IFM, an unorthodox biotech startup, scores third buyout with Novartis deal
Dive Brief:
IFM Therapeutics, a biotechnology startup developing drugs that target a part of the immune system, said Wednesday Novartis exercised an option to buy its IFM Due subsidiary for $90 million upfront and as much as $745 million in milestone payments.
The deal caps a partnership formed in 2019, when Novartis agreed to fund research into IFM Due’s immunotherapies targeting a pathway called cGAS/STING in return for an option to buy the whole subsidiary. The drugs that resulted from the collaboration “have the potential to treat an array of serious inflammation-driven diseases,” IFM said in a statement.
This is the second time Novartis has scooped up an IFM subsidiary. In April 2019, the Swiss drugmaker agreed to pay $310 million up front and as much as around $1.3 billion in contingent payments to acquire IFM Tre, which came with a drug already in the clinic.
Dive Insight:
In less than 10 years since launching, IFM has now successfully sold off three subsidiaries. That makes the Boston-based company the rare biotech to pull off a “liquidity hat trick,” noted Bruce Booth of Atlas Venture, one of IFM’s financial backers, in a blog post.
IFM first sold to Bristol Myers Squibb in 2017, transferring two immuno-oncology programs but retaining rights to the IFM name, personnel and remaining research programs. IFM moved forward with an unusual model, housing development programs in independent subsidiaries that share management and infrastructure. Nimbus Therapeutics, also backed by Atlas, operates in a similar way, as do other so-called hub-and-spoke biotechs.
The “option-to-buy” deal with Novartis for the Due unit offered both IFM and Novartis a way to share risks and rewards. Such deals are relatively rare now, but were more common when the biotechnology industry was suffering from challenging capital markets around 2010 to 2012, Booth said. He estimates about 30% of all such agreements result in the exercising of an acquisition right.
For IFM, the original Bristol Myers deal included $300 million upfront, plus as much as roughly $1 billion in milestone payments for each of the first two products to emerge from the transaction. Adding in the latest Novartis deal, the three acquisitions left IFM with $700 million in initial cash and the potential for more than $4 billion in future payments from the acquiring companies.
That’s an impressive return for a company that launched in 2015 after incubating as part of the Atlas Venture seed program. In 2016, IFM announced a $27 million Series A financing led by Atlas and Abingworth with participation from Novartis. In 2019, the company closed on a $55.5 million financing and launched a new subsidiary called IFM Quattro as well an incubator dubbed IFM Discovery.
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