GSK Gains T-Cell Vaccine Tech With €250 Million Okairos Acquisition

The British pharma has done the biggest takeout of a private, clinical-stage European biotech so far this year. It is focused on a Phase I RSV vaccine and a T-cell stimulating technology. As for VCs, they have nabbed roughly a 10x return on their invested capital.

Venture investors in European genetic vaccine developer Okairos AG will get a stellar return from the clinical stage company. After a competitive bidding process, GlaxoSmithKline PLC has agreed to acquire the biotech for €250 million ($325 million) in cash; VCs invested less than one-tenth that amount.

Vaccines are a core therapeutic area for GSK. With Okairos, it hopes to have the basis of a first-in-class, blockbuster. That opportunity could come with the biotech’s respiratory syncytial virus vaccine, which is in Phase I testing.

Of all Okairos’ programs, “That’s the one that really captured the imagination,” of GSK, said Tom Woiwode, the company’s chief operating officer and Venture Partner at Versant Ventures. “RSV is a huge unmet need. . . . Once there is an effective RSV vaccine, it will be recommended in all infants. This has the clear potential to be the next Prevnar-like product in the vaccine space,” he added.

There is no vaccine for RSV, which is a common virus that presents with cold-like symptoms. In infants under one year old in the U.S., the disease is the most common cause of bronchitis and pneumonia and can require hospitalization or occasionally be fatal. Okairos’ vaccine provided “complete protection” against RSV in preclinical testing on rats and calves; the biotech started a Phase I trial in 40 healthy volunteers in February. AstraZeneca PLC and AbbVie Inc. market blockbuster monoclonal antibody Synagis (palivizumab) to prevent serious lung disease caused by RSV in high-risk children.

Presaging Prevnar Potential

Prevnar 13, a pneumococcal vaccine from Pfizer Inc., is approved for use in infants, young children and adolescents. In 2012, Prevnar 13 had $3.7 billion in worldwide revenues. In the fourth quarter, the vaccine was Pfizer’s second largest-selling product (Also see "Pfizer’s Prevnar 13 Is Approved For Older Children As Use In Adults Lags" - Pink Sheet, 4 Feb, 2013.).

“Prevnar is recommended for use in every infant born. In the U.S. and Europe, the price is around $400 for a full course. You have a product that’s about $4 billion and projected to grow to $6-$7 billion,” added Woiwode.

He said GSK is committed to the Okairos’ adenovirus vector technology, which stimulates a T-cell based immune response. Existing vaccines work solely by generating an antibody response. According to the biotech, cytotoxic CD8 T-cells are the most relevant to this process. Adenovirus induces CD8 T-cell and protective antibody responses. Okairos’ said its adenovirus-based vaccines have high immunological potency, high productivity in cell lines and low seroprevalance to neutralizing antibodies.

“We can stimulate antibody response. The big gap is – how do you also stimulate strong T-cell response. That’s what Okairos’ technology does uniquely well. We’ve vaccinated over 700 subjects with our adenovirus vectors and seen strong T-cell response,” said Woiwode. Okairos has five clinical stage vaccine programs for malaria, HIV, hepatitis C (prophylactic and therapeutic) and RSV.

The Okairos platform and much of the management came out of Merck Inc. Okairos co-founder and CEO Riccardo Cortese was the founder and head of the Istituto di Ricerche di Biologia Molecolare (IRBM) in Rome, which later became a subsidiary of Merck. He departed Merck, taking much of his original IRBM team with him, and in-licensed the technology from the pharma in 2007 (Also see "Okairos SRL" - Scrip, 1 Nov, 2010.).

The former global head of vaccine R&D at GSK, Jean-Paul Prieels, sits on Okairos’ board, and Woiwode said he was instrumental in getting the acquisition done. “He obviously has great contacts. No doubt he was part of the reason why GSK took the deal seriously.”

The Italian start-up entertained both partnership and buyout offers from multiple suitors, including at least two to take out the entire company. In the end, however, Okairos chose the simplest, all-cash, unstructured offer.

“GSK and everyone else made offers that had earn-outs,” Versant Managing Director Brad Bolzon said. “They were complex offers, especially around the platform in particular. But pharmas don’t want programs so much as platforms, and we found it was hard to structure the [proposed] earn-outs.”

Versant Ventures Into Europe

Okairos raised €23.2 million in venture funding during its six years, including a €7.2 million Series A round in 2007 and a €16 million Series B in 2010. Life Sciences Partners, BioMedInvest AG and Novartis Venture Funds were its earliest investors, while Versant led the Series B round as the only U.S. firm participating. Bolzon said the firm’s investment generated a 100% internal rate of return in three years.

Okairos also garnered more than €25 million in grants from the National Institutes of Health (NIH), the European Union (EU), the Medical Research Council (MRC), and the Bill and Melinda Gates Foundation for the development of HCV, malaria and influenza vaccines.

Versant sees Okairos as emblematic of its European strategy. The Menlo Park, Calif. based firm has been investing in Europe since 2005 and thinks the region offers particularly good opportunities (Also see "Versant Ventures Looks To Canada, Europe For New Deals" - Scrip, 12 Apr, 2013.).

“The academic institutes [in Europe] are fantastic; the pharma infrastructure is every bit as good as in the U.S. The flip side is that the VC infrastructure is not as well-developed as in Europe. There’s not as much of a competitive feeding frenzy,” said Versant’s Woiwode.

He said that, as was the case with Okairos, Versant is looking for companies with “breakthrough technology, innovative, first-in-class products and a seasoned management team.”

Woiwode also pointed to the acquisition of another Versant portfolio company, Amira Pharmaceuticals Inc. by Bristol-Myers Squibb Co. in 2011 for $325 million, plus up to $150 million in milestones. “When you are developing truly first-in class products, you can capture the imagination of pharma. They can come in earlier,” he said (Also see "BMS Bets On Amira's IPF Drug In $325M Acquisition" - Pink Sheet, 22 Jul, 2011.).

Gauging Vaccines At GSK

The May 29 deal strengthens GlaxoSmithKline’s vaccines division, which currently includes numerous hepatitis, influenza, and pediatric prophylaxes (Also see "Mixing Business And Philanthropy Yields Returns For Glaxo In Africa" - Pink Sheet, 20 May, 2013.).

Vaccines accounted for about 11% of GSK sales in the first quarter of 2013, compared to the same period a year prior. Global GSK vaccine sales fell 11% that quarter, which the pharma attributed to unusually high sales for HPV vaccine Cervarix due to a catch-up vaccination program during the first quarter of 2012 in Japan.

In this deal, GSK will take full possession of Okairos’s ongoing programs and intellectual property; it plans to keep Okairos’ team intact as a semi-autonomous unit based in Italy. The companies plan to engineer a collaborative structure for the arrangement, based on a long-term service agreement between the parent company and the Okairos team.

Editor’s note: This story was updated with additional information on May 31.