Flexus goes from zero to $1.25 billion in 17 months

Bristol Myers
handout Armin Harris
Courtesy of Bristol-Myers Squibb

Bristol-Myers Squibb Co. (BMY) yesterday agreed to acquire Flexus Biosciences Inc., a San Carlos, Calif.-based developer of anti-cancer therapeutics. The deal could be valued at upwards of $1.25 billion, including $800 million upfront.

A few notes on what is the year’s most remarkable VC-backed exit so far:

1. Flexus is less than two years old: The company was originally incubated by Kleiner Perkins Caufield & Byers, whose lead healthcare partner (Beth Seidenberg) had worked with the entrepreneurs (Terry Rosen and Juan Jaen) years ago at Amgen (AMGN). The basic idea was to take an orthogonal approach to cancer immunotherapy – working on molecules that would be additive to what already was on the market from Bristol-Myers and Merck (MRK), rather than creating a me-too sort of therapy.

2. Very little investment: Flexus raised only $38 million over two rounds of funding, from KPCB, The Column Group and Celgene (CELG). The original investment came in October 2013. Seidenberg declined to disclose Series A or Series B valuations, but a separate source tells me that the firm’s stake in Flexus is around 30%. Or, put another way, a $375 million return on what is was less than $20 million in total investment. Remember when biotech startups were expensive and IT startups were cheap? When’s the last time an IT startup raised less than $40 million and was sold for more than $1 billion?

3. Did I say it was young? Flexus does not have a single drug candidate in clinical trials yet. That’s where the earn-outs come in, although Seidenberg says she is very “comfortable” with them and expects that they will be met within three years.

4. It’s only a partial exit: Bristol-Myers is technically buying all of Flexus, except it isn’t really. Instead, the $1.25 billion is for the company’s Flexus’ IDO/TDO discovery program, while the entire Flexus management team and its two other existing drug programs (both pre-clinical) will be spun out into a new, independent company. Expect the existing venture capital backers to soon fund a Series A round for NewCo.

5. What’s it do? I asked Seidenberg to explain the appeal of what Flexus is working on, in layman’s terms. Here is what she said: “We know that when cancer arises, in addition to cells multiplying and having genetic abnormalities, the other important part of either controlling the cancer of letting it get out of control is the immune system. When someone has an infection, for example, the immune system goes after it to clear it. When cancer occurs, those are the abnormal cells and the immune system has to clear it. But cancer is very smart and creates substances that dampen the immune system. This drug will revitalize the immune system so that it can do its job and help clear the cells.”

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