The blockbuster business news Monday was Pfizer Inc.'s $155 billion takeover of Allergan PLC, a deal that would create the world's largest drug company.
While the trans-Atlantic transaction says much about the fixation of big pharmaceutical companies with scale and costs, a small deal disclosed around the same time highlighted what makes the Massachusetts biotech industry tick: cutting-edge science that is increasingly driving the development of treatments.
Idera Pharmaceuticals Inc. of Cambridge, which conducts cancer and rare disease research, struck a collaboration and licensing agreement with GlaxoSmithKline PLC. Under the deal, the British drug maker will explore whether Idera's technology can treat chronic kidney disease. GSK will pay $2.5 million upfront to Idera, which eventually could draw up to $100 million in milestone payments plus sales royalties if the effort leads to drug approvals.
"It could be multiple compounds in multiple diseases, all in the kidney area," said Robert Doody, vice president at Idera, which has about 40 employees at its Cambridge lab. "We've come to a moment where it's time for our scientific endeavors to make the mark commercially."
If the Pfizer-Allergan deal was primarily about building a new corporate structure that would enable Pfizer to lower its tax bill by moving its headquarters from the United States to Ireland, the Idera-GSK partnership was about deploying promising science — in this case, gene-silencing research still in its infancy — to create potentially life-saving medicines.
Taken together, they underscore a trend that is likely to accelerate with industry consolidation: Big Pharma ceding research to smaller and more nimble biotechs, acquiring experimental drugs through partnerships with biotechs, and focusing on shepherding drug candidates through clinical trials and filings with regulators.
There are hundreds of Boston area biotechs involved in early-stage research in fields ranging from gene editing to targeted cancer therapies. With a few exceptions, they are minnows compared with whales such as GSK.
In the short term, Pfizer's buyout of Allergan would leave one fewer buyer for local biotechs and their drug compounds. It also might lead to restructuring at the new company that could temporarily slow down deal-making.
"Pfizer is going from being an 800-pound gorilla to a 2,000-pound gorilla," said Leora Schiff, principal at Altius Strategy Consulting in Somerville. "They'll have extraordinary resources. But the question is whether they'll have the time and the focus to engage with biotech companies. They'll be going through internal reorganizations that could put a pause to that."
Previous rounds of biopharma consolidation did just that, including Pfizer's acquisition of Wyeth in 2009 after Wyeth earlier purchased the Cambridge-based Genetics Institute. Those deals and others initially dampened appetites for deal-making, industry watchers said.
Long term, however, the Pfizer-Allergan megadeal could turn out well for entrepreneurial companies, suggested Michael Gilman, a venture partner at Atlas Venture and chief executive of Padlock Therapeutics Inc., a Cambridge startup working on drugs for autoimmune diseases.
"If you believe the bigger companies are, the harder it is to innovate, this creates a very large customer for the kind of innovation we do around here." Gilman said. "After the [Pfizer-Allergan] merger, once their head is clear, they're going to be doing a lot of shopping."
Gilman said the current wave of consolidation is likely to continue the transition of Big Pharma into companies that specialize primarily in later stage drug development.
"They are over time getting out of early-stage drug discovery," he said. "It's an inefficient use of their capital and it's more expensive for them to do it than for us. It makes more sense for them to sit on the sidelines and watch what we're doing and then swoop in and write a check."
Many large US and overseas drug companies have set up shop in Massachusetts specifically to work with and monitor the research of local biotechs as well as university and hospital labs that work in the life sciences. One is Pfizer, which recently consolidated a number of area sites at a 1,000-person research center in Cambridge.
Novartis AG of Switzerland, Merck & Co. of New Jersey, Merck KGaA of Germany, Sanofi SA of France, Shire PLC of Ireland, Takeda Pharmaceuticals Co. of Japan, AstraZeneca PLC of England, Amgen Inc. of California, and Baxalta Inc. of Illinois all have bought companies or opened research labs here.
Many others, including GSK and Johnson & Johnson of New Jersey, have collaboration offices in the Boston area.
The proximity of Big Pharma to early-stage research companies has sparked an environment of almost nonstop deal-making in recent years, ranging from partnerships like that struck by GSK and Idera to outright acquisitions such as Merck & Co.'s $9.5 billion purchase of Lexington's Cubist Pharmaceuticals Inc. in January. Those deals, fueled by cheap borrowing, tax benefits, and a need for companies to expand drug pipelines, are likely to continue.
"It's a wide-open merger environment," said Glen Giovannetti, the Cambridge-based life sciences sector leader for consulting firm Ernst & Young.