Google's Calico, AbbVie to have Bay Area research center

Stephanie M. Lee

Published 5:28 pm, Wednesday, September 3, 2014

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  Calico CEO Art Levinson calls the deal a "pivotal event." Photo: Genentech, New York Times

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Calico, Google's newly formed biotechnology company, has taken its first major step toward its mission of developing therapeutics for age-related diseases and extending human life.

In a deal potentially worth $1.5 billion, the company said Wednesday it will team with Illinois pharmaceutical giant AbbVie to build a research and development center in the Bay Area where scientists will try to discover and commercialize therapies for cancer, neurodegeneration and other age-related diseases.

Calico will be responsible for the earlier stages of the research process: setting up the facility, discovering promising compounds and taking them through midstage clinical trials during the first 10 years. After those studies, AbbVie will then have the option to handle the back end of development, namely testing the drugs in late-stage clinical trials and bringing those discoveries to market.

AbbVie and Calico said they will each initially provide up to $250 million to fund the collaboration, and each side may then chip in an additional $500 million. Both parties will equally share costs and profits.

"These are both hungry organizations," said George Geis, an adjunct professor at UCLA Anderson School of Management who studies mergers and acquisitions and follows Google. "AbbVie clearly wants to prove itself as a partner and as someone who wants to continue to develop a pipeline. Calico is recognizing that it can't do everything and that it needs a partner that has the marketing and later-stage development type of clout."

Pharmaceutical companies, AbbVie included, have undertaken some high-profile partnerships and acquisitions this year. Also Wednesday, AbbVie said it will be a development and marketing partner for an experimental blood cancer drug developed by Infinity Pharmaceuticals in Cambridge, Mass. The deal could be worth more than $800 million.

And in July, AbbVie, a recent spinoff of Abbott Laboratories, said it would buy its European rival Shire for around $54 billion. For AbbVie, the union was a move to reduce taxes by reincorporating on the island of Jersey in the English Channel, where corporate rates are lower than in the United States.

Both cancer and neurodegenerative diseases are of interest to AbbVie. The company has eight oncology drugs in various stages of development. It also has a drug that treats advanced Parkinson's disease, which is approved in Europe and Canada but is under regulatory review in the United States.

Calico's roster consists of just six executives so far, according to its website, but that will soon change. The company said Wednesday it plans to immediately start hiring "a substantial team of scientists and research staff" in the Bay Area.

Since Calico announced its formation a year ago this month, it has said little about its plans. On Wednesday, Calico revealed for the first time the location of its headquarters: South San Francisco. It did not specify where the planned research and development facility would be built.

"Our relationship with AbbVie is a pivotal event for Calico, whose mission is to develop life-enhancing therapies for people with age-related diseases," Calico's CEO and founder Art Levinson, who is the former CEO of Genentech, said in a statement. "It will greatly accelerate our efforts to understand the science of aging, advance our clinical work, and help bring important new therapies to patients everywhere."

The announcement did not seem to significantly affect either company's stock Wednesday. Google shares went up 61 cents to close at $577.94, and AbbVie's rose by 44 cents to close at $55.51.

"Clearly, from an investor point of view, people are recognizing this is a high-risk type of venture," Geis said. "Google is certainly prone to doing these, not just in this area but in so many other domains."