PanGenetics cashes in on Abbott's early stage bet

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In a world dominated by option deals, earn outs and risk sharing, the transaction announced yesterday between Abbott Laboratories and the private Dutch biotech PanGenetics certainly appears to break the mould. The US healthcare giant has placed a significant bet on a phase I antibody candidate, in trials for osteoarthritis, paying $170m to buy the asset outright.

Why both parties chose to pursue this route over a traditional licensing deal is an interesting question. The history of venture capital-backed PanGenetics provides a clue on this side and the company’s chairman, Francesco de Rubertis, who is also a partner at 40% shareholder Index Ventures, told EP Vantage today that the sale of this asset was always the plan. Abbott’s motives however are less clear; it has gained a promising unencumbered asset and will reap all the rewards if it is successful, but there is no hedge against failure.

Novel approach

The asset in question is PG110, a humanized antibody to Nerve Growth Factor (NGF), which is currently in a Phase 1 osteoarthritis trial and, according to PanGenetics, represents a promising new therapeutic for the treatment of chronic pain.

PG110 binds to NGF with very high affinity, preventing interaction with two key receptors that play a key role in pain transduction mechanisms in the adult peripheral nervous system; a highly specific mode of action. According to yesterday’s press release, if the phase 1 trial is successful, Abbott anticipates evaluating PG110 in a number of other pain states including chronic lower back pain, cancer pain and diabetic neuropathic pain.

PanGenetics is not alone in pursuing this approach, however there are not many anti-NGF Mabs in the pipeline, as the table below shows. Pfizer is by far the most advanced, with a candidate, tanezumab, in phase III.

Mr de Rubertis declined to be drawn on how PG110 is differentiated from tanezumab, but said the product was looking very promising.

“Pfizer has demonstrated that there is good value in this mode of action, now Abbott is committed to developing its anti-NGF,” he said.

With analysts already projecting sales of $190m by 2014 for tanezumab, according to EvaluatePharma, and a launch in 2012, the area clearly holds promise. 

Financial backers

Index seed funded and “incubated” PanGenetics four years ago, at its own headquarters, since then the company has been through three funding rounds, most recently a €23m round in March 2008, led by Edmond de Rothschild Investment Partners.

The company is clearly very financially focused; it has been backed by a raft of European private equity and VC houses, namely Forbion Capital Partners (formerly ABN AMRO Capital), Credit Agricole Private Equity and Fortis. Three of PanGenetics’ board members are also employed by Index to some degree, including chief executive Kevin Johnson.

This suggests that the company would have little interest in taking a product very far through clinical trials, and in this respect an asset sale represents an efficient way for the group to raise non-dilutive cash.

“This is a model that matched the strengths and weaknesses of the parties around the table,” Mr de Rubertis said.

Efficient model

According to PanGenetics' website, the company has raised a total of €38m in its short life, which it has spent on five very early stage projects, including PG110. With $170m, or €115m, heading its way, the group and its backers have certainly demonstrated that big returns can be made from early stage research, something that the venture capital industry has been struggling with in the last couple of years.

Mr de Rubertis declined to reveal what PanGenetics will now do with its very large cash pile. This could certainly be reinvested, however, considering the ownership base, it seems likely a large chunk will be returned to shareholders.

Anti-NGF Mabs in the pipeline
Product Indication Summary Company Originator
Phase III RN624/PF-4,383,119 (RI 624) (tanezumab) Osteoarthritis [Phase III]; Pain, chronic [Phase II]; Pain, cancer-induced [Phase II]; Post-herpetic neuralgia [Phase II] Pfizer Genentech
Phase I Anti-Nerve Growth Factor (NGF) Antibody Pain, neuropathic [Phase I]; Pain, chronic [Phase I] Johnson & Johnson Amgen
SAR164877 Pain [Phase I] Sanofi-Aventis Regeneron Pharmaceuticals
PG110 Pain [Phase I] Abbott (PanGenetics) Lay Line Genomics

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