Genentech doesn’t acquire many drugs from other people, partly because it has a prolific internal R&D operation. But the South San Francisco-based unit of Roche, the world’s biggest maker of cancer treatments, is announcing an unusual deal today in which it is paying to get an early-stage cancer drug program from Cambridge, MA-based Forma Therapeutics that could enable Forma to generate returns for its investors without going public or getting acquired. Here’s the deal: Forma is handing over the exclusive worldwide rights to a small-molecule drug program—still in early-stage animal testing—that’s designed to starve tumors by blocking a molecular target involved in cancer cell metabolism. In return, Genentech is making an upfront payment, providing support for research, covering all the development costs, and agreeing to make milestone payments if the drug hits certain development goals. That’s not unusual, but what comes next is: If the Forma drug reaches its development goals, Genentech has the option to acquire the full rights to the asset, leaving Forma with no royalty stream. If Genentech exercises that option, it would make an asset buyout payment that would be distributed to Forma’s investors, plus further milestone payments to Forma if certain sales goals are met.
