Celgene pays $200M to start ambitious Agios immuno-oncology pact

Celgene ($CELG) is retooling and expanding its long-standing research collaboration with Agios ($AGIO), handing over a $200 million upfront payment to get started on a new pipeline of drugs that focuses in on metabolism pathways for immuno-oncology. And as part of the deal the Big Biotech is also handing back the ex-U.S. rights it obtained in one of its option deals for AG-120 as it revises its set of goals with Agios.

The deal--which includes the potential for billions in payoffs if the work delivers multiple new products for commercialization--follows one of the more complicated paths that Celgene sometimes follows in its collaborations.

The highlights:

The 4-year pact can be extended by two years for an unspecified upfront. Agios will lead early-stage research, giving Celgene the right to opt in on each program for $30 million through Phase I dose escalation work. The two companies plan to split the cost and profits on the work, with Agios in line for up to $169 million in clinical and regulatory milestones on each.

Celgene will get a one-time chance to cherry pick a single metabolic I/O program, taking a 65/35 split of the profits and costs and offering up to $209 million in milestones to the smaller biotech.

Agios is getting first pick of the 50/50 programs it will lead, with the two companies alternating leadership after that. And if any inflammation or autoimmune drugs develop out of the deal, Agios will be in line for a goal of $386 million per product in milestones, with a set of tiered royalties on sales.

Two cancer metabolism programs discovered under the 2010 agreement, including a program focused on MTAP (methylthioadenosine phosphorylase) deleted cancers, will advance under the structure of the new research collaboration, according to Celgene.

The deal gives Agios a big boost toward its ultimate goal of becoming a real game-changer in the cancer field, CEO David Schenkein tells me. Agios now has 5 molecules in development, two in pivotal programs, two of them wholly owned. It’s a chance to add I/O metabolism to the extensive work it's already been doing in cancer metabolism as well as rare genetic diseases. And to hear Schenkein tell it, there’s no other company in the industry that compares to Celgene when it comes to collaborations.

“I’ve always felt they have been, from the business development perspective, incredibly creative where nobody loses,” says the CEO. “Other companies don’t do that.”

It also allows continued growth at a company that has seen its staff swell to 250. By the end of the year, says Schenkein, that number will be around 300, with $390 million in the bank to help fund a runway that now extends into 2018.

Celgene first allied itself with Agios back in 2010, partnering on cancer metabolism, which generally deals with cell growth and proliferation. That deal led Celgene to grab worldwide rights to AG-221--a mutant IDH2 protein inhibitor--in 2014. AG-120 is an IDH1 inhibitor. The company came back for AG-881 with an option deal in 2015.

This new deal leaves Celgene with the kind of multiple choices it likes to have in emerging R&D fields.

:CELG has been aggressively pursuing entry into the immunotherapy/ immuno-oncology category via a series of partnerships, having inked recent deals with JUNO (OP) and BLUE (OP) to develop CAR-T assets and with AZN (MP) to develop a PD-L1 inhibitor," Leerink noted Wednesday. "The amended arrangement with AGIO provides CELG with options with greater potential upside, albeit with a greater level of risk given the unknowns regarding the metabolic immuno-oncology therapeutic class. In other words, CELG has exchanged $200mm and AG-120 – a low value, high-probability-of-success asset – for a high potential but high risk shared research program in an unproven category with potentially broad utility. This approach is consistent with its overall BD strategy, including the acquisition of several assets in Immune-Inflammatory diseases (Ozanimod and GED-0301)."

Agios sounds happy to have AG-120 back in the wholly-owned stable of drugs. It’s now laying the foundation for a pivotal study in AML, with additional studies planned for solid tumors including cholangiocarcinoma and glioma. But investors appeared somewhat less enthusiastic about the change-up. Agios' shares slipped into the red late Wednesday morning as analysts sized up the pros and cons.