Wednesday, April 23, 2008

GSK/Sirtris: Up, Up, and Away

How does an early-stage biotech company focused on a single set of targets, with a lone compound in early Phase II and everything else preclinical (including its most promising compounds), command a buyout price of $720 million? That’s the feat Sirtris Pharmaceuticals pulled off when GlaxoSmithKline offered the amount, in cash, yesterday for the company’s outstanding stock—$22.50 per share, or an 84% premium to Sirtris’s closing price. The deal could be a shot in the arm for a moribund biotech sector and is the latest demonstration of pharma's platform-philia.

Sirtris’s drug development centers on a seven-member family of proteins called sirtuins, which have long been thought to play a role in the aging process. It has focused in particular on Sirt1, mostly in type 2 diabetes and oncology. (Sirtris’s lead compound SRT501, a proprietary form of resveratrol, an activator of Sirt1 that is found in red wine, is in a Phase IIa study in combination with the first-line Type 2 diabetes drug metformin.) The other sirtuins branch out into several other diseases of aging, including neurodegeneration and muscle wasting. Sirt2, for example, has in recent years become a notable potential target for Parkinson’s disease.

There’s no doubt that in some circles, sirtuins are hot. Sirtris, which dominates the IP landscape and has by far the broadest pipeline in the area, had been in off-and-on collaboration discussions with GSK for years. It’d also been talking to a handful of other pharma companies with sirtuin programs, senior director of corporate development, Michelle Dipp, told IN VIVO Blog.

But the trigger for the M&A discussion was a November 2007 paper in Nature in which Sirtris showed the chemical structure of one of its next-generation compounds (you can find our blog post around that publication here). “It proved to the world that we can develop [sirtuin] activators and that they are up to 1000 times more potent than resveratrol,” Dipp recalls. “That was the proof that they existed.” As important, it signaled to the world that its pipeline must be pretty deep. “A lot of people in the industry were surprised to see a chemical structure, because it was not even for a clinical development candidate.” In a sense, the display was a tease. The compound “was so behind what we have in-house right now,” she adds, “that we were willing to publish the structure.” Alongside of the early data on SRT501, it apparently sold GSK on Sirtris.

And that was exactly what Sirtris needed.

The problem for Sirtris was that the first-generation SRT501 was unlikely to be the centerpiece for a large collaboration—not for a long time, if at all. For one thing, it does not have composition of matter IP on SRT501 (unlike the follow-ons). Indeed, in January, the IN VIVO blog wrote that Sirtris “has to validate its target with a molecule that won’t drive all that much licensing value so that the follow-ons will.”

In a sense, SRT501 was bound to be a loss leader and an expensive one, especially given the current regulatory mandates of diabetes drug development. The usual conceit of building value through proof of concept was all the more risky, and perhaps not as rewarding. And GSK was offering more than any acquirer of a platform biotech at an equivalent stage in its clinical life, except for Merck's acquisition of Sirna Therapeutics in 2006, which arguably had a much broader platform and scope of potential enabling (and blocking) IP, around RNAi. (Some other comparables include GSK/Domantis:$454 million (2006); TEVA/CoGenesys:$400 Million (2008); BMS/Adnexus:$505 million (2007); Pfizer/CovX: $600 million (2007); Merck/GlycoFi:$400 million (2006); and Amgen/Avidia:$290 (2006).)

With GSK, Sirtris can now broaden its activities. “Right now, 90% of the company is focused on Sirt1," notes Dipp. "Now we have the resources to look into the other sirtuins, which are equally exciting.” As with next-generation antibody specialist Domantis, Sirtris will remain as a separate discovery operation, and the current management team will continue to lead this autonomous unit.

Will CEO Chrisoph Westphal stay with Sirtris? The company's exit again shows that he knows how to build a technology-based company. (Among Westphal's other credits, he is a co-founder of two other Cambridge-based platform biotechs, Alnylam and Momenta.)

"There are five things that you try to pull together in a technology-based company," Westphal told START-UP in April 2006. "A novel, breakthrough scientific idea, and the ability to address a broad, unmet disease area," are the first two. But you'd still be nowhere without three and four: "The ability to be a beachhead in the important new development of products by pulling together the leading scientists in the field, and the ability to finance the business." Fifth? "Understand early on and be comfortable with the fact that you can dominate the IP space."

As we wrote then: So it's that easy.
image from flickr user aoife mac used under a creative commons license

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