Vancouver, B.C.-based Aquinox Pharmaceuticals is set to buy Neoleukin Therapeutics, a Seattle startup that launched out of the University of Washington just eight months ago. Aquinox is paying for the company with 14.78 million of its own shares, valuing the young startup at more than $40 million based on Monday’s closing stock price of $2.88/share.
The final price tag won’t be known until the deal closes, which is expected to happen this Thursday, Aug. 8. Aquinox will take on Neoleukin’s name following the deal and will trade under the ticker NLTX on the Nasdaq exchange. The combined company will be headquartered in Seattle.
Neoleukin launched in January with the idea to commercialize a synthetic version of a powerful protein called Interleukin-2 (IL-2), which can fight cancer but is extremely toxic to patients. Currently, IL-2 is approved for the treatment of melanoma and renal cell carcinoma, where it cures 5 to 10 percent of patients.
The University of Washington researchers created a version of IL-2 that might be used to stimulate T-cells to attack tumors safely. They used a protein design program called Rosetta to make a molecule that bound to the two receptors on T-cells but lacked a third, which is thought to cause the harm.
The startup is one of many to launch out of the Institute for Protein Design, which is led by Professor David Baker. The institute won a $45 million grant from The Audacious Project at TED earlier this year.
Neoleukin also formed with the help of UW’s CoMotion, which offers support to early-stage companies and has launched more than two dozen startups in the past two years. Other biotech startups from CoMotion include PvP Biologics, which is developing a therapy for celiac disease, and Cyrus Biotechnology, a software-as-a-service company for protein design.
“The merger with Aquinox is transformational for our company, providing additional capital to prepare an IND submission, generate clinical data, develop additional preclinical programs, and advance our computational technology,” said Dr. Jonathan Drachman, CEO of Neoleukin. “We believe that cytokine mimetics, or Neoleukins, have the potential to offer enhanced therapeutic effects with fewer toxic side effects.”
Drachman spent 14 years at Seattle Genetics, where he was chief medical officer and head of R&D. He will be president and CEO of the new company, based at Neoleukin’s existing HQ in Seattle. The deal adds to Seattle’s emerging life sciences industry.
Joining Drachman in the leadership team are head of research Dr. Daniel Silva, vice president of translational medicine Dr. Umut Ulge, and vice president of corporate development Carl Walkey, who were all founding members of Neoleukin.
“The scientific founders have truly created an innovative approach that can serve as a platform for many products and advanced therapeutic options for countless patients,” Aquinox CEO Davide Main said on a conference call with investors. Main plans step down after the deal is complete.
Vancouver-based Aquinox hit a rough patch last year after a drug it was developing for bladder pain syndrome failed in a late-stage trial, sending the stock down 85 percent in a single day. Following that event, the company began looking for alternative investment opportunities. Aquinox expects to have $65 million in cash and no debt once the deal closes.
After the deal is complete, Aquinox stockholders will own 61.4 percent of the combined company, with Neoleukin shareholders owning the remainder. The new board of directors will consist of two existing members — Seattle Genetics CFO Todd Simpson and AveXis CEO Sean Nolan — along with new members Cantey Boyd, Managing Director at Baker Brothers Advisors; Jonathan G. Drachman, CEO, Neoleukin Therapeutics; Sarah B. Noonberg, former Chief Medical Officer at Nohla Therapeutics; and Lewis “Rusty” Williams, former CEO of FivePrime Therapeutics.