The new CEO of AstraZeneca, Pascal Soriot, has just written a huge check, worth $240 million in upfront cash. It’s going to a little biotech startup in Cambridge, MA, that started a couple years ago with a far-out idea for making drugs in a fast, cheap, and completely unorthodox way.
London-based AstraZeneca (NYSE: AZN) is announcing today it has struck an exclusive partnership with Moderna Therapeutics (pronounced mode-UR-nuh) to gain access to the startup’s technology, which uses injectable messenger RNA molecules to trigger production of protein drugs in the body.
The total value of the deal isn’t being disclosed, but it’s huge for a little company that hasn’t yet advanced to the ultimate proving ground—human clinical trials.
For starters, Moderna is getting $240 million in upfront cash. It’s eligible to get $180 million more for hitting three technical milestones, which aren’t being disclosed, says CEO Stephane Bancel. Moderna is also eligible to get undisclosed milestone payments, based on development and commercial progress, for each of the 40 different drug candidates that AstraZeneca has gained the right to develop for cardiovascular, metabolic, and kidney conditions, as well as certain forms of cancer. Plus, Moderna stands to collect royalties that range from a high single-digit percentage of sales to a low double-digit percentage.
Moderna didn’t have to give away any equity ownership of the company to AstraZeneca to get those terms. And Moderna retains the right to do perhaps one other partnership, and to develop its own drugs for rare diseases and cancer. While there have been bigger upfront payments to biotech companies—Roche’s $331 million upfront payment to Alnylam Pharmaceuticals (NASDAQ: ALNY) in 2007 was one—there aren’t many deals that have been this big for a company with a technology that hasn’t yet entered clinical trials.
“I met with quite a number of companies, and nobody I’ve met understood it as deeply as Pascal [Soriot] does, in terms of what this technology can do,” Bancel says. At a breakfast meeting in December, the first meeting between Bancel and Soriot, they hit it off right away. “He got it in five minutes,” Bancel says. He adds: “Pascal was willing to pay what I was asking because he understands that this technology can do things in a profound way. It can treat disease in a way you can’t with other technology.”
For AstraZeneca, the maker of the blockbuster “purple pill” for chronic heartburn, it’s a breathtakingly bold step into a new field of research. The deal comes shortly after AstraZeneca made headlines for axing its head of R&D, and for cutting 1,600 R&D jobs. It’s the biggest bet yet on a new field of R&D by Soriot, a Roche veteran who took the company’s top job about six months ago.
The concept here is a radical one. Today’s pharmaceutical industry can be broken down into two basic camps—small-molecule chemical compounds that we typically take as pills, or large-molecule protein drugs that are the fruit of genetic engineering, and are injected. A third class of RNA-based treatments is beginning to emerge, with specific technologies like antisense, RNA interference, and microRNA therapy, which seek to precisely alter disease processes at the molecular level.
Moderna is a different kind of story. This company, founded by Flagship Ventures with a $40 million financing in 2010, is all about using messenger RNA as a new kind of therapy. It synthesizes messenger RNA molecules as the therapies themselves. These messenger RNA molecules carry the instructions for making proteins. They are designed to be injected into the body, get inside cells, and to stimulate the cellular machinery into producing therapeutic proteins of interest. In theory, it’s another way of making insulin for diabetes, or erythropoeitin for anemia.
The traditional biotech industry giants, companies like Amgen, Genzyme, and Genentech, made their fortunes creating genetically engineered protein drugs in giant industrial vats, and then turning them into injectable drugs for cancer, arthritis, multiple sclerosis, and more. Moderna is supposed to sidestep that expensive and time-consuming process, by synthesizing mRNAs, injecting them, and letting them carry the desired genetic code into cells so the body itself acts like a drugmaking factory, churning out the needed protein in its proper shape and place.
These are still very early days for this new mode of drugmaking. Moderna, with a team of 32 employees, has spent much time and effort on attempting to corner all the intellectual property around this technology, Bancel says. The company has gotten 125 patent applications filed with the U.S. Patent Office, making 6,000 claims, and is on track to be able to block all other aspiring competitors in about six to nine more months, Bancel says.
