Adimab Turns Cash Flow Positive With GSK, Biogen Tech Transfer Deals
Tillman Gerngross has always had a two-step business model in mind for his Lebanon, NH-based drug discovery startup, Adimab. First, lure several big pharmaceutical companies to test out its efficient, yeast-based process for discovering antibodies. Then, wait for them to write a big check to license that technology and bring it in-house, providing big returns for Adimab’s investors in the process.
Today, six years after its inception, Adimab can say that it has now convinced two companies to quit kicking the tires and buy the car.
Adimab is announcing two separate technology transfer and licensing agreements—one with British pharmaceutical giant GlaxoSmithKline (NYSE: GSK), and another with Cambridge, MA-based biotech titan Biogen Idec (NASDAQ: BIIB). The agreements are significant milestones in Adimab’s development, because they represent the first two times a customer has decided to take the company’s drug discovery technology and use it as the basis to create a pipeline of antibody drugs.
“These are transformative deals,” Gerngross says.
This is because Adimab’s vision of a sustainable, profitable, privately-held biotech is becoming a reality. In the past, Adimab got nibbles from a legion of pharmaceutical companies—among them Merck, Eli Lilly, Roche, Pfizer, Novartis, and Gilead Sciences—that struck small partnerships around one, or even several, biological targets that it wanted Adimab to discover antibodies against. Some of them, such as Merck and Eli Lilly, broadened their relationship with Adimab: In January, for example, Merck got a three-year window to have Adimab scientists identify certain antibodies based on targets it selects, while Eli Lilly was given the right to test the company’s capabilities out in creating bispecific antibodies—which can hit two molecular targets instead of one. All of these deals gave Adimab revenue and the potential for milestone payments down the road, but not on the scale that would create the sustainable company that Gerngross envisioned. This is where the GSK and Biogen deals come in.
GSK will pay Adimab “significant” upfront payments, annual licensing fees, and give it a royalty stream from any antibody it creates that goes on to become a drug sold on the market, according to the announcement. Biogen, meanwhile, will give Adimab an undisclosed one-time signing fee, and make milestone payments tied to certain preclinical and clinical goals for its drug candidates. Adimab will also get royalties and other payments tied to certain sales targets.
While Gerngross wouldn’t reveal the actual size of the up front checks, or the total value of each deal, he notes a few ways in which they will dramatically change Adimab’s financial fortunes. First, he says, Adimab’s total revenue this year will now be between three and five times its $15 million to $20 million in yearly operational expenses—and it will continue to be so for the next five to 10 years. Despite having over 100 percent annual revenue growth for the past five years, Adimab has been “teetering on neutral.” Because of these agreements, this is the first year it will be significantly in the black.
This will allow Adimab to give its investors—which include Google Ventures, Polaris Partners, OrbiMed Advisors, and SV Life Sciences—a full return on the roughly $50 million they’ve poured into the company by next year, and begin distributing profits to its shareholders through dividends, Gerngross says.
“It took Amgen over 30 years to pay a dividend,” he says. “It took us less than seven.”
And apparently, there’s more to come: Adimab has a contract with a third company and is in negotiations with “numbers four through seven,” according to Gerngross. Adimab’s technology will now be used in three sites around the globe— the company’s headquarters in New Hampshire, an undisclosed site run by GSK, and at Biogen’s site in Cambridge. Adimab’s goal is to have 10 sites using the technology by 2015 in addition to its current collaboration portfolio, which includes 21 partnerships spanning 35 potential drug programs.
“In other words, we’re building a very large portfolio of programs of which we own a royalty, while at the same time running a profitable business,” he says. “And there are just very, very few cases like this in our industry.”
The attraction to Adimab comes from its efficiency. By using genetically engineered yeast cells to produce human antibodies, Adimab can whip them up within eight weeks—much faster than the norm. Gerngross notes, for example, that by using Adimab’s platform, Merrimack Pharmaceuticals (NASDAQ: MACK) came up with three antibodies that were used to form a cancer drug known as MM-151 and filed an investigational drug application in 18 months. Merrimack dosed its first patient with the drug two years after discovery efforts began.
“This is a speed of drug discovery that just has never existed before,” he says. “And I think the folks at Biogen and GSK—having seen that and having been able to test it on their own targets—have said, ‘we need to have access to this.’”
Gerngross says that Adimab went through a competitive process to win the Biogen deal. Biogen wants to build a pipeline of biologic drugs that involved antibodies, and did a “side by side comparison” of Adimab’s technologies and other unspecified antibody discovery engines before picking Gerngross’ startup.
“In order to identify the best antibody discovery technology to support these efforts, we engaged in a rigorous selection process and Adimab was the clear winner,” said Werner Meier, Biogen’s vice president of biologics drug discovery, in the statement.
The result was a seven-year license given to Biogen to tap the technology to discover and optimize all types of antibodies in certain specific disease areas.
GSK, meanwhile, began searching two years ago for an antibody-making platform that it could use across all of its programs and any targets it wanted to go after, according to Ian Tomlinson, its head of worldwide business development and biopharmaceuticals R&D. Adimab gave GSK an already-validated platform with broad access to disease targets that could generate antibodies quickly, he says.
“A lot of display technologies and certainly immunization approaches don’t yield hits to all targets,” he says. “And it appears to us that this technology yields hits to the vast majority of targets you go after—and that’s very important if we’re going to use it as a broad platform to underpin our antibody discovery assets going forward.”
No surprise, then, that GSK’s deal with Adimab is much broader than Biogen’s. It’s a full license giving GSK indefinite access to use the technology to find any type of antibody for any potential therapeutic area. GSK even has an option to bring the technology to other research sites if it wants to.
Adimab’s shareholders would be more than happy if it did.
“If GSK wins, we win,” Gerngross says.