2013 Financing of the Year Nominee: Calico

It's time for the IN VIVO Blog's Sixth 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 of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) 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™.

Across the pharma industry, companies are developing symptomatic treatments, therapies that attack the root causes of diseases, prophylactic vaccines, and occasionally, holy-grail cures that eliminate diseases from patients entirely. But Calico, a new company launched in September by Google founder Larry Page, aims for an even bigger kahuna: it’s trying to “solve death.”

That’s the way Time put it when it introduced Calico in a splashy cover story. And while some prefer the softer terms “anti-aging” and “life extension” to describe Calico’s aims, make no mistake: It’s the latest well-funded effort to discover treatments that slow down, arrest or reverse the gradual process of atrophy that makes us all older and more vulnerable to disease. If its ambitions seem outsized, its creator has company in Silicon Valley, where audacious goals occasionally take form as hundred-billion-dollar companies just a few years after they’re dreamt up.

Google employs futurist/inventor Ray Kurzweil, who has written a couple of books about life extension. PayPal founder and Founders Fund partner Peter Thiel has voiced a desire to be a supercentenarian, and has contributed funds to related projects. And a group including Facebook founder Mark Zuckerberg, his wife Priscilla Chan, 23andMe founder Anne Wojcicki (Page’s soon-to-be-ex-wife) and Russian billionaire/Valley investor Yuri Milner has launched the Breakthrough Prize in Life Sciences, which awards grants to scientists “curing intractable diseases and extending human life.”

If that just seems like a bunch of techies trying to become more like the robots they like to create, well, Calico has brought in one seasoned biotech veteran to steer the ship toward realistic outcomes. Longtime Genentech CEO Art Levinson – still Genentech’s chairman, a Roche director, and Apple’s chairman – is Calico’s chief executive. In a Google+ post at the time of the company’s launch, Levinson wrote that Page and Google Ventures partner Bill Maris approached him about a project “that would take the long-term view on aging and illness”; Page’s own post described the project as “a long-term bet” that might tackle decreased mobility, loss of mental acuity, and life-threatening diseases that afflict the elderly. (Page said Google itself had invested in the project; the Google Ventures web site doesn’t list Calico as a portfolio company. The venture arm has its own data-driven ambitions, as we discussed in this Start-Up profile.)

Calico – short for “California Life Company” – hasn’t revealed much more since its September launch, but it hired a few more industry vets and academic figures during the fall. Former Roche EVP of global product development and chief medical officer Hal Barron will lead Calico’s R&D. Ex-Princeton prof David Botstein, who ran the university’s Lewis-Sigler Institute for Integrative Genomics and won one of those Breakthrough Prizes, signed on as Calico’s chief scientific officer. Both are Genentech veterans. Also, former Genentech Senior Oncology Fellow Bob Cohen was named a Calico Fellow, while UCSF professor and researcher Cynthia Kenyon signed on as a Calico scientific advisor.

It wouldn’t kill you to consider Calico for this year’s Roger in the financing category, now, would it? (Though it remains to be seen if Calico can repay the favor with a little life extension.)

Thanks to Flickr user UlfBodin for the photo of a sun-kissed kitty, reproduced here under Creative Commons license.

2013 Financing of the Year Nominee: Editas

It's time for the IN VIVO Blog's Sixth 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 of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) 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™.

One of the financings of the year, in our humble opinion, comes from three venture firms you should all know well: Polaris Venture Partners, Third Rock Ventures and Flagship Ventures. The trio "locked arms," in the words of Polaris principal Kevin Bitterman, to commit $43 million to Editas Medicine. We've nominated this deal for two reasons.

First, Editas -- of which Bitterman is serving as interim president -- is the first startup to declare its intent to turn one of the hottest research tools around into a new wave of therapeutics. One might call it gene therapy, version 2.0: the technology known as CRISPR/Cas9 allows researchers working with cells or model organisms to delete genes or replace them with new ones, but in ways considered more precise than other gene-editing systems currently in use.

Got genes?

The answer to whether the CRISPR/Cas9 modification system can become a basis for pharmaceutical products is years away. It is, relative to most venture-funded efforts, a brand-new field. Most of the critical developments have been described in academic papers only in the last twelve months, and many more will undoubtedly come in the next twelve.

The second reason we've spotlighted this deal is the syndicate. The VC trio involved more often than not will work in stealth on new potential breakthrough technologies on their own, as our START-UP colleagues detailed earlier this year here and here. In the past year, for example, Flagship has done solo work in launching a microbiome company (Seres Health), an epigenetics company (Syros Pharmaceuticals), a patient-as-protein-factory firm (Moderna Therapeutics, also to be nominated in this year's contest), and a nutritional supplement and drug maker (Pronutria).

