Celgene is expanding its nearly two-year-old cancer collaboration with Sutro Biopharma to discover and develop multispecific antibodies and antibody-drug conjugates (ADCs). The companies agreed to move into the promising area of immuno-oncology products and double the maximum that Sutro stands to generate from the partnership to more than $1 billion, plus the possibility of being acquired by the biotech giant.

Sutro—which announced the expanded collaboration today—disclosed that the partners will focus on established immuno-oncology targets such as PD-1 and PD-L1, as well as new undisclosed targets, using Sutro’s Xpress CF™ and Xpress CF+™ cell-free biologics development platforms.

After an initial period, Celgene will have the exclusive option during the expanded collaboration to acquire Sutro—including rights to all Sutro-owned programs at that time—on prespecified terms.

“Substantive progress and unique advantages of Sutro’s platform have led us to expand and extend our relationship, as a key capability supporting our emerging immuno-oncology pipeline,” Thomas Daniel, M.D., Celgene’s president, global research and early development, said in a statement. “We see this collaboration as a unique opportunity to accelerate the evaluation and development of important products in this and other strategic areas of high potential impact.”

In 2012, Sutro and Celgene launched their collaboration to design and develop ADCs and bispecific antibodies for two undisclosed targets and to manufacture a Celgene antibody. The deal was anticipated to have generated up to $500 million for Sutro.

Under their expanded collaboration, Sutro will be responsible for discovery and early preclinical development of all collaboration multispecific antibodies and ADCs, plus the manufacturing of preclinical product candidates. Sutro and Celgene was expected to hammer out a clinical and commercial supply agreement for collaboration products.

But if Celgene does not exercise that option, the biotech may still take responsibility for global development and commercialization. Celgene will have worldwide rights to all collaboration products, except for those for which Sutro retains U.S. development and commercialization rights.  Sutro retains worldwide rights to product candidates not licensed to Celgene.

In return, Celgene agreed to pay Sutro $95 million upfront, including an equity investment; another up to $90 million during the initial research term, including payments for manufacturing-related and productivity milestones. Celgene also has an option to extend the collaboration beyond the initial research term in exchange for an additional undisclosed payment.

Sutro could gain more than $1 billion across all product candidates tied to achieving clinical and regulatory milestones, as well as royalties on product sales resulting from the collaboration.

“This multi-year collaboration agreement reflects Celgene’s commitment to our highly collaborative relationship, the significant progress we have made in exploring best-in class multispecific antibodies and ADCs using Sutro’s cell-free protein synthesis platform, and the value of our early pipeline of multispecific antibodies targeting immuno-oncology pathways,” said William Newell, CEO of Sutro Biopharma.

Sutro’s Xpress CF platforms use biochemical synthesis technology designed to allow for rapid and systematic exploration of numerous protein drug variants to identify drug candidates. Once the candidates are identified, Sutro says, it can scale up their production to commercial levels rapidly and predictably. In addition to Celgene, the technology has attracted big pharma partners that include Merck KGaA, which has teamed up to develop “multiple” oncology ADCs; and Pfizer, with which Sutro has teamed up to develop an undisclosed peptide therapeutic.

Sutro has also announced vaccine collaborations in January 2013 with Sanofi Pasteur to use Xpress CF to produce two undisclosed candidates, and on Jan. 8 of this year with Johnson & Johnson. Sutro joined J&J’s venture capital subsidiary Johnson & Johnson Development  to co-fund SutroVax, which will apply Xpress CF to develop new vaccines for a broad range of disease targets, the companies said.

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