FibroGen grabs an option to buy cancer drug startup Fortis

2023-05-09

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Dive Brief:

FibroGen has licensed an experimental cancer drug from biotechnology startup Fortis Therapeutics and grabbed an option to acquire the smaller company at a later date.

FibroGen won’t make an upfront payment to acquire the drug at the heart of the deal, a cancer medicine known as FOR46. But FibroGen could pay the startup $200 million if the medicine wins certain regulatory approvals and, within the next four years, buy the company for $80 million.

Fortis’ treatment is an antibody drug conjugate, or ADC, that’s being tested as a treatment for prostate cancer and multiple myeloma. Early results in prostate tumors were presented at the American Society of Clinical Oncology meeting last year.

Dive Insight:

In good times for young biotech companies, startups can build towards an initial public offering, a way not only to ensure future funding for drug research, but to generate returns for their backers.

When the public markets are tight, though, startups have to get more creative. Some rely on a reverse merger to get to Wall Street, or give up rights to a prized asset to raise cash. Others sell themselves altogether.

The deal between FibroGen, based in San Francisco, and Fortis, based in La Jolla, California, represents the latter approach, giving the smaller company a chance to earn returns for its investors while bypassing an IPO.

While the IPO window cracked open last week with lucrative offerings from Acelyrin and Kenvue, Johnson & Johnson’s consumer health unit, the biotech sector is still on its slowest pace for new stock offerings in at least five years, according to BioPharma Dive data. Before those two offerings, only four biotechs had priced offerings in 2023, and nine of the last 15 IPOs had raised $15 million or less, suggesting going public is still a long shot.

The potential acquisition gives Fortis and its investors, which include Avalon Ventures and one of Eli Lilly’s venture arms, a workaround. FibroGen will fund the development of Fortis’ program, and has the exclusive option to buy the company at a pre-negotiated price within the next four years.

For FibroGen, the deal gives the company another chance at a marketed drug.

The biotech debuted on the Nasdaq stock exchange in 2014 and has spent much of the time since developing an anemia drug known as roxadustat. That drug is approved in Europe, China and Japan, but was rejected in the U.S. over to safety risks. Prior to the agreement with Fortis, FibroGen had one other drug prospect in clinical testing.

“The agreement with Fortis Therapeutics bolsters FibroGen’s clinical pipeline in a capital-efficient manner, providing a product candidate with the potential to address a significant unmet medical need in oncology,” Enrique Conterno, FibroGen’s CEO, said in a statement.

The company had about $374 million in cash at the end of March, enough to cover its expenses into 2024, according to its first quarter earnings report.

FibroGen shares ticked down about 2% on Tuesday to around $17.40 apiece.

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