With advances in CRISPR technology coming quickly from several academic sources, however, the VCs felt it was better to join forces. “Once a decade, it makes more sense to pool the expertise and resources of investors and the technology and expertise of the academic founders instead of creating three, four, or five different companies positioned against each other,” Bitterman told our Pink Sheet Daily colleagues when the company launched. (Also joining the syndicate is the Partners Innovation Fund, the venture arm of Boston-based Partners Healthcare.)

How far have they gotten in front of the competition? Check back around this time next year. Other CRISPR/Cas9 start-ups should soon emerge, and a CRISPR tools company in Berkeley, Calif. hopes to land a Series A round early next year to help it move into therapeutics as well as industrial and agricultural applications. The Berkeley company, Caribou Biosciences, lays claim to all the IP from the lab of University of California professor Jennifer Doudna, according to Caribou CEO Rachel Haurwitz. (This, despite Doudna being one of Editas' scientific co-founders.) As we said, the IP race is afoot.

CRISPR stands for “clustered, regularly interspaced short palindromic repeats.” It describes a nucleic acid system, first discovered in bacteria by Japanese researchers 25 years ago, that banks bits of foreign viral DNA to serve as an immune-system reminder when the pathogen invades again. Re-infection triggers production of RNA associated with the foreign DNA, which seeks out a match. The RNA doesn’t destroy the invading DNA on its own; the CRISPR RNA (crRNA) brings along an enzyme to make a double-stranded break. Scientists have zeroed in on the nuclease Cas9, or “CRISPR-associated protein 9."

Come to think of it, there's a third reason to nominate Editas. If it succeeds, it will have to improve upon two different strands of biotechnology that have proved extremely frustrating the past decade: gene therapy and RNA-mediated drugs. Therapies based on CRISPR/Cas9 will also be RNA-mediated, which has implications both pro and con. One benefit is that, theoretically, there is less engineering required as a company targets more than one disease. That’s because the “scissors” of Cas9 can cut DNA at any juncture; only the RNA guides need to be changed, a simpler engineering problem.  But the molecules are tough to deliver. Companies have struggled to formulate agents that don’t break down in systemic applications. Bitterman said one of Editas’ “core competencies” will be delivery: “We’ve spent a lot of time thinking about it, and we don’t need to reinvent the wheel.”

In addition to Doudna, Editas’ scientific co-founders are Feng Zhang of the Broad Institute and three Harvard researchers, including George Church; Keith Joung, also of Massachusetts General Hospital; and David Liu, also of the Howard Hughes Medical Institute.

Deals of the Week Visits The Winner's Circle

Celgene Corp. continues its march to win the hearts and minds – or at least the votes – of the biopharma industry, as measured by The IN VIVO Blog’s Deals of the Year poll.

When the polls closed Jan. 4 for the 2012 contest, Epizyme Inc.’s April tie-up with Celgene walked away with nearly 60% of the vote in the Alliance category – the largest vote percentage in all three categories.

It's the second win in five years for a Celgene deal, following its $2.9 billion cash-and-stock-and-contingent value rights deal with Abraxis Bioscience targeting solid tumors in 2010.

This achievement could reflect widespread industry recognition for Celgene’s deal strategy over the years. Or perhaps it reflects a vigorous get-out-the-vote campaign in some quarters that would spark jealousy in Washington (and given our editors’ frequent entreaties to vote early and often, it's heart-warming to think our readers are listening).

Also taking the winners' circle this year was the Amylin Pharmaceuticals Inc./Bristol-Myers Squibb Co./AstraZeneca PLC three-way deal in the M&A category, barely edging out Biogen Idec Inc.’s acquisition of Stromedix Inc. The unique collaboration raises the stakes in the diabetes drug market, particularly the increasingly competitive market for glucagon-like peptide-1 agonist therapies, and its unusual structure allowed two pharmas to share the spoils of the recently-approved potential blockbuster Bydureon (long-acting exenatide).

And in the financing category, Foundation Medicine Inc.’s Series B took the honors, topping gene therapy company bluebird bio's funding. (One impassioned commenter devoted kind words to Intarcia's $210 million funding as well.) Foundation's funding was one of the smaller-sized deals vying for voters' favor, but the company has attracted interest from a large number of pharma companies for its genomics testing technology. The company raised a $43.5 million Series B round to fund marketing of its first product, FoundationOne, a test to identify all classes of genomic alterations (including copy number alterations, insertions, deletions and rearrangements) in about 200 cancer-related genes. 

