VenBio Scores Again as Genentech Pays $1.7B+ for Seragon Pharma

VenBio Scores AGain as Genentech Pays $1.7B+ for Seragon Pharma. Check out the story below.

Jul 2, 2014 at 2:01PM

Editor's Note: Genentech is a subsidiary of Roche Holding (NASDAQOTH:RHHBY)

The big year for San Francisco, CA-based life sciences venture firm venBio just got bigger.

Genentech, the big cancer drugmaker from the Bay Area, has agreed to buy a less than one-year-old San Diego, CA-based start-up called Seragon Pharmaceuticals for a whopping $725 million up front. Seragon's backers—the Column Group, OrbiMed Advisors, Aisling Capital, venBio, and TopSpin Partners—could see another $1 billion in payouts if the start-up's prospective breast cancer treatment hits a variety of milestones. The buyout is expected to close during the third quarter.

The deal gives Genentech a platform for developing so-called selective estrogen receptor degraders, or SERDs. The big idea is that they don't just bind to estrogen receptors, like the hormone therapies that are used to treat many cancers but ultimately fail as tumors develop a resistance to them. Instead, the SERDs are meant to actually bind to, and then degrade the receptors, eroding their signaling abilities. The biotech's most advanced program is a prospective breast cancer drug called ARN-810, which is currently in Phase 1 testing for patients with late-stage estrogen receptor positive breast cancer. Genentech noted that SERD treatments could also potentially treat early stage breast cancer and become a "cornerstone" of future combination therapies.

While the deal marks a big victory for all of Seragon's venture backers, it's also notable for a few other reasons. For one, it continues a big run for venBio, which has now ripped off three venture exits via big buyouts since 2013. First, in June 2013, Johnson & Johnson (NYSE: JNJ) snapped up Aragon Pharmaceuticals and its prostate cancer treatment for $650 million up front and $350 million more in potential milestones. (VenBio joined on late as an investor in Aragon, leading its $50 million Series D round in 2012—the company was founded within the offices of the Column Group). Then, just a month ago, Teva Pharmaceutical Industries snapped up another portfolio company, San Mateo, CA-based Labrys Biologics, for $200 million up front and another $625 million in milestones. That deal came less than two years after Labrys was formed, and venBio partner and co-founder Corey Goodman told Xconomy at the time that venBio had contributed $8.5 million of Labrys' $31 million Series A round plus an "extra kicker" for putting the deal together. VenBio's cut of the Labrys and Aragon upfront payments were more than the firm's $180 million fund has drawn down from its investors, Goodman said at the time.

Secondly, this a large part of the management team behind Seragon was also involved in Aragon. When J&J bought Aragon, it agreed to spin out a second asset, a potential breast cancer drug. That became the foundation for Seragon, which was formed in August 2013—just 11 months ago—and attracted $30 million in venture funding to get going. Many of the same executives from Aragon, including CEO Richard Heyman, were involved in both companies.

It's also huge validation for the work done to get Seragon going. Genentech, as one biotech executive told Xconomy last year, is the proverbial "goose that keeps laying golden eggs"—particularly big-time cancer drugs like rituximab. The fact that it's willing to pay up big numbers for an early stage program from outside the company speaks volumes.

"This year, breast cancer will claim the lives of nearly 40,000 women in the United States, and up to half of these women will have a disease that is driven by the estrogen receptor," said Richard Scheller, executive vice president and head of Genentech Research and Early Development, in a statement. "We believe these investigational oral SERDs could one day redefine the standard of care for hormone receptor-positive breast cancer.

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This article originally appeared on Xconomy, along with:

Ben Fidler has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson and Teva Pharmaceutical Industries. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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