Ablexis didn’t force its investors to wait very long to see some returns. The San Francisco-based biotech company is announcing today it has struck an unusual deal to provide its antibody drug discovery technology to five big drugmakers simultaneously, as an alternative way to generate returns without waiting around for the unlikely event of an IPO, or a lucrative company takeover.
Terms of the deal are mostly confidential, although Ablexis CEO Larry Green is disclosing that New York-based Pfizer (NYSE: PFE) is one of the companies obtaining rights to the Ablexis technology for discovering and developing antibody drugs. Pfizer, along with four other unnamed companies, are paying at least $1 million each upfront to Ablexis to the right to its transgenic mouse technology. More importantly, when Ablexis is ready to officially hand over the technology, it will get payments worth more than $10 million from all five big drugmakers, which will provide liquid returns to investors, Green says. He didn’t say how long it will be before Ablexis is ready to deliver the finished product, and collect all five of the 8-figure checks.
The deal represents a potentially quick buck for Ablexis’ investors. The company raised $12 million from Third Rock Ventures and Pfizer Ventures in a Series A round back in June. The vision was all about creating a new genetically engineered mouse that could be a prolific engine for antibody drug candidates that are potent inhibitors against certain markers found on diseased cells, while mostly sparing healthy tissues. Past innovators in the antibody world, like Protein Design Labs, Abgenix, and Medarex, have either been acquired or otherwise encumbered by business deals that make it difficult for their technology to get in the hands of Big Pharma companies. And there’s a huge thirst in Big Pharma to get into the antibody drug market, which basically didn’t exist in the mid-90s, but now comprises a $30 billion global market.
“This really speaks to the acute need out there on the part of experienced antibody drug discoverers and developers for robust platforms,” Green says.
Ablexis, as I described in a feature back in June, is all about creating genetically modified mice that can churn out a wide diversity of fully human antibodies against a certain target. Instead of creating these antibodies in a lab dish, and sending them off to the customer, the product that Ablexis intends to deliver to its Big Pharma customers is an actual mouse. These mice, in all the vast complexity of their live immune systems, will be able to offer a better guide to antibody discovery teams as they try to pick candidates that are likely to pass all the clinical trials required by the FDA before a drug can be sold in the U.S.
Once Ablexis finishes its work on its platform, called the AlivaMab, it will deliver the mouse to all five members of its consortium at the same time, and collect the equal eight-figure license fees, Green says. Each company will have unencumbered rights to use the Ablexis technology. That means they won’t owe the little company future milestone payments or royalties, and they will be free to develop antibodies against any target, or against any disease of their choosing.
Green and the Ablexis chairman, Scott Greer, chose to structure the deal this way partly based on their experience in the past at Fremont, CA-based Abgenix. While deals from the past may have given exclusive access to a single company, or divvied up the technology licenses for narrow uses against specific targets or diseases, Ablexis felt that would be counterproductive.
“We’ve found that putting encumbrances on platforms doesn’t necessarily add any business upside for the company, but it provides limitations for the company and end user,” Green says.
While this original consortium is made up of five of the world’s top 15 pharmaceutical companies, Ablexis has retained the right to structure other deals with other companies, Green says. So the company hasn’t put a limit on the maximum amount of money it can make from the AlivaMab mouse technology, he says.
Ablexis certainly isn’t the only company with what it hopes will be a platform technology for discovering antibodies, that will useful to big drugmakers. Lebanon, NH-based Adimab has struck a series of partnerships around its ability to pump out antibody candidates with a yeast-based technology that’s designed to be faster and cheaper than existing methods.
Without having hard numbers to crunch, it’s impossible to say how rich of a value Big Pharma companies are really placing on the Ablexis technology. But when asked about the deal structure, Green talked about how it provides a return to his investors without having to wait around for an IPO that may never materialize, or a big ticket acquisition by a single buyer. The upfront cash provides more operating capital to help build the company, without diluting the value of the stakes of earlier investors. Cary Pfeffer, a partner with Third Rock, noted in a statement that today’s deal provides a “resounding endorsement” of the Ablexis technology, and also creates a “near-term liquidity event,” in which his firm and others will be able to cash out.
“This consortium provides the return on investment that our investors are looking for,” Green says. “Typically, companies have provided a return on investment through an IPO or an acquisition. But there’s always uncertainty, especially in today’s environment.”