Biogen Idec Lets Stromedix Do The Hard Part

2/14/12

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his post as head of research following a big layoff. The group that is buying it (and him) back in 2012 is completely different. The company has a new CEO, George Scangos, a new head of research, Doug Williams, an even bigger pile of cash and a hunger for new therapies that have achieved some degree of clinical safety and early validation.

What Gilman and his team did in the intervening years was to thoroughly “de-risk” the STX-100 asset and to spend years tackling the big challenge of obtaining FDA clearance for trials. In particular, they have gotten the molecule through Phase 1, albeit in a related fibrosis indication in the kidney, and they developed biomarkers that will “inform upcoming clinical trials” and “increase the likelihood of bringing a much-needed therapy to patients,” according to today’s press release.

How to “inform” the clinical trials was the toughest nut to crack. As Gilman said in a very good February, 2011, interview, “The technical problem we faced is really a business problem that asks how we can measure anything meaningful in a short-term clinical trial for a long-term fibrotic disease,” he said. In the Phase II trial, he said then, Stromedix will use bronchoalveolar lavage to flush out cells and analyze them to see if the mechanism is working.

Now, in Biogen Idec’s eyes, the remaining risks are good ones. There is huge upside (two hundred thousand patients in the United States and Europe, no FDA-approved therapy). The indication area is ready to be tackled with biologics. And it fits the rest of the company’s portfolio. To quote the press release again, “‘Fibrotic organ failure, and in particular IPF, is a terrible disease with a high mortality rate, and there are no effective treatments at this time,’ said Douglas E. Williams, EVP, R&D of Biogen Idec. ‘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. The Phase 2 program complements our scientific expertise and advances our research and development efforts in immunology.’”

What made STX-100 so challenging—and why it apparently did not have a champion in the aftermath of Gilman’s departure—is that the antibody, which targets the cell-surface molecule alphaVbeta6 or av6, faced potential regulatory challenges because its mechanism of action, namely the blocking of TGF-beta production, might have unintended consequences. One imagines there may have been company or FDA concerns primarily about on-target effects (down-regulating TGF-beta in vital pathways unrelated to fibrosis) rather than about off-target effects in the event that the antibody was not 100 percent specific. Stromedix investor Booth writes that STX-100 also raised other concerns at FDA regarding its potential to serve as an unwanted immunostimulant. And since fibrosis was a disease that had barely been addressed with small molecules, let alone with antibodies or other biologics, there was not much of a reference database of patient responses to go on.

Thus the decision by Biogen Idec to let STX-100 go was both a rational one—the indication looked too hard, the regulatory path was too uncertain—and an irrational one—no one has ever done this before, there are no clear mile markers … too scary!

One cannot say enough to honor the determination and risk-taking of Gilman and his venture backers, primarily Atlas Venture. Even before launching the company, Atlas gave Gilman access to the firm’s deal flow. They provided office space to let him search for assets. And they put up the initial capital so that Stromedix could acquire STX-100. From their point of view, the risks were tractable and even welcome. How else, unless there was great uncertainty about some aspects of the molecule’s path, could you get it for such a low price?! Most importantly, they, and eventually other investors, trusted Gilman and they believed that he and his team—some of whom, notably project leader Shelia Violette, he hired away from Biogen Idec after they had worked there on STX-100—could take the necessary steps to get the molecule into trials and let it prove its value. There was plenty of risk but it was all in areas in which Atlas and Gilman believed that the team could add value.

It is hard to tell what the greater irony is about this happy outcome: Either that molecule-hungry pharma and biotech companies are again and again rewarding exactly the sort of risk-taking that is under attack in the current downsizing of the VC industry by its limited partners. Or that the molecule and Gilman, its champion, have found their way back to the company that once spurned them.

Steve Dickman is a former venture capitalist and the CEO of boutique consulting firm CBT Advisors as well as the author of the blog Boston Biotech Watch. Follow @

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  • Greg

    A question:

    How does a deal like this play out for the common shareholders of the target company? Wouldn’t employees who have exercised stock options have to tender their shares at some price, right now? Presumably this would be a good amount more than their strike price, but how do the milestone payments figure into this? It seems as if deals like this with modest up-front price tags and milestone payments are becoming more common. But I have not read anything that addresses how these kinds of structures affect common shareholders. Any thoughts?