The evidence it has collected so far has stirred a fair amount of skepticism and wait-and-see reactions in the pharma industry, Bancel says. Moderna says it has been able to stimulate production of dozens of different proteins through this method, out of the roughly 22,000 different protein molecules that make up the tissues of an individual human being, Bancel says. Moderna says it has shown it can make its mRNA molecules to be given as intravenous infusions, intramuscular injections, or in the more convenient shots just under the skin, known as subcutaneous injections. The company says it has demonstrated safety and effectiveness of its drug candidates in mice, rats, and primates.
Moderna remained stealthy in its first couple years, as my colleague Greg Huang wrote in December, because it was afraid a Big Pharma company would come along with a $50 million budget and squash it. It has one competitor of note, Germany-based Ethris, Bancel says. Moderna believes it is on course to start its first clinical trial with this new kind of therapy in 2014, Bancel says.
The company has some big names on its list of co-founders. Bob Langer, the MIT professor; Tim Springer, the professor at Children’s Hospital Boston and founder of LeukoSite; Ken Chien, a cardiologist at Massachusetts General Hospital; Derrick Rossi of the Harvard Stem Cell Institute; and Noubar Afeyan, the managing partner at Flagship Ventures.
Afeyan, Moderna’s chairman, was clearly excited about the AstraZeneca partnership when we spoke yesterday. But he also didn’t want to get carried away.
“I’ve been around 30 years in this industry, long enough to know that deeming something the next big thing is not a very useful activity,” Afeyan says. “We didn’t even talk about company publicly until December because we weren’t sure how broadly applicable it might be. We still don’t know, but we have some hints. We wanted to be sure we understood the critical challenges.”
One of the big challenges is finding ways to make sure the mRNA molecules don’t get degraded by various enzymes or destroyed by the body’s immune defenses, which might see them as foreign invaders. The company hasn’t seen that happen so far, and it has used proprietary chemistry to modify its drugs to avoid sparking that kind of immune reaction, Bancel says. The company has also been keeping an eye out for whether its drugs are toxic to the liver or the heart—where toxic side effects can be a show-stopper.
But if Moderna can clear those hurdles, it could have a huge opportunity with a cheap, efficient R&D platform. Moderna doesn’t need to go through long chemical screening processes to find a drug that hits a molecular target. It doesn’t need to use expensive, and time-consuming protein manufacturing processes in cell culture to make large molecules. Moderna can essentially start with a snippet of genetic code of interest, synthesize an mRNA candidate based on that code within days, do some basic purification, and dose the molecule to animals in days. This process can shave months, if not years, off the discovery processes that must come before a drug even enters animal tests.
“We went from nothing to having two drugs in primates in nine months,” Bancel says. He adds: “On Oct.1, 2011 we had nothing. On June 5, 2012, we had two drugs tested in non-human primates. I don’t think a company has ever done that in biotech.”
Moderna could have chosen to license its technology widely, like other technologies thought to have broad application in the pharmaceutical business—like RNA interference. It chose not to do that, Afeyan says, preferring to become a product developer in partnership with AstraZeneca, and maybe one more partner. By going this route, Moderna will get the money and development expertise of a bigger company and still get the resources it needs to grow as an independent company. Moderna, he says, will not be forced to tap into its new $240 million cash horde to carry out further development of drugs for AstraZeneca—that expense will be shouldered by AstraZeneca, he says.
Financially, Moderna is now sitting in about as good a position as a biotech startup can ever expect to be. It still has $20 million left in the bank from its original venture financing, Bancel says. The company now has $240 million from AstraZeneca which it can use to build up its own pipeline of mRNA drugs for rare diseases, and certain forms of cancer. It plans to hire another 20 to 30 people in short order to pursue some of its own opportunities, beyond just serving its big new collaborator.
“This is a very transformative moment for us,” Bancel says. “It will enable us to accelerate the company, start many new programs in the clinic, to build a very special company.”
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