Regen Medicine Drives Big Uptick In 2015 Start-Up Dealmaking

Biotech start-ups cut deals at a rapid pace in 2015, signing almost twice the number of alliances done in 2014. Regenerative medicine was prominent in key partnerships.

Start-up biotechs engaged in a dealmaking frenzy in 2015, signing almost twice the number of alliances penned in 2014. Regenerative medicine technologies were the key drivers behind some of the most lucrative deals in the industry. Oncology and CNS partnerships also doubled from last year.

The overall volume of start-up deals continues to increase year over year (see Exhibit 1), but 2015 showed a big uptick at 127 transactions, nearly a 50% increase from 87 in 2014. This year's group of start-ups (defined as those founded in the last four years) also found deep pockets in their big pharma/biotech partners, which represented more than two-thirds of the deals signed (the remainder of the agreements were either with smaller biotechs or tech transfer entities).

Notably though, big companies weren't always on the receiving end – several top pharmacos and biotechs out-licensed assets to start-ups. Amgen Inc., for instance, partnered Phase II cancer and GI candidates with NantPharma LLC[See Deal], Celimmune LLC[See Deal], and NantCell LLC[See Deal]. Eli Lilly & Co. also did a trio of out-licensing deals, with Cerecor Inc. (major depressive disorder and substance abuse [See Deal]), Ignyta Inc. (solid tumors [See Deal]), and Denovo Biopharma LLC (schizophrenia [See Deal]). In most of the agreements, Amgen and Lilly have off-loaded compounds completely, however in both the Celimmune and Cerecor alliances, the big pharmas have the right to take or license back some of the IP. These types of mini external R&D experiments have also been incorporated, in a larger way, in some of the build-to-buy models that started taking off in recent years. (See (Also see "“Build-To-Buy” Startup Model Alive And Kicking, Invested Execs Say" - Pink Sheet, 12 Mar, 2015.).)

Exhibit 1

Start-Ups Increase Dealmaking By Nearly 50% In 2015

Source: Strategic Transactions

Gene editing and gene therapies dominated the highest-valued alliances in 2015, led by CRISPR Therapeutics and Vertex Pharmaceuticals Inc.'s $2.6 billion four-year collaboration to use the CRISPR-Cas9 gene editing technique to tackle genetic defects causing disorders such as cystic fibrosis (a prime market for Vertex) and sickle cell disease [See Deal]. Vertex, which holds exclusive worldwide options on candidates, paid $105 million up front, including a $30 million equity stake in CRISPR. One of several start-ups in the gene editing area that has been funded well to date (see (Also see "Gene Editing: Rewriting The Code" - Scrip, 18 Mar, 2015.)), CRISPR also in 2015 added $35 million – from SR One and Celgene Corp. – to its Series A round (bringing the total to $60 million; [See Deal]), completed a $29 million Series B financing [See Deal], and got another equity investment: Bayer AG paid $35 million for a minority stake as part of their 50/50 gene editing joint venture [See Deal].

Both Sanofi's Genzyme Corp. and Bristol-Myers Squibb Co. were busy on the gene therapy side, where recent advances including development of safer vectors and strong proof-of-concept data have helped to de-risk start-ups pursuing this area. (See (Also see "Gene Therapy: Cures Within Reach" - Scrip, 13 Jul, 2015.).) Genzyme and Voyager Therapeutics Inc. will take advantage of each other's adeno-associated virus gene therapy capabilities to work on treatments for neurological diseases [See Deal]. Two-year-old Voyager, which also completed a $75 million IPO in 2015 [See Deal], got $100 million up front from Genzyme, and the potential for $745 million in development and sales milestones, in exchange for giving Genzyme options on therapies, plus ex-US rights on candidates for Parkinson's and Friedreich’s ataxia. Meanwhile, BMS will have rights to uniQure NV's gene therapy technology for up to 10 cardiovascular targets, including a preclinical candidate for congestive heart failure [See Deal]. The deal is worth $573 million and included $50 million up front plus a $38 million investment in uniQure. A 2012 start-up (founded around the assets of now-liquidated Amsterdam Molecular Therapeutics), uniQure is the only company to date to have a gene therapy on the market, Glybera (alipogene tiparvovec).

