September 28, 2010

Xconomy

Acceleron Weans Itself Off VC, Continues its Roll with Pharma Partner Dollars

Acceleron Pharma is in an enviable position among its biotech peers. Instead of relying on venture capital in a time when the VC well has been running dry, the Cambridge, MA-based firm has been supporting its operations primarily with cash from its pharmaceutical company partners. And now Acceleron has found prospects for additional deals with large drugmakers.

Earlier this month, Acceleron said that it brought in a $45 million down payment in its collaboration with the Ireland-based drug company Shire that is mainly focused on the biotech’s potential treatment for the genetic disease Duchenne Muscular Dystrophy. And since early 2008, the 140-person biotech has been generating revenue from a partnership with Summit, NJ-based cancer drug maker Celgene (NASDAQ:CELG). That deal, in which Acceleron is developing a treatment for anemia in cancer patients, has brought in much more than the $45 million upfront payment, Acceleron officials say. Plus, Acceleron also has a partnership with the Waltham, MA-based biotech firm Alkermes (NASDAQ:ALKS) to develop a long-lasting drug for rheumatoid arthritis.

All this means that Acceleron has the cash to fuel its operations without surviving solely on the capital it has raised from its venture capital investors—a predicament that biotech startups can get caught in when they don’t yet have money-making products on the market.

“Our hope is that we won’t have to go back to our ventures backers,” said John Knopf, the company’s CEO, who co-founded the firm in 2003. He noted that the recent deal with Shire “positions us well [financially] for the next couple of years.”

Knopf and his team have been quite successful in drawing both pharma partnerships and venture capital to his firm (which was formed around the idea that drugs designed to target certain receptors on cells can boost or stymie the growth of tissues in the body like muscle or bones to treat diseases.) From pharma partners, the firm has taken in about $140 million, according to Steven Ertel, the firm’s vice president of corporate development. Acceleron has also been rather prodigious in VC fund-raising as well, pulling in about $100 million since 2004 from big-named venture backers such as Advanced Technology Ventures, Bessemer Venture Partners, Flagship Ventures, MPM Capital, OrbiMed Advisors, Polaris Venture Partners, and Venrock Associates. (The company raised $86 million of its some $100 million from VCs prior to its Celgene deal in early 2008.)

For sure, Acceleron is among an exclusive group of Boston-area biotech firms that have also had success in garnering investments from both VC and drug companies. Others in this fortunate bunch include Aveo Pharmaceuticals (which went public in March), Concert Pharmaceuticals, and Agios Pharmaceuticals. Drug companies, with their deep pockets, appear to have become a more popular source of capital for biotech startups than before the financial collapse of 2008, which took its toll on other VC outfits and other investors.

Acceleron obviously has its hands on hot science that its drug partners want for their own pipelines. Its research, based on a family of proteins that control tissue growth and healing across a variety of tissue types in the body, has yielded numerous potential drugs for serious diseases. (The inspiration to start the firm was the muscle-bound Belgian blue bull, which has a protein mutation that causes rapid development of lean muscles.) The main focus of the firm’s pact with Shire, for example, is a drug that is designed to increase the growth of muscle tissue by impacting a protein receptor on cells. The drug, dubbed ACE-031, showed in an initial human study last summer that it could increase muscle mass and has advanced into a larger, mid-stage clinical trial.

For Shire’s part, the drug offers the opportunity to expand its Lexington, MA-based Human Genetic Therapies division, which is already a rapidly growing provider of drugs for rare genetic diseases such as Fabry disease and Hunter syndrome. While ACE-031 has the potential to work in a range of muscular disorders, Acceleron and now Shire see the most immediate market opportunity in Duchenne Muscular Dystrophy. There’s no cure and limited treatment options for the disease, which causes muscle tissues to fade and robs patients of their ability to walk. It affects about one in every 3,500 males born today, and its victims typically die by age 25.

“This collaboration with Acceleron still represents our focus on rare genetic disease but expands us into this new therapeutic area,” said Shire’s Arthur Tzianabos, a vice president in the Human Genetic Therapies unit, who was one of the key players in the deal between his firm and Acceleron.

Acceleron’s deal with Shire could be worth up to $498 million in payments and milestone fees related to development of drugs for muscular disorders. In addition, the biotech has kept full commercial rights to its potential muscular dystrophy drug in the U.S and it is eligible for royalties on Shire’s sales of the treatment outside of North America, where the bigger drug maker has rights to sell it. If development of the drug goes as hoped, the plan is to produce it at one of Shire’s new bio-manufacturing plants in Lexington. (Shire employs about 1,500 workers in Lexington and Cambridge.)

In the meantime, Acceleron has been collecting payments from Celgene for the development of another drug candidate (ACE-011) that could treat anemia caused by chemotherapy. The firm’s experimental treatment aims to block a cellular signal, which leads to the destruction of oxygen-carrying red blood cells and bone tissue. With the signal blocked, the intent is to increase red blood cell levels and increase bone growth in cancer patients who develop anemia. The Celgene has agreed to pay up to $510 million in fees tied to the development of the drug, yet Acceleron has also agreed to share with its partner the right to sell the drug in the lucrative U.S. market, according to the terms of the deal.

And Acceleron has even more assets in its pipeline that it says have potential to generate more deals, and more cash. Acceleron has recently begun talks with pharma companies interested in a separate cancer drug in early development called ACE-041, Knopf says. The drug targets a receptor linked to tissue growth, like its other treatments, yet this particular compound would kill cancer cells by preventing the growth of blood vessels that are needed to nourish tumors. And akin to Acceleron’s firms other experimental drugs, this treatment has been showing the type of promising results in an initial clinical trial that gets pharma companies interested.

“We have some very nice data from advanced cancer patients,” said Knopf, whose company won’t reveal full data from the study until after it concludes. “We’ve got a lot of initial interest in that, and we expect will have a partnership [for that drug] within a year’s time.”