Summer of biotech deals

While the rest of us were at leisure, it’s been a busy time in European biotech, with a string of new company formations, funding rounds and licensing deals announced over the past five to six weeks.

These have ranged from big ticket partnerships like that between the Austrian antibody engineering specialist F-Star and pharma company Merck Serono which boasted a headline value of €492 million, to small financings such as the €2.5 million follow-on round announced by Pharnext, a French start-up that is applying systems biology to find new uses for marketed drugs.

The F-Star deal, under which it will work to discover novel antibodies against inflammatory diseases targets supplied by Merck Serono, highlights how pharma’s R&D productivity problems and the ongoing restructuring of research operations continue to dominate partnering activity in the sector. Antibodies are now established as a valuable class of drugs and pharma companies are anxious to bolster their pipelines with novel formats that are emerging from research-based companies like F-Star.

Another example of the popularity of antibodies came in the agreement between 4-Antibody AG based in Basel, and the US company Human Genome Sciences. Neither the value of the partnership nor the diseases it intends to tackle was revealed, but it will involve using 4-Antibody’s platform technology to discover antibodies against targets that are considered to be very difficult to handle.

An example of the influence that the restructuring of pharma R&D is having on biotech came in the formation of Autifony Therapeutics Ltd, another spinout emerging from the restructuring of GlaxoSmithKline’s (GSK) R&D operations. The company, based on research carried out at GSK’s former neuroscience research centre in Verona, Italy, raised £10 million from venture capital investors to fund the development of drugs for treating hearing loss and the hearing disorder tinnitus.

Imperial Innovations extends its reach

Autifony has a collaboration with the Ear Institute at University College London (UCL), where researchers are carrying out preclinical research on Autifony’s lead compound. The company also hopes to carry out early clinical studies at the Phase I clinical trials unit for hearing disorders that UCL is in the process of setting up.

The VC investors in Autifony are SV Life Sciences and Imperial Innovations plc, the quoted technology transfer arm of Imperial College London, which each put in £5 million. This marked the first time Imperial Innovations has invested in a start-up in which UCL has an interest, and showed how the fund is pressing ahead with making larger investments across a broader field of technologies, following its £140 million rights issue in December 2010.

This was not Imperial Innovations’ only investment over the summer. Highlighting the way in which its new £140 million fund is improving the financing environment for biotech start-ups in the so-called Golden Triangle of Cambridge, Oxford and London, it also invested in the formation of Mission Therapeutics, a spin-out based on research funded by the charity Cancer Research UK, and carried out at Cambridge University by the founding scientist Stephen Jackson.

Jackson previously set up KuDOS Pharmaceuticals Ltd, a company that was sold to AstraZeneca in December 2005 for £121.5 million. Now, the senior scientists from KuDOS have left to form Mission, which raised £6 million in its first round of funding from a syndicate of VC investors led by Sofinova Partners and including £1.3 million from Imperial Innovations. While this was Imperial Innovations’ first investment in a Cambridge University spin out, it has also been busy over the summer providing follow-on funding for existing investee companies, leading a £2.15 million round for PolyTherics Ltd, a company which is developing new ways of formulating and delivering protein drugs.

As the summer break drew to a close, another new company, Amakem NV announced an even larger first round funding, raising €18 million to fund the development of treatments for eye disorders, including glaucoma. The Belgian start-up was formed around intellectual property from the plant biotechnology company DevGen, based in Ghent.

Eye diseases are also the focus for another summer spin-out, KalVista Ltd, set up by the UK company Vantia Therapeutics in collaboration with scientists at Harvard Medical School. KalVista raised £8 million in its first round from VC backers Novo Ventures and SV Life Sciences, both existing investors in Vantia. KalVista will work with its partners at Harvard to develop treatments for the eye disorder diabetic macular oedema, a common complication of diabetes, which leads to blindness.

Lining up alongside Mission Therapeutics as a start-up specialising in cancer treatments, was Tube Pharmaceuticals, based in Vienna, which raised €1 million in its first round. The company is based on research into molecules called tubulysins, carried out more than ten years ago at the Helmholtz Centre for Infection Research in Braunschweig. Tubulysins can be targeted to tumour cells where they bind to tubulin, a key component of the cell wall, causing the cell to self-destruct.

Public money flows in

So, the summer saw a tide of private money moving into biotech. Public money, handed out by governments intent on developing their life science sectors, also flowed in. Two of the most interesting examples involve the Russian government fund, the Russian Corporation of Nanotechnologies (Rusnano), which put money into the UK company Lipoxen and was also revealed to have put US$300 million into the formation of a new Anglo Russian biopharmaceutical company, Pro Bono Bio.

Lipoxen, a specialist in novel formulations of protein drugs which is listed on the Alternative Investment Market in London, sold a majority stake worth £12.8 million to SynBio LLC, a firm that is majority-owned by Rusnano. Under the terms of the investment, SynBio will now take on the development of six of Lipoxen’s drugs, furthering Rusnano’s mission of building Russia’s biopharmaceutical sector.

In the case of Pro Bono Bio, which is owned by the London-based private equity fund Celtic Pharma Holdings, Rusnano’s US$300 million investment is matched by US$300 million from private investors. The company has been in gestation for the past three years, but went public today (12 September) to coincide with a visit of the British Prime Minister David Cameron, to Moscow. It expects to launch its first product, a nanosphere-based topical treatment for osteoarthritis, on the UK market by the end of the month.

Currently, Pro Bono Bio’s activities are based outside Russia, but under the terms of the investment by Rusnano, it will build manufacturing facilities and carry out clinical trials in the country.

Summer’s over; it’s time for work

Rounding off the summer of deal-making was the largest of the lot, an agreement between Evotec AG and Roche in Alzheimer’s disease with a headline value of US$830 million. In addition, Roche assumed all development and commercialisation costs for EVT301, the compound at the centre of the deal. This is notable not only because of the value, but also because EVT302 was originally outlicensed from Roche to Evotec in 2006.

After spending five years building the data file, including conducting Phase I trials, Hamburg-based Evotec has persuaded Roche to take the product back and to commit to a large investment for its further development.

August may already be a distant memory, but now there’s a lot of work to be done to build value for European biotech on the back of the summer of deals.