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Biogen buys Stromedix

by Ben Fidler | Published February 14, 2012 at 3:22 PM

Marking the latest in what has been a string of acquisitions in early 2012 by the nation's largest biotechnology companies, Biogen Idec Inc. has jumped into the fray, scooping up Stromedix Inc., started six years ago by a former Biogen executive.

The Weston, Mass.-based company has agreed to buy up privately held, venture capital-backed Stromedix in a deal worth as much as $562.5 million. Biogen, a Stromedix shareholder, will pay $75 million in cash up front and make up to $487.5 million in additional contingent value payments for the rights to Stromedix, depending on whether the target's lead drug candidate, STX-100, hits certain milestones.

The deal follows two other acquisitions in the past month by large-cap biotechs Celgene Corp. and Amgen Inc.

Stromedix's STX-100 is a monoclonal antibody that has posted positive data in a Phase 1 trial and is headed for a Phase 2 trial in patients with idiopathic pulmonary fibrosis, or IPF, a typically fatal disease in which patients experience more and more trouble breathing due to fibrosis, or scarring, of the lungs. IPF affects more than 200,000 people in the U.S. and Europe.

Biogen, the world's oldest independent biotech, focuses on therapies that have either few or no cures available, chiefly in the markets of neurodegenerative diseases, hemophilia and autoimmune disorders. There is currently no Food and Drug Administration-approved treatment for IPF.

"We believe STX-100 has the potential to be a best-in-class therapy and it is an excellent strategic fit with our focus on highly differentiated programs with the potential to make a real difference for patients," said Douglas E. Williams, Biogen executive vice president of research and development, in a statement.

Stromedix CEO and founder Michael Gilman, a former executive vice president of research at Biogen before founding the biotech in 2006, said that Stromedix's fibrosis program was initially founded by Biogen itself. After Gilman left Biogen to start his own company, Biogen agreed to license the program to Stromedix for an equity stake and a board observer seat. The biotech giant then increased its equity stake when STX-100 began Phase 1 trials, Gilman said in an interview with The Daily Deal on Tuesday, Feb. 14.

"Biogen stayed close to the program," he said. "[Fibrosis] is a huge, important area, and it's very closely aligned with their internal expertise in immunology. They looked at a lot of fibrosis programs and liked ours the best, which shouldn't be a surprise, since it was born under their roof."

With the aid of Biogen, with its $5 billion in annual revenue, Stromedix will be able to accelerate the development of STX-100 and certain other unspecified "promising early-stage drug candidates," Biogen said in the statement.

Stromedix has another preclinical compound in its portfolio that could be used to treat injuries caused by inflammation.

Biogen also said that STX-100 has potential in several other fibrotic indications.

On Jan. 26, the world's largest biotech, Amgen, announced a deal to acquire cancer-fighting antibody producer Micromet Inc. for $1.16 billion. On the same day, Celgene made its own M&A move when it agreed to buy Avila Therapeutics Inc. for as much as $925 million. Avila has a compound in clinical trials that treats cancer and autoimmune diseases and two hepatitis C, or HCV, treatments in preclinical development.

It is also at least the fourth acquisition of a fibrosis treatment company since late 2010. Gilead Sciences Inc. struck first, agreeing to pay at least $225 million for Arresto Pharmaceuticals Inc. in December 2010. Bristol-Myers Squibb Co. paid as much as $475 million for Amira Pharmaceuticals Inc. in July. And in November, Pfizer Inc. bought Excaliard Pharmaceuticals Inc., which develops drugs to treat skin fibrosis, for an unspecified amount, according to The Deal Pipeline.

"There's definitely been a run, and I have to say, that was sort of our investment thesis five or six years ago," Gilman said. "Fibrosis is a really significant medical problem that is highly unmet and affects many millions of people."

Stromedix is backed by a group of VC investors including Atlas Venture, New Leaf Venture Partners, Bessemer Venture Partners, Red Abbey Venture Partners and Frazier Healthcare.

Gilman said Tuesday that the group has provided a total of $38 million in funding through two equity rounds worth $29.4 million and another $9 million in convertible debt that will convert into equity when the transaction closes. He declined to reveal the amount of cash going to the investor group through the $75 million up-front payment.

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