Just a year after Johnson & Johnson ($JNJ) swooped in to buy up Aragon's game-changing work on prostate cancer in a billion-dollar deal, Roche's Genentech has followed up to buy what remained: a closely-related breast cancer program that promises to change the way that disease is treated. And the big Roche ($RHHBY) subsidiary is paying a blockbuster figure, handing over $725 million in cash for the fledgling biotech Seragon Pharmaceuticals--which was spun off from Aragon after the J&J deal--and promising up to a billion dollars in milestones.
In exchange Roche is getting a Phase I cancer therapy with a stellar pedigree and a groundbreaking approach to breast cancer. Seragon has been targeting hormone-receptor positive cases, which are currently treated with drugs that either block the estrogen receptor or prevent the production of estrogen. The biotech has been working on a drug that doesn't just block the receptor--it's out to eliminate it altogether.
 |
| Richard Scheller |
"This year, breast cancer will claim the lives of nearly 40,000 women in the United States, and up to half of these women will have a disease that is driven by the estrogen receptor," said Richard Scheller, the head of Genentech's research arm, dubbed gRED. "We believe these investigational oral SERDs (selective estrogen receptor degraders) could one day redefine the standard of care for hormone receptor-positive breast cancer."
Seragon was built on the scientific foundation laid by Aragon, a San Diego biotech created to pursue the insights of noted investigator Charles Sawyers, now at Memorial Sloan-Kettering. Standard therapies for breast and prostate cancer are designed to block the effect of the hormones, acting like "glue in the lock" of hormone receptors, then-Aragon CEO Rich Heyman told FierceBiotech back in 2010. But over time, patients become treatment resistant and the therapy can wind up fueling the cancer. Heyman called his lead therapy for prostate cancer "super glue. It truly blocks the receptor in this resistant state."
J&J plucked the lead androgen-receptor prostate cancer work out of the company, paying $650 million in upfront cash, and left Heyman to go on to pursue the focus on breast cancer and estrogen receptors in a new company backed by some very happy investors. Last fall the new company got started with a $30 million round and a lineup of Big Pharma admirers.
This new deal with Genentech is remarkable for several reasons. Genentech is not known for paying out a lot of cash to bring in new drug programs. As any of its execs will tell you, the giant Roche subsidiary is confident that it has a big pipeline of cancer drugs and doesn't need to buy up a string of new programs. So it tends to buy or license very early stage efforts for modest amounts that complement that work--unlike Roche's pRED group based in Basel, which has been scouring Europe and the U.S. for new technologies.
The deal also underscores the promise of the work that Seragon was doing. Genentech is considered one of the best cancer drug developers in the world, so when it pays big for a drug, they're betting that they're jumping into something transformative. What was an early-stage effort at a small biotech is now a leading program at Roche. And the way fast-paced cancer drug R&D works these days, it shouldn't take too much more time before we start seeing human data on its effect on breast cancer.
Finally, these kinds of numbers in a cancer deal highlight the level of attention oncology is getting from the major players in biopharma. As much as a third of all research cash is now directed at cancer and inflammation and top assets are fetching premium prices. The $1.7 billion Seragon deal suggests that the premium just got bigger, which will only further emphasize the leading role that the biggest companies with the deepest pockets play in the field.
The Wall Street Journal's Helen Thomas, though, used her 'Heard on the Street' column to raise an early warning, calling it "disconcerting. Rarely in other sectors do companies shell out vast sums for assets that could quite possibly amount to nothing." And she went on to note the chronically high failure rate of experimental drugs as well as the fact that Seragon was formed only last year.
True enough. Thomas, though, overlooks the years of research that had already been done in Aragon and more recently at J&J on these receptor-related drugs, to say nothing of Sawyers' earlier work. Also, investigators have been changing the odds on cancer R&D in recent years.
Roche and Genentech are gambling big sums, their task now is to prove they know how to do it wisely.
- here's the release
Special Report: 2012 Fierce 15 - Aragon Pharmaceuticals