Forma, CRT Deal Part of Broader Research Initiative
Forma Therapeutics has built itself brick by brick with a drug discovery engine that has caught the eye—and the dollars—of industry titans like Celgene (NASDAQ: CELG), Boehringer Ingelheim, Genentech, and Johnson & Johnson (NYSE: JNJ). Now, it is putting that cash to work in a new collaboration with academic researchers.
Watertown, MA-based Forma is announcing a partnership today with Cancer Research Technology Ltd., the commercial arm of London’s Cancer Research UK, the largest cancer charity in the U.K. The deal is part of a large plan by Forma to do similar-style partnerships, but it boils down to this: A team of CRT investigators will gain access to compounds developed by Forma with the goal of discovering therapeutics that target a class of enzymes implicated in the emerging field of protein homeostasis.
“We’re looking to exploit the integration of our drug discovery engine together with very carefully selected teams of academics that can really help drive the science once we can provide tool compounds into their labs,” says Forma CEO Steven Tregay.
The deal is the first step in a broad initiative that Forma began on June 18 that it refers to as its “Asset Discovery and Development Company,” or “ADDco,” platform. Through the ADDco plan, Forma is using some of the cash from its various big-money partnerships to create virtual companies—ADDco’s— holding intellectual property rights to one, or even several drugs. Forma can then use those ADDcos as chips to create returns for itself and its investors through lucrative partnerships, sales, or otherwise. By taking advantage of its structure as a limited liability company, or essentially a holding company, Forma can easily hive off these entities when the time comes, while keeping its core drug discovery team intact.
“It allows us to sell the stock of the company, and that allows a more efficient distribution of the liquidation of that to the shareholders,” Tregay says. “In this case, the shareholders would be the institutions and Forma and its shareholders together.”
Forma is scouring the globe for specific academic and not-for-profit institutions to collaborate with. Its hope is that the researchers it taps can make drugs out of its compounds in areas it wants to target—in the near term, oncology and rare genetic disorders, Forma says—and then house each drug created by each partnership in an ADDco. Forma can then either dangle that ADDco in front of interested potential pharmaceutical partners or acquirers, keep it to develop on its own, or even consider taking it public, according to Tregay.
“We try to have some very generic mechanisms, but we really try to make sure that our partners feel that there’s a very close alignment with sharing in the economic upside,” he says. “I feel that that’s very important, because it creates a very strong alignment towards value creation.”
The structures of these ADDcos will vary. Forma will share equity ownership of some ADDcos with its research partners. Other times, the deal will include revenue sharing structures and milestones. Sometimes it will have both equity and revenue sharing components.
Here’s how Forma’s agreement with CRT works. A consortium consisting of Forma and five principal investigators—including professors at the University of Liverpool and Oxford, among others—will oversee the creation of as many as 10 ADDcos. The group will take a deep dive into what are known as deubiquitinating enzymes, or DUBs. Researchers believe these enzymes play a key role in protein homeostasis, or the ability of cells to properly manufacture or deactivate proteins. When this homeostasis is disturbed, proteins do things they aren’t supposed to do, and this can lead to diseases. Researchers think DUBs could be used as a tool to manipulate protein levels in a cell, to essentially bring cell processes back into balance. Forma and CRT will look into ways they can be utilized to treat cancer. Forma will own the equity of the ADDcos, will provide the research funding, and will make certain unspecified payments to CRT if the ADDcos hit certain milestones.
“What we really like about DUBs is, there [are] a little over 90 of them, they’re divided into various structural classes, and they have very strong specificity,” Tregay says. “This isn’t just a generic block-all-protein-degradation kind of sledgehammer, these are very scalpel-like instruments with the ability to block a particular protein.”
Tregay says more than 50 DUBs have direct links into cancer, and they also could be tied to neurodegenerative and certain rare diseases. Tregay anticipates that some of the drugs created through the CRT partnership will end up being put into the protein homeostasis collaboration it has with Celgene. If that happens, Forma will share some of its Celgene milestone cash with CRT.
If this ADDco initiative sounds familiar, it’s because Forma is far from the first to use an LLC structure to its advantage. Two Atlas Venture-backed drug discovery companies, Nimbus Discovery and RaNa Therapeutics, for example, are using that structure as well. Forma’s twist on the concept is using the LLC structure as a vehicle for research collaborations. This, in turn, gives it more ammunition to not only help other companies discover drugs with its engine, but also to be financially sustainable enough to develop and potentially, one day, sell its own drugs in risky fields of what Tregay refers to as “emerging new target classes,” like protein homeostasis.
Tregay wants to delve deeply into a new field every 12 to 18 months, cycling through such industry and academic partnerships. That’s where the ADDcos can help. Each one gives Forma more opportunities for more partnership revenue, or even potential drug candidates for its pipeline.
Forma is only able to do this, however, because it has raised more than $350 million in non-dilutive cash from its industry partnerships, compared to about $40 million in venture funding.
“It certainly gives us a lot more working capital to be able to go after things like this,” Tregay says. “It gives us a lot more latitude than your traditional biotech, that’s for sure.”
It’s far too early to say if Forma can hit the milestones in its various partnerships and ultimately become the sprawling organization Tregay envisions. But Tregay has a path in mind: while supporting itself through its partnerships and deals from its ADDcos, Forma wants to use emerging fields of biology—like protein homeostasis—and selectively target patient groups with a high unmet medical need, and develop drugs that hit the genetically-defined mutations that those patients have.
By doing so, Forma can run smaller, less-costly trials and reduce the financial risk of failure while giving itself the chance to take a more streamlined path through clinical trials and towards regulatory approval. Forma hopes to eventually hold an IPO so public investors to buy into its plan, but Tregay knows Forma—which expects to move its first program into pre-clinical development next year—has plenty of work to do to first.
“What we’re trying to do is prove that we have a differentiated drug discovery engine, which takes time and has to be built kind of organically,” he says. “Hopefully, we can prove to the marketplace that the value of a differentiated drug discovery engine that has the ability to bring multiple drugs forward and onto the market is very, very differentiated in its value proposition [compared to] a single-product company.”