Known for its audacious deals with biotech startups, Celgene ($CELG) forked over $100 million to gain an exclusive option to buy Acetylon Pharmaceuticals. Boston-based Acetylon's most advanced drug candidate is in a Phase Ib clinical trial for multiple myeloma, a blood cancer of strategic importance to Celgene.
Celgene is one of the world's top providers of drugs for myeloma, including Revlimid, Thalomid and its most recently approved therapy Pomalyst. Preclinical research has shown that Acetylon's lead drug, an HDAC6 blocker called ACY-1215, works synergistically with Revlimid, Pomalyst and a range of proteasome inhibitors, company CEO Walter Ogier said in an interview.
"Clearly everyone would like to enhance the effectiveness of their regimens in myeloma and other diseases … [and] do that in a way that doesn't add toxicity to the regimen," Ogier told FierceBiotech.
Summit, NJ-based Celgene, which initially invested $15 million in Acetylon early last year, has agreed to terms that could lead to a buyout of the startup worth $1.7 billion. If Celgene decides to pull the trigger on a buyout of Acetylon, the company must pay up at least $500 million in cash on top of the upfront option fee of $100 million. It would then pay Acetylon shareholders up to $250 million in regulatory milestones and up to $850 million based on sales of drugs from the startup.
Still, Celgene has no obligation to acquire Acetylon, and Ogier declined to reveal the amount of time that the buyout option remains in force. Such option deals are often great on the front end, as shown with the $100 million in non-dilutive cash Acetylon is getting from Celgene, but companies that accept such payments must live with the risks of the option holder declining to buy them or renegotiating for a lower purchase price.
"I think there's a little bit of downside risk if the big company doesn't exercise the option," Ogier said. "And there's always reconsideration for what the purchase price would be. If you negotiate these arrangements correctly, you can minimize those risks."
For instance, Acetylon has garnered a significant upfront option fee, and Ogier expects that the $100 million should enable the company to advance multiple programs to midstage clinical development, potentially making the company far more valuable if those studies pan out well. Acetylon is also able to advance its programs without further dilution to its investors, which consist mostly of wealthy individuals such as the Kraft family that owns the New England Patriots of the NFL. Acetylon has raised $50 million from the sale of equity to those backers and Celgene.
Celgene has barely flinched at hefty sums to acquire early-stage biotech companies. Last year the company scooped up Avila Therapeutics, which was in early clinical trials for a BTK inhibitor, for $350 million upfront and up to $575 million in future payments.
As Ogier says, his investors lacked interest in shooting for an IPO, a tangible option for many biotech companies with targeted cancer drugs like Acetylon. Others such as Epizyme ($EPZM) and Agios Pharmaceuticals ($AGIO) have pulled off two of the most successful public debuts this year, during which more than two dozen drug developers have gone public. The investors, many of which view Acetylon as a philanthropic investment, want to see its drugs get to patients. Acetylon has raised $50 million from the sale of equity to those backers and Celgene.
Celgene has the money and experience to take ACY-1215 all the way, but it's up to the biotech giant to decide whether it wants take full ownership of Acetylon.