straightforward story. I was a little naive, because that was a big step for pharma and even investors to get behind. So I think that is how I got to it. The experience doing it and thinking this made a lot of sense. And there was a high potential, but I was not aware of the dark cloud of the CB 1 blockers that was really there.

Nanna:
Maybe take a step back and just spend a couple of words on talking a little bit about Rimonabant, which was obviously the first CB I blocker that was developed and what were some of the both advantages and problems with that drug that led it to be withdrawn from the market.

Francois:
The CB I blockers are a great start initially in the early 2000s, with Sanofi leading a group of large pharma companies with Rimonabant. Rimonabant was the first approved CB I blocker it was specifically designed to target the brain receptors. It was very prolific at that time to provide glycemic control but also weight loss, and it was developed as a weight management drug. However, because it was built to target the brain receptors it also brought with it some psychiatric adverse events. It was worsening anxiety, increasing depression sometimes even producing severe depression in patients, and that really was not the right benefit risk ratio for a patient who was trying to lose weight. But there was a lot of clinical data, a lot of preclinical data that was produced through the years from 2000 to 2008. When eventually Rimonabant was pulled from the market by Sanofi because of those psychiatric events, so we were building on a lot of data on the target. And there were reasons to believe that the peripheral CB I receptors, the ones outside the brain, were really at play here. And that was where we were going with Inversago.

Nanna:
So I think in many ways, an exciting adventure, because on the one hand, you already had a lot of proof that this mechanism would be efficacious. But on the other hand, also some risks involved in terms of perhaps dispelling some of those dark clouds. So with that development background in mind, to what extent was looking for an agreement with pharma through M&A, was that part of the objective as you were starting Inversago?

Francois:
Well, initially, we were trying to raise funds to develop our asset in obesity, believe it or not, in the 2015 / 2017 period, we were really focusing on obesity. Because it was a clinically validated target, right, we had seen it work. However, investors, pharma, no one was really interested, I would say pharma might have been they were more like “if you ever get to the clinic, please call us.” But the investors were really more like there is no market in obesity. There is nothing to do here. So we had to refocus everything. A business plan around the rare disease, namely Prader-Willi syndrome was really where we landed to make our proof of concept, and really build on the safety of our new compounds. And that is how we really got started in 2018. But you know, the alignment was not just yet, we needed to show the pharma companies that clinically, this was safer than the previous generation.

Nanna:
It is astonishing to think in 2023, that only a few years ago, people have been did not really believe that obesity was an interesting indication. Today it is front page news. So Francois, you, and I obviously first met a few years ago, in the context of the latest round of investments by Forbion Growth into Inversago. But you already had a long history with Forbion at that point with our colleagues from Forbion Ventures IV already joining in 2020. I think you had long conversations with them even before that. I think it would be interesting to hear how you think VCs can help support, if at all, for biotechs as they are readying themselves for future M&A?

Francois:
Absolutely. The series B brought Forbion Ventures, and then we met for the clinical stage a proof of concept stage. Every step of the way, when VCs come in, I was looking for investors who had that experience, that understanding of what we were trying to do. You brought in people like Carlo Incerti, as a chairman for the company, who had the experience of large pharma, could see and read in that environment and really bring me that that view of what it is on the other side, and how we can build on that. The other thing is the networking, investors work together, you guys know of each other. There are some strengths and, and not weaknesses, but differences between different funds. So that the VCs are bringing that aspect to who could be helpful here in this story, because every story is different. So it is that, network and experience that I think later stage investors should and you have met in this story.

Nanna:
I think one of the exciting areas about this area of biology with CB I receptor signaling, and endocannabinoid signaling in general is that it really has potential applications across a number of different disease areas and indication areas. We started out this podcast by referencing both metabolic and fibrotic disease, you have also spoken about, Prader-Willi disease and the rare disease space. So how on earth as a small biotech, do you go about figuring out what is the right direction to go in, and which indication to select for your first major clinical trial?

