up programs right out of academia, then hand them off before clinical trials. Potential buyers would be recruited early and get an option to acquire startups down the road at prearranged prices.
Those preset prices are often anathema to VCs who don’t want to put ceilings on potential returns. Like prearranged marriages in a post-liberation society, these prearranged deals might even seem a relic of gloomier times as biotechs go public by the bushel, often giving their private investors a shot at spectacular profits.
“The innovator and venture guys used to be happy to get three to five times return on investment, but not anymore,” says Gwen Melincoff, who ended a long tenure last year as the top dealmaker at the acquisitive drug firm Shire, but not before overseeing a build-to-buy deal with Versant. “The economy and everything has changed.”
To be clear, Versant isn’t entirely committed to build-to-buy; it has plenty of traditional investments. (CRISPR Therapeutics falls into that category, although with a twist, as we’ll see in a moment.)
Quanticel, for a deal with a capped upside, seems to have brought more than modest returns back to Versant. Celgene is paying at least $100 million and could pay nearly $500 million total as Quanticel’s technology and drug programs advance. Versant’s original investment was $10 million; if it invested more, it wasn’t made public. (Bolzon declined to discuss returns.) Celgene says several experimental drugs from Quanticel should enter human trials in early 2016. Golumbeski lauds Versant for being “remarkably flexible” and giving Celgene the chance to “go all-in” with Quanticel, and even test some of Celgene’s in-house compounds with the startup’s technology.
Several groups have created build-to-buy models or single-asset companies. But no one has dived as deeply into the strategy as Versant. The firm has effectively built a biotech company with as much as 70 staffers split between San Diego, Vancouver, and now Montreal, to generate the build-to-buy companies. It’s called Inception Sciences, and the satellite companies it spins off are Inception 1, 2, 3, and so on, with early backing from Shire, Roche, and Bayer.
Quanticel, its sale announced Monday, is also a build-to-buy, but its formation predated Inception. Versant put in the original equity, and Celgene paid $45 million in 2011 to get intimate with Quanticel’s technology and hold the right to buy the company after three and a half years.
At the time of the deal, Quanticel CEO Steve Kaldor told me, “We hope it ends in an acquisition by Celgene. That’s the design.” It went exactly to plan.
There are five more build-to-buys being nurtured by Inception, and the new site in Montreal will add capacity. “At the beginning I didn’t know how we could do more than a couple of these at a time,” says Bolzon. “But once you build the infrastructure, each one gets easier.”
Bolzon is the former hockey player. He grew up in Guelph, Ontario and played junior hockey, an amateur club level for 16 to 20 year olds that is serious stuff. His dad played junior hockey, too, he says, and once even played an exhibition against Montreal Canadiens legend Maurice “Rocket” Richard.
A bloc of Versant’s backers are now Canadian, like Teralys; it’s not often a venture firm finds a “largely new cast” of LPs, as Bolzon puts it. The firm has other Canadians, or spouses of Canadians, and hockey lovers on staff. Its geographical expansion is strategic. Inception set up R&D centers in Vancouver and Montreal to hire local scientists, some who worked with Inception’s CEO Peppi Prasit at Merck Frosst Canada. And it has opened an incubator in Toronto to capture innovation from that city’s academic researchers. But the Canadian shift has a tinge of patriotism in it, too. Bolzon said he had a good feeling when he first met Prasit, who was wearing a sweatshirt from the Canadian clothing company Roots.
(They also named their Toronto incubator Blueline Bioscience, a hockey reference I completely
