The new CEO of AstraZeneca, Pascal Soriot, has just written a huge check, worth $240 million in upfront cash. It’s going to a little biotech startup in Cambridge, MA, that started a couple years ago with a far-out idea for making drugs in a fast, cheap, and completely unorthodox way.
London-based AstraZeneca (NYSE: [[ticker:AZN]]) is announcing today it has struck an exclusive partnership with Moderna Therapeutics (pronounced mode-UR-nuh) to gain access to the startup’s technology, which uses injectable messenger RNA molecules to trigger production of protein drugs in the body.
The total value of the deal isn’t being disclosed, but it’s huge for a little company that hasn’t yet advanced to the ultimate proving ground—human clinical trials.
For starters, Moderna is getting $240 million in upfront cash. It’s eligible to get $180 million more for hitting three technical milestones, which aren’t being disclosed, says CEO Stephane Bancel. Moderna is also eligible to get undisclosed milestone payments, based on development and commercial progress, for each of the 40 different drug candidates that AstraZeneca has gained the right to develop for cardiovascular, metabolic, and kidney conditions, as well as certain forms of cancer. Plus, Moderna stands to collect royalties that range from a high single-digit percentage of sales to a low double-digit percentage.
Moderna didn’t have to give away any equity ownership of the company to AstraZeneca to get those terms. And Moderna retains the right to do perhaps one other partnership, and to develop its own drugs for rare diseases and cancer. While there have been bigger upfront payments to biotech companies—Roche’s $331 million upfront payment to Alnylam Pharmaceuticals (NASDAQ: [[ticker:ALNY]]) in 2007 was one—there aren’t many deals that have been this big for a company with a technology that hasn’t yet entered clinical trials.
“I met with quite a number of companies, and nobody I’ve met understood it as deeply as Pascal [Soriot] does, in terms of what this technology can do,” Bancel says. At a breakfast meeting in December, the first meeting between Bancel and Soriot, they hit it off right away. “He got it in five minutes,” Bancel says. He adds: “Pascal was willing to pay what I was asking because he understands that this technology can do things in a profound way. It can treat disease in a way you can’t with other technology.”
For AstraZeneca, the maker of the blockbuster “purple pill” for chronic heartburn, it’s a breathtakingly bold step into a new field of research. The deal comes shortly after AstraZeneca made headlines for axing its head of R&D, and for cutting 1,600 R&D jobs. It’s the biggest bet yet on a new field of R&D by Soriot, a Roche veteran who took the company’s top job about six months ago.
The concept here is a radical one. Today’s pharmaceutical industry can be broken down into two basic camps—small-molecule chemical compounds that we typically take as pills, or large-molecule protein drugs that are the fruit of genetic engineering, and are injected. A third class of RNA-based treatments is beginning to emerge, with specific technologies like antisense, RNA interference, and microRNA therapy, which seek to precisely alter disease processes at the molecular level.
Moderna is a different kind of story. This company, founded by Flagship Ventures with a $40 million financing in 2010, is all about using messenger RNA as a new kind of therapy. It synthesizes messenger RNA molecules as the therapies themselves. These messenger RNA molecules carry the instructions for making proteins. They are designed to be injected into the body, get inside cells, and to stimulate the cellular machinery into producing therapeutic proteins of interest. In theory, it’s another way of making insulin for diabetes, or erythropoeitin for anemia.
The traditional biotech industry giants, companies like Amgen, Genzyme, and Genentech, made their fortunes creating genetically engineered protein drugs in giant industrial vats, and then turning them into injectable drugs for cancer, arthritis, multiple sclerosis, and more. Moderna is supposed to sidestep that expensive and time-consuming process, by synthesizing mRNAs, injecting them, and letting them carry the desired genetic code into cells so the body itself acts like a drugmaking factory, churning out the needed protein in its proper shape and place.
These are still very early days for this new mode of drugmaking. Moderna, with a team of 32 employees, has spent much time and effort on attempting to corner all the intellectual property around this technology, Bancel says. The company has gotten 125 patent applications filed with the U.S. Patent Office, making 6,000 claims, and is on track to be able to block all other aspiring competitors in about six to nine more months, Bancel says.
The evidence it has collected so far has stirred a fair amount of skepticism and wait-and-see reactions in the pharma industry, Bancel says. Moderna says it has been able to
