Biotechs Benefit From Pharma Deals And Dollars
This article was originally published in Scrip
Big pharma companies may be under pressure to buy like-sized peers with late-stage clinical programs and marketed products, but several collaborations with and investments in biotechnology firms announced during the first few days of 2016 show that the world's largest drug makers also are focused on long-term prospects for their research and development pipelines.
Quartet Medicine, with just $17m in previous venture capital investment, entered into a partnership with Merck & Co. Inc. to develop novel medicines for pain and inflammation that gives the bigger company an option to buy the biotech firm in a deal worth up to $595m and maybe more. In other transactions, Rodin Therapeutics raised $17.3m in a Biogen-backed financing and inked an R&D collaboration with the big biotech that's worth up to $485m.
Meanwhile Millendo Therapeutics raised $62m in a Series B round supported by Roche's venture fund and other investors, and the endocrine disorder-focused biotech firm licensed a polycystic ovary syndrome (PCOS) drug candidate from AstraZeneca PLC. (See separate stories on the Millendo and Quartet transactions here and here.)
Also, the new Pharmaceutical Product Development LLC (PPD) spinout X-Chem signed drug discovery deals with Sanofi and the University of Texas MD Anderson Cancer Center; Accelerator Corp.'s first New York startup Petra Pharma Corp. raised $48m in Series A cash from Accelerator's big pharma and other investors; and Cortexyme Inc. in South San Francisco raised $15m in a Series A round led by Pfizer Inc.
The pending $160bn merger of Pfizer and Allergan PLC, which will create the biggest pharmaceutical and largest health care company in the world, raised the bar for mergers and acquisitions among big pharma firms and major biotech players.
Large biotech companies, such as Celgene Corp. and Biogen, have built up a lot of firepower from blockbuster biologic sales to justify significant acquisitions on top of active licensing deals and small purchases. But neither blockbuster M&A deals nor small transactions alone will fill the gaps in pharma and biotech R&D pipelines, so large drug makers may dabble in both mega-mergers and mini-deals throughout 2016.
Rodin Rolling In New Money
Rodin, a biotech – like Quartet – that was founded by Atlas Ventures, has $17.3m in preferred stock financing commitments from the VC firm and Biogen to fund development of novel therapeutics for neurological disorders. In a separate multi-year R&D collaboration between Cambridge, Massachusetts-based Rodin and Biogen, the companies will focus on neuronal epigenetics.
Atlas and Johnson & Johnson Development Corp. funded Rodin's $12.9m Series A round in May 2014 after J&J announced an early-stage investment in the startup, which was spun out of the German firm Proteros Biostructures, back in 2013. Rodin hired repeat entrepreneur Adam Rosenberg as the company's president and CEO in October.
Rodin is developing epigenetic modulators with a lead program that's focused on HDAC2 inhibition, which will be advanced into the clinic via the Biogen partnership. Biogen has an option to acquire Rodin under the companies' collaboration agreement for up to $485m in upfront and milestone fees.
Pharmas Back Accelerator Startup Petra
Accelerator raised $51.1m from Alexandria Venture Investments, ARCH Venture Partners, WRF Capital, Eli Lilly & Co., Harris & Harris Group, The Partnership Fund for New York City, Pfizer Venture Investments and Johnson & Johnson Development Corp. in Aug. 2014 to fund startups that will be headquartered in the company's Manhattan incubator, and in Oct. 2015 AbbVie, WuXi PharmaTech and Watson Fund contributed another $11.7m for Accelerator's incubators in Seattle, Washington and New York.
Petra Pharma is the first startup to emerge from the Manhattan location with $48m in Series A funding provided by all of the investors in the syndicate, which also include ARCH Venture Partners and Innovate NY Fund. Petra will work with Weill Cornell Medicine to develop small molecule inhibitors for the treatment of cancer and metabolic diseases in collaboration with researchers who discovered PI3K as a therapeutic target and who pioneered development of therapies that target other kinases.
X-Chem Spins Out, Adds Partners
X-Chem in Waltham, Massachusetts offered few financial details about its formal separation from PPD, but the spinout company also will be a privately-held firm. X-Chem mines its DNA-Encoded X-Chem (DEX) library of 100bn compounds to discover small molecules against high-value therapeutic targets, and attracted an investment from PPD in 2010 and then was acquired by the firm in 2014.
X-Chem has several drug discovery partnerships, which involve more than 70 therapeutic programs and 16 licensed compounds, including deals with AstraZeneca, Bayer, Johnson & Johnson's Janssen Biotech and Navitor Pharmaceuticals.
The company did not release any financial details under its new agreement with Sanofi, but X-Chem will do drug discovery on the French pharma's behalf for multiple targets in oncology, rare diseases, diabetes and other areas. However, X-Chem will receive research funding and retain an ownership stake in compounds discovered in partnership with MD Anderson to treat various cancers.
Cortexyme Targets Neurodegenerative Infections
Cortexyme's $15m Series A round was led by Pfizer with participation from Takeda Pharmaceutical Co. Ltd.'s venture capital arm and unnamed private investors, including prior backers, such as Dolby Family Ventures. The company is developing therapies, along with diagnostics, that may alter the course of Alzheimer's disease and other degenerative disorders by targeting a specific, undisclosed pathogen that's been associated with neurodegeneration.
Prior to the Series A round, Cortexyme raised $1.025m, including an award from Breakout Labs. The company is a tenant in J&J's biotech incubator in San Francisco.