Inside the deal: $125 million Mirus acquisition a Wisconsin milestone

Swiss pharmaceutical company Roche Holdings is continuing its Madison buying spree by acquiring Madison-based Mirus Bio for $125 million. Mirus, a privately held company, develops therapies based on nucleic acids.

Mirus was established in 1995 based on the gene therapy work of UW-Madison scientists who were the first to show that native DNA can be directly taken up by muscles and other tissues. This provides a new way to deliver nucleic acid-type therapies. Building on this pioneering research, Mirus now markets novel research reagents and is developing gene therapy tools.

According to Mirus President Russell Smestad, the company's gene therapy research will remain in Madison and employ about 40 people. The research reagents business will be divested into a stand-alone firm, Mirus Bio, LLC, and also will remain in Madison, employing about 20 people.

Last June, Roche also purchased NimbleGen, a privately held Madison-based genomics company, for $272.5 million, to form Roche NimbleGen.

No venture capital needed

Smestad pointed out that the sale of Mirus to an international company is particularly satisfying since Mirus received no venture capital financing. The company is financed by about 60 individual investors and through federal grants, according to co-founder and board Chairman Ralph Kauten.

This financing model is not uncommon in Madison. Several other notable biotech companies, including Promega, PanVera and Quintessence, were established and grew with little or no venture capital. Kauten attributes the use of this model to a relative dearth of venture capital in Wisconsin, which requires companies to look elsewhere for funding.

But, as Kauten pointed out, these successful examples prove that companies can get to a “critical mass” without VC funding.

Smestad believes that the success of Mirus should provide encouragement for other small and early stage companies in the area. “It is a milestone for Madison and its companies," he said.

Echoing that sentiment, James Leonhart, executive director of the Wisconsin Biotechnology and Medical Device Association said that the Mirus deal “is the latest in a series of acknowledgments that the biotech industry in Madison is maturing.”

“It's pretty nifty that one of the largest biopharma companies in the world has come to Madison for two of Madison's companies”, he said.

Kauten also said that the sale of Mirus is a “win-win” situation for Mirus, Roche, the state and Madison. He pointed out that this is the first time in Wisconsin that an emerging therapeutics company was purchased and remained in the state.

Why Mirus?

Roche is primarily interested in Mirus' technologies for delivering small RNA molecules used in RNA interference, or RNAi, which is one of the most promising areas for biotech-based therapies. Work on the technology won two professors the 2006 Nobel Prize in Physiology or Medicine.

RNAi uses short RNA sequences to selectively silence expression of a disease-associated gene in specific cells. This ability to selectively shut down unwanted genes gives the technology tremendous flexibility and potential for treating a wide range of maladies.

A limitation to RNAi therapy is that the RNAi molecules tend to fall apart in the blood, and they have a hard time getting into the proper compartment inside the cell to exert their gene-silencing abilities. According to the company's web site, Mirus has developed delivery methods and chemistry to deal with these major roadblocks.

Several months ago, realizing that they had a superior delivery platform for RNAi therapies, Mirus began courting larger companies. The timing could not have been better, since Roche had just completed a potential $1 billion deal with Cambridge, Massachusetts-based Alnylam, a company with several RNAi therapies under development.

Kauten pointed out that partnering Mirus' delivery system with Alnylam's RNAi therapeutics pipeline is a synergy that should accelerate RNAi clinical trials.

"The technology brought by Mirus, together with additional technologies (from Alnylam), will bring us closer to creating fully-enabled RNAi therapeutics," said Lee Babiss, global head of Roche pharma research.

The biggest biotech in the world?

Roche is on a buying spree. In addition to the recent purchases of NimbleGen and Mirus and the deal it made with Alnylam, the company is also moving to purchase the pioneering California biotech company, Genentech, in one of the largest biotechnology acquisitions ever, according to a report by Reuters.

Smaller biotechs are having a harder time finding revenue streams, which have dried to less than a third of what they were this time last year. So, it makes sense that companies like Mirus would look for financial backing. Not only do the smaller companies benefit by being acquired; the larger ones strengthen their drug pipeline while avoiding the risk of early stage drug development.

Smestad believes that Roche is positioning itself to be the world's largest biotech company. This signals recognition that the biotech industry has matured and that there is confidence that its promises can be translated into deliverables.

Kauten agreed that Roche is buying the necessary biotech pieces to become a biotech-pharma company.

Related articles

• BIO 2008: Targeted therapies enjoy banner year
• Mirus Bio study confirms therapeutic breakthrough
• Mirus Bio, Pfizer enter multimillion-dollar research agreement
• NimbleGen to discontinue IPO after Roche's $272.5 million acquisition