Easy as ADC?

GAITHERSBURG, Md.—In mid-October, London-based AstraZeneca announced that U.S.-based Medimmune, its global biologics research and development arm, had acquired Spirogen, a privately-held biotech company focused on antibody-drug conjugate (ADC) technology for use in oncology.

 

The deal called for MedImmune to acquire all of Spirogen’s shares for an initial consideration of $200 million and additional deferred consideration of as much as $240 million depending on various predetermined development milestones. Existing out-licensing agreements and associated revenue streams were excluded from this acquisition.

 

Moreover, the deal wasn’t just about grabbing Spirogen—MedImmune also entered into a collaboration agreement with ADC Therapeutics to jointly develop two of the latter’s antibody-drug conjugate programs that are in preclinical development. MedImmune will also make an equity investment in ADC Therapeutics, which has an existing licensing agreement with Spirogen.

 

That $20 million equity investment in ADC Therapeutics will be matched by Auven Therapeutics, which is the majority shareholder of ADC Therapeutics and also majority shareholder of Spirogen before the sale of that company.

 

The collaboration agreement with ADC Therapeutics will include an upfront payment with predetermined development milestones for two programs from a defined list and a cost- and profit-sharing arrangement, with MedImmune representing the majority share. ADC Therapeutics will also have the option to co-promote one of the products in the United States.

 

Both deals are a potential boost to AstraZeneca’s oncology pipeline, as antibody-drug conjugates offer the promise of both high potency and selective targeting of cancer cells. Spirogen’s proprietary pyrrolobenzodiazepine technology attaches potent cytotoxic agents, sometimes called warheads, to specific cancer-targeting antibodies using biodegradable linkers, so as to optimize delivery of the cancer drug to tumor cells and minimize toxicity to patients.

 

“We believe that pyrrolobenzodiazepine-armed antibody-drug conjugates will emerge as a critical component in the next generation of cancer biologics with the potential to make a difference for oncologists and their patients,” said Dr. Chris Martin, CEO of Spirogen, in the announcement about the acquisition. “We look forward to combining our world-class capabilities in this area with MedImmune’s ability to develop this exciting class of oncology drugs.”

 

According to Dr. Bahija Jallal, executive vice president of MedImmune, “Antibody-drug conjugates are groundbreaking technologies with the potential for directly targeting many types of cancer tumors while safeguarding healthy cells. The cutting-edge technologies developed by Spirogen and ADC Therapeutics complement MedImmune’s innovative antibody engineering capabilities, enabling us to accelerate antibody-drug conjugates into the clinic.”

 

There doesn’t seem to be much criticism of the acquisition and equity investment among analysts, though the topic of generic competition does seem to crop up in the discussion. In the case of Zacks Investment Research when it commented on the deals, the firm simply noted neutrally that generic competition has been adversely affecting AstraZeneca that past few quarters and reminded investors that deals like this “are in line with AstraZeneca’s strategy of boosting its pipeline by acquiring candidates.”

 

In an interview with Bloomberg, Kepler Cheuvreux analyst Fabian Wenner went a bit farther to say that while the acquisition deal is good for AstraZeneca, the company still needs to address the impact of generic competition and shore up its late-stage pipeline as the patent expiration for Crestor looms.

 

Auven hadn’t been motivated until very recently to consider an outright sale of Spirogen, apparently, according to Stephen Evans-Freke, co-founder and managing general partner of Auven and chairman of Spirogen, saying, “While our business strategy for Spirogen had been to license its ADC warhead technology to multiple industry partners, an unsolicited approach by an unrelated party to this deal to acquire the company caused us to explore with Lazard the potential for enhanced value realization through an outright sale. While we had interest from various parties, MedImmune stood out as an ideal partner. We were very pleased with the outcome.”