Elixir Fuels Up On Equity, Acquisition Option Deal With Novartis
By Lorie Konish
Metabolic disease pharmaceutical
developer Elixir Pharmaceuticals Inc. has sealed a deal giving existing
investor Novartis AG the exclusive option to acquire the company with the
completion of certain clinical milestones.
The deal could top $500 million, including an undisclosed initial acquisition
payment and possible regulatory and sales milestones.
Novartis first became an investor in Elixir in 2007, when Elixir first raised
funding through a fund managed by MPM Capital on behalf of Novartis, MPM Bio IV
NVS Strategic Fund LP. MPM has been an investor in Elixir since the company's
inception through MPM BioVentures II LP. At the time of the strategic fund's
first investment, Novartis was interested in a certain undisclosed Elixir
program, said MPM Managing Director Todd Foley, and its attention turned to the
ghrelin antagonist program, around which this deal was formed.
At the same time, Elixir has raised a $12 million Series B-2 equity
recapitalization financing co-led by MPM Bio IV NVS Strategic Fund and Physic
Ventures. Other investors in the round included ARCH Venture Partners, MPM
BioVentures II, Omega Fund and Oxford Bioscience Partners. Elixir President and
Chief Executive Paul Martha declined to elaborate on the terms of the Series
B-2 transaction.
Novartis now has the exclusive option to acquire Elixir with the completion of
the Phase IIa study of its lead ghrelin antagonist, which is currently in
preclinical development. Elixir's ghrelin antagonist treatments work to block
the ghrelin receptor and target the treatment of metabolic disease including
Type II diabetes.
"If you can pre-sell the company today at tomorrow's price, it's certainly
better than selling the company today at today's price," Foley said of the
option deal, which was formed on competitive terms for all sides. "The
problem in venture these days is when are you going to get an exit? This is
crystal clear as any situation."
In working with Novartis through its strategic fund, MPM has seen other recent
option deals: for Peptimmune Inc., including the worldwide rights to its lead
multiple sclerosis drug, and Proteon Therapeutics Inc., with rights to acquire
the company after the completion of a Phase II study.
Other pharmaceutical companies have taken to option deals as a way of placing
early bets on promising clinical products, while mitigating risk.
Venture-backed Ception Therapeutics Inc., for example, entered into a $100 million
deal with Cephalon Inc. in January with the option to acquire the company.
For ARCH, an investor in Elixir from its early stages, the corporate interest
is a testament to the attention the program's preclinical results have received
in an area that has been hard to drug in the past, said ARCH co-founder and
Managing Director Robert Nelsen.
"There are a limited number of fundamental innovations in the diabetes and
metabolism space," Nelsen said. "Elixir's experience has been rare in
getting corporate partners to step up early, but we all consider it a good
thing."
Elixir's work and its potential implications in the diabetes and obesity space
were what attracted Physic Ventures, a venture capital firm focusing on
consumer-driven health care investments. Its portfolio includes cardio-fitness
technology company Expresso Fitness Corp. and sleep-inducing food and beverage
company Dreamerz Foods Inc. In Elixir, the firm saw the same potential as its
other investments to reach a high level of consumer involvement in chronic
disease.
"We want to feel like the consumer can understand what it is and have a
dialogue with their doctor about that particular therapy approach," said
Physic Managing Director Dion Madsen.
While Elixir will use the $12 million equity for the development of its ghrelin
antagonist program, the company will also look to form other deals to further
the development of its other pipeline treatments. The company finished Phase
III testing of Metgluna, a combination of a product in-licensed from Japan and
metformin, for the treatment of Type II diabetes. Elixir also has planned a
Phase I trial with the Food and Drug Administration for its ghrelin agonist
treatment targeted at diabetic gastroparesis and cachexia.
"We do have the freedom to form partnerships and other things with other
assets before the Phase IIa," Martha said. "We are actually in
discussions and looking at strategic alternatives with the other assets."
Elixir last raised a $28 million Series D round in September 2007, when it also
filed for an initial public offering. Through MPM's strategic fund, Novartis
contributed $10 million to that round, giving the company the option to obtain
rights for the development and commercialization a ghrelin antagonist or
sirtuin program, according to a regulatory filing from the time. Other
participants in the Series D included ARCH, MunMun International Ltd., Oxford
and Physic. Elixir withdrew its plans for an IPO in May 2008.
Elixir raised more than $100 million since its founding in 2001, Martha said.
Other investors have included Boston University Community Technology Fund, CDB
WebTech, CDIB Bioscience Venture, Jafco Ventures and YFY Bioscience. Tredegar
Investments sold its life science portfolio in 2003 to W Capital Partners,
which subsequently sold its ownership to an undisclosed investor in either late
2005 or early 2006.
With this transaction, MPM Capital Principal Kenneth Greenberg has joined
Elixir's board.
Cambridge-based Elixir has downsized its staff from about 33 to ten in the last
year, Martha said, in an effort to focus on development in place of previous
research efforts. Martha assumed the role of chief executive in January, after
previously serving as chief medical officer and senior vice president of
clinical and regulatory affairs. He replaced William Heiden, who left the
company in December.
http://www.novartis.com
http://www.elixirpharm.com
