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With Big Takeda Deal at Launch, Can Ambys Keep Control of Its Future?

Xconomy San Francisco — 

A new biotech has debuted today aiming to make a variety of treatments for deadly liver diseases. The startup, Ambys Medicines, has formed an unusual, broad alliance with Takeda.

Some early, wide-ranging partnerships between new biotechs and Big Pharma have fallen apart in the past and have been too limiting for the biotech, but Ambys’s CEO says this deal will still allow the company to maintain control of its future.

Ambys, of Redwood City, CA, has raised a $60 million Series A from Third Rock Ventures and Takeda, a typical early round for biotechs created by the Boston life sciences venture firm. But Ambys is starting up with much more than that. Alongside the Series A, the company has received another $80 million in committed capital from Takeda to help fund its research. And Ambys could see more cash from Takeda: the partnership gives the Japanese pharma options to grab partial rights to Ambys’s first four drug programs, which, if exercised, would trigger more payments. Ambys aims to develop a range of drugs, from traditional small molecule ones to newer treatments like gene and cell therapies.

Out of the gate, Ambys has enough cash to last it a “minimum of four or five years,” says CEO and Third Rock venture partner Jeff Tong (pictured). “As long as the programs are productive, this is a company that doesn’t need to worry about its finances,” he says. Those programs aren’t close to human tests. Tong says the hope is Ambys will have some candidates for clinical trials within the next few years.

Venture funding is flowing into biotech at a record pace, driven partly by the wide-open IPO window for companies with little to no proof their drugs might work. This cash-friendly environment is allowing young companies like Ambys to pursue many different strategic paths.

One of those paths is to form with deals already in place, or soon after. These arrangements can include co-development deals, option-to-buy deals for specific programs, or even commitments to acquire the whole company in the future. Third Rock’s own Warp Drive Bio, for instance, started up in 2012 not only with a $125 million financing, but a commitment from Sanofi to buy the company later on. Firms like Constellation Pharmaceuticals, Proteon Therapeutics (NASDAQ: PRTO), and Acetylon Pharmaceuticals arranged alliances with bigger firms either to co-develop drugs, be acquired at a pre-arranged price, or both. These types of deals infuse the smaller firms with cash, help validate their work, and at least in theory increase the odds for investor returns.

But wide ranging partnerships come with a cost, particularly for fledgling companies. There’s a “tension,” Tong says, “around control, the amount of financial support, and the level of downstream ownership of the products that get created.” Strategic paths can change. A number of option-to-buy deals—including those mentioned above—have fallen apart or been modified over the years. When Genentech passed on an option to buy Constellation in 2015, for example, its then-CEO, Keith Dionne, who came aboard after the deal was signed, was relieved. He told Xconomy the company was so closely aligned with Genentech it couldn’t discuss partnerships with others. Warp Drive and Sanofi punted their buyout deal in 2016 in favor of a licensing deal agreement, which freed up Warp Drive to work with other companies.

“The hamstring for many of these deals historically, even ones with very large up front checks, is that the company has lost some level of control or ownership—whether at the product level, the corporate level, or in the downstream commercialization rights,” Tong says.

Ambys needs significant investment because it wants to develop multiple types of treatments, simultaneously, without one program “sucking up all the resources,” Tong says. But it was wary of a big round because of how much more difficult it would become to generate meaningful returns for investors. Aligning with Takeda gave Ambys another way.

What’s atypical about this deal, Tong says, is Ambys gets a lot of cash up front, yet “always retains its independence.” There are no buyout clauses for slices of the company or the whole thing. Takeda can only choose from the first four programs, regardless of what type of drugs they are or for what diseases they are developed. So despite cutting into the eventual profits its first four drugs could generate, Tong contends the deal “preserves, for Ambys, its long-term future.”

Tong describes three different types of therapies under development at Ambys, but won’t say which chronic liver diseases, specifically, they would treat—just that they aim to restore lost liver function. Small molecule drugs the company hopes to develop, for example, would help a cell produce a protein that is lost. Gene therapies would be delivered into scar-forming myofibroblast cells in the liver, aiming to reprogram them so they turn into healthy liver cells. And cell therapies would transplant healthy liver cells into patients with failing livers—a possible alternative to a full liver transplant.

The last two, in particular, are significant scientific challenges. The gene therapies currently approved or in human tests tell the body to produce a specific protein it lacks, not reprogram the entire function of cells. And the few cell therapies that are currently approved for blood cancers use immune cells, not liver cells. Although some cell therapy approaches for liver disease have been tested in humans, the field isn’t nearly as far along. “There’s much to be worked out,” Tong says.

Ambys was co-founded by liver disease and cell and gene therapy experts at the University of Illinois Urbana-Champaign (Martin Burke), the Oregon Stem Cell Center (Markus Grompe), the Salk Institute for Biological Studies (Juan Carlos Izpisua Belmonte), and UCSF (Holger Willenbring).

Photo courtesy of Tri Nguyen/Ambys Medicines.