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Report on Business For Clementia Pharmaceuticals founder, US$1-billion takeover of Montreal biotech is ‘bittersweet’ outcome

Clarissa Desjardins, Founder and CEO of the Clementia Pharmaceuticals Inc., poses for a photograph at company offices in Montreal on Monday, February 25, 2019. Clementia is being acquired by French pharmaceutical company Ipsen. (Dario Ayala / The Globe and Mail)

Dario Ayala/The Globe and Mail

Clementia Pharmaceuticals Inc., one of Canada’s leading biotech startups, has agreed to a takeover by Paris-based Ipsen for US$1.04-billion, a year before its lead drug is expected to reach the market.

Ipsen agreed to pay US$25 a share in cash for the Nasdaq-listed company, an amount that could rise by US$6 a share to a total deal size of US$1.3-billion if the drug receives approval for a second application. The deal, unveiled Monday, represents a 77-per-cent premium over Clementia’s 30-day weighted average price. The stock soared by almost 75 per cent in value Monday, closing at $26.06. Clementia would have to pay Ipsen a US$35-million break fee if the deal doesn’t close.

“What [the deal] means is that someone [in Canada] with a great idea can develop it from scratch to over $1-billion in just over six years,” said Clementia founder and chief executive Clarissa Desjardins. “That’s tremendous and speaks volumes to the maturity of the biotech ecosystem here."

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The idea for Clementia came to Ms. Desjardins in June, 2012, when she read in scientific journal Nature Medicine that researchers at Thomas Jefferson University had discovered a new use for a failed emphysema drug: It limited the effects of a rare disease that turned muscles, tendons and joints into bone, trapping its victims in a second skeleton of sorts. The drug worked in mice and was safe in humans. The next day, the veteran entrepreneur quit her job as head of a federal non-profit agency, determined to take the drug, palovarotene, to market.

“I was struck on the one hand by the potential business opportunity … but on the other hand, I looked at it as a mother and couldn’t believe that a disease like that existed,” she said. “I felt compelled to do something about it.”

Clementia went public in mid-2017 and last fall got the okay from the U.S. Food and Drug Administration to file a new drug application this year for palovarotene. But the stock was “under-loved," Wedbush Security analyst David Nierengarten wrote in a recent note. It closed Friday a few cents below its US$15 IPO price.

The transaction, the largest in Ipsen’s 90-year history, represents “a really big deal for us,” said Richard Paulson, the company’s president for North America, as it continues a recent strategic shift to increase sales on this continent and acquire new treatments for cancer, neurological ailments and rare diseases.

“It really accelerates our growth with a potential first-in-class anchor asset for our rare-disease platform,” he said, adding Ipsen, which had €2.2-billion ($3.3-billion) in sales last year, views palovarotene as “a largely de-risked asset. There’s a high unmet medical need, limited competition, it is near-term with regard to FDA approval” after the agency granted it fast-track status as an “orphan drug” in late 2014. An orphan drug is a treatment for a rare medical condition.

The takeover is also a key deal for the Canadian biotech market. Clementia is one of several domestic firms that have attracted investors globally in recent years. It will also represent a huge windfall for the venture-capital arm of the Business Development Bank of Canada, which stands to reap at least US$137-million after investing less than US$20-million for its stake of 14.5 per cent in the company early on. BDC is spinning out its biotech venture-capital fund into a standalone entity led by former BDC partners Jean-François Pariseau and Dion Madsen. “This deal is validation that we are doing great things in Canada with great entrepreneurs like Clarissa,” Mr. Pariseau said. "We think it is one of many transactions to come over the next couple of years” in the sector.

Ms. Desjardins said that while the takeover was a winner for investors, employees and patients, she acknowledged selling out now was “bittersweet” for her personally. “Our goal was always to continue to develop drugs for other rare diseases,” she said. "I don’t see any reason why Montreal or Canada couldn’t produce standalone global world-class biotechnology companies, and Clementia could have potentially been one of those.”

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Until palovarotene, there was no treatment for the debilitating chronic disease known as fibrodysplasia ossificans progressiva (FOP) that causes soft tissue to turn into bone after painful flareups. The disease hinders mobility and breathing, typically leading human victims to die by their 40s. It is believed to affect about 9,000 people globally. Clementia has shown in human trials that it can reduce projected bone growth by 70 per cent if patients take a daily pill for 12 weeks once a flareup starts.

The drug was abandoned by drug giant Roche after extensive trials proved it was safe for humans, but not effective enough to treat emphysema. A few months after reading of its potential use for FOP, Ms. Desjardins struck a licensing deal with Roche in early 2013. She raised US$90-million-plus in private financing before taking Clementia public in 2017.

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