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Vertex Bets $950M on Semma and a Stem Cell Therapy for Diabetes

Xconomy Boston — 

Vertex Pharmaceuticals is paying $950 million to acquire Semma Therapeutics, a biotech startup developing a stem cell therapy for type 1 diabetes.

The deal announced Tuesday is Vertex’s first step into the diabetes field and is the latest in a string of moves the Boston company has made to diversify beyond its core franchise of commercialized and experimental cystic fibrosis treatments. The $950 million figure is also the largest amount that Vertex has committed up front in any deal in its history, according to the company. And it’s a bet on a treatment that has yet to prove its worth in human studies.

Shares of Vertex (NASDAQ: VRTX) ticked down by half a percent after the deal was announced Tuesday.

Cambridge, MA-based Semma is developing a stem cell-based treatment for type 1 diabetes, a chronic condition in which the immune system destroys the cells in the pancreas that produce insulin. Patients who have the disorder require regular insulin injections or infusions of the hormone from an insulin pump. Type 1 diabetes has no cure.

Semma uses embryonic stem cells—which can mature into most any type of cell in the body—to make insulin-producing beta cells and then infuses them into a patient in a one-time procedure. The company has also developed a device that encapsulates these new cells, which in theory might protect them from the immune system and prevent a patient from having to take immune-suppressing drugs for life. The goal is for the procedure to restore patients’ ability to make insulin.

The company’s work is based on the research of Douglas Melton, a Harvard University stem cell biologist, and Semma has been able to raise more than $150 million to move it forward. But the treatment has much to prove. Semma hasn’t yet begun human testing; it just touted results from animal studies at a medical meeting in June. It also trails a rival program being developed by San Diego-based Viacyte that is already in clinical trials.

The deal is thus the most significant gamble yet for Vertex, which is best known for its multi-billion dollar franchise of cystic fibrosis drugs. Under CEO Jeffrey Leiden, the company has been trying to branch out beyond CF and add medicines—through research and dealmaking—for other specialty diseases that it can sell with a small sales force. The company, for instance, has several drug candidates in development for the rare diseases alpha-1 antitrypsin deficiency and focal segmental glomerulosclerosis, a debilitating kidney disorder. But it has also cut deals with companies like Moderna (NASDAQ: MRNA), CRISPR Therapeutics (NASDAQ: CRSP) and Kymera Therapeutics to get access to cutting edge technologies like messenger RNA therapeutics and CRISPR gene editing and experimental medicines sickle cell disease, beta-thalassemia, and more. The Semma buyout is its second major purchase of 2019: In June, the company paid $245 million for Exonics Therapeutics, which is developing gene editing therapies for Duchenne muscular dystrophy and myotonic dystrophy type 1.

The deal has been approved by the boards of directors of both companies, and by Semma shareholders, which include Arch Venture Partners, MPM Capital, and others. Melton will remain chair of Semma’s scientific advisory board when the deal closes, which should occur later this year.

Here’s more on Vertex and its diversification plans.