Warp Drive Bio started up in 2012 with a potential buyer, Sanofi, already in place. Six years later the Cambridge, MA, company is being acquired—by another startup, Revolution Medicines.
The companies aren’t disclosing financial details of the acquisition, other than to say that Warp Drive’s shareholders will be issued Revolution stock. Third Rock Ventures founded both Warp Drive and Revolution, and Sanofi (NYSE: SNY) reached deals with both firms. Sanofi is Revolution’s largest shareholder, according to Third Rock partner Alexis Borisy. (He wouldn’t disclose Third Rock’s stake in either company.)
The companies expect to close the transaction by the end of the month.
The deal aligns two companies that are using similar approaches to combat cancer. Revolution and Warp Drive are both developing drugs that target RAS, a well-known family of proteins linked to cancer growth. Revolution’s lead drug blocks one particular RAS protein called SHP2, while Warp Drive has been trying to develop therapies that bind to RAS proteins that haven’t been reachable by traditional small molecule drugs. Revolution’s first SHP2 program began a Phase 1 study earlier this month, while Warp Drive’s drug candidates haven’t yet started human testing.
“By combining, we end up having comprehensive coverage of this pathway,” Revolution CEO Mark Goldsmith (pictured above) says. “We may have the deepest bench, if you will, of serving patients with these mutations.”
Still, the deal marks an unexpected conclusion to the story of Warp Drive. The company launched in 2012 backed by $125 million from Third Rock and Sanofi as well as an option by the French pharma to buy the startup down the road at a prenegotiated price. The company’s plan was to develop drugs derived from “natural products”—plants, animals, and organisms found in nature. For Warp Drive to get that investment and trigger the buyout option, it needed to hit certain milestones tied to proving its technology worked.
The Sanofi deal never materialized, however. In 2016, Sanofi and Warp Drive restructured their agreement and nixed the buyout option. At the time, Warp Drive CEO Laurence Reid told Xconomy that the change gave the company the opportunity to pursue deals with other partners. Meanwhile, Sanofi would still share in the upside through its Warp Drive equity stake, and the companies would still work together to make cancer drugs and antibiotics.
Today, Reid characterizes Sanofi’s role as strictly financial. Reid says Sanofi has no ownership of Warp Drive products and it is “a strategic investor in the company,” currently owning 40 percent. Following the acquisition, that equity stake will convert into a minority stake in Revolution, and Sanofi will have the same rights as the other investors in Revolution, Goldsmith says.
Reid says that Warp Drive spent the past year evaluating options to advance its work. It considered raising more cash or securing additional partnerships like the deals it has in place with GlaxoSmithKline (NYSE: GSK) and Roche. But Reid and Goldsmith knew of each other and the work of their respective companies, and had talked about teaming up. Goldsmith says drugs from the respective companies have the potential to work together, as well as in combination with other cancer drugs. As Warp Drive evaluated its options, Reid said that combining the two companies emerged as the best possible path forward.
While being sold for stock in a fellow private company, not to Sanofi, is a much different outcome than was originally envisioned for Warp Drive, Third Rock partner Borisy nonetheless said in an e-mail that the deal is “a great outcome” given the similar pursuits of both Warp Drive and Revolution.
“We have long been excited about the discovery work that [Warp Drive] had done and the potential of its technology platform and product pipeline,” he wrote. “The acquisition by [Revolution] strengthens [Revolution’s] focus, deepens its ability to target elusive cancer drivers within prominent pathways precisely and comprehensively, and will accelerate its trajectory as a leading oncology company.” (Borisy added that Third Rock played no role in the merger of the two startups; independent board committees at each company oversaw the negotiations.)
Warp Drive’s partnerships with GSK and Roche will continue, and Revolution will keep Warp Drive’s Cambridge site and its 43 employees for now, Goldsmith says. But eventually, that work will be consolidated into Revolution’s Redwood City, CA, headquarters, where the company currently employs 71. Goldsmith said it’s too early to project what the company’s headcount will be once the consolidation is complete, but Reid won’t be part of it. He will step away after the acquisition, and will consult with Revolution for a few months to help with the transition.
Revolution is the younger of the two companies, having raised its Series A three years ago. But it has also undergone some changes. The company started out developing both antifungal and cancer drugs based, like Warp Drive, on technology meant to derive drugs from natural products. But it shifted gears along the way, declaring itself a cancer drugmaker in April when it raised a Series B round. Three months later, Sanofi paid the company $50 million up front to co-develop SHP2 inhibitors, including lead drug RMC-4630. The Phase 1 study underway tests the drug in patients with advanced solid tumors.
In addition to integrating the two companies, Goldsmith is also considering whether to take Revolution public. Revolution’s finances are strong given its recent Series B and its alliance with Sanofi. But the Warp Drive deal could help build the case for an IPO.
“We’ll be looking at that, sometime in 2019 most likely,” Goldsmith said.
Ben Fidler contributed to this report.
Photo by Revolution Medicines