Back in 2012, Sutro Biopharma Inc.'s chief scientific officer, Trevor Hallam, said a potential $500 million pact offered new partner Celgene Corp. "a way of kicking our tires," to see whether Sutro's cell-free protein expression capabilities were as promising as they sounded. (See BioWorld Today, Dec. 19, 2012.)
Clearly, the Summit, N.J.-based big biotech thought so. The firms disclosed Thursday a second collaboration this one broader in scope, with more than $1 billion in potential milestones, and accompanied with a buyout option to develop multispecific antibodies and antibody-drug conjugates against targets in the sizzling immuno-oncology space, which has been generating headlines over the past two years on the back of positive late-stage data for PD-1 checkpoint inhibitors Keytruda (pembrolizumab, Merck & Co. Inc.), approved by the FDA last month, and Bristol-Myers Squibb Co.'s Opdivo (nivolumab). (See BioWorld Today, Sept. 5, 2014.)
Sutro has been advancing its own work in immuno-oncology, thanks to a $26 million series D round closed late last year, conducting early research on targets such as the PD-1 and PD-L1 checkpoint proteins. That work will be included in its new Celgene deal, said Jeremy Bender, chief business officer, "but we'll also go after additional targets."
That checkpoint inhibitors can improve overall survival in cancer is a given. In fact, firms such as BMS are now testing whether combining inhibitors against different pathways will prove even more efficacious, with promising early results. But treating patients with two or more drugs also increases the risk of off-target effects.
"So we have a great opportunity here," Hallam told BioWorld Today. Sutro can design multispecific antibodies, so it can start with "PD-1 or PD-L1 or others and then build on extra attributes [to] block more than pathway," all the while "designing out off-target effects."
The number of targets in the Celgene collaboration was not disclosed, but Sutro's system is designed to quickly and systematically run through tests of proteins and protein combinations, rather than the "exhaustive interrogation" that had typically been required for large molecule development, Hallam said.
The cell-free biologics development platforms, known as Xpress CF and Xpress CF+, offers "two really exciting aspects," he explained. The first is the fact that it involves an extract all the components necessary for biochemical protein synthesis that can be stockpiled and used for generating antibodies within about 10 hours. And, importantly, that antibody generation can be done at any scale within that time period.
"Celgene is extremely interested in our approach," Hallam said. Compared to the cell-based expression platforms, which would require months, Sutro's technology "really represents a new operating system," he added, likening it to the "clunky old PC" that gets replaced by the "new Mac on the block."
South San Francisco-based Sutro will take on all discovery and early preclinical work in the latest collaboration and will handle manufacturing of preclinical candidates. Celgene agreed to an up-front payment of $95 million in cash and equity. A breakdown was not disclosed, but Bender acknowledged that it as "largely up-front cash."
In its earnings report Thursday, Celgene, which had acquired an initial equity stake in Sutro upon inking the 2012 deal and participated in the series D round, said its stake had grown to about 15 percent.
The deal also includes up to an additional $90 million that Sutro could earn during the initial research term, including payments for manufacturing and productivity milestones; should Celgene opt to extend the deal beyond the three-year research term, Sutro would be entitled to an additional payment. Clinical and regulatory milestones across all candidates included in the collaboration could exceed $1 billion and, on top of that, Sutro would be entitled to royalties from any product sales.
If Celgene shoulders responsibility for global development and commercialization, it will hold worldwide rights to all collaboration products, unless Sutro retains U.S. development and commercialization rights to certain candidates. After an initial period, disclosed by Celgene to begin in September 2016, the big biotech will have the exclusive option to acquire Sutro on pre-specified terms.
If Celgene does not exercise that option, any candidates not licensed to Celgene revert to Sutro.
It's a bold move for Celgene and speaks highly of Sutro's technology, particularly given that the company is still some ways from entering the clinic with its first program.
And Sutro management was "willing to embrace" an option that could offer liquidity to its investors, which include Alta Partners, Amgen Ventures, Lilly Ventures, Skyline Ventures and SV Life Sciences. "Every biotech CEO and board needs to think about returns for investors," said Sutro CEO Bill Newell, while also focusing on "world-class science that leads to new therapies that can transform the treatment of cancer."
In addition to its programs with Celgene, Sutro is working on antibody-drug conjugates in an early stage deal with Merck KGgA and has its own internal pipeline it's advancing. As Bender put it, "We're really going into hyperoperative mode now."
CELGENE BEATS CONSENSUS IN in Q3
The Sutro deal is the latest by Celgene to help build out its early stage pipeline via external agreements its March deal with Bluebird Bio Inc. to develop CAR T-cell therapies is another example even as it continues growing its own commercial franchises. (See BioWorld Today, March, 22, 2014.)
Indeed, Celgene has been one of the most stable top biotech performers of recent years and its third quarter earnings, disclosed Thursday morning, continued to tell the same story. The company bested consensus estimates for both revenue $1.982 billion vs. $1.96 billion and earnings per share 97 cents vs. 95 cents and reported total product sales for the three months ending Sept. 30 of $1.957 billion.
Sales were driven largely by its multiple myeloma therapies, Revlimid (lenalidomide) in particular, which posted total revenue of $1.3 billion, up 19 percent from the third quarter of 2013 and topping consensus estimates of $1.26 billion. Pomalyst (pomalidomide) did well, too, with sales of $181 million beating estimates of $177 million.
Sales of Abraxane (nab-paclitaxel), which continues to pick up market share as part of the new standard of care in pancreatic cancer, reached $212 million in the third quarter, a year-over-year increase of 25 percent.
Otezla (apremilast), the PDE4-targeted psoriasis drug approved earlier this year, might have been the only miss, but it didn't miss by much sales totaled $18 million vs. consensus of $20 million and was considered "forgivable" by Wells Fargo analyst Brian Abrahams.
The company increased its revenue guidance for the full year, expecting it to top $7.6 billion. As of Sept. 30, Celgene had about $6.9 billion in cash, equivalents and marketable securities.
Shares (NASDAQ:CELG) closed Thursday at $100,40, up $5.64.