SmartCells CEO Reflects on Strategy Leading to $500M Exit with Merck

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has not been disclosed, and SmartCells’s CEO also declined to say the amount of guaranteed cash in the agreement, yet he said the firm’s 17 employees “have been rewarded very well for their efforts.”

The firm’s conservative fundraising strategy appears to have also benefited its angel backers. Generally speaking, startups typically need to get bought for way more than the amount they have taken from investors to provide handsome returns to shareholders. If SmartCells had raised a ton of cash, Zion said, it would have been much harder to see a lucrative return.

SmartCells began pursuing business development opportunities in earnest about nine months ago, Zion said, and after talking to multiple pharmaceutical companies the startup received a definitive buyout offer from Merck. “We’re on the doorstep of running human clinical studies,” he said, “and at this point it really does make sense to transition [our technology] to a large pharmaceutical company that can provide the type of resources you need to get a potential blockbuster diabetes drug like this through the clinic and onto the market.”

At Merck, the startup’s product candidate provides a strong early-stage prospect for the future of the big drug maker’s diabetes business. The drug giant reported that its top drug for Type 2 diabetes, sitagliptin (Januvia), brought in $1.7 billion during the nine months ending September 30.

SmartCells’s SmartInsulin product candidate is designed to work much differently than Januvia, which is an oral pill from the class of meds known as DPP4 inhibitors. The SmartCells treatment uses a polymer that is designed to release insulin only in the presence of certain glucose levels in the blood-which could be a major improvement for diabetics who struggle to keep their blood sugar levels steady. It has not yet reached human clinical trials, but Zion said that the firm has approval for an initial human study of the product in the European Union.

Merck plans employ a small team of soon-to-be former SmartCells employees to work on a transition of the assets from the startup to the big pharmaceutical firm, according to Zion, who will be part of that transition team. Then it will be up to Merck to lead development of the technology, which 35-year-old Zion has been working on since his days as a doctoral candidate in chemical engineering at MIT. (The startup’s other co-founder is his former MIT advisor, Jackie Ying, who has since left the school to be the executive director of the Institute of Bioengineering and Nanotechnology in Singapore.)

What does the CEO plan to do when his work is done at SmartCells?

“Frankly,” Zion says, “I’ll take a little bit of time off with my family, who has missed their husband and father for a good number of years.”

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5 responses to “SmartCells CEO Reflects on Strategy Leading to $500M Exit with Merck”

  1. James Geshwiler says:

    Congratulations Todd & company! Great benefits for patients seem on the near horizon. Wonderful return for all your angel investors.

  2. Bernat Olle says:

    Congratulations Todd and Tom. Way to put MIT ChemE on the map!

  3. Howard I Benesch, Ph.D. says:

    Congratulations Todd & company! Any chance of doing something similar with glucagon?

  4. donna schindler says:

    We, as parents of Type 1 diabetic children still up at 2:42 am after having contacted Todd Zion and Merck as of September 2011 almost a year after this buyout and No response are wondering in vain, where is SmartInsulin? Glad you have your 500 mil, Todd, and glad you have secured the rights to this wonderful invention that would cut drastically into your profits, Merck, but before I go check my beloved child’s bg with a finger prick of blood from his finger whilst he sleeps, and ascertain if he needs an insulin shot, or juice or God willing, neither, I ask, where is SmartInsulin?