Novartis, A Switzerland-based drugs company, has acquired for an undisclosed price US-based CoStim Pharmaceuticals from a consortium including corporate venturing unit Johnson & Johnson Development Capital and the first exit for Partners Healthcare’s venture fund.
CoStim, which is developing cancer treatments known as immunotherapy after work in four academic labs in the Boston region, was acquired within 12 months of its $10m series A round providing “significant, above-top-decile return,” according to one investor.
Luke Evnin and Robert Millman, venture capitalists at MPM Capital, helped found Costim in 2012 and led the initial seed round. Millman was also its initial president and chief operating officer before Dan Hicklin, a former vice-president of oncology at Merck, joined Costim as president and chief scientific officer halfway through last year.
MPM and venture capital peer Atlas Ventures co-led the $10m A round, which also included JJDC and Partners Innovation Fund. A regulatory filing from April 2013 showed Costim had tried to raise $22.26m in this round.
Bruce Booth, partner at Atlas, on his blog said: “Although financial terms were not disclosed, this will provide a significant, above-top-decile return. As a general rule, startups in ‘red hot’ areas like immune-oncology don’t get bought early unless the returns are very attractive. If the contingent milestones are paid, this deal will return a significant portion of the entire life science allocation in Atlas Fund VIII….
“The syndicate we joined and co-led last year was designed to be strong enough to take these programs into the clinic ourselves, but Novartis pre-emptively moved forward with a discovery-stage deal. The credible ‘threat’ of going longer alone as an early stage company was an important element of the deal dialogue.”
Mike Chuisano, vice-president of venture and chief operating officer of Johnson & Johnson Development Corp (JJDC), by email concurred: “As with any investment, I guess when there is an offer you can’t refuse…you don’t.” JJDC had Marian Nakada, VP of venture investments, on Costim’s board in her first deal since her move from its Janssen research and development unit.
The deal also marks the first exit for the $35m Partners Innovation Fund, a corporate and academic research venturing unit of Partners HealthCare System, a US-based hospital and physicians group covering Brigham and Women’s Hospital, Massachusetts General Hospital, and McLean Hospital. Partners had Roger Kitterman, managing partner of its Innovation Fund, on Costim’s board.
Over the past seven years, Partners has invested in at least 19 companies, 17 spin-off companies through the fund and two through a different Partners channel. More than 30 discrete investments have been done. Christopher Coburn, vice-president of innovation at Partners HealthCare, by email said: “We would view the deal as an example of terrific technology and great timing. As you have written, there is a tangible market for breakthrough biotechnology with demonstrated potential to help large numbers of patients.”
Vijay Kuchroo, Arlene Sharpe, and Gordon Freeman, working in labs at Harvard Medical School, Brigham and Women’s Hospital, Dana-Farber Cancer Institute and Boston Children’s Hospital, developed the ideas behind Costim.
Bill Sellers, global head of oncology at the Novartis Institute for Biomedical Research in Cambridge, told news provider Boston Globe the drugs CoStim is developing — drugs that help T cells block cancer signals without having to remove them — will give the drug maker another research approach to that developed through its academic partners at University of Pennsylvania.
Last year, Novartis spent $43m to buy a manufacturing facility for such drugs from Dendreon, the Globe reported.