Afraxis, a San Diego biopharmaceutical founded in 2007, says today it has licensed exclusive global rights for all of its proprietary drug compounds to Genentech, the Roche subsidiary based in South San Francisco, CA.
While details of the deal were not disclosed, it still counts as an exit. Afraxis says it’s eligible to get as much as $187.5 million from Roche, including the upfront payment and various milestone payments for hitting research, development, and commercialization goals. Afraxis was founded and was backed exclusively by Avalon Ventures. The San Diego venture firm has not disclosed its total investment in Afraxis, but it’s at least $7.2 million (and probably about $12 million), based on the company’s past disclosures.
Perhaps more importantly, the Afraxis deal with Genentech represents the latest in a series of profitable payouts for Avalon, which seems to excel at early investments in biopharmaceutical startups. Earlier this month, BioMarin Pharmaceutical (Nasdaq: BMRN) acquired San Diego-based Zacharon Pharmaceuticals for $10 million upfront, with potential milestone payments that were not disclosed.
In a statement today, Avalon partner Jay Lichter says, “Avalon’s approach to investing in companies at the earliest stages and staying actively involved in company management is proving to be a successful strategy for life science investing.”
Lichter, who led the firm’s investment in both Zacharon and Afraxis, says the BioMarin deal with Zacharon actually involved the acquisition of two drug development programs—and one more deal involving an Avalon biopharma startup is expected to close in the next week or so. That means the San Diego venture firm is now expecting payouts on four drug development programs that all began since 2007. Happy New Year.
In fact, Lichter says Avalon invested in six target-stage drug development programs at five San Diego startups—Afraxis, Zacharon, Avelas Biosciences, RQx Pharmaceuticals, and Sova Pharmaceuticals—“and in all six, we produced a clinical candidate or near clinical candidate.” At a time when the attrition rate of preclinical drugs is 70 or 80 percent, Lichter says Avalon has gone six-for-six. And by next week, he says, four of those six programs will have been acquired or licensed.
In the case of Afraxis, Avalon pounced on a 2007 breakthrough in the lab of Susumu Tonegawa, a Nobel laureate and MIT professor of biology and neuroscience. Avalon moved to build the lead drug development program at Afraxis around the P21-Activated kinase (PAK), a protein that regulates the development and activity of neural structures called dendritic spines. Tonegawa’s research indicated that PAK was a potential drug target for Fragile X syndrome, the second leading cause of mental retardation.
In 2010, Lichter told Xconomy that Afraxis had developed a library of several hundred compounds that can turn off the PAK1, the specific member of the PAK family believed responsible for Fragile X symptoms. By then, Afraxis also saw opportunities for using its library of compounds to target other disorders of the central nervous system, such as schizophrenia and Alzheimer’s disease. PAKs also have emerged as potential targets for cancer and anti-inflammatory drugs, Lichter says.
The only discordant note may be that development of a drug candidate for Fragile X will likely end with the Genentech licensing deal. Afraxis moved work on Fragile X to a collaborative effort with the NIH Therapeutics for Rare and Neglected Disease (TRND) program in 2011.
Lichter says he expects that effort will be terminated by Genentech, “because they will want rights for all indications.”