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Celgene Puts $35M into VentiRx, Gets Option to Buy Cancer Drugmaker

Xconomy Seattle — 

Celgene became one of the world’s biggest biotech companies because of its drug for blood cancers that scientists say works at least partly by stimulating an immune reaction against cancer cells. Now it’s putting some big money into a partnership with Seattle-based VentiRx Pharmaceuticals that aims to go a step further in developing cancer immunotherapies.

Summit, NJ-based Celgene (NASDAQ: CELG) is announcing today it has agreed to pay $35 million upfront to VentiRx as part of an exclusive, worldwide collaboration to develop a drug that stimulates the immune system to fight cancer cells. Full terms of the deal aren’t being disclosed, but Celgene is getting an option to make a future equity investment in VentiRx and an exclusive option to acquire the company at a pre-determined price if clinical trials are positive.

Through this alliance, VentiRx will be able to charge ahead with a pair of large, well-controlled clinical trials that would otherwise be too expensive and difficult for a little company with 10 employees and about $53.9 million in total venture backing. The deal also enables VentiRx’s investors—Arch Venture Partners, Frazier Healthcare Ventures, Domain Associates, and MedImmune Ventures—to count on a predictable return if the drug pans out. And for Celgene, the deal offers a way to invest in an edgy new immunotherapy at a time when other companies such as Bristol-Myers Squibb have shown this approach can work with drugs like ipilimumab (Yervoy) and an experimental PD-1 antibody.

“We talked to a number of different groups, but Celgene really jumped out at us,” says Rob Hershberg, VentiRx’s CEO. “They’ve demonstrated they can do very creative deals that are well-financed, and they’ve shown they are an excellent partner. They are a company that knows the oncology space, and they have a strong and growing interest in immunotherapy.”

VentiRx CEO Rob Hershberg

Celgene did a similar deal last year with San Francisco-based Quanticel Pharmaceuticals, in which it agreed to provide the small company with a $45 million upfront fee in exchange for an option to acquire the company at a later date, says spokesman Greg Geissman. In the case of VentiRx, Celgene sees the potential for combining the new immune-booster with other drugs. One such combination the company is looking at closely involves its own lenalidomide (Revlimid) in combination with Genentech’s rituximab (Rituxan). “As we look at a number of collaborations, our main goal is to identify promising technologies that have potential to really make an impact on treatment in cancer and other diseases,” Geissman says.

The companies aren’t saying how long Celgene’s option to acquire VentiRx lasts, but Hershberg says the partnership provides support for the development of VentiRx’s VTX-2337 over the next three to four years.

The scientific concept at VentiRx is to create conventional small molecule drugs that stimulate Toll-like receptors (TLRs), specifically one called TLR8. The family of TLRs are key components of the body’s innate immune system—the first-line defense that recognizes foreign invaders at their point of entry under the skin, in the mucus linings of the nose, and in the gut. VentiRx’s lead drug candidate, VTX-2337, is designed to be given in a once-weekly injection just under the skin, by a medical professional. It is meant to stimulate TLR8, Hershberg says.

VentiRx has been seeking to show how its drug works in combination with the chemo agent doxorubicin (Doxil) in animals, and it recently saw some encouraging signs of anti-tumor activity in a Phase Ib clinical trial, Hershberg says. The company has also run preclinical studies, as well as an early-stage clinical trial, that indicate the experimental immune-stimulator could augment a combination of chemotherapy and Eli Lilly’s cetuximab (Erbitux).

Based on those early results, Celgene and VentiRx are forging ahead with the kind of long-term, expensive clinical trials that will be needed to prove the value of the product to physicians, regulators, and insurers. VentiRx plans to start one mid-stage trial of about 210 patients with ovarian cancer who will be randomly assigned to get Doxil or Doxil and VTX-2337, Hershberg says. After that, VentiRx will start another mid-stage trial that will randomly assign about 150 patients with head and neck cancer to get VTX-2337 plus a chemo agent and cetuximab, or the chemo and cetuximab alone. VentiRx will retain control over the development program, although a joint steering committee of Celgene and VentiRx executives will oversee the work, Hershberg says.

Those trials ought to give researchers a clear-cut answer on the value of the new VentiRx drug, which is the kind of evidence the company has been looking to gather for some time. VentiRx has had to watch its spending carefully to get this far. Back in September 2011, the company closed its San Diego branch and consolidated operations in Seattle as it looked to preserve cash. Even now with the additional money coming in from Celgene, Hershberg says the company plans to stay “virtual” with about 10 employees, and keep getting its work done through a network of contractors. “This is really positive step for us to show that the model works for setting up companies virtually, and still being able to do significant clinical development,” Hershberg says.

Like most biotech deals, some personal connections between the companies played a role in getting the ink on paper. Tom Daniel, Celgene’s president of research and early development, used to work at Seattle-based Immunex and at Amgen’s operations in Seattle. He got to know both Hershberg and Steve Gillis, the Immunex co-founder and now chairman of VentiRx, during his time there. “Tom is an extremely thoughtful guy, and there’s definitely a connection there,” Hershberg says.