Amgen, Relypsa and the art of the biotech-spinout-startup-restart

(UPDATED: See below.)

A common dilemma in biotech acquisitions is how to keep a startup’s entrepreneurial management happy and productive when they’ve just been assimilated by the Borg. The answer, often enough, is not to bother, and to let them spin out a new company with scientific “leftovers” that weren’t the point of the acquisition in the first place.

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That’s more or less what Amgen has just done in launching Relypsa, a new Santa Clara, Calif., biotech just spun out of the big biotech’s Ilypsa unit. Relypsa is basically a full restart of Ilypsa — thus the name, I suppose — which Amgen acquired earlier this year for roughly $420 million (see our coverage here).

Of course, the new startup now lacks the kidney-disease drug (specifically, a treatment for hyperphosphatemia) that Amgen had shown particular interest in. But Relypsa is free to rev up its existing drug-discovery platform — one focused on making drugs out of long-lasting polymers that grab and eliminate excess molecules such as potassium or sodium — and also managed to keep a pipeline of promising candidates that might one day be useful in treating kidney and heart disease.

Such restarts of acquired biotechs aren’t unknown in the industry, although they’ve been growing in popularity. For instance, the former management of Eyetech Pharmaceuticals recently banded together to form Ophthotech with technology left over from Eyetech after it was swallowed by OSI Pharmaceuticals (our coverage here). This sort of strategy is likely to hold increasing relevance for Big Pharma as its companies fire up their biotech-acquisition machines.

The Relypsa deal, however, may set records for speed and continuity. The former CEO of Ilypsa, Jay Shepard, reprises that role at Relypsa; Ilypsa co-founder Garrett Klaerner returns as COO; and Ilypsa’s former chief medical officer Detlef Albrecht now resumes that position at Relypsa. (Honestly, props to whoever came up with the name “Relypsa,” because it’s really apropos here.) And so on down the line.

Relypsa raised $33 million in a first spinout round, with investors that included 5AM Ventures, New Leaf Venture Partners, the Sprout Group, Delphi Ventures, CMEA Ventures and Mediphase Venture Partners. Amgen, of course, retains a minority stake in Relypsa, and probably insisted on some form of right-of-first-refusal should Relypsa get interested in striking a partnership with — or selling itself to — another company. (I’ve asked Relypsa’s representatives about that, and will report back if I learn more.)

UPDATE: Relypsa’s external PR person got back to me on the right-of-first-refusal question, but kudos to you if you can make any sense of it. Here’s the response in its entirety: “Amgen retained certain rights related to transferred programs customary for spin outs at this stage. Relypsa will initiate partnering campaigns for certain indications and territories as appropriate.” Well, that was helpful. Sometimes I wonder why I bother asking.

UPDATE REDUX: In a later interview, Relypsa COO Gerrit Klaerner told me that “of course” Relypsa has an “entanglement” with Amgen, although he wouldn’t go much further than the official statement in describing Amgen’s particular rights. “There is enough skin in the game for Amgen to keep an interest in Relypsa,” he said. “If you see us doing a partnership, you will get an answer to your question.”

Klaerner added that the idea of recreating Ilypsa came up shortly after the acquisition. “We wanted to save a bunch of jobs and create a new home for the technology,” said Klaerner, who worked as an advisor to 5AM for the deal. “We had 38 people who, after the success of Ilypsa, had multiple job offers and asked them to stick with us, even though the company wasn’t really created.” What’s more, he said, Amgen’s backing of the deal didn’t waver despite the company’s recent woes (see, for instance, here). “Given what they were going through, to give this level of high-level support was really, really remarkable,” Klaerner said.

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Oh, and the name Relypsa was apparently an internal placeholder that turned into the real thing when no one could think of anything better, Klaerner said.

FINAL UPDATE: I started thinking about other recent deals that resemble Ilypsa-Relypsa after an email correspondent planted the bug in my ear. The one that comes most immediately to mind would be the launch of Sequel Pharmaceuticals — another clever name — out of NovaCardia’s acquisition by Merck (our coverage here). Another example would be Cerexa Pharmaceuticals, which spun out of Peninsula Pharmaceuticals in 2005 after Peninsula was purchased by J&J. Cerexa was acquired by Forest Labs this past January, and doesn’t appear to have launched another spinout.

Have any other good examples? Sound off in comments.