Roche buys Zürich spin-off

Blazing the path from incubation to acquisition by a large company in a remarkably short time, GlycArt Biotechnology AG, a 2000 spin-off from the Swiss Federal Institute of Technology (ETH) in Zürich, has been acquired by the Roche Group for 235 million Swiss francs (€150 million).

GlycArt and Roche have been working together since September 2004 under a partnership that gave Roche access to GlycArt's proprietary technology that enhances the potency of antibodies.

Spurred by an unsolicited bid for GlycArt, Roche moved in within six months to secure exclusive rights to the antibody-boosting technology and potentially close out its competitors from the technology. Roche also gained GlycArt's pipeline, which holds three possible anti-cancer treatments in the preclinical stage.

With the somewhat unusual purchase of antibodies in the preclinical phase, Roche demonstrated its long-term perspective toward its pipeline, much as it did with its acquisition of Genentech fifteen years ago. The acquisition also shows Roche's commitment to the antibody market and to disease areas such as cancer.

A hybrid strategy

For GlycArt, the early sale confirms the wisdom of the company's hybrid strategy of licensing in companies to use its patented technology while simultaneously developing its own product candidates. GlycArt's use of effective and cheap feasibility studies, ones that allowed potential partners to test antibodies modified by GlycArt in their own labs, may have also contributed to the company's fast-track career.

"There's an appetite by pharma companies to acquire later-stage products that are much further into clinical studies. But this could be the beginning of a trend to consider even earlier-stage companies if they have very focused technology and are the market leaders in their segments," said Edwin de Graaf, the investment director for Gilde Investment Management.

Gilde was one of several venture capital funds to pick up on the potential of GlycArt, acting as co-lead investor of an international syndicate that invested 18 million Swiss francs in the Series A financing round of GlycArt in November 2003.

de Graaf said he was initially attracted to GlycArt because the company's technology was applicable to an important class of already-marketed antibodies in the field of oncology. The company had been showing in vitro that it could improve the efficacy of these molecules significantly by modifying their carbohydrate component through genetic engineering of the antibody-producing cells.

"The genetic engineering of the antibody-producing cell is essentially a small trick, but a patented trick, and it's one that fits well into the current production infrastructure of big companies," said de Graaf, adding, "If a therapeutic product is on the market with blockbuster sales and another company has something to make it better, this attracts us from a business point of view."

A partner at co-lead investor Global Life Science Ventures, Dr. Hans Küpper, said, "I think this acquisition is a very positive signal for the market. Other companies will begin to ask themselves, 'Are we missing something?' "

'Are we missing something?'

Daniel Wendorff, a European biotechnology analyst at WestLB in Düsseldorf, agrees. "The pharma industry has strong cash flows, and this cash has to go somewhere. I could image that a very early stage biotech company with a promising platform or a composition of interesting targets might be interesting for big pharma companies," he said.

The sale of all of GlycArt's outstanding shares, advised by ABN AMRO Corporate Finance, was announced on 19 July and is expected to close in the third quarter. Roche will maintain the GlycArt facility in a neighbourhood of Zurich, and the company will be fully integrated into the Roche Pharma research organization, reporting to Penzberg, Germany.

At the tender age of 34, Jean-Mairet, PhD, the Chief Executive Officer and a founder of GlycArt, has already seen his idea move from university notebooks to the laboratories of one of the world's largest pharmaceutical companies.

With a hint of excitement in his voice, he told Science Business: "We started from scratch four-and-a-half years ago as PhD students. This is a great achievement."