developing drugs that target BET, a member of the reader class, and EZH2, a member of the writer class. But Genentech won’t be completely excluded from the potential to benefit from those programs. That’s because the second major feature of the deal is that it enables Genentech to acquire Constellation outright if certain pre-negotiated terms are met. Such “hybrid” deals—which include both up-front capital and the potential for a future exit strategy for the smaller player—offers a win-win for both parties, Sabry says. “It solves the liquidity problem for them and it allows us to buy a future cash-flow stream at a price that works for us,” Sabry says.
For Constellation, retaining the rights to its lead programs until such time as Genentech decides to buy out the company is particularly satisfying, Goldsmith says. “It’s a way to monetize the programs without ceding rights to them,” he says. At the same time, pre-arranging a potential buyout “creates inherent value,” Goldsmith says. “It provides all our shareholders the possibility of liquidity under attractive terms.” For Genentech, it’s at least the second time in the past year that it has been willing to strike a creative deal with a Boston-area startup, following its June partnership with Forma Therapeutics.
Prior to today’s announcement, Constellation raised a total of $70 million in venture funding from Third Rock, The Column Group, Venrock Associates, SR One, and Altitude Life Science Ventures. Goldsmith says the company is on track to move a drug candidate from its BET and EZH2 programs into the clinic by the end of this year. With that much suppor and this new Genentech deal, Goldsmith says, the mood amongst the company’s 60 or so employees is giddy. “We’re very excited,” he says. “This is a fantastic validation of our strategy.”
