Pharma Deal Is a Quick Turnaround for VC Firms

Venture capital profits have been scarce this year, but a recent investment in a Massachusetts drug company looks like a quick payout for a group of VC firms.

New Jersey-based biotech company Celgene Corp. announced today it will take over closely held Gloucester Pharmaceuticals Inc., for as much as $640 million, to gain the company's promising cancer drug Istodax.

Cambridge, Massachusetts-based Gloucester raised $29 million in August from a group of firms led by Novo AS's venture capital arm. Novo is the investment business of Novo Nordisk, the Danish pharmaceutical company. With its investment, it also gained a seat on Gloucester's board.

The deal is structured in parts: Celgene acquires Gloucester for $340 million in cash upfront and pays milestones up to another $300 million.

Gloucester received U.S. approval of Istodax in November to treat a form of lymphoma. It's seeking approval to treat another form of the disease. While Celgene is mitigating its risk if the drug doesn't get approval for expanded use, it notes that the drug is on a fast track for consideration. That designation is reserved for potential breakthrough drugs.

The sale marks a pretty quick turn for a VC investment, especially in the current environment. Apple Tree Partners, ProQuest Investments, Prospect Venture Partners, and Rho Ventures also invested in Gloucester.