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GSK to acquire Cellzome for $99 million
05-17-2012
by Kelsey Kaustinen  |  Email the author

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UPDATED May 22, 2012, with additional reporting and information
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LONDON—GlaxoSmithKline (GSK) announced May 15 the establishment of an agreement by which it will acquire those shares it does not already own in proteomics technology company Cellzome. GSK will acquire the shares for $99 million, and Cellzome will become part of GSK's research and development organization.  
 
GSK currently owns a 19.98 percent equity interest in Cellzome, and after the acquisition it will assume full control of the company. In conjunction with the acquisition, Cellzome shareholders, with GSK included, plan on creating a spin-off company. The spin-off would hold the rights to those of Cellzome's assets and activities that GSK does not want to further develop. The acquisition is not subject to third-party approvals, and the expected completion date was May 21, though as of May 22, when this article was updated, there was still no indication on either company's website that the transaction had been finalized.
 
"The acquisition of Cellzome adds significantly to our scientific capabilities and capacity to characterize drug targets and provides the opportunity to further enhance GSK's ability to bring medicines to patients in a more effective manner," John Baldoni, senior vice president of Platform & Technology Science at GSK, said in the initial news release about the acquisition.
 
The transaction reportedly fits with GSK's strategy of collaborating with external partners, with Cellzome representing the company's third platform technology acquisition since 2007. GSK acquired both Domantis Ltd., a leader in developing next-generation antibody therapies, and Praecis, which specialized in novel therapeutic programs and a chemical-synthesis and screening technology. Cellzome's technologies focus on proteomics and can be used throughout the drug discovery process, and function by assessing drug interactions with target proteins in settings that are more closely representative of the entire biological system.
 
Cellzome's "product engine," as the company puts it, is used both in-house and in partnerships, and is centered on its proprietary technologies Episphere and Kinobeads, "which wok with native proteins in a true physiological setting to discover small molecule drugs targeting protein complexes that underlie disease." The company focuses on epigenetic and signal transduction drug targets in cancer and inflammation, it notes on its website, but the drug discovery method can be applied in other indications as well. Acquiring Cellzome and its technology platform secures GSK significant proteomic mass spectrometry and screening abilities, which the company feels could reduce the failure of potential drug compounds in the early development phases.  
 
The companies have worked together since 2008 in a pair of strategic drug discovery alliances. The first was announced in September 2008, focused on the discovery, development and marketing of novel kinase-targeted therapeutics for inflammatory diseases. The alliance gained GSK access to Cellzome's Kinobeads technology, and set Cellzome up to be eligible for several success-based milestone payments. The second alliance was announced in March 2010, also focused on inflammatory diseases, and gained GSK exclusive access to Cellzome's Episphere technology. The acquisition will allow GSK to apply Cellzome's technology platforms across its entire portfolio, rather than just in immunoinflammatory disease indications.  
 
"We are pleased to announce this transaction, which will enable GSK to progress the technologies that we have been developing for more than a decade," Tim Edwards, CEO of Cellzome, said in the news release announcing the deal. "This follows nearly four years of successful collaboration with GSK, during which time we demonstrated the value and breadth of the Cellzome platform for drug discovery."
 
Zacks Investment Research acknowledged the likelihood that adding Cellzome's proteomics technologies would enable better analysis of a drug's efficacy and safety profile, thus reducing the number of discontinued candidates in development phases for GSK, but the prospect of folding Cellzome into GSK's R&D organization and spinning off a new company did nothing to change Zacks' "Neutral" rating on GSK.

As Zacks notes, "a major part of Glaxo's revenues will be exposed to generic competition as multiple drugs are scheduled to lose exclusivity in the next few years. We expect the company's top line as well as gross margins to remain under pressure in the coming quarters."

In addition to generic competition, U.S. healthcare reform and E.U. pricing pressure will continue to affect sales, notes Zacks, which seems more focused on Glaxo's recent hostile bid to acquire the outstanding shares of Human Genome Sciences Inc. as opposed to the Cellzome deal. As Zacks notes, that acquisition would gain Glaxo exclusive rights to Benlysta as well as other candidates such as darapladib and albiglutide. "The acquisition will raise the returns on research and development expenses for Glaxo and lead to cost synergies of minimum $200 million by 2015. We believe this potential takeover would be accretive for the company from 2013," Zacks says.

 
Code: E05161201

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