January 6, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Cambridge, Mass.-based Quartet Medicine announced today that it has inked what is called a “built-to-buy” deal with Merck & Co. .
Under the deal, Quartet will get up to $20 million split across an upfront payment and various future milestone payments. The plan is to use the money to push its lead program through Phase IIa clinical proof-of-concept for its pipeline of novel small molecule drugs that modulate the tetrahydrobiopterin (BH4) pathway. The “built-to-buy” component comes into play when, at that point, if it chooses to exercise its option, Merck can buy the company.
The total deal, if it is completed with an acquisition, would total up to $575 million.
“Merck is an ideal partner to help advance development of Quartet’s potential first-in-class therapy for chronic pain,” said Kevin Pojasek, Quartet’s president and chief executive officer, in a statement. “This agreement provides a mutually beneficial collaboration framework, while providing Quartet significant non-dilutive research and development funding to advance our program through human proof-of-concept.”
Pojasek indicates that Quartet doesn’t expect to produce clinical data until 2018 or 2019. These types of “built-to-buy” deals are apparently a favorite of venture capital firm Atlas Venture, the driving force behind Quartet’s Merck deal, and a recent deal between Rodin Therapeutics and Biogen .
In that deal, Biogen has an option of buying Rodin, which is working on treatments for cognitive impairment diseases such as Alzheimer’s, for a total of $485 million in total payments. Also, Biogen and Atlas will invest $17.3 million in Rodin.
On the plus side, deals like these bring quicker acquisitions, the potential buyer has already been identified and is presumably both interested and committed, and will provide various kinds of support to ensure that various milestones are met, since it’s in both companies’ best interests to do so. Built-to-buy deals are generally less expensive than typical venture fundraising with multiple venture rounds and an aim toward an eventual public offering.
On the minus side, built-to-buy deals have smaller returns for venture investors. As Ben Fidler writes for Xconomy Boston, “The upside is capped early on, meaning there won’t be the type of windfall a venture firm could see as a founder and eventual IPO shareholder in a successful biotech.”
Quartet’s focus is on pain therapies and drugs to treat inflammation. It is focused on choosing a lead drug that modulates the BH4 synthesis pathway, which has been associated with numerous chronic pain and inflammatory conditions. In addition to using various biomarker tools and preclinical disease models, the company is utilizing what it dubs a “translational biomarker strategy for clearly establishing human target engagement early in Phase I clinical trials.” This is an apparent attempt to minimize the risks involved in early clinical development.
“Attracting a top-tier partner like Merck provides additional validation to the importance of BH4 in regulating chronic disease, as well as the progress we’ve made at Quartet over the last year,” said Bruce Booth, chairman of Quartet and partner at Atlas Venture, in a statement. “The Quartet team has done a tremendous job building a compelling preclinical data set around new drug candidates that modulate BH4. We look forward to collaborating with Merck as the Quartet pipeline continues to mature.”
