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| SR One's Jens Eckstein, via |
GSK has set broad parameters for SR One, with few restrictions; the firm invests with an eye on "the future of pharma in general," not GSK, Eckstein says. GSK has never bought an SR One investment, and the firm steps aside if it sells one of its portfolio companies. He adds that the fund's priority is early-stage innovation, with innovation defined broadly as “anything that changes the way medicine is done today.” That said, as SR One’s interests move "earlier and earlier” up the value chain, the evergreen funding provided by the corporate parent eliminates funding cycles and gives the venture firm a huge advantage over independent competitors.
To illustrate the range of SR One’s interests, Eckstein pointed out that moneys dispersed last year ranged from $20,000 to $10 million. Some of the smaller investments were made to support due diligence because “one theme in the VC world now is to kill early,” he added, even before officially forming companies. "We put the money to work even before we start companies, which is very different than in the past," he says. So, the firm is working with a contract research organization that determines the reproducibility of scientific data supporting potential technological investments.
It also is experimenting with ways to incentivize management to kill struggling projects quickly, something that is not easy to do in a world in which stopping work on a project can put management out of work, a theme that other investors echoed. “If you have a good relationship with a management team and talk with them,” you can do it, he said. And if management is straight about bad news, he will look to them for the next project.
SR One is moving into healthcare information technology, and Eckstein expects it to do its first IT deal this year. Figuring out the financial and business models for healthcare IT has been a struggle for traditional life sciences venture investors, but Eckstein says SR One has built capabilities to do that. That said, the IT mindset differs from straightforward life sciences because the key hurdles in IT are not technological, but are business model related. With IT, Eckstein explains, you can prototype projects quickly and your projects can have an impact quickly. And no one's talking about consumer apps here, but about using IT to "understand the patient as a whole and the way we triage patients through the hospital system." He adds, "I have fairly specific ideas of what I am looking for and we are getting there."
Eckstein wouldn't divulge specifics on the fund's performance, but he pointed out that historical analysis shows it is in the top 25% of venture capitalists and is "not a cost center to GSK."
Time will tell how SR One will do under Eckstein's watch, but for starters, here's a way to start the scorecard: The firm has done eight financings since he joined (of which six are publically announced), including the following: River Vision, which joins the ranks of orphan drug start ups with a $17 million Series A round announced in December; RaNa Therapeutics; Auxogyn Inc., a video technology that helps to assess the viability of early embryos; IlluminOss Medical Inc., a developer of minimally invasive technology for treating bone fractures (SR One was a first time investor in a $28 million C round that closed in September); and PsiOxus Therapeutics, which SR One joined as part of a Series B syndicate that raised $22 million. Canadian firm Thrasos Therapeutics also joined the portfolio, as GSK invested in a Series C round supporting an acute kidney injury therapy entering Phase II clinical trials.
While Eckstein and others were creating buzz at JPM, of course, real world deals were taking place, and for more on that, let's turn to...
Shire/arGEN-X/Ethris: This was a busy week for Shire, in which the Ireland-headquartered group announced it is buying Boston-based Lotus Tissue Repair, as well as expanding its early-stage rare disease collaborations with arGEN-X BV of the Netherlands and young German biotech Ethris. On Jan. 7, arGEN-X and Shire said their initial alliance, formed in March 2012 to create novel human antibody therapeutics to fight rare and unmet diseases, was so successful that they’re expanding it to explore “a new and exciting therapeutic opportunity.” The duo did not identify that disease area or give financial details. Under their arrangement arGEN-X will remain responsible for all antibody discovery and certain preclinical activities, while Shire will conduct all relevant preclinical work, as well as clinical and commercial development of therapeutic antibody products. arGEN-X receives research funding and success-based payments, as well as milestones and royalties on products developed under the collaboration.
