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Acetylon Crafts New Buyout Deal With Celgene, Spins Out Startup Regenacy

Xconomy Boston — 

[Updated, 12/5/16, see below] Earlier this year, Celgene passed on an exclusive option to buy Acetylon Pharmaceuticals. But surprisingly, the two companies have come up with a new deal instead. Celgene agreed Friday to acquire just a portion of the assets of the Boston company, which will spin the rest of its assets into a new startup called Regenacy Pharmaceuticals.

In the deal, Summit, NJ-based Celgene (NASDAQ: CELG) will get partial rights to two drug candidates developed by Acetylon: citarinostat (also known as ACY-241), and ricolinostat (ACY-1215). Specifically, Celgene will get worldwide rights to develop both drugs for cancer, neurodegenerative diseases, and autoimmune diseases, but nothing else.

Regenacy meanwhile, will also have partial rights to these two drugs, but only for other disease types, such as nerve pain. It also gets access to other preclinical drugs Acetylon has been developing for blood diseases like sickle cell disease and beta-thalassemia.

[Updated w/comments from CEO] Acetylon CEO Walter Ogier—who will be the president and CEO of Regenacy—said via e-mail that Celgene was only interested in the parts of Acetylon that fit with its current portfolio. Acetylon’s shareholders and executives, meanwhile, wanted to push the rest of the company’s experimental products forward. So the two companies let the original deal expire and came up with the new transaction.

“The remaining assets are exciting enough to create a new company to advance,” Ogier said.

Other “key members” of Acetylon’s executive team will switch over to the new company as well, according to the announcement. Ogier said Regenacy has acquired Acetylon’s remaining cash in the deal—he didn’t say how much—to get itself started.

Both citarinostat and ricolinostat interfere with what are known as histone deacetylases (HDACs), enzymes that help regulate gene expression and are implicated in a number of cancers. HDACs are a well-known molecular target, but Acetylon’s drugs are part of a newer breed of HDAC-blocking agents meant to be more precise, and thus less toxic, than their predecessors. Acetylon’s lead drug ricolinostat, for instance, is meant to block only the specific enzyme HDAC6. Citarinostat is a pill version of ricolinostat,

With Celgene’s help, Acetylon has been developing these drugs as potential treatments for breast cancer and the blood cancer multiple myeloma. It has been testing the drug in combination with Celgene’s own experimental drugs, like the myeloma drug pomalidomide (Pomalyst) and the breast cancer drug nab-paclitaxel (Abraxane).

[Updated w/CEO comments] Citarinostat, for instance, is being tested as a multiple myeloma treatment in a Phase 1b trial in combination with pomalidamide and dexamethasome in multiple myeloma. Acetylon and Celgene just reported early data at the American Society of Hematology’s annual meeting. Ricolinostat is in a mid-stage study in multiple myeloma as well as several investigator-sponsored studies in lymphoma, chronic lymphocytic leukemia, and ovarian and breast cancer, according to Ogier.

Regenacy will take ricolinostat into a Phase 2 trial in peripheral neuropathy next year, he says.

The two companies aren’t disclosing the terms of the deal. Co-founder and chairman Marc Cohen said in a statement that the deal is a “favorable outcome” for Acetylon’s shareholders—an unusual mix of private financiers, non-profits, public companies, and federal grant sources including Celgene itself, Kraft Group (the holding company founded by New England Patriots owner Robert Kraft), Cohen, and the Leukemia & Lymphoma Society. (All of those shareholders aside from Celgene will be the owners of Regenacy.)

But it’s a different outcome than Acetylon and Celgene anticipated when they signed a broad deal in 2013. At that time, Celgene paid Acetylon $100 million for the option to buy it outright for at least an additional $500 million (the actual price was to be tied to an independent valuation). The deal included another $1.1 billion in “bio-bucks,” future payments tied to clinical progress that may or may not materialize. All told, that meant the Celgene deal could have been worth $1.7 billion to Acetylon and its shareholders. Acetylon raised $55 million from shareholders before it struck that deal with Celgene.

Celgene extended its partnership with Acetylon in the summer of 2015, but that included a contingency that the relationship would end in May 2016 if it didn’t buy Acetylon. A regulatory filing in July showed that’s exactly what happened: the collaboration between the two companies ended this year, and that Celgene was no longer on the hook for any future payments related to 2013 deal.

Though that deal is now history, Acetylon shareholders were at least able to generate some type of return—and take another shot on some of the same assets. Ogier said these shareholders have “ample capacity” to make further investments in Regenacy, though the company will try to find new partners to help move its programs forward as well.

“We are excited to continue Acetylon’s legacy through the receipt of rights to many of Acetylon’s most promising compounds and the continued advancement of these clinical and preclinical programs in disease indications outside of Celgene’s areas of strategic focus, where we believe patients may especially benefit from selective HDAC inhibition,” he said in a statement.

Here’s more on Acetylon, which was formed in 2008 out of work at Harvard University and the Dana-Farber Cancer Institute.