Celgene, the acquisitive US biotech company, has signed a deal worth up to $2.6bn with a cancer start-up to develop a new generation of drugs that try to turn the body into a weapon against tumours.
The partnership with privately owned Jounce Therapeutics is the latest in a flurry of bets that large drugmakers have made on experimental medicines, as they brace for the launch of cheaper generic versions of their blockbuster drugs.
Jounce will receive an upfront cash injection of $225m and a $36m equity investment from Celgene, as well as $2.3bn in further payments linked to whether its drugs are ultimately successful.
Richard Murray, Jounce chief executive, said Celgene had fought off bids from several rival companies following what he described as “a very competitive process”, although he declined to disclose his group’s valuation following the equity investment.
Jounce, founded in 2013 with backing from venture capitalists, is trying to develop a string of “immunotherapy” drugs that aim to activate the body’s immune system so it can attack cancerous cells.
Bristol-Myers Squibb, Merck of the US and Roche are already selling immunotherapies that remove brakes in the immune system, and they have had success in some patients with forms of the disease that were previously very hard to treat, such as a type of lung cancer and melanoma.
However, the drugs, known as “checkpoint inhibitors”, only work in about a third of patients, prompting companies such as Jounce to try to develop companion medicines that could extend their benefits to a larger proportion of sufferers.
Jounce’s most advanced drug, codenamed JTX-2011, tries to stimulate a protein found on the surface of a type of white blood cell, which is believed to trigger an immune response to cancer. It is due to begin testing the medicine in humans later this year.
If the drug were to be approved by regulators, Celgene would receive 40 per cent of US profits as well as 100 per cent of profits generated overseas. It would also be entitled to a share of the spoils from a string of other medicines that Jounce hopes to discover.
Some investors had expected Jounce to pursue an initial public offering, after the biotech group raised $60m in April 2015 from a group of “crossover” investors that typically buy into a company ahead of a flotation.
Shortly after, shares in biotech companies plunged amid fears of a sector-wide bubble, prompting companies such as Jounce to partner with larger drugmakers to secure the cash they need to run expensive clinical trials.
“Obviously the capital market conditions were choppy, so this was a natural deal for us,” said Mr Murray.
Celgene has spent four years investing in smaller biotech companies as it prepares for the introduction of a cheaper knock-off version of its top-selling drug Revlimid, which generated sales of $1.6bn last year and accounted for roughly two-thirds of overall revenues.
Last year it paid $7.2bn for Receptos, a biotech group developing drugs for immune disorders such as multiple sclerosis, and placed a $1bn bet on Juno Therapeutics, which is developing a type of immunotherapy for patients with blood cancers.
Celgene recently signed a deal with Natco, an Indian drugmaker, that allows the rival group to start selling limited quantities of a generic Revlimid in 2022 before competing fully in 2026.
Revlimid is a safer and more potent version of Thalidomide, which became infamous in the 1950s and 1960s after it was used to alleviate morning sickness in pregnant women, leading to thousands of babies being born with birth defects.