Biotech Values

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Boston Globe chimes in on GlycoFi deal:

http://www.boston.com/globe/business

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Merck to buy N.H. biotech in record bid

Privately held GlycoFi to net $400m in cash

By Stephen Heuser
May 10, 2006

A small New Hampshire firm with a new idea for making biotechnology drugs said yesterday it would be acquired by global pharmaceutical giant Merck & Co. for $400 million in cash, the largest such deal ever reported for a private biotechnology company.

Six-year-old GlycoFi Inc. of Lebanon, N.H., cofounded by Dartmouth engineering professors, has only 55 employees and specializes in genetically altering yeast cells so they can produce useful human proteins.

According to the National Venture Capital Association, the deal was the third-highest price paid for a private biotechnology firm, and the largest on record to be done in cash.

As injectable proteins -- so-called 'biotech drugs" -- become a larger and more profitable part of the US pharmaceutical industry, major drug makers like Merck have been racing to expand beyond traditional pills into the complex realms of biotechnology, which involve growing human proteins in large vats of living cells.

'We felt that GlycoFi gave us enormous capabilities in the area of biologics, which is an area where we want to have a far larger footprint," said Merv Turner, a Merck licensing executive.

GlycoFi's scientists say they have solved a longtime frustration of biotechnology drug makers: While yeast cells can crank out therapeutic proteins far faster than the cells now used in most biotech factories, the resulting molecules are contaminated with various sugar 'side chains" that make them unusable as drugs. GlycoFi was founded with the idea that yeasts could be coaxed to make much cleaner versions of the proteins.

'It was a team that took on a really challenging problem and they solved it," said Terry McGuire of Polaris Venture Partners in Waltham, which provided the lead financing for GlycoFi.

As the company's technology began to look more promising, it signed research deals with Merck and Eli Lilly & Co., among others. A recent paper in the journal Nature Biotechnology showed that its genetically engineered yeasts could take a well-known antibody -- a cancer treatment sold by Genentech Inc. as Rituxan -- and reliably produce slightly different versions of the drug in yeast [#msg-9379256].

Some of the versions appeared to be more effective than the original. 'If you put the right sugar on it, you get Rituxan that's 100 times better, 100 times more potent in killing cancer cells," said Tillman Gerngross, GlycoFi's chief scientist, who cofounded the company with Dartmouth professor Charles Hutchinson.

The deal will result in a major payday for the New Hampshire firm's venture backers, including Polaris, which sank $10 million into GlycoFi and will cash out for more than $100 million when the deal goes through.

'You definitely play the game for days like today," said McGuire of Polaris.
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