It didn’t take long for startup Delinia to entice a big drug developer: Just over four months after emerging from stealth and raising a Series A round, the company, developing drugs for a range of autoimmune diseases, has been acquired by Celgene.
Celgene (NASDAQ: [[ticker:CELG]]) will pay $300 million up front to buy Cambridge, MA-based Delinia. Its shareholders, co-led by Atlas Venture and Sofinnova Partners, could see another $475 million in payouts too, should Delinia’s experimental programs hit a variety of milestones.
The deal marks an incredibly quick payout for Delinia’s shareholders, albeit at the cost of possibly generating higher returns down the road. Drug development is a long, difficult, risky slog, often taking years and millions if not billions of dollars to bear fruit—and most efforts fail. Venture-backed startups create more and more value the farther their experimental drugs advance—with the big payouts coming either via an IPO or a sale—but there is always a high risk of failure.
Delinia’s first experimental drug, DEL106, hasn’t even begun clinical testing yet. CEO Saurabh Saha, a venture partner at Atlas, says the company has raised $35.2 million total since inception, all from the Series A the company closed in September. It has just six full-time employees and is mostly virtual aside from some lab space in Emeryville, CA.
Saha says Delinia’s original goal was to get DEL106 into clinical testing and take it as far as possible, not to forge a partnership or sell the company. But Delinia began getting interest right away—unsolicited inquiries from some companies, and early meetings with others its backers already had a relationship with. “It really caught us by surprise,” Saha says.
Those talks quickly progressed into deal terms, and Saha, without disclosing specifics, says Delinia got “many bids” before inking a deal with Celgene.
The risk of succeeding with DEL106, then, has shifted to Celgene. The big, Summit, NJ, company is best known for its blood cancer drugs but has been building a franchise in autoimmune diseases as well. Celgene is known to make bold bets on early stage companies to add to its pipeline, often through creative deals. Back in 2010 it paid $130 million to align with Agios Pharmaceuticals (NASDAQ: [[ticker:AGIO]]) before it had even begun its first clinical trial. That partnership has led to a slew of other agreements, option-to-buy deals and more that have established Celgene as a savvy, nimble dealmaker. With some $9 billion in yearly revenue, these are bets Celgene can easily afford to make.
“It’s important to get the value you want for your molecules, but it’s much more important to make sure the molecule is in the right hands,” Saha says.
Delinia’s plan was to begin testing DEL106 in clinical trials by late 2017 or early 2018, but that will now be Celgene’s call. In a release, Celgene says it could test DEL106 in a variety of autoimmune diseases, among them lupus and rheumatoid arthritis.
Autoimmune diseases—which occur when the body mistakenly attacks its own tissues—are typically treated with drugs that work like a sledgehammer. They broadly suppress the immune system, which, while very effective in treating diseases like rheumatoid arthritis, leaves the body open to dangerous infections. Delinia is trying to show that its drugs can effectively treat autoimmune problems without those safety hazards. Its drugs, DEL106 among them, target a specific receptor on regulatory T cells (Tregs), a type of immune cell that helps regulate the body’s immune response. The goal is to change the levels of Tregs in the body and restore “balance” between various types of immune cells, which in turn supposedly will keep the body’s defenses from commencing a wayward attack. That hypothesis—and the implications for how it could, if successful, lead to a completely different type of autoimmune drug—is what drew potential acquirers.
“We didn’t realize how much interest there is now in re-establishing immune tolerance and the integral role that [Treg] cells play in maintaining immune homeostasis,” Saha says.
Thousand Oaks, CA-based Amgen (NASDAQ: [[ticker:AMGN]]), for instance, has a similar type experimental autoimmune drug, AMG-592, in Phase 1 trials.
Delinia is based on the work of co-founder and chief scientific officer Jeffrey Greve, the former vice president of research at another company developing protein drugs for autoimmune diseases, San Diego’s aTyr Pharma.
