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Biotechs continue merger moves

Gloucester sold to Celgene; Merrimack to acquire Hermes

By Robert Weisman
Globe Staff / December 8, 2009

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Buyout fever heated up in the local biotechnology sector yesterday, with a pair of privately held Cambridge biosciences companies linking up with out-of-state partners in two separate deals.

Gloucester Pharmaceuticals Inc., which last month won Food and Drug Administration approval to market its first drug in the United States, said it has agreed to be acquired by publicly traded Celgene Corp., a Summit, N.J., biopharmaceutical company, for $340 million in cash plus up to $300 million in future milestone payments.

In the second deal, Merrimack Pharmaceuticals Inc., which is developing treatments for cancer and autoimmune disease, said it bought Hermes Biosciences Inc. in South San Francisco, Calif., another privately owned firm, for an undisclosed sum.

Yesterday’s deals, along with the pending tender offer from Cambridge’s Biogen Idec Inc. for Facet Biotech Corp. of Redwood City, Calif., underscore a recent pickup in biotechnology business activity. Ninety merger and acquisition transactions involving US biotechs have been unveiled so far in 2009, compared with 84 in 2008, according to the Thomson Reuters research firm.

The Burrill Select Biotech Index, which tracks publicly traded biotechnology companies, gained 4.5 percent last month after tumbling 10 percent in October. And four private biotechnology companies, including Ironwood Pharmaceuticals Inc. of Cambridge, registered in November to sell stock in initial public offerings, an indication of confidence in investor appetite for biotech stocks.

“You’re seeing more investment in, and acquisition of, the small biotech companies,’’ said Robert Coughlin, president of the Massachusetts Biotechnology Council, a trade group based in Cambridge. “For us, this is all about bringing a therapeutic to market. And if some consolidation is required to do that, that’s not such a bad thing at all. You’re going to be seeing more activity, lots more.’’

The acquisition of Gloucester Pharmaceuticals will mean a payout for the venture capital firms that backed the six-year-old Cambridge start-up. Gloucester’s most recent round of funding, in August, raised $29 million from five firms, including Apple Tree Partners of Cambridge. Last month, the FDA approved Gloucester’s drug Istodax, which treats a rare cancer known as cutaneous T-cell lymphoma.

Gloucester, which has 15 full-time employees, used consultants to manage clinical development of the drug. It considered bringing Istodax to market itself but ultimately struck the deal with Celgene, said Alan Colowick, Gloucester’s chief executive.

“From our perspective, getting Istodax to patients who benefit from the drug has always been our number one priority,’’ Colowick said. “And if you have the preeminent blood cancer company in the world, Celgene, agreeing to buy your company, this is certainly a good outcome.’’

Colowick said he couldn’t discuss what will happen to Gloucester and its employees until the acquisition is completed, likely in the first quarter of next year. Shares of Celgene edged down 44 cents, or 0.8 percent, to $55.53 on the Nasdaq exchange yesterday.

Merrimack Pharmaceuticals, an 11-year-old company with about 130 employees in Cambridge, bought Hermes Biosciences to acquire its drug delivery technology, said Merrimack chief executive Robert Mulroy.

“It is totally a technology play,’’ he said.

Hermes develops lipidic nanocarriers that can deliver drugs directly to cells. That is a valuable tool for Merrimack, which has two cancer drugs in clinical trials and a pipeline of compounds in earlier stages of development. Mulroy said most of Hermes’s seven employees have agreed to move to the Boston area.

“It’s not huge in scale, but it’s very important to us,’’ Mulroy said of the Hermes purchase. “We’ll be able to attach antibodies to their nanocarriers so they can target cancer cells.’’

Robert Weisman can be reached at weisman@globe.com.