Back in September 2018, the FDA approved Lilly’s Emgality, an anti-CGRP antibody therapy, for the preventative treatment of episodic and chronic migraine.
Arteaus Therapeutics, a biotech company founded by Atlas Venture in 2011, played a critical role in Emgality’s early development, helping it rapidly advance from its first-in-human studies through a randomized, controlled, double-blinded Phase 2 Proof of Concept (PoC) trial in only 30 months. 
While the antibody was discovered by Lilly, it was licensed to Arteaus as part of an R&D externalization initiative in order to test the drug’s potential in migraine patients. This license was done via a novel built-to-buy structure, where Lilly had a predefined right to reacquire the asset. They exercised that right in January 2014 and brought the program back into their late development pipeline, as was detailed in a blog post titled “The Arteaus Therapeutics Story: R&D Externalization with Eli Lilly”. Since 2014, with Lilly’s successful Phase 3 development and approval, Arteaus received all development and regulatory milestones associated with the option deal.
Today we officially complete the story of Arteaus with the monetization of the last piece of remaining value: the sale of the royalty interest on future global net sales of Emgality to Royalty Pharma for $260M (link).
As background, Royalty Pharma (RP) is one of the leading firms in the field of drug royalty monetizations. Founded in 1996, they now have a portfolio of interests in over 50 pharmaceutical products. RP not only purchases existing royalty interests (like Emgality here, or recently Tysabri with Perrigo), but they also work with biopharma companies to create novel funding structures around synthetic royalties (like recent deals with Biohaven and Immunomedics). These latter deals can offer an attractive alternative to dilutive equity capital. After Emgality’s approval, Arteaus ran a strategic process with Morgan Stanley, supported by LEK consulting, and chose to partner with Royalty Pharma.
Here’s a quick refresh on Arteaus.
Back in July 2011, after nearly a year of working with Lilly on the spinout structure, we closed on a 3-tranche $18M Series A round (link) led by my partner Jean-François Formela, along with our friends at OrbiMed, to advance what was then called “LY2951742” (galcanezumab) through its early clinical testing. The first tranche of the financing supported the FIH Single Ascending Dose (SAD) study in healthy volunteers, while the second and third tranches enabled the Multiple Ascending Dose (MAD) study, including a PK/PD biomarker assessment, and a 218 patient Phase 2 study for migraine prevention, respectively. The company quite efficiently executed on its development plan such that it didn’t even call all the capital in the 3rd tranche. See the 2014 blog post for more on those trials and the clever translational strategy. By late 2013, Arteaus was the first company to establish the definitive PoC for anti-CGRP antibodies in migraine prevention, ahead of competitors like Amgen, Teva, and Alder.
Arteaus was run by CEO Dave Grayzel and a very small virtual team, many of whom have gone on to other exciting things here at Atlas: Dave became a partner at Atlas in May 2014; Arteaus’ CSO Scott Chapel went on to help start Surface Oncology; and, Head of Clinical Development Steve Sweeney is now leading clinical operations at Rodin Therapeutics (and worked with several other Atlas companies in the interim, including Annovation and Quartet), as examples. As discussed before, recycling talent is key to the venture creation model.
Today’s news of the final part of the value creation story is the capstone of a great investment. Not only did Arteaus help advance a medicine that after approval by the FDA and EMEA is now helping alleviate suffering in patients with a severe disease, but it also delivered stellar financial returns. The initial acquisition of Arteaus by Lilly was within 2.5 years of founding, and now, five years after that acquisition, we’ve monetized the royalties. Based only on public disclosures, Arteaus has generated north of $300M in payments across the upfront, milestones, and royalties – after spending less than $18M in equity capital. A superb venture return.
At the time of the 2014 transaction, we were asked repeatedly about what we would do given the temporal challenge of a closed end time-limited venture fund and the long tail of future royalty payments. We always said we’d monetize them by partnering with firms like Royalty Pharma, who specialize in creating liquidity around these cash flows. And today we did – successfully closing the final chapter of Arteaus Therapeutics
