Bristol-Myers Squibb this afternoon is acquiring a young startup, IFM Therapeutics, in an unusual deal that will also see the big drugmaker get a chance to own rights in a new company the biotech is spinning out as well.
New York-based Bristol (NYSE: [[ticker:BMY]]) will pay $300 million up front for IFM, which will give the pharma company rights to two preclinical cancer drugs discovered by the Cambridge, MA, startup. IFM’s shareholders—a group that includes Atlas Venture, Abingworth, and Novartis—could see up to another $1.01 billion in future payouts, per program, if the two therapies progress successfully through clinical testing.
The deal is a big gamble on science that has yet to produce any human clinical data. But Bristol has recently shown it is willing to bet cash on such risks. In 2015, Bristol paid a whopping $800 million up front for Flexus Biosciences, a preclinical cancer immunotherapy startup also without any human clinical data. The drug Bristol acquired is now in Phase 2 testing; a regulatory filing shows Flexus investors got another $100 million this year when the drug began mid-stage testing.
In the Flexus deal, the startup preserved some assets and spun them into a new company now known as FLX Bio. Incidentally, IFM and its backers are revealing similar plans today. IFM’s shareholders are spinning out the company’s remaining assets, consisting of research into drugs for inflammatory diseases and fibrosis, into a new company called IFM Therapeutics LLC that will be backed by the same investors and staffed by current IFM executives. In exchange for an “additional payment at closing and future investment,” Bristol will get certain rights—such as a right of first refusal—to a drug the new company is developing, according to a statement.
IFM was incubated within Atlas, raised a $27 million Series A round in June 2016 and is led by veteran biotech executives and dealmakers, among them ex-Lycera CEO Gary Glick and former Novartis dealmaker H. Martin Seidel. The company has been developing drugs for cancer and autoimmune disease—specifically, small molecule drugs that target the innate immune system, the body’s first line of defense against foreign invaders.
IFM’s drugs are meant to either tamp down an overactive immune response to treat inflammatory diseases, or stimulate an immune response against cancer. The company’s research largely focuses on a family of proteins called NLR, which can help drive a haywire innate immune response—and thus inflammation—in a variety of diseases. IFM lists nonalcoholic steatohepatitis, or NASH, among its targets, as well as inflammatory bowel disease and gout.
On the cancer side, IFM’s drugs attempt to stimulate one of two molecular targets, NLRP3 or STING. By doing so, the drugs are meant to first alert the innate immune system, which then flags our body’s other cancer fighters—the adaptive immune system—to join the fight. These drugs might be useful on their own or in combination with immunotherapies called checkpoint inhibitors, which have been approved for a number of cancers but still only help a fraction of patients. Bristol, among others, has been running a slew of clinical trials testing its checkpoint inhibitor nivolumab (Opdivo) with other therapies to boost its effectiveness. Honing in on innate immune system targets in this combination therapy game offers Bristol a “potentially differentiated approach,” said executive vice president and chief scientific officer Thomas Lynch, in a statement.
The deal marks the latest score for Atlas, meanwhile, a Boston-based VC firm that seeds and invests in life sciences companies and just raised a $350 million fund in June. Over the past year, Atlas has now sold two startups to Bristol-Myers—IFM and Padlock Therapeutics—and flipped a third, Delinia, to Celgene. All three of these deals came less than two years after the companies’ Series A rounds.
IFM CEO Glick also had similar success at his last startup. He founded Lycera, an immunotherapy firm spun out of the University of Michigan in 2006 that inked an option-to-buy deal with Celgene in in June 2015. At that point, he stepped down to work on an undisclosed new venture, which was later revealed to be IFM.