The same day saw privately-held Ethris GmbH of Germany and Shire announce an R&D alliance to develop and market RNA-based therapeutics based on protein replacement. Ribonucleic acids that encode for such proteins are attracting much R&D attention, but so far RNA’s inherent instability and immunogenicity have been significant hurdles. Shire and Ethris hope to clear that obstacle by using the latter’s technology which creates so-called stable and non-immunogenic messenger RNA molecules for use in protein replacement therapies to treat monogenic genetic diseases.. Privately-held Ethris is financed by QureInvest II, a life sciences investment fund managed by HS LifeSciences, Düsseldorf Germany.--Sten Stovall
Shire/ Lotus Tissue Repair: Shire continued its strategy of engaging in bolt-on
acquisitions that can expand its growing Human Genetic Therapies business – a
group that has been thriving since its inception in 2005. Its latest addition
is the ultra-rare disease-focused biotech Lotus Tissue Repair. The specialty pharma announced Jan. 8 that it is taking over the small Cambridge, Mass.-based biotech for an undisclosed upfront payment and the promise of future milestones. Lotus
investor Third Rock Ventures
declined to reveal the multiple it got back on their investment. The draw of
the small company is its late preclinical stage treatment for dystrophic
epidermolysis bullosa, a severe genetic disorder that causes fragile skin and
blistering particularly in the mouth, esophagus, and lower GI tract. DEB is a
more serious form of epidermolysis bullosa and affects about 300,000 people
worldwide. The lead product candidate is an intravenous protein-replacement
therapy that is meant to replace the missing or defective human collagen type
VII in DEB patients. Lotus was founded in 2011 and conducted a $26 million Series A through its sole investor, Third Rock. The tiny company is manned solely by CEO Mark de
Souza. De Souza, James Fordyce and Third Rock partner Philip Reilly co-founded
the company along with the University of Southern California professors who
invented the technology, Mei Chen and David Woodley. Chen and Woodley acted as
scientific advisors to the company. De Souza is expected to join the HGT staff
located in Lexington, Mass.--Lisa Lamotta
Evotec/Yale: Evotec AG, the German R&D services and product company, and Yale University announced on January 9th a strategic partnership, which will integrate basic science undertaken at Yale with Evotec’s drug discovery platform. Yale and Evotec will jointly assess novel research technologies, including assays, screens, and models, as well as exploratory drug targets and compounds. No financial terms were disclosed. The intention is to advance candidates in as efficient and accelerated a manner as possible to a stage where they can be commercialized. Cord Dohrmann, CSO of Evotec, said in the release that the partners will focus “all efforts on bringing individual projects to highest industrial standards in preparation for development and commercialization partnerships with pharma companies.”
The German mid-cap has ventured before into academic waters, collaborating with Harvard University in March 2011 to develop new diabetes therapies targeting beta cell regeneration. In July 2012, Janssen Pharmaceuticals Inc. licensed exclusive rights to the small molecules and biologicals that resulted from that collaboration. Evotec also expanded the Harvard alliance in January 2012 to include Brigham and Women's Hospital and to refocus it on discovering and developing new biomarkers and treatments in the field of kidney disease. The Yale deal is more wide-ranging over several therapeutic areas, including central nervous system diseases (CNS), metabolic disease, immunological disease, and cancer. It also harnesses Evotec’s arsenal of discovery and preclinical capabilities, including assay development and screening, structural biology, medicinal chemistry, and in silico and zebra fish modeling. --Michael Goodman
Amgen/Bind Biosciences: The first major partner for nanomedicines company Bind Biosciences is Amgen, with the two companies announcing a licensing deal Jan. 8. The partnership will be the first to study a nanomedicine technology combined with a targeted drug, rather than with a cytotoxic agent, according to the companies. Amgen gains the exclusive right to develop and commercialize a kinase inhibitor nanomedicine for a range of solid tumors, using a novel Accurin from Bind’s nanotechnology platform and its own undisclosed proprietary kinase inhibitor. Both companies will work on the preclinical development of the compound, and Amgen will have responsibility for all future development and commercialization. Bind could receive upfront and development milestone payments totaling $46.5 million, and could receive an additional $134 million in regulatory and sales milestones for the first therapeutic indication. The deal also includes tiered royalties on potential sales of the drug. Bind is eligible to receive additional milestones if Amgen pursues other indications beyond the initial one. “This takes the technology to the next level,” said Bind CEO Scott Minick. The company is continuing to develop its own clinical-stage nanomedicine, BIND-014, combining one of its propriety Accurins with the cytotoxic agent docetaxel, independently. Phase II studies are expected to start in early 2013, following positive Phase I data.--Jessica Merrill
BioMarin/Zacharon: Orphan drug developer BioMarin expanded its portfolio of drugs for rare diseases with the acquisition of glycobiology company Zacharon Pharmaceuticals, the firm announced Jan. 7. San Diego-based Zacharon is focused on developing small molecules targeting pathways of glycan and glycolipid metabolism and has two drug discovery projects focused on inhibition of heparin sulfate synthesis for the rare lysosomal storage diseases Mucopolysaccharidosis Type III and other MPS disorders. BioMarin knows the field well; it already has two drugs, Naglazyme and Aldurazyme, on the market for MPS VI and MPS I, respectively, and is planning to file a new drug, known as GALNS, with FDA this year for MPS IVA. The addition of Zacharon could help BioMarin bring an oral MPS treatment to market. BioMarin paid $10 million upfront for 100% of Zacharon’s share capital and may make additional milestone payments. Zacharon raised $3.5 million in a Series A financing in 2008; the company partnered with Pfizer on rare disease drug development in 2011 in a deal valued up to $210 million.--J.M.