Francois:
Again, picking up information from the people you speak to, including investors who are not ready to invest, but also some will not, pharma the same. Putting all the pieces together and finding the right indication or indications for a proof of concept, you had an idea, we had an idea that this drug could work and obesity, the risk benefit ratio was not just yet demonstrated. We had to find the right indications for a proof of concept that people would buy into. And so we consult with firms, there are some great consulting firms out there that can help you, but put just that together and kick ideas around. And then you have those discussions with your investors and future investors that you would like to see come in. It is sitting back at the office with a team and discussing those and coming together, and building confidence that, some of these indications are better suited for the task than others. So it is not easy. In the end, as we mentioned, we were developing in diabetic kidney disease, I was the most reluctant person probably around to go there, initially. But I was part of those discussions. And eventually I was convinced, you have to build the trust around your team, and also yourself and the data. And they eventually I even told some investors who asked, change indication, and then we will join and I was like, I cannot, this is the best indication at this time.

Nanna:
I think that is a good point. And you know, in some ways, you have to solicit the advice, but you also have to back the judgment of you and the team. Were you able to have access to other advisors around the company, potentially people who have been part of the original Rimonabant story or other areas of specialties?

Francois:
Absolutely. We were from the start with people who had worked on the previous generations, but also within our board of directors. I mentioned Carlo Incerti was chairman was at Sanofi Genzyme at that time, so he had seen everything from a close perspective. It is important to gather those people very close to you. We did that in a way to not see all the negative, but really see what was positive. How can we build on what was observed? And what has really happened back in those years? Because there is a lot of myth about what happened, and you need to not ignore them. You should not be like, this is just a myth, you should just build the story on it. Just to address it - front and center.

Nanna:
Yeah, but I think it is actually in some ways, it is a challenging area of pharmacology. I think even we had a lot of those discussions at the time Forbion Growth’s investment as well, because in some ways, it was such a prolific area of clinical research at around the time of Rimonabant and a lot of other large pharma companies had their own CB 1 programs as well, but they were all discontinued once the side effect profile became clear. So on the one hand, you had all this exciting clinical data, but on the other hand, you had this potentially challenging side effect profile. I think the concern in the back of mind of investors and probably also potential pharmas - how many patients do you have to study before you can dispel this myth? Or before you can show that your molecule is different? Was that a concern you encountered?

Francois:
Absolutely! Showing you want to prove that you do not have something is difficult right? Then there is no small molecule that is entirely restricted from the brain. So when we say peripherally acting, we mean that it is very low brain penetration. But what is low enough? How much is too much? All of these questions were extremely difficult to address in a quantitative way. So we had to think about, again, proof of concept and preclinical models known to be sensitive to that brain penetration and demonstrate their safety margin was the first step. And then eventually you get to the clinic, and that is where you really need to be.

Francois:
So you need to bring people along with you, and explain how you see it. Because we believed it, and I thought we believe it. It is not because we are trying to trick anyone. So you have to present it clearly.

Nanna:
So switching gears a little, I think one of the things that you did very well obviously at Inversago was actually having a close dialogue with potential pharma partners throughout the development path. Perhaps share with us a little bit, how you built those relationships and how that informs some of the choices you took for Inversago by having some of that feedback from potential future partners.

Francois:
It is a mix of a few things, right? I think with Novo and other a couple of other large pharma, it is being at the biotech showcase meetings, being at the JP Morgan healthcare conference surroundings, and asking for those meetings. Obviously my first meeting was not with the head of BD. Those folks who are there to track and find the next innovation that is going to be game changing in maybe five years. That is the first part, to be out there, be present, ask for those meetings. You do not know the person that is okay. He is going to be your champion or she is going to be your champion and build relationships there and ask to be able to present to a larger group. The years go by and you are invited to the JPM healthcare conference, not that the conference itself, but to the pharma and then you get to higher level people. Make that impression and build that relationship. So it is step by step and eventually, funds like Forbion can also introduce you to some of them and bankers become interested in the story and they are thinking long term relationship with you. They will make introductions to other companies you may not have connections there, so it is step by step. At least it was for me.

Nanna:
I think it sounds like the short version of the answers is hard work and persistence pays off.

