For the second time in just over four years, former Biogen research executive Michael Gilman has steered a startup towards a buyout. This time, it’s Padlock Therapeutics, a fledgling developer of autoimmune disease drugs that’s about to join Bristol-Myers Squibb’s portfolio.
Bristol (NYSE: BMY) has agreed to acquire Padlock in a deal that could be worth up to $600 million if everything breaks right. Specifically, Bristol will pay up to $225 million in “upfront and near term” milestone payments—it didn’t specify how much it’s paying initially—for Padlock. The pharma company could shell out another $375 million in downstream payments as well, depending on how Padlock’s experimental drugs fare going forward. The deal should close during the second quarter of this year.
The buyout marks a quick turnaround for the investors in Padlock, which was formed less than two years ago and has raised just about $18 million since its inception, according to a blog posted this morning by Atlas Venture partner and Padlock chairman Bruce Booth. The startup was launched and incubated by Atlas. Johnson & Johnson Innovation, MS Ventures, and Index Ventures also took part in Padlock’s December 2014 Series A financing—a $23 million round that Padlock didn’t fully draw from, according to a company spokesperson. Booth writes in his blog this morning that, should all the payments go through for Padlock, investors could net “upwards of a 30x multiple” on the amount invested in the company.
It’s a bit of déjà vu for Gilman (pictured), who has now sold two Atlas startups to large companies. Some 12 years ago, he hooked up with Atlas and formed a startup called Stromedix, which took a fibrosis drug gathering dust at Biogen, advanced it, and then sold it back to the big biotech in 2012. After the deal closed, Gilman left Biogen again and reunited with Atlas as an entrepreneur-in-residence. That led to Padlock, which Gilman has led as CEO since the company’s inception. The company was based on work coming out of the Scripps Research Institute.
“Stromedix obviously turned out well for us, but it was kind of a slog for awhile,” Gilman says. “[Padlock] went a lot faster, and it felt like we were just getting going.”
Padlock zeroed in on what are known as protein-arginine deiminases, or PAD enzymes, and targeted them to make new drugs for autoimmune diseases. PAD enzymes can transform normal proteins into slightly modified forms attract the immune system’s attention, spurring it to attack otherwise healthy tissue. Padlock is developing PAD inhibitors to stop this from happening. If it succeeds, it could provide a way to treat autoimmune diseases that’s different than the biologics like adalimumab (Humira), which block a step further along in the immune system’s reaction.
In a press release, Bristol-Myers mentioned PAD blockers’ potential in treating rheumatoid arthritis and lupus. As Gilman explained to Xconomy a few years ago, these drugs might not just treat rheumatoid arthritis when the disease is established, but could prevent people with a specific genetic makeup from developing the disease in the first place. It’s that type of effect that Bristol is hoping for.
“Targeting PAD enzymes has the potential to be one of the most innovative mechanisms for treating autoimmunity which both strengthens and accelerates our immunoscience pipeline,” said Bristol chief scientific officer executive vice president Francis Cuss, in a statement. “By pursuing a treatment approach which may address disease progression earlier, we hope to transform the lives of patients with RA and other autoimmune diseases.”
Gilman says that initially, PAD enzymes seemed like a “super obscure piece of biology.” But as the startup moved along and began to develop its own molecules, suddenly companies and investors became interested in Padlock’s work. That gave the company options: Should it raise a Series B round? Think about an IPO? Sell?
“You’re always trying to do the math—you can’t predict the future. A year ago the public markets were super receptive, this year they not, next year, who the hell knows?” Gilman says. “At the end of the day it boils down to maximizing shareholder returns and taking the long view of how best to get these compounds to patients. And this opportunity seemed to satisfy both of those goals.”
Gilman says he’ll soon be figuring out whether he’ll stay on at Bristol-Myers, along with the rest of Padlock’s 10 employees. But after the dust settles, it wouldn’t be a surprise to see Gilman back in the company creation game again.
“I’m not quite ready to hang up my skates yet, but we’ll see,” he says. “I could use a vacation [first], that’s high on my list.”