Merck & Co. Inc. set in motion two definitive agreements to acquire privately held biotechnology companies GlycoFi Inc. and Abmaxis Inc., and $400 million for $80 million, respectively, and would pay cash for both.
The deals bring to Whitehouse Station, N.J.-based Merck glycoengineering and antibody-engineering technology platforms, and are part of the company's strategy announced last year to buyout biologic capabilities to strengthen its business and pipeline.
Both GlycoFi, of Lebanon, N.H., and Abmaxis, of Santa Clara, Calif., were founded in 2000. They have spent their time developing their respective technologies, and are now ready for the next stage.
"It's a natural evolution," said Charles Hutchinson, GlycoFi's CEO and co-founder. After six years of building its expertise in yeast glycoengineering, the company realized, he said, that "at some point in time you need enough resources to actually deploy your technology very broadly."
Abmaxis initially tried to get as much validation as possible for its technology by doing several corporate partnerships, but has since moved to developing its own product pipeline in preclinical studies. Now, Merck will take over that development.
"We're absolutely delighted with this acquisition," said Shirley Clayton, Abmaxis' CEO. "We feel that Merck, with their strength and their reputation with doing good research, is a really good home for what we've developed."
Merck is acquiring 100 percent of the equity of both companies, and each will become a wholly owned subsidiary. GlycoFi will remain a subsidiary for at least two years at its current location.
The company has 55 employees. Abmaxis, which has just less than 20 employees, will eventually close, said Janet Skidmore, Merck's director of media relations, who added that the staff would be offered positions at other Merck sites.
Merck began a relationship with Abmaxis in late 2004. That alliance resulted in Abmaxis successfully re-engineering a Merck human monoclonal antibody.
"We took that antibody," Clayton said, "and it was quite a challenge, but we were able to improve that antibody by 70-fold," while also retaining its specificity.
Merck and GlycoFi joined forces in late 2005 to develop novel biologic and vaccine candidates. (See BioWorld Today, Dec. 13, 2005.)
"They were very successful partnerships with both of them," Skidmore told BioWorld Today, "and on the basis of that, the acquisition discussions began."
The deal with GlycoFi enabled Merck to evaluate the technology, Hutchinson said, "and once they did that, they felt comfortable with that and wanted to move forward with it."
GlycoFi's technology, however, did not get quite so much attention in its early days, when the company's chief scientific officer and co-founder, Tillman Gerngross, first thought of it while sitting in his office at Dartmouth College, where he is a professor.
He was not able to raise money from the National Institutes of Health but did attract some investors in GlycoFi who recognized that the idea "may be technically risky, but if it can be accomplished, it will be of tremendous value," he said.
Among the company's investors are Polaris Venture Partners, of Waltham, Mass., and Boston-based firms SV Life Sciences, Boston Millenia Partners and Fletcher Spaght Ventures.
Its largest shareholder, Polaris, seeded the company with $400,000 and invested a total of $10 million over five years. Its share of the acquisition proceeds is more than $100 million. "Obviously, it's a great outcome financially," said Terry McGuire, managing director of Polaris, who added that the acquisition was the right next step. "Passing the baton to Merck is perfect."
Glycoengineering involves the making of proteins, such as monoclonal antibodies with pre-specified and defined human carbohydrate side chains. While most glycoproteins are made in mammalian cells, GlycoFi makes them in yeast, which offers advantages of speed, cost and quality.
"We took out all of the genes that make yeast sugars and replaced them with the human sugars," Gerngross said. "So it's basically a humanized yeast."
The company is able to make antibodies "100 times more potent" than current therapies "just by changing the sugar," he added. Gerngross will remain on GlycoFi's staff through August, and then return full-time to his teaching duties, serving as a consultant to Merck through the end of 2007, Skidmore said.
GlycoFi's technology could enhance the ability of scientists to find and develop oncology drugs and vaccines for infectious diseases, two areas of high priority for Merck, which already had yeast expression capabilities of its own. The company demonstrated those capabilities by producing virus-like particles in its human papillomavirus vaccine, Gardasil.
The Abmaxis technology was developed in-house and enables structure-centric computational design that leads to the selection of optimized human or humanized monoclonal antibodies. The starting point for the technology, known as in silico Immunization, can be an antigen target, or a murine, animal or human antibody, Clayton said.
The company has several products in preclinical development in oncology and inflammation, among other indications.
The acquisitions are expected to close in the second quarter. The GlycoFi closing is subject to clearance under the Hart-Scott-Rodino Anti-Trust Improvements Act.
Seven Hills Partners LLC, of San Francisco, served as Abmaxis' exclusive financial adviser in the transaction.