Sutro Strikes Celgene Deal Worth Up to $500M

12/18/12Follow @xconomy

South San Francisco-based Sutro Biopharma thinks it has a way to make biotech drugs that’s faster and better than the traditional method that incubates the molecules inside living cells. And today it got a big vote of confidence from one of biotech’s big players, Celgene (NASDAQ: CELG).

Sutro said today it struck a broad agreement with Celgene in which it will develop two different types of drugs against two different molecular targets. Sutro will manufacture a proprietary antibody drug from Celgene’s pipeline, and it will make new antibody-drug conjugates (otherwise known as targeted “smart bombs”) plus bispecific antibodies which can hit more than one molecular target.

Terms of the deal aren’t being fully disclosed, but Sutro is getting what it calls a “substantial” upfront cash payment from Celgene, an equity investment, and payments for R&D and hitting milestones. If the deal hits all of its goals—which seldom happens in biotech—then Sutro could get $500 million in payments, plus royalties on future sales of products from the collaboration.

Sutro, founded in 2004, has its roots in work done at Stanford University. The big idea at Sutro is to develop a new process for making biologic drugs that doesn’t rely on incubating specific strands of DNA inside living cells. Instead, Sutro is crafting a biochemistry-based method in which genetically engineered drugs can be synthesized in a way that’s faster, cheaper, and more consistent—similar to the way classic “small-molecule” pharmaceuticals are made by big drugmakers. The hope is that Sutro will be able to make drugs with the molecular targeting capability and add-on modular capabilities of biotech drugs, but with lower cost and better efficiency than existing cell-based methods.

Sutro most recently raised $16 million in the second installment of a Series C venture financing in May. Skyline Ventures led that deal, which included Lilly Ventures, Amgen Ventures, SV Life Sciences, and Alta Partners.

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