GlaxoSmithKline Extends Avalon Partnership
November 09 2015 - 9:04AM
Dow Jones News
By Denise Roland
LONDON-- GlaxoSmithKline PLC has extended a partnership with
California venture-capital group Avalon Ventures that gives the
drug maker rights to promising early-stage drug candidates.
The U.K.-based pharmaceutical giant has increased the maximum
amount of money it would pay to Avalon should it acquire any of the
startups established under the partnership.
Glaxo and Avalon have already established seven startups under
the original deal, signed 2 1/2 years ago. The most recent,
announced Monday, is focused on developing a drug for the
muscle-wasting disease amyotrophic lateral sclerosis, or ALS.
The partnership involves Glaxo and Avalon jointly investing up
to $10 million, the majority of which comes from the drug maker, to
establish each startup. Glaxo later has first rights to buy any of
these startups. Under the original agreement, Glaxo said it would
pay up to $40 million to Avalon, spread over development
milestones, per company it acquired. On Monday, Glaxo increased the
total potential milestone payments to $50 million per company.
"A lot of people thought we'd fail," said Jay Lichter, managing
director of Avalon. But "the economics are fair for both us and for
Glaxo."
He said the deal allowed Avalon to invest in a project three to
four years earlier than it otherwise would. Normally,
venture-capital funds don't invest in a project "from the eureka
scientific discovery moment," since the returns don't justify the
$10 million to $15 million it would cost to develop the idea into a
drug ready for human testing.
"We can only do that when some R&D dollars used during
discovery are from Glaxo. They don't need a venture return," said
Dr. Lichter. "That's what makes it work."
For Glaxo, the main benefit is access to La Jolla, Calif.-based
Avalon's "really strong network" on the U.S. West Coast, according
to Damien McDevitt, head of the pharmaceutical company's new San
Diego site, which forges partnerships with academic research and
small biotech companies. "GSK has now been able to tap into that
network and gain access to compelling early-stage discoveries," he
said. "That's a big advantage."
Most of the startups established under the deal are based on
discoveries made in West Coast universities, though some have come
from further afield, including the University of Michigan and Stony
Brook University in New York.
Large pharmaceutical companies are increasingly looking beyond
their own laboratories to replenish their pipelines, fueling a wave
of acquisitions and licensing deals with small biotech companies.
Many have also set up sites in prominent clusters of life-science
research, such as Boston, San Diego and Cambridge, England, to
forge stronger links with the universities there.
The Glaxo and Avalon startups are all housed in a science park
in La Jolla, where they keep costs down by sharing back-office
functions and some equipment. The seven existing companies target a
wide range of disease areas, including thyroid disorders, cancer,
and gluten intolerance, though each startup focuses on just one
compound.
Write to Denise Roland at Denise.Roland@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 09, 2015 08:49 ET (13:49 GMT)
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