Eli Lilly is wagering up to $1 billion on a private biotechnology company developing new, non-opioid pain drugs that have already caught the attention of other large pharmaceutical firms.
Per an announcement Tuesday, Lilly plans to acquire SiteOne Therapeutics in an all-cash deal. The companies aren’t disclosing how much money is being exchanged upfront or when they expect the transaction to close. But, if SiteOne’s research programs hit certain regulatory and commercial goals, the amount paid to its shareholders could reach that 10-figure mark.
A San Francisco-area biotech, SiteOne has been overlooked by major drug companies and biopharma investors for much of its 15-year history. Its research focuses on “sodium ion channels” — a class of proteins with the potential to treat pain without the use of an opioid. Yet these proteins are notoriously hard to drug, a characteristic that scared off potential backers and left SiteOne leaning on small grant funds to stay afloat.
Over the last two years, however, the company has seen an influx of interest and investment. That’s thanks, in good part, to the precedent set by Vertex Pharmaceuticals, which successfully developed and now sells a pain drug that acts on one of the nine known sodium ion channels, “NaV1.8.” Vertex has positioned this drug, Journavx, as a valuable alternative to opioids. Wall Street analysts, meanwhile, expect it to eventually become a blockbuster product.
Ahead of Journavx’s approval, SiteOne closed a $100 million fundraising round led by Novo Holdings, the controlling stakeholder of Ozempic-maker Novo Nordisk. Existing investors participated, too, as well as OrbiMed, Wellington Management, Mission BioCapital and BSquared Capital.
At the time, SiteOne said it would use the fresh funds on human studies designed to show its drugs work as intended. The company’s most advanced program, code-named STC-004, also targets NaV1.8 and is now ready for mid-stage testing. STC-004 “may represent a next-generation, non-opioid treatment for patients suffering from chronic pain,” according to Lilly.
"The global burden of chronic pain continues to increase, and an effective non-opioid treatment remains elusive," said Mark Mintun, Lilly’s group vice president of neuroscience research and development, in a statement. Mintun added his company is “eager” to continue advancing STC-004 with the SiteOne team.
While that drug could one day rival Journavx, SiteOne is actually partnered with Vertex on a different program targeting the NaV1.7 ion channel protein.
Until now, Vertex was contending with two much smaller companies in SiteOne and Latigo Biotherapeutics. Michael Yee, a Jefferies analyst who covers Vertex, wrote in a note to clients that the Lilly acquisition “adds intrigue” to the competitive landscape in this area of drug development.
Even so, Yee highlighted how Vertex remains comfortably in the lead.
For Lilly, the deal further fleshes out its pipeline of pain therapies. The pharma giant has advanced to mid-stage studies three other assets: an antibody directed at epiregulin, a small molecule meant to inhibit the cell membrane receptor “P2X7,” and another small molecule designed to amplify the “SSTR4” protein.