As in past years, the IN VIVO Blog invites the winners to make acceptance speeches in this space. As for the new year, we've already got some new tales to tell. To the winners go the spoils, and to you, we present 2013's first...

AstraZeneca/Cellular Dynamics: Madison, Wisc.-based stem cell research company Cellular Dynamics International Inc. said AstraZeneca PLC will use its technology to conduct drug safety tests as part of the drug discovery process. In a deal announced Jan. 3, CDI said AstraZeneca would both use its broad-ranging, commercially available iCell products and genetically engineer new products using CDI’s MyCell lines for specific patient groups, as part of the discovery and testing process for novel compounds, including in vitro disease research. CDI markets induced pluripotent stem cell products, which are modified cells from biopsies taken from adult patients rather than harvested from embryonic lines, and can be differentiated into various tissue cell groups from an individual’s own stem cell line. The company, which has raised at least $100 million since 2004, believes that its cells can be used during the drug discovery and pre-clinical testing phases to reveal information about safety and efficacy while avoiding ethical concerns and reducing clinical costs.CDI also counts Roche as a customer and partner, under agreements dating to 2008 and since expanded multiple times. Financial terms of the new deal with AstraZeneca weren’t disclosed. -- P.B.

Pfizer/Philogen: The Italian-Swiss targeted antibody company Philogen SPA has attracted another big pharma collaborator, Pfizer Inc., for its angiogenesis-related products. The two companies announced Jan. 3 a worldwide licensing agreement to develop Philogen's Phase I antibody product, Dekavil, in autoimmune diseases. Pfizer intends to evaluate Dekavil in inflammatory bowel disease, as well as continuing Philogen's current clinical program in rheumatoid arthritis. The product consists of an antibody targeting inflammatory disease sites coupled to the immunoregulatory cytokine interleukin-10 (IL-10). Because IL-10 modulates immune responses rather than suppressing them, the companies hope Dekavil will not be associated with unwanted side effects. Philogen will receive an upfront payment and will be eligible to receive milestone and royalty payments, while Pfizer will have exclusive rights to market any products developed in the collaboration. Further terms were not disclosed. Pfizer already has a smaller collaboration with a Philogen unit, Philochem, involving the discovery of cancer targets. Philogen is also collaborating with New Jersey-based Actinium Pharmaceuticals Inc. on attaching alpha-particle emitting radionuclides to its antibodies, with Merck Serono on molecular biomarkers, and with MedImmune on encoded chemical libraries. Philogen researchers helped pioneer the targeting of cytokines, radionuclides, and drugs to the site of disease using antibodies against stromal (connective tissue) antigens. It has five products in Phase I/II studies: darleukin (L19 antibody linked to interleukin-2); teleukin (F16 antibody linked to IL-2); fibromun (L19 antibody linked to tumor necrosis factor); radretumab (F8 antibody labeled with I-131); and Dekavil (F8 antibody linked to Il-10). Back in 2011, Bayer withdrew from a near 12-year strategic collaboration with Philogen on radretumab and darleukin, citing a change of strategy and scuppering Philogen's planned IPO on an Italian stock exchange. -- John Davis

Sanofi Pasteur/Sutro: Protein therapeutics platform developer Sutro Biopharma Inc.’s latest partner intends to create new products using its cell-free protein synthesis technology. The privately held, South San Francisco-based start-up’s newest ally is vaccine specialist Sanofi Pasteur, which plans to develop two new vaccines based on Sutro’s platform. Specific terms of the deal, announced Jan. 3, were not revealed.

Sutro typically uses its platform to develop antibody-drug conjugates and bifunctional antibodies for oncology, but the new deal may range into new territories; the companies did not disclose which targets they will pursue. In December, Sutro announced a tie-up with Celgene Corp. under which the companies will discover ADCs and bifunctional antibodies; that alliance could be worth up to $500 million. Venture investors including Skyline Ventures, Lilly Ventures, Amgen Ventures, SV Life Sciences and Alta Partners have supplied Sutro with nearly $60 million since its 2003 inception, with the latest $18 million tranche of its Series C round arriving in May 2012. The company also inked a multi-year partnership with Pfizer in early 2011 to discover novel peptide-based therapeutics. -- P.B.

