Astra’s near-record research deal gets lost in the noise

Analysis

With AstraZeneca’s 5,000 job cuts understandably taking centre stage at today’s hotly awaited strategy review, the $240m the company has handed over to an unknown private start-up in a research alliance was almost lost in the noise.

The beneficiary of Astra’s generosity is Moderna Therapeutics, a three-year-old mRNA specialist. Not only is $240m almost the largest signing fee for any preclinical deal, it amounts to six times the total venture capital investment in Moderna so far – and it has not even bought Astra an equity stake. The deal might be more indicative of Pascal Soriot’s plan as Astra’s chief executive than job cuts or the precise location of the firm’s R&D labs.

Mr Soriot has certainly put his money where his mouth is, having previously rejected the widely held view that Astra needs big M&A to overcome its myriad problems (No quick fixes, but Astra's Soriot can still be bold, March 18, 2013).

Although he insists that “nothing was off the table” in the strategic review, M&A bankers will bemoan the scotched prospects of a takeover of Shire or merger with Bristol-Myers Squibb. Astra’s willingness to pay top-dollar for what it sees as the right assets could prove lucrative for deal bankers, although they will need to think hard to come up with such assets.

EvaluatePharma data reveal that in terms of recent preclinical-stage signing fees the Moderna tie-up is second only to the $400m handed over by Abbott Laboratories in 2011 to Reata Pharmaceuticals for a portfolio of oral antioxidant inflammation modulators.

But what is most striking is just how much higher than Moderna’s current valuation $240m is: the Massachusetts biotech had raised just $40m so far from private backers led by Flagship Ventures. Of course paying more for a deal up front that the whole target company is worth is not entirely novel – its most famous instance is the 2002 tie-up between Roche and the UK’s Antisoma, which happened to end in failure – but it is unusual.

Astra highlighted the disruptive nature of Moderna’s technology, and the fact that it could yield 40 R&D candidates. But it would not be drawn on why it did not simply buy the whole company; without any equity Astra does not even have first call on Moderna’s assets should Astra want to buy it, as was the case in the 2006 acquisition of its then-partner Cambridge Antibody Technology.

Mr Soriot’s thinking can therefore only be guessed at, as can the view of Moderna’s VC backers, who either turned down a sixfold return or saw it slip away. Conventional thinking would go something like this: Astra wants to foster the entrepreneurial edge that biotechs have and does not want to destroy it by simply buying the company and integrating it into its own business.

Biologics 2.0

Some have already called Moderna the next big thing in biotech – with all the potential positives and negatives that this entails. The company’s technology uses mRNA containing naturally occurring nucleotide analogues to stimulate the body to produce therapeutic proteins without an immune response.

Analysts at Bryan, Garnier & Co call this idea of effectively making new drugs in a patient’s body “Biologics 2.0”, and speculate that it might enable totally undruggable targets to be hit. But however promising and innovative such a technology is, many have come and gone before it and – crucially – it has yet to be tested in humans.

The five-year tie-up also involves future payments, including $180m for three technical milestones, and royalties, and is focused on cardiometabolic diseases and oncology. This fits neatly with Astra’s slimmed down therapy focus presented at today’s strategic review, at which the UK firm also denied that its interests in the now non-core infectious diseases, vaccines and CNS would be sold; there had been some hope that a deal-making bonanza might include divestments.

One of the things that Moderna certainly does illustrate is just how expensive and scarce high-quality biotech assets are in the current market. Astra insists that the deal could be a game-changer and usher in the first entirely new way of making therapeutic proteins since the development of recombinants over 30 years ago.

But whatever Moderna’s potential to become Astra’s Genentech, the road to a human therapeutic will be long and complex.

To contact the writer of this story email Jacob Plieth in London atjacobp@epvantage.comor follow@JacobEPVantageon Twitter

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