Francois:
I guess so absolutely. You know it is no secret that Amgen ventures invested in the series C. And you know, that the champion there, Aaron Wallen, just to name him, used to work at Novo. And he was the one first person I met with Chuck Grey, I remember very well. Eventually the Aaron moved to Amgen, and so that created that bridge, right? So it is all these people who are out there and work in this area. There is no one that's too low on the ground, you have to meet with those and build relationships.

Nanna:
That is very true. It is a small world and you come across the same people in different jobs across the years.

Nanna:
And just going back a little bit to think about once you have successfully raised the money, and you have got some VC investors around the table with you, and discussions in the board about how do we best position this company? I would like to talk for a moment about the choice of indications because I think, when you and I were we're closing the Series C financing of Inversago, obviously, we were not primarily focused on obesity, but rather a different indication, and what was that? What were some of the reasons for that choice?

Francois:
No, it is true. Going back a little bit to Rimonabant, remember what the regulatory authorities like the FDA told Sanofi: this is not the right risk benefit ratio. So, if you are coming in with a weight management drug with a new target, and it is doubling the risk of severe depression, that is not going to work. So as a biotech, we wanted to position ourselves in an indication where we could show our proof of concept but demonstrate safety as well. Without going in front of us, too far ahead, doing large phase two trials was going to allow us to prove the safety. But let us say that there was some remaining liability, it was not doubling the risk of severe depression, but it might be something less, we do not believe there is. Let us say there is, as a biotech, we want to ensure this would not kill this class again, because this class has a lot of potential. Imagine keeping somebody off dialysis, if he has kidney problems, for example. There is a little risk of increasing depression, I think that risk benefit ratio makes sense. That is really how we worked through the different indications that were in front of us, and the target provides us with a lot of options. That was really nice because, again, a lot of clinical data, a lot of preclinical data presented in front of us, a lot produced by us, convinced us that we could go in diabetic kidney disease. In this this indication, we have people who are overweight and obese, diabetic, dyslipidemic, and at the same time, they have, failing kidney function. We thought this is a perfect indication for us to really cover a breadth of biomarkers and get out of a phase two with a strong indication of where to go next. Obesity has always been in the background, as you know, but not as a first indication for biotech.

Nanna:
Around the time that we were starting that phase two study in diabetic kidney disease, this was obviously at the time when GLP-1s were making a huge impression on our industry and on society, I think more broadly, really making an impression of suddenly putting obesity and weight loss medicines back into the limelight. And then I think there was at least a discussion within the board about, maybe we should also be looking at obesity. How do you think that that could play into sort of preparing the company or readying the company for potential acquisition?

Francois:
I think again obesity is in the background, right? That is where we think we should land eventually, if we can demonstrate that safety. So after phase I, which was very successful, and we had seen some pharmacodynamic around appetite in the phase I, so we decided, as a board to look at, obesity in the metabolic syndrome population. So people with large waist circumference, dyslipidemia, and glucose intolerance. And this phase IB was a very short four week trial. It was meant to assess a single dose of it INV2, our lead asset in this population versus placebo. The goal was to see the magnitude understand a little bit better the pharmacokinetic and then obese population, because sometimes that could affect that. But in the background, we really wanted to see what kind of profile we got. And so that study was a turning point, because when we saw the effect size, on weight, on lipids, on glycemic control, and, all those biomarkers, we were very impressed. I think pharma was equally impressed.

Nanna:
I agree. I think it is one of those great experiences when you see a data set, and you really do not have to do any kind of very complicated analysis. It is very obvious, just looking at the data, that something quite dramatic is happening with this drug. I guess to some extent, it was maybe a positive surprise, because actually, the effect size was significantly greater than with Rimonabant. And also before we have done that experiment, I guess no one knew to what extent the effects would be mediated by the central CB 1 receptors versus the peripheral CB one receptors. There are still a lot of different issues that express CB one receptors, even peripherally, that I think we still, are far from completely understanding the biology of what are the most important areas to actually drive this pharmacology.

