- With immuno-oncology (I/O) currently reigning as the hottest area of drug development, it's become fairly common to see big pharma using any tool at its disposal — though M&A in particular — to gain a stronger foothold in the space.
- But smaller companies are increasingly getting in on the action too, with the latest example coming from Heat Biologics. The company announced on Wednesday plans to acquire fellow I/O medicines maker Pelican Therapeutics, snatching up an 80% controlling stake in the Austin, TX-based target.
- Heat's move arises largely from its interest in PTX-25, a T-cell stimulating drug targeting the TNFRSF25 protein that the company plans to pair with its two immunotherapy technology platforms to develop combination treatments.
I/O is akin to the hottest club in town. It's difficult to get into, but the payoff may be well worth the long lines and pricey cover at the door. Heavyweight drugmakers have used M&A (along with internal R&D) as a way to break into the party faster. Bristol-Myers Squibbs' takeover of Cormorant Pharma for $95 million upfront in mid-2016, Baxalta's potentially $1.6 billion deal with Symphogen a few months earlier, and Novartis' acquisition of Admune Therapeutics in 2015 are just a few instances.
Smaller players are now using similar tactics as well. Just last month, for example, Annapolis, MD-based PharmAthene, a small-cap company that focuses on immunotherapies for rare diseases, revealed a merger plan with privately held Altimmune, Inc.
This week's Pelican acquisition is the first relatively big one for Heat, which has two drugs in development and a market cap of about $23 million.
It's not a particularly unexpected transaction, however. The company spun out privately-held Pelican a few years back because it couldn't devote the proper amount of resources to Pelican's pipeline, according to a Heat spokeswoman.
Pelican shareholders must okay Heat's stock purchase for the deal to commence. In exchange, the buyer is offering up to $500,000 for participating investors, as well as issuing 1,323,021 — almost 5% of all outstanding shares — of Heat common stock. Heat expects the deal to close before May.
The Durham, N.C.-based company has also agreed to loan Pelican money to pay for fees associated with the transaction. Heat reported roughly $8.5 million worth of cash and cash equivalents as of Sept. 30, according to its most recent 10-Q filing with the Securities and Exchange Commission.
Meanwhile, Pelican will provide payments related to clinical and commercialization milestones, royalties and sublicensing income. Further details about those payments were not disclosed in a March 8 statement. Pelican had previously received $15.2 million from the Cancer Prevention and Research Institute of Texas, money expected to fund all its preclinical development and at least one Phase 1 clinical trial.
"Pelican’s two product candidates are transformative assets for us as there are compelling data indicating that targeting TNFRSF25 may have significant advantages over competing costimulatory receptors currently under development," Heat CEO Jeff Wolf said in the statement. "This is important because many of the leading global pharmaceutical companies are focused on T cell costimulators to enhance the effectiveness of their existing immuno-oncology therapies."