Monday, December 10, 2012

M&A Deal of the Year Nominee: Biogen/Stromedix

It's time for the IN VIVO Blog's Fifth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

When Biogen Idec paid $75 million up-front in February 2012 to acquire Stromedix, that biotech became the third start-up in the niche idiopathic pulmonary fibrosis space to get snapped up in just over a year. Stromedix and the others (Arresto, acquired by Gilead for $225 million u/f at the end of 2010 and Amira, bought by BMS in 2011 for $325 million u/f) were no doubt at the vanguard of a scientifically and commercially compelling, if developmentally daunting, space. That a trio of the biopharma world’s savvy dealmakers was jumping into the fray is no doubt exciting.

But Stromedix’s focus on fibrosis and the exciting opportunity IPF and other fibrotic diseases represent isn’t why we’ve selected this deal for a DOTY nomination.

Nor are the deals terms what locked it down. At roughly 2.5 times the total capital invested paid out on the up-front (and $487.5 million in earn-outs possible), the deal was a winner for Stromedix’s backers Atlas, Bessemer Venture Partners, Red Abbey Venture Partners, New Leaf Venture Partners and Frazier Healthcare Ventures.

But it wasn’t the biggest deal of the year and doesn’t boast a fancy new structure.

What makes Biogen’s acquisition of Stromedix stand out in the crowd of up-front-plus-earnout private biotech deals is the fact that to land Stromedix’s lead asset, Biogen first had to set it free.

In 2005, former Biogen head of research Michael Gilman left the company and joined Atlas Venture. Hunting around for a drug in the fibrosis space he eventually, in 2007, alit on what became STX-100, Stromedix’s lead asset. STX-100 is a monoclonal antibody targeting integrin alpha-v-beta-6, a cell-surface adhesion molecule and activator of transforming growth factor beta, itself a popular target in a variety of indications including fibrosis and oncology.

The drug candidate had been in active development for IPF when Gilman left Biogen. By 2007 Biogen had filed an IND with FDA but the asset was mothballed during a round of portfolio prioritization. Biogen out-licensed STX-100 to Stromedix – and retained no future rights to the asset (though it did retain an equity stake in the biotech). Stromedix planned to develop the molecule to prevent kidney fibrosis following a transplant. It hit the clinic in early 2008.

In the end, the renal transplant idea didn’t play out the way Gilman hoped it would. Eventually Stromedix made its way back around to IPF, and years after waving goodbye, the researcher and drug candidate have returned to the fold.

But it’s interesting to think about the things that needed to go right for STX-100 to make its way back to Biogen. Gilman had to know about the compound; it wasn’t part of an active out-licensing effort at Biogen. Biogen had to be willing to let it go – and on terms that would allow Stromedix and its initial backers Atlas and Frazier to build enthusiasm to support the drug’s development. And both Stromedix and Biogen (the latter under all-new management since the time Stromedix signed its initial deal) had to change course, and believe the drug had a bright future in the IPF space.

If you love something, set it free. If it comes back to you, just maybe it was meant to win IN VIVO Blog’s Deal of the Year.

image by flickr user ajari, creative commons license

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