Atlas Leans on Amgen, Novartis to Build New Startups

Xconomy Boston — 

[Corrected on 5/16/13, 9:11 a.m., see below] Fresh off raising $265 million to bankroll its ninth fund, Atlas Venture has forged strategic partnerships with Amgen and Novartis to help supply the bigger companies with innovative new drug candidates. The deals represent the latest in a string of alliances that is bringing venture firms and Big Pharma closer together than ever before.

Cambridge, MA-based Atlas announced today that it has struck what it calls “corporate strategic partnership” agreements with Amgen (NASDAQ: AMGN) (through its VC fund, Amgen Ventures), and Novartis (NYSE: NVS). According to Atlas partner Bruce Booth, both pharma giants are “significant” limited partners in Atlas’s latest fund, Atlas IX, which is expected to create at least 15 biotech companies.

Through those agreements, Atlas, Amgen, and Novartis will essentially work together to build biotech startups without locking them into transactions that cap their value.

Here’s how a partnership for a theoretical company would work, according to Atlas’s Booth. Atlas would scout out an interesting drug development platform or therapeutic from academia and seed finance it with around $500,000—or more, with the financial help of Amgen and Novartis—to validate the academic findings. If Atlas is convinced after a six to 12-month period that the technology works, it would put together a $10 million to $15 million Series A round to turn the idea into a company and pursue the next set of experiments needed to gather convincing evidence to support the platform, or various new drug candidates. Amgen or Novartis could be part of that financing round if they choose, but have no contractual obligation to do so.

Amgen and Novartis, in fact, won’t get any specific transactional rights or equity stakes in the companies that get created. Instead, they will give advice and feedback during the creation process and get the closest seat to watch those companies grow. Amgen and Novartis can then decide, as the startups mature, to eventually license a product if there’s a piece they like, or bid to acquire the entity altogether down the road.

“During that whole time Novartis and Amgen would really have a close proximal view of the scientific progress of those companies and at some point may say, ‘You know what? We like that enough that we’d like to integrate that into our R&D portfolio,’” Booth says. “That would certainly be a successful outcome for us and for [them].”

Atlas has between six and 10 seed-stage companies in Atlas IX already, all of which the firm has been actively communicating with both Amgen and Novartis about. The idea from here is to “cherry pick the ones” that are worth progressing into fully-invested companies, according to Booth.

The partnership is the latest in an … Next Page »

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