Pfizer/Repligen: Pfizer continued its multi-deal first week of 2013 on Jan. 3 by acquiring exclusive worldwide license to Repligen Corp.’s program for spinal muscular atrophy (SMA), led by Phase I, small-molecule candidate RG3039. Pfizer, which will pay Repligen $5 million upfront with the potential for up to $65 million in milestones and royalties on sales of any product reaching market for SMA, also gets backup compounds and enabling technologies from the Waltham, Mass.-based biotech.Repligen previously in-licensed ‘3039 from the patient group Families of SMA, which had invested more than $13 million in preclinical development. Under the deal, Repligen will complete two active cohorts of an ongoing Phase I trial in healthy volunteers, expected to finish during the first quarter of this year. At that point, Repligen will transfer the program to Pfizer, which will be responsible for all subsequent clinical development of ‘3039. The compound has orphan drug status in both the U.S. and Europe. Repligen President and CEO Walter Herlihy said the transaction is consistent with his firm’s strategic decision announced in August 2012 to seek external partners for its drug-development programs while focusing internally on bioprocessing. -- Joseph Haas

Takeda/Amylin: This was one tie-up that didn’t survive a change of control. Four months after the Roger-winning Bristol/AZ takeout of Amylin, a co-development partnership for obesity compounds between Amylin and Takeda was formally severed. It didn’t come as a shock: the partners had in fact discontinued development of their top candidate, the Phase II pramlintide/metreplin combo, in August 2011. Takeda had originally paid $75 million upfront in late 2009 to initiate the partnership. Development and sales milestones across the multiple programs could have totaled more than $1 billion. The deal called for development milestones up to $200 million for two specific products and up to $50 million for any additional products. Commercial milestones were set at $140 million per product related to first sale of the products and up to $800 million per product for other sales-based milestones. Amylin was responsible for all development through Phase II in the United States, with Takeda taking over for Phase III and for all phases outside the U.S. It is unlikely Takeda ever paid any milestones.-- Alex Lash

Thanks to Denise Peterson for this week's lead section.

Alliance Deal of the Year Nominee: Versant/Roche/Inception 3

It's time for the IN VIVO Blog's Fifth Annual Deal of the Year! competition. Once again we're presenting awards in three categories to highlight the most interesting and creative deal making 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 a half dozen nominations in each category throughout December, and you, the voting public, will decide the winners, voting early and often once we've announced all the nominees. Strap yourselves in, it's The Race for the Roger™.

We’re nominating Inception 3 not because it will star someone other than Leo DiCaprio, who never signed on to do sequels, but because it’s a biotech deal that opens a window into an intriguing new hybrid model of company creation.

Don't vote for Leo...

Let’s back up a bit. When Bristol-Myers Squibb bought Amira Pharmaceuticals in 2011 for $325 million upfront, the core scientific team at Amira decided to stay in the drug-hunting business – a lucrative business for them, indeed.

...vote for Peppi.

 Amira chief scientist Peppi Prasit’s team not only shepherded its idiopathic pulmonary fibrosis drug into Phase II, but while previously at Merck, the group discovered two commercial hits: arthritis drug Vioxx (rofecoxib), now withdrawn, and asthma treatment Singulair (montelukast). With the help of Versant Ventures, they created Inception Sciences, a mothership that would poke around conferences and tap into academic connections to find intriguing projects or targets. The idea is to bring those projects in-house, into Inception’s labs, create individual daughter companies around each project, and work them into pre-clinical shape with enough original R&D to hold composition of matter patents. “Everything up to GLP toxicology, we do in-house,” says chief business officer Clare Ozawa.

Those daughter companies are a well-known asset-financing concept: with each product housed within its own company, the ultimate goal of a clean trade sale to a biopharma is more easily attained.  The discovery engine remains independent. But Inception has also created a feedback mechanism that it hopes will keep the mothership’s engine running. It has no products, nor does it hold equity in the daughter companies. Instead, it is the contractual service provider for the daughters, with about 30 full-time staffers doing chemistry, biology, business development and more.

Inception 3 is the first publicly disclosed test of the system. Instead of drug hunting first and finding a partner or buyer later, Inception found a hunting partner in Roche, which wanted to go after hearing loss but didn’t have the internal capabilities or resources to devote to this very new therapeutic area -- new, at least, for drugs. In turn they formed Inception 3 based on technology from Stanford University. Versant provided equity funding, and Roche has added funding that gives it an option to acquire Inception 3 upon filing of its first IND. Ozawa declined to give a development timeline. The partners will be looking for small molecule therapies to address sensorineural hearing loss, which is all too common, permanent, and afflicting more and more people in the age of the iPod.

