GSK £61m buy-out rescues Cellzome platform from venture wasteland
This article was originally published in Scrip
The £61 million purchase of Cellzome gives GlaxoSmithKline a cutting-edge platform in proteomics. However, the real story behind the acquisition is one of a small company running out of money and venture investors running out of time to get any return on their investment.
The word from GSK is that the two companies enjoy "a continuing good relationship" and that the negotiations that led to the deal sprang from collegial "mutual conversation". It is also clear that GSK is buying Cellzome for its platform capability and not primarily for the early stage drug assets that have sprung from the platform. GSK told Scrip that some of the drug assets will be made available to third-parties once the pharma company has had a chance to rationalise its view on the Cellzome portfolio.
Cellzome, which is privately owned with laboratories in Cambridge, UK, and Heidelberg, Germany, will become part of GSK's R&D organisation almost immediately, with integration beginning on 21 May 2012, according to a GSK spokesperson. GSK is representing the new acquisition as part of a continuing "strategy" of "collaborating with external partners and seeking out the best science, wherever it may be", with Cellzome being the rather-delayed third in a sequence of acquisitions which began in 2006 with the purchase of antibody engineering company Domantis (scripintelligence.com, 15 December 2006) for £230 million and Praecis (scripintelligence.com, 3 January 2007) for $55 million.
Cellzome was founded in May 2000 and has raised around $70 million since its formation. But most of that money came in its early years. It raised a € 34 million second round of financing through a private placement led by Index Ventures, to add to a founding €8 million tranche. Then in March 2003 it added a further €30 million in a round led by INVESCO Private Capital, and including experiences existing investors such as Advent, Atlas Venture, Index Ventures, Schroder Ventures Life Sciences, and Sofinnova Partners.
Subsequent to that, however, Cellzome had been unable to raise any more venture capital, which meant that the money clock was ticking for the company.
The consequence was that when the current CEO Tim Edwards arrived at Cellzome in September 2004, the company had "no money and no projects," according to a close observer of the firm.
With the public capital markets desert-dry in Europe, Cellzome turned to corporate partnerships for its revenue stream.
One insider told Scrip that the acquisition by GSK was almost inevitable when Cellzome found itself outside the spiral of fund-raising. "It was difficult to see how the company could get more money," "[ Cellzome] always to make the best out it, since there was only one way out."
In the end GSK was the last partner standing. According to sources close to Cellzome, its deal with Novartis was renewed two times but "came to a natural end."
A separate deal with Johnson & Johnson is still continuing through the early R&D phase but it seems unlikely that any projects arising from that will be taken forward.
The unusual aspect of Cellzome's technological approach is that it uses proteomic mass spectrometry and other screening to look at the interactions between early-stage drug candidates and their targets in a cellular or tissue environment, rather than in isolated preparations.
GSK and Cellzome have two active early stage research collaborations using these discovery capabilities within the immune-inflammation therapy area. With the acquisition, the technologies could be leveraged across GSK’s whole portfolio.