Celgene steps back from $1bn Sutro acquisition

Celgene has decided not to acquire US biotech Sutro Biopharma, opting instead for an amended licensing deal with the cancer immunotherapy specialist.

The two companies have been working together since 2012, and firmed up their alliance with a $1bn partnership in 2014 that gave Celgene an option to buy Sutro outright. Now Celgene has decided to focus its involvement on four programmes headed to clinical trials - including an antibody-drug conjugate (ADC) targeting B-cell maturation antigen (BCMA).

Celgene has the right to buy additional shares in Sutro on top of its current 15% stake, with an upper limit, but can no longer buy it outright.

The revised deal has come about because both companies have changed dramatically since the 2014 pact. Celgene has new leadership that seems increasingly focused on bolt-on deals that add selected assets rather than all-out acquisitions of platform technologies, and give it the option to back multiple players. It already has a BCMA candidate in-house after buying EngMab for $625m last year, for example.

Meanwhile Sutro is increasingly confident of its prospects as a standalone company. It has a pair of its own candidates heading for the clinic, namely an ADC targeting CD74 for B-cell malignancies such as non-Hodgkin lymphoma and multiple myeloma called STRO-001 and STR0-002, an ADC which targets folate receptor alpha for ovarian cancer and other solid tumours, and wants greater freedom to take those forward on its own.

Also - and perhaps crucially - the biotech can now consider other financing options including an initial public offering (IPO) - which was prohibited under the terms of the 2014 arrangement with Celgene.

The new deal also gives greater flexibility to Celgene. Under the original deal, it had rights only to the first programme coming though the clinic. Now it gets the opportunity to acquire worldwide rights to a second programme for an undisclosed amount, and ex-US rights to another two that reach the clinical trial stage. The identity of the other programmes after the BCMA candidate is being kept under wraps.

Sutro will get an undisclosed payment upon signing of the revised agreement and continues to be entitled to development and regulatory milestone payments and royalties.

"Our goal is to continue to build momentum for promising antibody drug conjugates and bispecific antibodies for immuno-oncology therapeutics developed with Sutro's cell-free protein synthesis platform," commented Sutro CEO Bill Newell.

"With this revised agreement, Celgene continues to support Sutro's development, while we can move rapidly into development of multiple product candidates and evaluate new opportunities for partnerships and funding."