None of the dollar amounts were disclosed, but in July Inception 3 filed notice of raising a little more than $1 million of an anticipated $10 million offering. Ten million was also the target offering of Inception 1 and Inception 2, which are built around neurology and oncology programs. Each has raised $5 million, according to SEC filings. Versant to date has been the only shareholder, and it funds them from its general fund, not from cash set aside for Inception projects, says Ozawa, who was a Versant associate before joining Inception: “Each daughter has to stand alone and make sense to Versant, just like any other start-up.”

If the concept takes off and Roche proves a reliable fiancé, Inception could find more gentlemen callers on its doorstep.

Deals of the Year Exit/Financing Nominee: Warp Drive Bio

It's time for the IN VIVO Blog's Fifth Annual Deal of the Year! competition. 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 a half dozen nominations 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™.

 

No life science venture firm makes more blockbuster early-stage investments than Third Rock Ventures, often without syndicate partners. But the bicoastal firm opened 2012 with a twist on its typical modus operandi when it unveiled Warp Drive Bio in early January.

Warp Drive itself is a new approach to an old concept. The firm is using new computational technology to find the basis of new drugs in natural products -- or if you prefer, pharmacognosy -- once the main hunting ground for the pharmaceutical industry but left behind in the era of high-throughput screening of vast libraries of synthetic compounds. Warp Drive is building what it calls a genomic search engine to comb through all accessible bacterial genomes and look for conserved chemical structures that signal underlying gene expression with “novel and profound biological effects” and higher potential of drug-like properties. The firm calls these structures “chemomemes” – a term coined in an early Warp Drive meeting by scientific advisor Rick Klausner, a former National Cancer Institute chief and current VC at The Column Group (which is not a Warp Drive investor).

CEO Alexis Borisy reckons his team has sequenced “more microbial genomes than the rest of the planet a couple times over just this year alone,” and has moved on to step two: searching through the digitized genomes, more than 40,000 so far, for chemomemes that point the way to potential drugs. “We don’t tell anyone what we’re looking for,” says Borisy. “It’s a closely guarded secret. We think it’ll cause a lot of people to go ‘Wow.’”

Hello? Any drugs here?

Borisy thinks Warp Drive will be ready to unveil the secret in scientific papers a year or so from now. For now, he says the proof of concept is working; the team has already put searches to the test and gotten “hits,” to use search-engine parlance. The firm will stick to bacteria, which dominate every corner of the planet, and will later investigate fungi. Plants are much more difficult, says Borisy.

The total for the round was tabbed at $125 million, 60 percent of which was equity. As the lead investor, Third Rock wanted not only to build a syndicate to spread the investment risk but also find a potential buyer who could guarantee a healthy return. With that in mind, Third Rock recruited two others for the Series A: Sanofi and Greylock Partners. Sanofi’s involvement is where the deal twist comes in. The multinational pharma company, with an undisclosed equity stake, also has an option to buy Warp Drive. It’s a two-way street, in fact: The investors can force a sale to Sanofi if Warp Drive hits certain goals. The strike prices for each side are pre-determined but undisclosed, as are the milestones that would trigger the put and call sales.

Sanofi receives the chance to collaborate on early-stage research and feed its pipeline, while Warp Drive gets cash to develop its platform and form a drug pipeline of its own. Under the Sanofi collaboration, the sides would like to get at least two drugs into the clinic within the next five years.

Third Rock had already incubated Warp Drive Bio for “a couple of years,” according to Borisy, when conversations with Sanofi began in mid-2011. Warp Drive Bio was built around the ideas of Harvard University professor (and Third Rock partner) Greg Verdine. Harvard University genetics professor George Church, and the University of California, San Francisco pharmaceutical sciences professor James Wells are co-founders. 

The plan upon unveiling was to spend 2012 building the platform, then spend the next couple of years building a pipeline, going after previously undruggable targets. Borisy says the firm is ahead of schedule and has already triggered some of the equity and non-equity milestones with its build-out and its early chemomeme search activities. Warp Drive should grow from its current dozen staffers to about 40 next year.

The Warp Drive deal kicked off another year of Series A activity for Third Rock. It has since funded, either solo or with syndicate partners, the companies Alcresta (nutritional supplements), Global Blood Therapeutics (blood disorders), Myokardia (allosteric modulators for cardiovascular defects) and Cibiem (carotid body modulation device).-- Alex Lash

Photo of Yellowstone extremeophiles courtesy of flickr user Tim Pearce.