Celgene Narrows Its Relationship With Sutro, No Acquisition Coming

Celgene Narrows Its Relationship With Sutro, No Acquisition Coming

Celgene (NASDAQ: CELG) is revamping its relationship with Sutro Biopharma, walking away from an option to acquire the privately held antibody drug developer but keeping potential rights to four of Sutro’s programs—none of which have yet reached clinical studies.

Their first deal was in 2012, and they expanded it two years later with Celgene taking 15 percent ownership in South San Francisco, CA-based Sutro, which has developed a way to produce therapeutic proteins without using live cells as miniature factories.

Cranbury, NJ-based Celgene is keeping its stake, now just under 15 percent, according to Sutro CEO Bill Newell, and has the right to buy more when Sutro sells shares in the future, either privately or in an IPO. The sides have agreed to cap the amount Celgene can buy, said Newell, but he declined to give more details. “We agreed that their appetite for more shares was appropriate,” he said.

When asked why they reworked the deal, Newell cited several factors, including new leadership at Celgene and a decision to prioritize a program that hits a protein called BCMA, which is present on multiple myeloma cells. Of the four programs Celgene can now license from Sutro, it is the only one with a disclosed target. Multiple myeloma, a type of blood cancer, is Celgene’s greatest focus and accounted for the bulk of its $11.2 billion in sales last year.

BCMA is already on Celgene’s radar. It paid $600 million last year for EngMab and its experimental antibody drug targeting BCMA. And it’s working with Bluebird Bio to develop a cell therapy that treats multiple myeloma by attacking BMCA.

The anti-BCMA product is what’s known as an antibody-drug conjugate—an antibody bonded to a highly toxic chemical that’s meant to zero in on its target without collateral damage in healthy tissues. Only two ADCs have been approved and remain on the market in the U.S., one from Seattle Genetics (NASDAQ: SGEN) and one from Roche’s Genentech group. (A third, from Pfizer, was withdrawn in 2010.)

Celgene came to prominence last decade by reworking thalidomide, which caused birth defects in the 1950s and ’60s, to become lenalidomide (Revlimid), a treatment for multiple myeloma. It has since built a constellation of partnerships, mainly with smaller biotechs, to feed its own pipeline. Its approved products now include treatments for other blood cancers and disorders, solid-tumor cancers, and autoimmune disease.

It is not unusual for Celgene, one of biotech’s most prolific deal makers, to streamline or alter its partnerships. The current myeloma accord with Bluebird started out as something larger; and instead of buying Acetylon Pharmaceuticals in full last year, Celgene bought two of its drugs and started a new company with them.

Last year, Celgene expanded its collaboration with Agios Therapeutics (NASDAQ: AGIO) of Cambridge, MA. The partners just ushered an acute myeloid leukemia drug onto the U.S. market in shortened time and have other programs in the works.

Another high profile Celgene deal is its $1 billion tie-up with Juno Therapeutics (NASDAQ: JUNO), a Seattle developer of CAR-T cell therapies. The 10-year accord, which included buying a 10 percent stake in Juno, has had a rocky start. Juno’s lead product was shut down after several deaths in clinical studies last year; based on Juno’s share price, Celgene recorded a $272 million loss in 2016.

Celgene has paid Sutro more than $120 million over the years, roughly a third of the total cash Sutro says it has raised from private investors and industry partners. Under the revised deal, Celgene can take full control of two of the four drugs now in its partnership with Sutro. The decision would leave Celgene responsible for taking the programs into clinical studies.

The most advanced programs Sutro owns outright are for blood cancers and ovarian cancer. If all goes well, the firm will ask FDA permission next year to allow the two drugs to enter clinical studies.

Image “Handshake” by Aidan Jones via Creative Commons 2.0

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