Astex will make a great case study.
Who are the equity winners in the Astex story? It is quite fascinating. It is very different from the entrepreneurs who start a company on a kitchen table with low overheads and low salaries trying to build value in the business and keeping as much equity as possible. This is just not possible in the bio world. Big money is required to develop drugs and it leaves the founders struggling to keep much equity in the company. They only come good through options which “vest” on sale. Well that is what I learn from a quick look through of the public data. It is quite a story.
It goes like this, starting in 1999:
- take two Cambridge professors, Prof Abell and Prof Sir Tom Blundell
- add commercial skills gained at GSK, Dr Harren Jhoti
- raise nearly £100million of VC funds (perhaps the VCs put the team together) leaving the founders with tiny shareholdings but some with high salaries
- use small molecules and high throughput robots to identify potential drugs
- partner with pharma companies to develop five potential drugs
- in 2011, “merge” with a quoted drug company listed in New York which has strong commercial skills and plenty of cash
- close down the USA laboratory
- in 2013, sell to a Japanese pharma company and cash in the options.
The Japanese company, Otsuka Pharmaceuticals, bought Astex Pharmaceuticals for $800million in October 2013. Who will be the winner? Is this another story of academic research in the UK being sold before a great company has been built? Can you build a great pharma company from scratch? Is it really for entrepreneurs?
According to the University of Cambridge website, the story goes back to 1999 when Prof Abell and Prof Sir Tom Blundell combined with Dr Harren Jhoti from GlaxoSmithKline (with partial seed funding from the University of Cambridge) to form Astex. The two professors had developed fragment based drug discovery. It is easier to use small fragments and fast processing techniques to work out which is active and then you can design your drug (I think). I guess that this sounds easy but needs great brains to realise and then make happen.
In 2011, Astex merged with Supergen Inc of Dublin, California. Supergen was a quoted Delaware company – it is always Delaware! By the time of the merger, both companies has raised some $100million of funds. It was more a merger of equals. From a quick read through all the papers, the research labs near Dublin were closed and the new company concentrated on the work in Cambridge where some 80 people were employed. The companies ran up some $350 million of losses but revenue from partnership with the major drug companies were covering running costs. It appears that the owners, (VCs?) of Astex flipped the company into a Delaware quoted company bringing along the science with Supergen providing the quote and the commercial strength with their James Manuso becoming Chair and CEO. It is a great model and has happened to many University of Cambridge spin-outs.
Of course, running a fast moving company in such a competitive and fast moving world as pharma needs top talent. The directors were well paid, with top people earning hundreds of thousands of pounds per year. The details are available on line as for all quoted companies for those with time to search.
The holdings of the directors are available on line and make interesting reading.
What happened to the staff? Did they have an option scheme?
What happened to the two founding professors? To CE?
Has the UK lost out on building a great UK company?
Astex annula reports: http://investor.astx.com/annuals.cfm
Astex board: http://investor.astx.com/committees.cfm