Versant Ventures and Bayer have started several biotechs together. But today marks the first time the German drug maker takes a step further and buys one of them: cell therapy developer BlueRock Therapeutics.
Bayer already owns a 40.8 percent stake in BlueRock through its Leaps by Bayer venture arm. But it will pay $240 million up front for the rest of the company, which includes Versant’s similar-sized stake and the remaining shares owned by management. Bayer could shell out another $360 million for BlueRock, but those payments are tied to the progress of various programs and may not materialize. The deal values BlueRock at $1 billion and should close during the third quarter.
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The deal gives Bayer rights to a company using cells harvested from healthy donors to develop cell therapies for a variety of different diseases—from neurodegenerative disorders like Parkinson’s to heart failure to graft versus host disease. But the buyout is a gamble on an ambitious technology whose first human study, in Parkinson’s, will start later this year.
“The risk associated with developing early stage pharma programs is an inherent part of the business,” says Stefan Oelrich, the president of Bayer’s pharmaceuticals division. “But we believe BlueRock has one of the strongest IP portfolios in the space and the strongest team with the necessary expertise to drive the future development forward.”
BlueRock turns healthy donor cells into a large bank of induced pluripotent stem cells—which can then, in turn, be reprogrammed to become a wide range of cells in the body, depending on the type of disease it aims to treat. The company also has the ability, through a partnership with Editas Medicine (NASDAQ: EDIT), to edit the genes of those stem cells so the immune system won’t see them as foreign, or so those cells may produce a therapeutic protein. These cells are infused into a patient, where they’re meant to replace similar cells that have been damaged or lost.
These experimental treatments are “allogeneic,” or “off-the-shelf” cell therapies, which are cheaper and easier to produce than the “autologous” CAR-T cancer treatments that have come to market over the past few years and are made from each patient’s own immune cells. BlueRock’s therapies are being developed as ways to say, replace lost neurons for someone with Parkinson’s disease, and thus restore motor function; or provide new cardiac tissue for someone with a failing heart.
Despite its potential, stem cell technology has yet to fulfill its promise as a way to develop therapies that regrow, repair, or replace damaged tissue. What BlueRock is doing—putting neurons back into the brains of a Parkinson’s patient, for example—is “totally and entirely different,” counters CEO Emile Nuwaysir (pictured above). But it was seeded by Versant in 2015 based on the idea that stem cell technology, and the cell therapy field as a whole, is coming of age.
The technological processes needed to turn pluripotent stem cells into very specific types of adult cells have become more advanced, says Versant managing director Jerel Davis. And two CAR-T therapies have been approved in multiple countries and are now manufactured commercially. That means the regulatory path for these products is clearer, and there is more expertise in developing them. “All of those things converged to make this possible,” Davis says.
Versant licensed work at University Health Network in Toronto and Memorial Sloan-Kettering Cancer Center in New York, and joined with Bayer in December 2016 to plunk down a $225 million Series A round. BlueRock hasn’t raised any additional cash, though the company would’ve pursued an IPO if Bayer hadn’t stepped forward with an offer, according to Davis. “It’s rare that you get an exit of this magnitude two and a half years from [a Series A],” he says.
Nuwaysir wouldn’t say how far away BlueRock’s other potential treatments are from human testing. “Let’s talk later this year,” he says, though he adds that the Bayer deal should “help us develop better medicines faster.”
“They’ve seen the rapid progress we’ve made,” he says of Bayer.
BlueRock is one of four companies that Bayer and Versant have teamed to back since 2013. The others are Casebia Therapeutics, a gene editing company spun out of Versant-backed CRISPR Therapeutics (NASDAQ: CRSP); Century Therapeutics, a cancer-focused developer of stem cell therapies that raised a $250 million Series A round last month; and Inception 4, an eye drug developer that Bayer had an option to acquire but passed on. (Inception 4 was later acquired by Ophthotech.)
With Century and BlueRock, just Bayer and Versant supplied the financing for nine-figure Series A rounds. Davis says there isn’t anything else in the works with Bayer specifically, but “you’ll see more of that from us over the next two or three years.”
BlueRock, which has 130 employees in Cambridge, MA, New York, and Toronto, will be a completely independent unit of Bayer following the buyout, Nuwaysir says.