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Sold For Parts, Accelerator Grad Allozyne Reaches End of the Line

Xconomy Seattle — 

With barely a whisper, Seattle biotech Allozyne has been broken up for parts, with most of its assets sold off earlier this summer to a previous licensing partner, Xconomy has learned.

The buyer was MedImmune, the biotech division of the multinational drug company AstraZeneca (NYSE: AZN), and the deal effectively ends the nine-year run of what was once a big name in Seattle biotech circles.

“MedImmune did not acquire Allozyne; however, we did purchase rights to selected patents and technology that the company had either developed or licensed in,” according to MedImmune spokeswoman Tracy Rossin.

Rossin did not elaborate, but a source familiar with the deal told Xconomy that while not a corporate change-over, the purchase is for “substantially all of Allozyne’s remaining assets, including IP.”

The main asset left under Allozyne’s roof is its lead compound, AZ01, according to chairman Steve Gillis (pictured above), who is a managing director in the Seattle office of ARCH Venture Partners, a top investor in the company. In late 2011, Allozyne’s CEO and president at the time, Meenu Chhabra, told Xconomy that AZ01, a longer-acting version of the multiple sclerosis treatment beta interferon, was “on a Phase 3 trajectory in 2012“—a big leap for a drug that had at that point only completed Phase 1 studies.

There’s no record in the NIH’s clinical trial database or Alloyne’s own press materials of a Phase 3 trial ever starting. ARCH’s Gillis told Xconomy that AZ01 is “Phase 3 ready” and “in the process of being partnered.”

Gillis also wrote in an e-mail that “the MedImmune transaction provided up front funds and future payouts” but did not disclose details.

Allozyne sign

The tenant directory in the lobby of 1600 Fairview Ave. East in Seattle.

It’s unclear how many—if any—employees remain. When asked, Gillis didn’t respond by publication time. (At last check, the Allozyne name is still posted in the lobby of the building the firm occupied in Seattle.)

Allozyne raised at least $50 million in venture funding from ARCH, MPM Capital, OVP Venture Partners, and Amgen Ventures, plus several million more in debts and warrants.

A high-profile graduate of Seattle’s Accelerator incubator, Allozyne suffered several bumps and bruises in recent years, starting around the time of Chhabra’s “Phase 3 trajectory” pronouncement. In late 2011, plans fell apart for a merger into the shell of a failed biotech, which would have taken Allozyne onto the public markets. From that point on, SEC records show its fundraising activity limited to a few million dollars in debt and warrants.

In early 2013, Xconomy reported that Allozyne let several employees go, in a move the company described as “furloughs.”

At that time, the company’s website listed only two remaining members of the management team, CEO Chhabra and chief scientific officer Ken Grabstein. Chhabra, who joined Allozyne as CEO in 2007, has since moved on. Earlier this summer she joined Proteostasis Therapeutics in Cambridge, MA, as president and CEO. The Proteostasis announcement, dated June 30, praised Chhabra’s work at Allozyne that “resulted in the lead program advancing directly from Phase 1 to Phase 3 and also triggered a strategic collaboration with a top tier pharmaceutical company that culminated in an eventual acquisition.”

Though the implications of this statement—that Allozyne was acquired outright and that AZ01 has reached Phase 3 testing—are contradicted by the comments from MedImmune, ARCH’s Gillis, and others, it was until now the only public acknowledgment of any sort of sale. We reached out to Chhabra for comment. Via e-mail, Proteostasis investor relations manager Susan Shepard replied that Chhabra “is legally prohibited from talking about Allozyne because of contractual obligations.”

Former CSO Grabstein now describes himself as independent, with his tenure at Allozyne ending in June 2014. He also declined to comment.

With technology spun out of the California Institute of Technology labs of David Tirrell—who was an Allozyne board member—and William Goddard, Allozyne specialized in engineering techniques that made slight changes to the structure of proteins. Known as site-specific modification, the approach allows therapeutically beneficial materials, such as powerful cell-killing toxins, to be attached to proteins to create, in theory, new or better pharmaceutical products. (When reached for comment, Caltech licensing officials called the Allozyne situation a confidential matter, and Tirrell did not return requests for comment.)

Allozyne soon put its weight behind AZ01, which was made by attaching a polyethylene glycol chain to the multiple sclerosis drug beta interferon. This process, called pegylation, creates a version that stays in a patient’s system longer, requiring less frequent dosing—a big deal for patients who have to sit for hours during infusions. Beta interferons were already the best-selling MS drugs; Allozyne wanted to make a better one.

But others had the same idea. It was a crowded field.

San Diego’s Ambrx, also a specialist in site-specific modification, had a development deal with Merck Serono. But five years later there’s no sign of it. (Ambrx tried unsuccessfully to go public this year, and its regulatory filings made no mention of the program.)

More important, Biogen Idec (NASDAQ: BIIB), the leader in multiple sclerosis medicine, beat Allozyne to the punch. Biogen announced positive Phase 3 data in 2013 from its own longer-lasting beta interferon—essentially an improvement upon its own flagship product Avonex. Then Biogen last month won approval for the new drug, now called Plegridy.

When asked how AZ01 stacks up now that Plegridy is on the market, Allozyne chairman Gillis wrote: “Longer half-life. Potential for less frequent dosing. Other players in the MS space are natural partners as they don’t have a Plegridy.”

Based on venture capital raised, Allozyne was for a while the most successful graduate of Seattle’s Accelerator, a biotech startup incubator formed in 2003. Thong Le was on the Accelerator board for seven years before rising to chief executive in early 2014. When asked about the Allozyne situation, he said it was the first he had heard of it.

Accelerator was not an investor in the company once it left the fold in 2007 and did not formally track its progress, but generally, Le said, “When a small company is an arms race there’s a small window of opportunity to be successful.”
As with the other Accelerator graduates that have been acquired or subjects of major transactions—Xori, VLST, and Acylin Therapeutics—the details of Allozyne’s purchase remain private.

Accelerator’s track record is important, because it is trying to expand its franchise to New York City, as Xconomy reported in August. It raised $51 million for its fourth fund as it prepared for its New York debut.

At the time of the New York launch, Le told Xconomy’s Ben Fidler that its mix of deals and investments is going to change, with not as many long-term bets on very early stage startups. “You’ll see a very different level of discipline and focus around the type of deals we’re going to do,” he said.

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3 responses to “Sold For Parts, Accelerator Grad Allozyne Reaches End of the Line”

  1. Carlos Danger says:

    Ah yes, yet another smashing success of the Acellerator….I wonder whether any have yet to actually make a dime relative to the original cash invested by the VCs?

  2. Stephen McCraith says:

    Nice Job Ken!

  3. And then there was one……. Come on Theraclone (fka Spaltudaq).