On the prowl for new drug candidates, drug maker Celgene Corp.’s favorite hunting ground is the Cambridge biotech cluster.
Celgene’s latest deal, unveiled Tuesday, will hand a $225 million upfront payment to Jounce Therapeutics Inc., a three-year-old Cambridge startup that is developing cancer drugs. The agreement, potentially worth as much as $2.3 billion, will help Jounce fund development of a new generation of drugs that stimulate the immune system to fight tumors.
It comes three months after Celgene, which embraces a “distributed” research and development strategy, fronted $200 million to another Cambridge cancer drug developer, Agios Pharmaceuticals Inc. Celgene, based in Summit, N.J., is also collaborating with Bluebird Bio Inc., Epizyme Inc., and Acceleron Pharma Inc., all in Cambridge, and has options to buy two other Massachusetts companies.
Celgene will take a $36 million equity stake in Jounce, and received options to share profits and losses from its lead experimental drug, JTX-2011, which seeks to treat head and neck cancer and non-small cell lung cancer. The deal also includes options on four other cancer immunotherapies in Jounce’s research pipeline.
“We had a number of business discussions, and in the end we felt that Celgene was the right strategic partner,” Jounce chief executive Richard Murray said in an interview. “This agreement really validates our approach, and substantial capital and resources will now be available to us.”
The Jounce-Celgene alliance is one of the largest unveiled in recent months between early-stage biotechs seeking cash and development expertise and larger drug makers looking for promising new treatments. Such deals allow the parties to share the escalating costs and risks of drug development.
With a market value of $79.6 billion, Celgene is the third-largest US biotech company, after Amgen Inc. and Gilead Sciences Inc. Its senior vice president of business development, George Golumbeski, is known as one of the most aggressive executives in working with partners, establishing alliances with more than a half dozen Massachusetts biotechs in the past five years.
Jounce, launched in 2013 by Boston venture capital firm Third Rock Ventures, has raised more than $100 million in private capital. Its name, derived partly from a physics term and partly from a synonym for jolt, is meant to signal the dramatic change the company and its financial backers expect from their cancer-fighting approach, which it calls immuno-oncology 2.0.
Most of the first generation of cancer immumotherapies — such as the melanoma drug Keytruda, which Murray worked on at Merck & Co. — are so-called PD-1 inhibitors that empower a specific T cell to kill tumors. While they can be effective for up to a third of patients, the majority fail to respond.
“There’s been a kind of a gold rush in the oncology business over the past six or seven years,” Murray said. “We’re locking in the correct way of using the immune system against tumors. But we’re also seeing that not all patients respond to this approach. Our immuno-oncology 2.0 approach looks at the entire immune system and provokes different immune cell types to target the 70 to 80 percent of patients that aren’t responding” to current drugs.
Murray said the Jounce lead drug, JTX-2011, which targets solid tumors, “steps on the gas” of T cells to generate more robust anti-tumor activity. He said Celgene, a leader in hematology treatments, could help Jounce also develop blood cancer drugs.
Celgene’s other recent partner, Agios, is also a cancer drug company but not a direct competitor to Jounce. Agios scientists take a different approach, seeking to treat tumors by fixing metabolic irregularities.
Under their collaboration deal, Jounce and Celgene will share profits and losses for all programs on which Celgene opts in. Jounce would retain a 60 percent US profit share of JTX-2011, with Celgene getting 40 percent. Celgene would be allocated 75 percent of the US profits, and Jounce 25 percent, on the first additional drug program, and the partners would share US profits equally on any of the next three programs. Outside of the United States, Celgene will have exclusive rights to market the drugs, but Jounce will receive royalties from foreign sales.
The eventual value of the deal for Jounce will depend on how many options Celgene exercises and the success of any drugs developed.
Jounce currently has about 60 employees at its office and lab complex near Harvard Square. Murray said it expects to hire about 20 additional employees by the end of the year.