Presage Snags $13M from Celgene to Pick Winning Cancer Drug Combos

3/5/13Follow @xconomy

Seattle-based Presage Biosciences has found another big partner that thinks it can help separate the winners from the losers in early cancer drug development, before the really big bucks get wasted on bad experiments.

Presage, a spinoff from the Fred Hutchinson Cancer Research Center, is announcing today it has struck a new partnership with Summit, NJ-based Celgene (NASDAQ: CELG), the world’s No. 3 biotech company by stock valuation, behind Amgen and Gilead Sciences. Under the deal, Celgene has obtained the right, on a non-exclusive basis, to use Presage’s technology to study combinations of its proprietary cancer drugs and chemo agents in animal models. In return, Presage is getting $13 million upfront, plus undisclosed future payments if the Presage technology helps Celgene hit certain goals.

The big idea at Presage is to see if it can help improve the odds of success for cancer drugs in clinical trials, where roughly one out of 10 molecules that enters clinical trials ever graduates to become an FDA-approved product. Presage struck its first significant partnership last April with Cambridge, MA-based Millennium: The Takeda Oncology Company, and that partnership remains intact, according to Presage president Nathan Caffo. The Millennium deal, and the Celgene deal, are intended to provide a critical source of cash to Presage and allow those companies to gain insights about how their drugs work in combinations before they enter the high-stakes realm of human clinical trials. If the new technique works for them, there’s sure to be intense demand from other companies. Almost 1,000 different cancer drugs are said to be in development, according to a 2012 report by the Pharmaceutical Research & Manufacturers of America.

Longer term, Presage has visions beyond just bringing efficiency to cancer R&D. It also wants to provide physicians with more diagnostic insights on which drugs are most likely to work on a given patient’s tumors.

Nathan Caffo, president of Presage Biosciences

“We’re very excited,” Caffo says. “Our goal was not to become a service company, but to form three really deep partnerships. That’s still our focus, still our plan.”

Presage’s approach is unusual. The technology, licensed from Jim Olson’s lab at the Hutch in 2009, was built to use an array of porous needles that deliver many different experimental drugs, or chemotherapy agents, to different regions of a tumor sample. That way, researchers could see how an individual patient’s tumor responds to certain drugs in their native microenvironment. At least in theory, it provides researchers a way to account for the wily genetic variability found in different parts of tumors, known as tumor heterogeneity. That genetic variability of tumors is thought to explain in some cases why a drug might successfully kill part of a tumor, but not all of it, allowing other parts of the tumor to grow and spread.

Since its founding, Presage has added a couple different technologies to enhance its understanding of how tumors respond to certain drug combinations. One is supposed to enable it to assess how an experimental drug might perform against tumors with repeat dosing, or in a staggered dosing sequence with chemo or other agents, that allows them to prime a tumor with one drug and whack it later with another, Caffo says.

Presage, which currently has 21 employees, plans to use the new shot of cash from Celgene to double in size over the course of the agreement, Caffo says. The plan is to add new capabilities in imaging analysis of the data it gets from its three different technologies, and to make its underlying technologies easier to use for more than a handful of specialized technicians.

Celgene is clearly hopeful the new partnership will help it get more productive in early R&D, where companies often have to make expensive, long-term investments on thin bodies of evidence.

“Drug development is currently challenged by heavy reliance on in vitro test systems and animal xenografts of little relevance to individual patients,” said Tom Daniel, Celgene’s president of research and early development, in a statement. “The Presage platform addresses this challenge, permitting rapid assessment of drug candidates and combinations in relevant models, with potential to base critical drug development decisions on in vivo response data.”

Besides the scientific angle, Celgene was willing to consider creative ideas on the structure of the business deal, Presage’s Caffo says.

Presage had previously raised a total of $7.7 million from a network of angel investors, and with no venture capital or other institutional backing, it has somewhat limited fundraising capability. So Celgene provided an $8 million portion of its upfront payment in the form of an equity investment in Presage, while the remaining $5 million is allocated for research support.

Caffo, like many other startup executives, raved about Celgene’s flexibility in structuring a partnership for mutual benefit. Celgene has struck a number of high-profile deals with companies like Cambridge, MA-based Agios Pharmaceuticals, Cambridge, MA-based Epizyme, and Seattle-based VentiRx Pharmaceuticals, which have provided significant support to the small company, while allowing it to stay autonomous and nimble while it develops its technology. Even though Celgene has invested more than half of the $15.7 million that has gone into Presage so far, the big company was willing to accept less than a controlling ownership stake, Caffo says. Celgene isn’t getting a seat on Presage’s board, or an observer seat, he adds. What the bigger company did get was the opportunity to make an offer to acquire Presage if it entertains a bid from another company, Caffo says.

“These guys have a deserved reputation as real innovators,” Caffo says. “They were willing to structure something very creative. They were really willing to work with us to do an equity investment that enables us to build up the platform.”

If things break right in the Celgene deal, it could provide resources for Presage to grow into a more diversified company. Olson, in this 2009 Xconomy feature, talked about the possibility of physicians using the Presage tool to prescribe the optimal mix of drugs for an individual patient’s tumor, after seeing how various drugs perform against a surgically removed tumor sample. Presage shied away from such a diagnostic strategy in its early days, preferring to help drug companies, because the FDA approval pathway appeared too uncertain and expensive, Caffo says. But Presage has recently revived the idea of going down the diagnostic pathway, and recently began a clinical trial of its tool with support from a grant provided by the National Cancer Institute.

If that study shows the Presage tool can help physicians better treat patients, then Presage will look for a third big partner, to help it go down that road in clinical trials, Caffo says.

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