VLST, After Nine Years and $50M, Sells Assets and Winds Down
VLST, a Seattle biotech company that raised about $50 million in its nine-year history, has wound down all its operations and sold off its remaining assets, Xconomy has learned.
The names of the buyers, and the price they paid for VLST’s components, aren’t being disclosed, said VLST’s former CEO Marty Simonetti. One buyer has scooped up an antibody drug candidate for cancer that’s being prepped for mid-stage clinical trials. Another buyer has obtained VLST’s proprietary drug discovery engine, preclinical drug candidates, and related intellectual property, Simonetti said. The deals are structured a bit like a licensing agreement, in which VLST’s management and shareholders stand to collect additional milestone payments if the drug candidates or technology reach certain goals.
The transactions, which weren’t announced publicly, were completed before the end of June, Simonetti says. Investors in the company, and its remaining five managerial employees, were “happy” with the result, he said. VLST, as I reported back in September, had already laid off most of its employees, stopped its drug discovery work, and narrowed its focus to its lone cancer drug candidate. VLST wasn’t out of cash at the time it sold, but if it was going to stay independent, it clearly had to raise more to take its lone candidate very far in clinical trials.
“Investors are happy when they get a good return. That’s one piece of it,” Simonetti said. “But from a management perspective, we had built a series of programs and had in-licensed a program that we were excited about, and now there are parties that can resource them in a way to move them forward to give them a greater shot at success.”
VLST was founded in 2004 by Immunex veterans Craig Smith and Steve Wiley. They got their first backing at Accelerator, the venture backed startup incubator in Seattle. The idea was to look broadly for proteins that viruses secrete to defend themselves from an immune system attack. By studying those proteins, and the targets they hit on cells, VLST hoped to find new drugs to tamp down various autoimmune diseases.
The company secured a $55 million financing commitment in 2006, which it stood to collect over time for hitting certain milestones. Over time, the investor syndicate included Texas Pacific Group Ventures, MPM Capital, Arch Venture Partners, OVP Venture Partners, Amgen Ventures, MedImmune Ventures, and WRF Capital. By 2008, VLST struck an important collaboration with Danish drug giant Novo Nordisk, which agreed to pay $12 million upfront to collaborate in the hunt for new treatments for autoimmune disease.
But after all that time and money, VLST never put a single drug candidate from its discovery group into clinical trials. In September, VLST decided to lay off its remaining scientists to conserve its remaining cash for a drug it in-licensed from Pfizer. That product candidate, an antibody aimed at a molecular target called CD40, had completed an initial stage clinical trial, but had been shelved by Pfizer. VLST hoped to build some value in it by advancing it into mid-stage clinical trials.
Although it’s impossible for anyone outside the company to evaluate what VLST accomplished without full disclosure of the terms of its sale, two of its investors said they were satisfied.
“VLST had the opportunity to either push forward on its own or to pursue further development activities with the backing of a major strategic partner,” said Thong Le, managing director at WRF Capital. “The company and board opted for the latter path, which gave the company the expertise and financial resources to move its therapeutic programs forward effectively. Taking this path also provided a positive financial return to the investors, which made everyone happy.”
Carl Weissman, the CEO of Accelerator, said the choice to sell was a simple one. “It was the best offer received, preserved the assets and the programs going forward, and provided a tidy return to the investors.”
Of course, when a company gets $50 million in venture capital and puts no drugs into value-creating clinical trials, investors could theoretically be happy if they got any money back at all. Le declined to comment further on what it would take for an investor to be happy. “All I can say is we’re happy with the outcome,” Le said.
Simonetti, for his part, said he’s been enjoying some time away from work during this beautiful summer in Seattle. He said there were “a lot of long days” during his 7.5-year run as CEO of VLST, and he’s not exactly in a hurry to get back into the fray. “When the right opportunity arises, I’ll take a look at it,” he said.