Big pharma spinouts grow up
Companies formed around unwanted big pharma assets have a mixed record, although some parents are better at finding spinouts than others.
The approval of Viela Bio’s Uplizna earlier this year represented swift progress for a company that was only founded in 2018. It also marked another successful transition on to the market for an Astrazeneca spinout – of the three companies that the pharma giant has actively set on an independent path, another has seen a drug approved, and the third is in late-stage trials.
These other companies are Albireo and Entasis, and this track record arguably makes Astra one of the more successful big pharma companies when it comes to building new homes for unwanted assets. An Evaluate Vantage review of this activity finds that Merck KGaA is by far the most enthusiastic spinner, having forged nine young start-ups in the last decade, though not all of these are still around today.
Back in 2012 Merck KGaA’s biotech unit, Merck Serono, pledged to seed a number of companies after dramatically cutting back and reshaping its R&D operations in Geneva. This lead to a string of spinouts, including Asceneuron, Calypso Biotech and iOnctura, which remain early-stage companies. Tocopherx appears no longer to exist, although Prexton, the first to be spun out, was acquired by Lundbeck in 2018, for $123m up front.
|A summary of spinouts from major drug developers|
|Parent company||No. of spinouts||Summary of progress|
|Merck KGaA||9||Listed: Poxel. Acquired: Prexton, Nitec. Private: iOnctura, Calypso, Esperere, Asceneuron. Dead: Tocopherx, Tioga.|
|Pfizer||6||Listed: Springworks, Esperion*, Raqualia*. Acquired: Fabrus. Private: Ixchelsis, Nerviano*.|
|Novartis||3||Listed: Nabriva*, Mereo. Acquired: Speedel*.|
|Glaxosmithkline||3||Acquired: Convergence. Private: Nerre. Dead: Autifony.|
|Roche||3||Acquired: Novuspharma, Cytonet. Listed: Basilea*.|
|Astrazeneca||3||Listed: Albireo*, Viela*, Entasis.|
|Sanofi||2||Acquired: Novexel, Proskelia.|
|Johnson & Johnson||2||Acquired: Movetis. Dead Prep Biopharm.|
|Bayer||2||Acquired: Actimis. Private Aicuris*.|
|Takeda||2||Private: Chordia, Cerevance.|
|Eli Lilly||2||Dead: Biocritica*, Muroplex.|
|Teva (via Cephalon)||2||Dead: Clevexel, Allara.|
|*Product to market, directly or via partner. Source: EvaluatePharma.|
Defining a spinout has become slightly more complicated with the emergence of motivated venture firms that actively seek unwanted projects and set out to build companies around them. A decade ago this activity was very much driven by the parent pharma company, which provided the assets and frequently staff, although external partners were generally brought on to provide financing.
For example, Bing Yao, chief executive of Viela, was head of respiratory, inflammation and autoimmunity at Astrazeneca’s Medimmune unit before striking out to head the start-up alongside several other Astra staffers; external investors initially injected $250m but Astra retained a large stake. Similar models were used with the spinouts of Albireo and Entasis.
Compare this to a start-up like Impact Biomedicines, which was set up around fedratinib, an asset that had been abandoned by Sanofi. The company was explicitly set up to buy the Jak2 inhibitor off the pharma giant, and was aided in large part by Medicxi, a venture firm and a big proponent of a so-called “asset-centric” investment model.
Sanofi retained a stake in Impact but the formation of that company was driven by parties external to the pharma giant. There are grey areas of course and to a certain extent this comes down to semantics – take Corvidia Therapeutics for example, which was recently bought by Novo Nordisk for $725m up front.
The company was founded by venture firms Sofinnova and Apple Tree, which funded a licensing deal over an Astrazeneca project that was earmarked for selling on. True, Corvidia also took several former Astra employees; however, the pharma giant does not consider Corvidia a spinout, under strict definitions of the term.
This overview focuses on spinouts that, as far as can be determined, were driven by the parent company, and focuses on those set up by very large drug developers only. It also only concerns spinouts of research-stage companies, and not the separation of business units with products already on the market.
Vantage’s search of EvaluatePharma’s database found 39 such companies that had been set on an independent path, most of which were formed in the past decade, spun out of 12 global drug makers.
Of these, nine remain private, 13 have moved on to the stock market, while seven are either bankrupt or no longer appear to be active. Ten have been acquired, and nine have seen products win approval.
That around a quarter of these companies managed to cross the regulatory finish line is pretty impressive, given that many were set up with very early projects. Perhaps, though, this is not so surprising: a motivated parent is unlikely to spend the time and money to set up a new company unless it sees real potential.
Still, this does not necessarily mean that investors should rush to back big pharma spinouts. Nine have got to market but few have been real commercial success stories. The most notable spinouts are listed below, and even here several have taken years to deliver these achievements.
With venture firms flush with cash there are plenty of buyers out there for big pharma cast-offs. And these huge developers are no doubt content for this complex and time-consuming activity to be driven externally.
|Spin-out success stories|
|Company (year of spin out)||Parent company||Detail|
|Viela (2018)||Astrazeneca||Uplizna on the market; $2bn market cap|
|Basiliea (2000)||Roche||Two products to market; $545m market cap|
|Esperion (2008)||Pfizer||One product to market; $1bn market cap|
|Prexton Therapeutics (2012)||Merck KGaA||Bought by Lundbeck in 2018 for $125m up front|
|Convergence (2010)||Glaxosmithkline||Bought by Biogen in 2015 for $200m up front|
|Movetis (2006)||Johnson & Johnson||Bought by Shire in 2010 for $559m|
|Actimis (2004)||Bayer||Bought by Boehringer Ingelheim in 2008 for $515m|
|Novexel (2004)||Sanofi||Bought by Astrazeneca in 2009 for $505m|
|Speedel (1998)||Novartis||Bought by Novartis in 2008 for $880m|