Deal Watch: Flagship Ventures Doubles Down On Microbiome

Scrip regularly covers business development and deal-making in the biopharmaceutical industry. Below is a roundup of some of the most noteworthy transactions that occurred between July 8-13. Deal Watch is supported by deal intelligence from Strategic Transactions.

Evelo/Epiva

A pair of microbiome-related deals with ties to venture capital outfit Flagship Ventures were announced July 12, with Flagship-backed biotechs Evelo Therapeutics and Epiva Biosciences merging to create an immuno-microbiome company that will develop next-generation therapies for cancer, autoimmune disease and inflammatory disease. The new company will operate under the name Evelo Biosciences, led by CEO Simba Gill and Chairman Noubar Afeyan, also the CEO of Flagship Ventures.

The VC firm launched both companies out of its Flagship VentureLabs Innovation foundry in 2014, following up on previous forays into microbiome therapies such as Seres Therapeutics Inc., launched in 2012. (Also see "Flagship Ventures Dives Into Microbiome, Launches Seres Health" - Pink Sheet, 27 Jun, 2012.)

Evelo says its platform combines expertise in microbiology, immunology, pharmacology and computational biology and that it has identified specific bacteria that offer the ability to "modulate the immune system in defined ways." The new company will create therapeutics that activate the immune system against tumors or down-regulate the immune system to address inflammatory or autoimmune disorders. Although the Cambridge, Mass.-based biotech's website does not include any pipeline information, it says the firm has identified several candidates for oral delivery "with the potential for many more."

The company resulting from the merger will have 42 employees and combine each firm's research and intellectual property to date, encompassing more than 50 patents and applications. Flagship has provided more than $40m in financing to the firms so far, with plans for additional investment "to support its rapid growth." [See Deal]

"As the microbiome field begins to turn its attention to diseases beyond gut infections, we see the combination of these two first-mover companies as an important strategic development aimed at creating sufficient mass to lead the field," Afeyan said. (Also see "Mining The Microbiome: Are Gut Microbes The Next Big Source Of Drugs?" - In Vivo, 15 Jul, 2015.)

Seres/Emulate

Also on July 12, Flagship-backed Seres announced a collaboration with "organs-on-chips" biotech Emulate Inc. to advance the latter's Intestine-Chip platform, a micro-engineered, living-tissue based system that models the human intestine. Earlier this year, Emulate raised a $28m Series B round with involvement from its Series A investors, plus new backers Hansjorg Wyss, NanoDimension and Cedars-Sinai Medical Center[See Deal].

Via its involvement in this collaboration, Cambridge, Mass.-based Seres plans to use the Emulate technology to identify novel bacteria compositions that may offer therapeutic potential. David Cook, the biotech's executive vice president of R&D, said Emulate's platform consists of multiple human cell types that may provide greater accuracy in recreating human gastrointestinal tissue and replicating interaction with the microbiome than previous conventional cell culture approaches have allowed.

Flagship was among the primary investors in Seres' initial public offering in January 2015, which netted the firm $143m [See Deal]. Over four venture rounds, Flagship and its syndicate have raised $134m for Seres.

Martindale/Viridian

UK specialty pharma Martindale Pharma announced the acquisition of ViridianPharma July 11 at undisclosed terms, but said the deal bringing in a set of niche pharmaceutical products would be immediately accretive.

Martindale said the deal fits into its larger strategy to expand its product portfolio and support growth of its range of hospital-initiated medicines on offer. Viridian, established in 2002, has developed five drugs with regulatory approval in the UK, all of which represent first-to-market specialty drugs for the hospital setting, Martindale added.

Martindale has worked with Viridian to manufacture and market two of those products, a caffeine citrate injection and a caffeine citrate oral solution, both for apnea of prematurity in preterm babies. The other products include a sodium chloride oral solution to correct hypernatremia in infants, a sodium citrate solution to prevent respiratory complications in pregnant women undergoing caesarean section, and peppermint water for symptomatic relief of minor upper digestive irritation.

Bayer/X-Chem

Bayer AG has expanded a drug discovery collaboration with X-Chem Inc.first signed in 2012, to use the Waltham, Mass., biotech's DEX platform to discover novel small molecules across a broad range of therapeutic areas and target classes. The firms signed a multi-target deal in 2012, but it was not disclosed until 2014: Bayer has licensed two compounds under the partnership to date, including a cardiovascular disease candidate in December 2014 [See Deal].

Under the initial agreement, Bayer paid upfront cash and provided research funding, with option exercise fees for each licensed program as well as preclinical, clinical, and sales milestones and potential sales royalties. The renewal and expansion focusing on innovative lead structures for complex drug targets in areas of high unmet medical need, announced July 12, provides X-Chem additional upfront and R&D funding, as well as the possibility of up to $528m in development and regulatory milestone payments, plus sales royalties and sales milestones. Bayer gets an exclusive option to license any candidates discovered over the course of the collaboration.

X-Chem generates candidates using its DNA-encoded proprietary small molecule library, comprising more than 120 billion molecules, which uses DNA tagging (via the chemical ligation of oligonucleotides) to record the molecule’s synthetic history and chemical structure during combinatorial synthesis processes. The resulting DNA “barcode” allows the compound to be quickly identified, through DNA sequencing, during drug-target screening.

In a release, Bayer Head of Drug Discovery Andreas Busch said the collaboration so far had exceeded expectations in terms of its output. "Complementing our in-house expertise with technologies and know-how of excellent partners is an integral part of our innovation strategy at Bayer," he said. "We have identified the DEX platform as a highly valuable extension for our drug discovery efforts."

But Wait, There's More

Since the last edition of Deal Watch, Scrip also reported that:

Belgium's Celyad SA out-licensed development and commercial rights in Japan, Taiwan and Korea on July 11 to its allogenic NKR-2 T-cell immunotherapy to Japan's Ono Pharmaceutical Co. Ltd. (Also see "Celyad Signs Deal With Japan's Ono For CAR-T-Like Program" - Scrip, 11 Jul, 2016.)

Japan's Nichi-Iko Pharmaceutical Co. Ltd. paid $736m on July 11 to buy US generic drug company Sagent Pharmaceuticals Inc. (Also see "Nichi-Iko Buys Sagent To Strengthen US Biosimilars Presence" - Scrip, 11 Jul, 2016.)

France's Servier SA paid €25m with potential for up to €713m in milestones July 11 for exclusive rights to US biotech Sorrento Therapeutics Inc.'s anti-PD-1 candidate STI-A1110 in solid and hematologic tumors. (Also see "Servier Expands Its Immuno-Oncology Presence With Sorrento PD-1 Deal" - Scrip, 13 Jul, 2016.)

Germany's Boehringer Ingelheim GMBH inked a research collaboration with Eli Lilly & Co. to test the big pharma's CDK 4/6 inhibitor abemaciclib with an early stage asset from BI, the latest in a string of ties between the companies. (Also see "Lilly Teams Up With Boehringer Ingelheim To Boost Abemaciclib" - Scrip, 13 Jul, 2016.)