VLST Snags Partnership with Novo Nordisk to Develop New Drugs for Autoimmunity

12/17/08Follow @xconomy

VLST has nailed down its first partnership with a major pharmaceutical company. The Seattle biotech is announcing today it has formed an exclusive, worldwide collaboration that will allow Danish drugmaker Novo Nordisk to develop drugs against cell targets VLST has discovered for autoimmune and inflammatory diseases.

It’s a pretty big deal for VLST. The collaboration will pump $12 million into the company through a combination of upfront fees and equity investment, plus undisclosed future milestone payments and royalties for every drug that Novo decides to cherry-pick and push through development. Novo, the world’s largest maker of insulin for diabetes, is also agreeing to pay the salaries of 12 of VLST’s 40 employees over the next three years. This means VLST should have enough capital now to operate through the end of 2010.

“Oh man, are we ever thankful,” says Martin Simonetti, CEO of VLST, and an Xconomist. “This couldn’t have come at a better time. The markets are beyond ugly. To get this collaboration in place, and still be able to create value for VLST outside the collaboration, is a major step forward.”

The Novo deal is the first time a major drugmaker has validated the VLST technology, which is still at very early stages of development and hasn’t yet translated into a drug candidate in clinical trials. The company is built around the idea of studying proteins that viruses secrete in the body to help fend off an immune system reaction that might kill them as “foreign invaders,” says Simonetti. The concept is to study these proteins, and the targets they hit on cells, to develop new drugs that mimic that same viral effect created by Mother Nature. If this idea is on the right track, drugs made this way could tamp down the overactive immune reactions that attack healthy tissues. This is the root cause of a lot of chronic diseases like rheumatoid arthritis, multiple sclerosis, Type 1 diabetes, and lupus, that affect a staggering number of people, about 14 million to 24 million in the U.S. alone, according to the National Institutes of Health.

This deal has benefits for both sides, Simonetti says. Novo Nordisk announced over the summer that it is opening an autoimmune/inflammation research center of excellence in Seattle with 80 people, who are being set up at a new lab building at Mercer Street and Fairview Avenue North. This is about five blocks from VLST’s offices on Westlake Avenue, so this will make it easy to meet, and help “jumpstart” the new Novo research center, Simonetti says.

For VLST, it gives Simonetti a little more breathing room on financing. The company raised a $55 million financing commitment in 2006, and has currently drawn down $35 million of that, Simonetti says. That leaves one more tranche of $20 million that it can get access to from that round, provided it reaches goals set by its investors. The company’s investment syndicate includes Texas Pacific Group Ventures, MPM Capital, Arch Venture Partners, OVP Venture Partners, Amgen Ventures, MedImmune Ventures, and WRF Capital.

At the same time, VLST was careful not to give away the store, or hand over so much value to Novo Nordisk that it had very little left, Simonetti says. That’s why … Next Page »

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