Sutro adds Merck KGaA to its roster of marquee 'armed antibody' partners

Sutro Biopharma has landed another marquee name for its list of development partners for antibody-drug conjugates. Merck KGaA, which has been struggling in the clinic for years, has signed on with the San Francisco-based biotech, offering a $300 million-plus package of milestones along with some unspecified research support.

Sutro CEO Bill Newell

ADCs have been pioneered by companies like Seattle Genetics ($SGEN), which have been linking cytotoxic agents with a targeting mechanism. And biotechs like Sutro have been stepping in to offer some next-gen technology in the field.

One of the big attractions in this particular deal is that Sutro gets to "access some truly exciting tumor biology that Merck Serono has been working on for years," says Sutro CEO Bill Newell. That gives Sutro a better opportunity to devise the right antibody and payload to do the most effective work in fighting cancer.

Adding new partners has helped Sutro grow its roster of employees to 65--a substantial figure for a private biotech. And Newell notes that the company has had a chance to balance out the equity investments it's received with nondilutive cash from its partners to help fund operations. An IPO is being considered, he says, but with more than a year's worth of cash in the bank, Sutro is keeping its options open on just how it will raise more cash in the future.

Celgene ($CELG), Johnson & Johnson ($JNJ) and Sanofi ($SNY) have already signed on to work with Sutro. And the biotech's last round--a $26 million package late last year--brought in the likes of Amgen ($AMGN) and Eli Lilly ($LLY) along with Celgene, Alta and SV Life Sciences. The new round gave Sutro enough money to ramp up a fresh effort in one of the hottest fields in cancer R&D: immuno-oncology, specifically using the checkpoint strategy that stole the show at ASCO for the past two years running. Newell said at the time that the company plans to quickly whip up bispecific antibodies that can mix and match the PD-1 and PD-L1 checkpoint approach with other cancer targets.

Merck KGaA has been promising to do more deals like this, including some potential buyouts as it struggles to right a crooked course in R&D. It blundered into a disaster with an errant program for multiple sclerosis several years ago, which triggered a decision to reorganize its research group. Then the German company compounded its error by sticking, until recently, with its failed cancer vaccine tecemotide. That effort, partnered with Oncothyreon ($ONTY), was abandoned just days ago after yet another clinical setback in Japan.

"We continue to explore opportunities that will allow us to better understand the potential ADCs have in directly targeting cancer cells," said Andree Blaukat, SVP and head of the translational innovation platform for oncology at Merck Serono, the biopharmaceutical division of Merck KGaA, based in Darmstadt, Germany.

- here's the release