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Yes to Flexus: The Science And Strategy Behind A Huge Biotech Return

Xconomy San Francisco — 

It was hard to miss the numbers. On Monday, Bristol-Myers Squibb (NYSE: BMY) bought Flexus Biosciences—or a large chunk of it—and still provided one of the best returns in recent biotech memory: $800 million guaranteed and potentially $450 million more, all from a $38 million investment over less than two years.

It was also hard to miss the reason: cancer immunotherapy, a field that has also produced several product approvals, massive IPOs, and stunning clinical results in the past year or two.

But why Flexus? Their immunotherapy program isn’t yet in the clinic, and others are doing similar work. Yet its executives and investors hit the jackpot.

The last couple days, I’ve had a chance to hear more about the history and science behind San Carlos, CA-based Flexus, which launched its cancer immunotherapy research program in 2013—from scratch, it turns out, without a patent or license in hand, according to CEO Terry Rosen (pictured).

Rosen said that he and Kleiner Perkins Caufield & Byers partner Beth Seidenberg mulled cancer immunotherapy for some time before alighting on the idea of boosting the “checkpoint inhibitor” approach—that is, the class of drugs that have received marketing approval the past few years, starting with Bristol’s ipilimumab (Yervoy) in 2011.

“The more success there is in the checkpoint inhibitor area—and there probably will be no stone unturned—the more we think our work will be complementary,” said Rosen.

A bit of cancer immunotherapy background: Normally our bodies recognize mutated cells as bad actors, and our immune systems clear them out. Cancer happens when the immune system doesn’t do its job. Cancer immunotherapy, broadly speaking, jumpstarts or recalibrates the immune system to go after cancer. There are two major groups right now. The checkpoint inhibitors are mainly monoclonal antibodies and have been successful so far treating solid tumors but not blood-borne cancers. The other group is chimeric antigen receptor T-cell (CAR-T) therapy, in which a patient’s T cells are removed, genetically engineered to be better cancer fighters, and then re-inserted into the patient. CAR-T has been successful treating hematological cancers in experimental settings.

The portion of Flexus work now in Bristol’s hands is still preclinical, which makes the price tag all the more remarkable. It centers around the enzyme IDO-1, which tumor cells can produce to suppress the immune system. IDO-1 and a related enzyme, TDO, break down the amino acid tryptophan—one of life’s essential building blocks—and the resulting byproducts influence the way T cells evolve.

In response to the increase of IDO-1, they evolve away from being effector T cells, or “the soldiers in the immune response,” as Flexus chief scientific officer Jordan Fridman put it. What’s more, the T cells that have already become soldiers “require adequate levels of tryptophan to be effective killers.”

In other words, breaking down tryptophan hobbles the soldiers and reduces their ranks. It’s just one of many survival tricks that tumor cells have up their molecular sleeves.

Tumor cells also secrete proteins (CTLA-4, PD-1, PD-L1) that put the brakes on the immune system in a different way. The checkpoint inhibitors already approved remove those brakes, but here’s where the IDO work of Flexus and others enters. When tumor cells sense a heightened immune response, they deploy IDO to fight it—a second line of defense. That’s where an IDO inhibitor comes in. “If you can block IDO you can enhance the immune effect,” said Rosen.

This isn’t a new concept. In fact, it’s already been the subject of a fairly high profile deal. Last October, Roche’s Genentech division, based in South San Francisco, CA, paid Ames, IA-based biotech NewLink Genetics (NASDAQ: NLNK) $150 million upfront, with more than $1 billion in potential future payouts, for rights to NewLink’s IDO program. That program, like that of Flexus, also includes work on the related TDO pathway.

Others with IDO inhibitor programs include Belgian biotech iTeos Therapeutics, which is collaborating with Pfizer (NYSE: PFE); Incyte, which is testing its IDO inhibitor in combinations with four Big Pharma products; and the Scottish firm IOMet Pharma.

On top of the $800 million upfront, Bristol could pay $450 million more in milestones that Rosen said are achievable within three years “if IDO is a good thing.”

Rosen said the lofty sum Flexus received was due to “a competitive situation.” I asked what differentiated … Next Page »

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