Francois:
You are right, the magnitude of the peripheral action showed us that actually Rimonabant banned from Sanofi was providing about 6% weight loss over a full year versus placebo. And that is really the maximum tolerable dose because it was brain penetrating if you avoid that brain penetration, and you bring a little bit of a twist on biology which we shared the along the way, you can actually tap into the CB 1 blockers in the periphery much more profoundly. And so we were at about 4% - 3.8% in four weeks, instead of 6% in 52 weeks. So we are in a different zone. And we are happy to have initiated a new phase II in obesity, just to make sure that we capture that on the in the long term.

Nanna:
It has been an exciting and exciting journey. The opportunity to enter into this agreement into this acquisition with Novo Nordisk probably came a bit earlier than then had been planned. I think it is typical companies expect once you have positive phase II data in a larger study that it is a typical point where an asset can be acquired. How did you know that this was the right moment for Inversago and what advice would you give to other biotechs, as they are thinking about positioning themselves for the right time to seek a partnership?

Francois:
About a year early as you know. In my mind that phase IB was a nice proof of concept. So when you have that data, obviously you have to go around eventual partners and present that to them. And so I think it is important that you have a relationship with those potential strategic partners early on. And we did, we did have discussions every once or twice a year with Novo, but with all the other names that you are thinking about. And so when you get this data, you are able to say, look, that phase IB, here are the results, what do you think? And so you build that. It happens a little bit naturally, the strategic fit with Novo is a little bit above everything else. Because of the way obesity came up, patent lifetimes and the opportunity to be a leader in the new class, because we are not incretins. We are not like GLP I agonists, or GLP I, the other dual agonist, and so on. So that makes a big difference. And I thought that offer from Novo is a great opportunity. They saw it, they agree, then they are the right partner, right? They know the market, they can do the phase IIB, the phase three trials much faster than we can. So eventually, it just made sense to sit down and discuss.

Nanna:
I think it definitely seems to be a great partnership. And hopefully, I think this partnership will really accelerate the timeline to make this make this product available to patients. So I have often had people in our industry say that biotech companies are bought or not sold, I guess meaning that basically the only way to effectively prepare for M&A is to plan for the future as an independent company. Because it is hard to control these things. So do you think this was true for Inversago, and what steps did you did you take to do this?

Francois:
Absolutely, the Series C was pivotal. We came in January in San Francisco with a Series C close. A lot of money to support a couple of phase IIs that were going to bring us to a proof of concept. We were preparing the company for a NASDAQ listing IPO. The market wasn't really good, but when you look at cardiometabolic companies, it was okay. So all the gears were in place to get there to the public market, but also keeping in mind that you have phase II proof of concept coming up in 2024. So really shaping up the company to go far, to have a plan to do the phase IIBs and phase III, and even filing the NDA before partnering. But you know, again, keeping those relationships because eventually, when it makes sense, and you have the right person, the right group, you can move. So we were bought, we never were for sale. That's for sure.

Nanna:
Finally Francois, is there any sort of one particular piece of advice that you have received, or maybe that you wish you had received that you think you would want to share with other biotech leaders to start thinking about developing partnership strategies?

Francois:
As I said at the start, it is okay to be a little naive on what you are trying to do. But you should always listen to the feedback. We took two years to understand that feedback. You know, it does not pay to be stubborn. So when the investor community tells you something, I think it is just listening and it is not that they are right and you are wrong. It is more about shaping up your plans to satisfy some of the feel that they have, because investors like Forbion are underground, seeing everything about talking to those pharmas so they can give you great advice. Do not listen to all of them, but take some notes and adapt.

Nanna:
It is funny to think back on the on the Inversago journey in some ways because you sort of started out with obesity and then to take a little bit of a detour to think more about more rare diseases and more fibrotic indications, but actually I think the clearly the main the major driver of the strategic interest has clearly been back to where we started at that obesity. So thank you so much Francois, it has been really great talking to you as always, and I was really interested to hear your thoughts on how to decide on both clinical development strategy, financing strategy and how to keep your options open. And obviously you position yourself by fantastic outcome with this with this M&A. So I hope that this will give some valuable insights for some of the others that might be listening and thinking about M&A for a future path for their business. And congratulations again on the agreement with Novo and wish you all the best for the future.

Francois:
Thank you, Nanna. Thank you for the invitation and always fun to have those discussions.