In 2015, 20 start-up deals (nearly half of which had a disclosed value; see Exhibit 2) centered on anticancer immunotherapy. This group happened to also feature the second-largest up-front payment on an alliance in 2015, among all start-up and non-start-up deals. Celgene spent $1 billion up front in a 10-year deal with Juno Therapeutics Inc. to produce T-cell receptor (TCR) and chimeric antigen receptor T-cell (CART) therapies for cancer and autoimmune diseases [See Deal]. The majority of the up-front fee is Celgene's purchase of $850 million worth of Juno's stock. Juno, which was founded in 2013, completed one of the largest biotech IPOs in 2014, netting $283 million [See Deal]. And it ended up having a busy 2015; besides the Celgene deal, it also teamed up with Editas Medicine Inc.[See Deal] and Fate Therapeutics Inc.[See Deal] in CART, and bought both X-BODY [See Deal] and Stage Cell Therapeutics (now Juno Therapeutics GMBH) [See Deal]. In addition, Juno and St. Jude Children's Research Hospital settled a long-standing dispute with the University of Pennsylvania and Novartis AG over CART IP, dismissing all claims in legal proceedings [See Deal]. Juno now gets milestones and royalties from Novartis in exchange for nonexclusive rights to patents.

Exhibit 2

Big Push Into Immunotherapy: Start-Up Deals With Disclosed Values In 2015

Date	Licensee	Licenser	Subject Of Deal	Deal Value* ($)
June	Celgene	Juno Therapeutics	Options on TCR- and CART-based therapeutics, including CD19 and CD22 targets	1.1Bn
October	Kite Pharma	Alpine Immune Sciences	Transmembrane immunomodulatory protein technology and two associated cancer immunotherapy programs to be converted into TCR and CART therapies	535m
December	Roche	SQZ Biotechnologies	CellSqueeze technology to modify B-cells and trigger an immune-mounted cascade to treat several types of cancer	500m
May	Juno Therapeutics	Editas Medicine	Three research programs developed using Editas’ disruptive genome editing technologies and Juno’s CART and TCR platforms	255m
March	TG Therapeutics	Checkpoint Therapeutics	Antibodies targeting PD-L1 and GITR	165m
March	NantCell	Sorrento Therapeutics	Antibodies targeting PD-1 and PD-L1, and Chimeric Antigen Receptor Tumor attacking Neukoplasts (CAR-TNK) candidates	110m
May	Juno Therapeutics	Fate Therapeutics	Hematopoietic cell programming platform	63m
March	Mustang Therapeutics	City of Hope	CART IP	40m
June	Seattle Genetics	Unum Therapeutics	Antibody-coupled T-cell receptor technology	25m
April	Novartis/UPenn	Juno Therapeutics/St. Jude Children's Research Hospital	Legal settlement related to CART IP	12m

*Includes up-front payment plus pre- and post-commercialization milestones.

Strategic Transactions

Among the nonprofit groups that partnered with start-ups, City of Hope, a top cancer treatment hospital in California, was the most active. It out-licensed IP to five biotechs, including two newly created divisions of Fortress Biotech Inc. (formerly Coronado Biosciences). Mustang Therapeutics Inc. paid $40 million in up front and milestones for CART technology [See Deal], while DiaVax Biosciences licensed rights to cytomegalovirus immunotherapies [See Deal]. During 2015, Fortress also formed another division, Checkpoint Therapeutics Inc., which acquired preclinical immuno-oncology antibodies from the Dana-Farber Cancer Institute[See Deal] (Checkpoint simultaneously out-licensed the antibodies to TG Therapeutics Inc.[See Deal]). Fortress' business model involves forming such subsidiaries to bring in novel biopharma products.

Unsurprisingly, oncology remained in the top spot as the focus of start-up partnerships, and actually more than doubled in volume to 47 deals in 2015, up from 23 in 2014. (See Exhibit 3.) Start-ups collaborating in the CNS field also increased greatly from 2014 (14 vs. 25) Included in this group was Ovid Therapeutics Inc., which is led by former Teva Pharmaceutical president and CEO Jeremy Levin, PhD. Ovid started operations this year by in-licensing the former H. Lundbeck AS compound gaboxadol (OV101), which the biotech is developing in two orphan neurological indications, Angelman and Fragile X syndromes [See Deal]. Lundbeck had been testing the GABA-A agonist in insomnia before it failed in Phase III because of poor clinical results. Ovid also managed to secure over $80 million in venture financing, most of that from its $75 million Series B round led by Fidelity Management and including several corporate and crossover investors [See Deal].

Exhibit 3

Oncology And CNS Alliances Double In 2015

Start-Up Deals By Therapeutic Area

Note: An alliance may be counted in more than one therapeutic category, for multi-product deals or products with multiple indications. There were nine alliances for which a therapeutic area wasn’t specified, so those deals aren’t included in this chart.

Strategic Transactions