March 2, 2011

Wall Street Journal

A Venture Bonanza in Plexxikon $805 Million Sale to Daiichi Sankyo

Plexxikon raised $67 million in venture capital on the way to discovering a potential breakthrough treatment for melanoma. Now those venture investors are ready to cash in with the fourth largest sale of a venture-backed biopharmaceutical company, according to VentureSource, a market tracker owned by Dow Jones & Co.

On Tuesday, Japan’s Daiichi Sankyo agreed to acquire Plexxikon for as much as $935 million, comprised of $805 million plus $130 million in milestone payments tied to approval of Plexxikon’s PLX4032, which in Phase III clinical trials has shown potential to improve survival of metastatic melanoma patients harboring a genetic mutation known as BRAF.

Plexxikon reduced its need for equity through corporate alliances that brought in over $200 million in non-dilutive funding. Because of these deals the company is profitable and has been paying taxes since 2008, said Chief Executive K. Peter Hirth. Its sale to Daiichi Sankyo, expected to close in about month, will provide returns for Advanced Technology Ventures, Alta Partners, Astellas Venture Capital, Pappas Ventures, Walden International and others.

Plexxikon and partner Roche Holding expect to file for U.S. and European approval of PLX4032 this year. By acquiring Plexxikon, Daiichi Sankyo will take over Plexxikon’s right to co-promote the drug in the U.S. with Genentech, Roche’s U.S. commercial oncology unit. It also gains a pipeline that includes PLX3397, which is set to enter Phase II studies in multiple cancers, and PLX5622, an oral rheumatoid arthritis therapy that just entered the clinic.

Central to Plexxikon’s success was a drug-discovery engine that enabled it to quickly identify compounds and ready them for clinical trials. The company was formed in 2001 with a plan to use structural biology to identify small-molecules aimed at kinase-enzyme drug targets. The approach involves crystallizing kinases with the compound bound to them. The insights this provided enabled it to develop drug candidates that bound selectively to their target.

Plexxikon discovered PLX4032 in 2005, moved it into clinical trials in 2006 and partnered it with Roche that year. The companies are developing a companion diagnostic to identify patients suited to the drug, which is taken orally. About half of melanomas have the BRAF mutation and 8% of solid tumors harbor it as well, according to the company.

In addition to Roche and Genentech, Plexxikon also formed deals with Wyeth and French drug company Servier. Because its drug-discovery engine produced so many products–generating a compound ready for the clinic about every 12 months–Plexxikon was able to form multiple deals while still being selective about the drugs it chose to advance on its own, said ATV General Partner Michael Carusi.

The potential of Plexxikon’s lead drug extends beyond melanoma, Hirth said. Colorectal cancer is another target, since the BRAF mutation occurs in about 10% of these cancers, according to the company.