A Deep Dive Into The Roche Holdings AG Basel ADR Common Stock (OTCMKTS:RHHBY), MacroGenics Inc (NASDAQ:MGNX) Deal

Roche

Roche Holdings AG Basel ADR Common Stock (OTCMKTS:RHHBY) is on something of a spree of late, seemingly rushing to get a spate of deals tied up before one of the biggest events of the year in this space – 36th Annual J.P. Morgan Healthcare Conference – which is set to take place in San Francisco, CA, from Monday.

The company just announced that it’s joined forces with small-cap biotechnology company MacroGenics Inc (NASDAQ:MGNX), and that the two will collaboratively develop what, right now, remains a relatively nonspecific asset in an equally nonspecific target indication.

Here is what we know and what we don’t.

So, right off the bat, we know that the deal is worth a potential all-in figure of $380 million to MacroGenics but that the upfront payment associated with the collaboration comes in at just $10 million. In the biotechnology space, backloading deals like this is pretty much standard practice but for a company to only pick up circa 2% of the overall deal value at the initial close is slightly unusual. It suggests that the programs that the collaboration will target are early-stage and, by proxy, speculative, and this is likely a driver behind neither company being overly specific as to what, or with what, they are targeting.

With that said, however, there are a couple of things that Roche did report in the press release detailing the deal.

First up, we know that MacroGenics’ lead technology focuses on what are called Dual-Affinity Re-Targeting, or DART, molecules. These are single molecules designed to simultaneously bind to two targets, each with antibody-like specificity, with the goal of creating a more significant biological effect than binding any one of the targets with a single antibody (or even two separately as a combination).

The company already has five DART product candidates in clinical studies and a bunch in preclinical development.

It’s reasonable to assume, then, that Roche is either going to pick up one of these programs and combine it with its own technology to advance the development (and, specifically, the speed of advance towards commercialization) as compares to the advance that MacroGenics would be able to achieve on its own.

So that’s the specifics on the MacroGenics side – we also know a bit about what Roche is bringing to the table. The company has two platforms called CrossMAb and DutaFab, both of which are designed to match antibodies with various disease types.

The logical conclusion is, then, that Roche will feed MacroGenics’ existing DART molecules into the program to see if it can match some target indications or, the other way around, will run the program to identify some target indications and then use these target indications to inform the development of fresh DART-type molecules.

Either way, it looks like a strong deal on both sides. Roche gets access to some potentially game-changing drug types and MacroGenics has the potential to turbo boost its asset development program using Roche’s database and technology.

Here’s what Scott Koenig, M.D., Ph.D., president and CEO of MacroGenics, said in the statement tied to the deal:

“MacroGenics and Roche are both leaders in the field of bispecifics and have each advanced numerous molecules into clinical testing… By combining our two companies’ respective scientific talent, technology platforms and experience, we hope to generate a compelling product candidate to address unmet patient needs.”

So what’s next?

We’d be surprised if we heard anything more about this collaboration during the next few weeks, especially given that the vast majority of the fresh news in this space is going to be dominated (across the same period) by fallout from the above mentioned J.P. Morgan Healthcare Conference.

With that said, just because we don’t get word of anything fresh doesn’t mean that there’s nothing going on behind the scenes. Roche is known in this sector for getting things moving and we don’t expect the company to hang around on this deal – even though it’s only taking on a very small degree of risk with the $10 million upfront payment that it’s agreed to at deal signing.

We’ll keep an eye on things as they mature and we’ll update our readers if we get wind of any fresh information (i.e. a specific disease type target or a specific DART molecule).

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