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Novartis Bets $250M-Plus on Aduro’s Immuno-Oncology Work

Xconomy San Francisco — 

How bullish are big drugmakers on cancer immunotherapy these days? Take a read from the deal Novartis announced today with Berkeley, CA-based Aduro Biotech, which is getting a nine-figure check from the Swiss drug giant for an immunotherapy approach that hasn’t yet been tested in humans.

Novartis will pay Aduro $200 million in cash, make a $50 million equity investment, and may shell out as much as $500 million more down the road, to work with Aduro to find and test compounds that activate the Stimulator of Interferon Genes, or “STING” receptor in immune system cells. Once stimulated, this receptor sets off a cascade of human immune responses that might be harnessed to control cancer.

The two companies will share development and commercialization costs, as well as the profits from any marketed drugs that come out of their work. Aduro and Novartis will split those costs and profits evenly in the U.S. In Europe and Japan, the split is 45 percent for Aduro and 55 percent for Novartis. Novartis will foot the bills and take profits everywhere else, with Aduro getting royalties in the mid-teens, according to CEO Stephen Isaacs.

The big upfront haul is particularly notable given that Aduro hasn’t yet tested a STING drug in clinical trials. So far, Aduro has only demonstrated that an experimental STING activator compound it’s developing called ADU-S100 can curb tumor growth in animals.

Isaacs says the terms of the Novartis deal are unusually favorable for a preclinical program from a small biotech company.

“It’s clearly a super deal for us,” Isaacs says. The agreement covers the use of Aduro’s family of STING-stimulating compounds—small molecules called cyclic dinucleotides or CDNs—specifically for cancer. Aduro retains rights to use these drug candidates in non-cancer illnesses such as infectious diseases.

Isaacs couldn’t comment on how the major new deal would affect Aduro’s recently announced plans to go public, because the company’s March 11 filing of a registration statement with the Securities and Exchange Commission initiated a quiet period on details related to the IPO.

The Novartis agreement is the latest in a string of positive events for Aduro over the past 15 months. Novartis is the second pharmaceutical company to form a drug development partnership with Aduro during that period. Johnson & Johnson (NYSE: JNJ) unit Janssen Biotech has inked two separate deals with Aduro since May, after the smaller company reported promising results in early-stage clinical trials of its most advanced therapeutic candidates for immunotherapy, nicknamed LADD.

Janssen is paying Aduro at least $30 million upfront for rights to Aduro’s LADD therapies tailored to treat prostate cancer, lung cancer and certain other cancers. If everything goes well with those drug development programs, Aduro stands to reap more than $1 billion combined in additional milestone payments from the two Janssen deals.

The experimental LADD therapies were created to take advantage of a natural and useful trait of a type of bacteria called Listeria monocytogenes, which kick-start the immune system. To turn these dangerous bacteria into cancer treatments, Aduro used genetic engineering to eliminate their hazardous properties. The company also modified the bacteria so they would produce tumor antigens, which signal immune system cells to attack cancerous ones. Aduro customizes the LADD therapies to work in different tumor types.

Janssen came calling after Aduro announced positive results for its LADD therapy designed to treat pancreatic cancer. In an early-stage trial, its lead experimental LADD treatment, CRS-207, combined with another of its cancer vaccines, GVAX Pancreas, helped patients with metastatic pancreatic cancer live longer than those given the GVAX vaccine alone.

Braced by that news, Aduro launched the larger ECLIPSE trial in February. That trial in pancreatic cancer will compare the CRS-207 and GVAX combination to chemotherapy. Top-line results are expected in the first half of 2016. The FDA has granted a “breakthrough therapy” designation for this experimental pancreatic cancer treatment, opening doors for a possibly speedier review from the agency than Aduro would otherwise have.

Aduro has also been fundraising to meet its heightened expenses as it moves its experimental treatments into clinical trials.

In January this year, Aduro said it had closed a $51.4 million Series D equity financing, which brought the company’s total funds raised in 2014 from venture capital firms and other investors to $106.4 million.

As of Dec. 31, Aduro had $119 million in cash and $81 million in working capital, according to the company’s SEC filing in preparation for its IPO.

Aduro had been preparing to move its STING activator compounds—its back-burner program to the more advanced LADD therapies—into an initial clinical trial on its own late last year, Isaacs says. But the company was also exploring partnership possibilities with a number of pharmaceutical companies, including Novartis, he says. Interest was heightened because the potential of the STING pathway, a fairly recent discovery, was making news in top scientific journals, he says.

STING receptors are found widely in immune system cells. Activating them triggers immune responses along multiple pathways, including the release of chemicals such as interferons, cytokines, and chemokines. The chain of events ends with the formation of T-cells that are dedicated to destroying tumor cells bearing the antigens characteristic of each individual’s cancer.

“People realize that the approach could bear fruit in a big way,” Isaacs says.

Novartis had its own researchers exploring not only the STING pathway, but also another new class of cancer drugs called checkpoint inhibitors, he says. Aduro considers the checkpoint inhibitors a possible ingredient in combination therapies with its STING activator compounds, Isaacs says.

Due to the quiet period, Isaacs declined to answer questions about the impact of the Novartis deal on the company’s capital needs, the timing of the IPO, and estimates of Aduro’s valuation. Novartis has paid $25 million for a 2.7 percent stake in Aduro, and plans to make a second $25 million equity investment on an undisclosed future date.

While Novartis has gained rights to co-develop cancer drugs from Aduro’s STING activators, the deal is actually a broader scientific collaboration that could encompass other compounds that stimulate the STING receptor, Isaacs says.

“The deal revolves around STING as a target,” Isaacs says. “We’re both looking at a diverse set of compounds.”

Aduro’s original plan was to start an early-stage trial this year of STING activator ADU-S100, Isaacs says. Aduro would’ve chosen which cancer to target based on how accessible the tumors were to a direct injection of the drug—the method already used in animal trials of ADU-S100. The possible targets included melanoma, kidney cancer, and head and neck cancers. Aduro would have used the results of the first trial in humans to determine if its STING drugs have potential as solo therapies, rather than just pieces of a combination regimen, Isaacs says. But those plans are now on hold while Aduro and Novartis together discuss the possibilities for initial clinical trials, he says.

“Now that we have the deal, we’ll work together to see what the best path forward is,” Isaacs says.