Daiichi Sankyo/Amplimmune: Amplimmune signed its second business development agreement on Jan. 8, agreeing to an option deal including R&D funding and other possible earn-outs with Japan’s Daiichi Sankyo for Phase I-ready AMP-110. Amplimmune, which out-licensed AMP-224, a fusion protein blocking interaction between the PD-1 and B7-H1 proteins to GlaxoSmithKline in 2010, to intends to start clinical development of ‘110 in an undisclosed autoimmune indication within the next six months. A large-molecule fusion of the extracellular domain of B7-H4 protein, ‘110 is designed to mimic the activity of naturally occurring B7-H4 protein in inhibiting T-cell pathways that can contribute to autoimmune disease. While the partners will not announce the first indication before launching the initial Phase I study, a description on Amplimmune’s website notes that ‘110 suppressed the progression of collagen-induced rheumatoid arthritis in mice. Amplimmune will develop ‘110 through Phase IIa, with Daiichi having the option to acquire the program at any point during that period. The Japanese firm will pay Amplimmune more than $50 million to cover past and upcoming R&D costs for ‘110, as well as an undisclosed upfront fee. Amplimmune also can earn undisclosed performance-based milestones. If Daiichi licenses ‘110, however, there will be no further earn-outs for Amplimmune, such as royalties on product sales.—Joseph Haas
Gilead/MacroGenics: Privately-held MacroGenics announced a licensing agreement Jan. 7 under which it will co-develop and commercialize Dual-Affinity Re-Targeting (DART) therapeutics for four unspecific targets with Gilead Sciences. Gilead gets exclusive worldwide rights for the three of the programs, with MacroGenics to receive up to $30 million in license fees and up to $85 million in preclinical milestones. For the fourth, undisclosed program, MacroGenics will retain commercial rights outside of the U.S., Europe, Australia and New Zealand. MacroGenics’ proprietary DART technology platform discovers bi-specific antibodies in which a single recombinant molecule is able to target two different antigens. Gilead will fully fund all R&D activities surrounding the projects. MacroGenics also can earn up to $1 billion in clinical, regulatory and commercialization milestones if all four programs succeed, plus tiered royalties, up to low double-digits. The deal is MacroGenics’ fourth around its DART platform in the past two years, following agreements with Pfizer, Boehringer Ingelheim and Servier.—JAH
Ultragenyx Pharmaceutical/Baylor Research Institute: The Novato, Calif.-based biotech Ultragenyx Pharmaceutical announced Jan. 10 that it has in-licensed a third compound from the Baylor Research Institute in Dallas. The deal gives Ultragenyx the North American rights to triheptanoin (UX007), a synthetic triglyceride of C7 fatty acids that is meant to treat defects in mitochondrial metabolism of long-chain fatty acids; the biotech also has an exclusive option to rest-of-world rights. UX007 is expected to treat the family of fatty-acid oxidation disorders (FAOD) that affect schildren and can result in muscle weakness, fatigue, low blood sugar, cardiomyopathy and a greatly shortened life-span. Terms of the deal were not disclosed. UX007 will fit squarely within the company’s pipeline, which includes UX001, a replacement therapy meant to treat hereditary inclusion body myopathy (HIBM), which is a rare muscle-wasting disease. Ultragenyx conducted a Phase I trial of 26 patients and currently is conducting a Phase II trial that has 45 patients. Data are expected in 2013. Its other program is UX003, an enzyme replacement therapy to treat mucopolysaccharidosis type 7 (MPS7), the rarest of the MPS disorders. The company expects to begin a Phase I/II trial in mid-2013 and to generate interim data from that trial before the end of the year.--LL
Illumina/Verinata: Genetic analysis specialist Illumina said Jan. 7 that it has acquired privately-held prenatal testing test maker Verinata of San Carlos, Calif. Illumina paid $350 million up-front in the deal, which also includes $100 million in milestone payments that could be fulfilled by 2015. The acquisition brings Verinata’s non-invasive prenatal test, Verifi, which identifies conditions including Down’s syndrome, Edwards syndrome, Patau syndrome, and sex chromosome abnormalities, by analyzing cell-free fetal DNA circulating in the mother’s blood. Verinata launched Verifi in May 2012. Several months prior to the launch, Illumina had established a three-year supplier agreement with Verinata for sequencing instruments and consumables, which also included an unspecified collaboration between the companies toward gaining regulatory approval for the test. The acquisition spells an exit for Verinata’s venture investors, which include Mohr Davidow Ventures, Sutter Hill Ventures, and Alloy Ventures; they most recently supplied $48.5 million in Series C funding in August 2011. Originally named Artemis Health, Verinata licensed key technology for its product from Stanford University in January 2009. Illumina had $1.2 billion in cash, cash equivalents and short-term investments as of Sept. 30, 2012.– Paul Bonanos
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