More thoughts on the Astex-Otsuka marriage

Teddy already highlighted the planned $866 million acquisition of Astex by Otsuka, and I thought I’d add a bit of context. Astex Therapeutics was founded in 1999, just three years after publication of the Abbott SAR by NMR paper that arguably launched widespread interest in fragment-based lead discovery. From the outset, Astex focused heavily on crystallography, which was somewhat unusual at the time; Vicki Nienaber’s seminal SAR by Crystallography paper only came out in 2000.

Astex researchers have made many practical contributions to FBLD, from the (sometimes controversial) rule of three to the LLE_AT metric to the Astex Viewer familiar to anyone who has seen a presentation from the company. More than 100 publications have come from Astex, including one of the earliest comprehensive reviews of the field. And the company has also delivered: of 28 fragment-derived compounds to make it into the clinic, Astex has had a role in nearly a quarter, including AT13387, AT7519, AT9283, JNJ-42756493 (with J&J), LEE011 (with Novartis), AT13148, and AZD5363 (with AstraZeneca and ICR).

In terms of price, $866 million is indeed a tidy sum, more than the up-front Daiichi Sankyo paid for Plexxikon (though a bit under the total deal value of $935 million) and more than an order of magnitude higher than the $64 million Lilly paid for SGX back in the dark days of 2008. Even with close to a billion dollars on the table, some are calling the price too low, with one analyst suggesting Astex is worth $13 per share rather than the $8.50 offered by Otsuka.

Of course, the Astex pipeline is not entirely fragment-based; a merger with SuperGen in 2011 brought in a marketed product (decitabine) as well as other clinical compounds. Still, from what Otsuka has said publicly, it does appear that the FBLD technology was a major driver: it is the first item mentioned under the heading “Objectives of the Acquisition.”

As Derek Lowe pointed out over at In the Pipeline, Japanese firms have a good track record of not breaking or shuttering acquired companies; last I checked Plexxikon was still going strong. Hopefully this will hold true for Astex as well. Practical Fragments offers congratulations and wishes continued success to everyone involved.

Wedding announcement: Daiichi Sankyo and Plexxikon

Practical Fragments has highlighted several mergers and acquisitions of fragment-based companies over the years, but yesterday’s announcement that Daiichi Sankyo plans to acquire Plexxikon for $805 million in up-front cash plus an additional $130 million in near-term milestones is definitely the largest. You may recall that PLX-4032, Plexxikon’s B-Raf kinase inhibitor, is currently in Phase 3 trials and a favorite to be the first fragment-based drug approved.

According to FierceBiotech, Plexxikon has raised a total of $67 million in venture funding, so a number of investors are likely popping Champagne. This is a nice validation of the value of fragment-based drug discovery, so let’s all raise a glass!

A tale of two deals

Two deals involving companies in the fragment space were announced today. I don’t have inside information on either of these, but superficially they are strikingly different.

In the first, Australia’s Biota has agreed to acquire UK-based Prolysis Limited, which previously published some nice work on using FBLD to discover new antibiotic leads (see here and here). The price? Just $10.8 million. However, Biota did say it plans to invest up to $25 million over the next three years on programs Prolysis started.

At the same time, UK-based Astex Therapeutics announced a new partnership with GlaxoSmithKline. The deal is for multiple targets in multiple therapeutic areas, with Astex focused on fragment screening and lead discovery and GSK focused on optimization of the resulting leads as well as preclinical and clinical development. The price? $33 million in up-front cash and equity, with a total potential of more than $500 million (BioBucks).

Astex of course is one of the few intact survivors of the first wave of fragment-based companies and has put several compounds into the clinic, including AT9283, AT7519, and others. It’s encouraging to see that deals of this size are still being done for what look to be fairly early stage collaborations.

A Darwinian Marriage

The Galapagos Islands inspired Charles Darwin to develop his theory of evolution, and now Belgium-based Galapagos may be able to teach us something about the evolution of fragment-based drug discovery: the company recently announced the purchase of Sareum’s structure-based drug discovery services unit. A few days later, UK-based Sareum announced that it was discontinuing internal laboratory research.

Sareum’s platform focused on the crystallographic discovery and recombination of fragments; Galapagos is planning to merge these capabilities with their BioFocus DPI contract services group.

The price? Just £ 553,000, or a little more than $ 1,000,000 at the time of the announcement.

What conclusions can be drawn from this acquisition? On the one hand, clearly Galapagos feels the technology has value. On the other, a million dollars doesn’t go far these days; it would be difficult to put together the platform Sareum has been building since 2003 for this sort of money.

Obviously a single data point can not lead to a whole theory, but it does spawn many hypotheses. What does this mean for service-based business models? For valuations of European vs US companies? For the value (fiscal and scientific) of fragment-based drug discovery in general?