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Former shareholders in autoimmune biotech acquired by Bristol Myers Squibb are suing the large pharma for what they claim are missed milestone payments and maneuvers to discredit the biotech’s work. BMS bought Padlock Therapeutics in 2016 for $150 million upfront and up to an additional $450 million if certain R&D and regulatory milestones were hit. Padlock’s shareholders are now claiming that BMS moved a monoclonal antibody into the clinic in November 2023, and that asset — BMS-986454 — was derived from the startup’s R&D. They say the company didn’t tell them that the clinical milestone had been achieved. If it had, that would have triggered a payment to shareholders. “BMS decided to renege on the deal and claim all of the benefits of Padlock’s discoveries for itself,” the Padlock shareholders said in their legal filing. The dispute was made public on Monday in a legal filing in the Delaware Court of the Chancery. Padlock was founded in 2014 by repeat biotech entrepreneur and industry veteran Michael Gilman, who currently leads Arrakis Therapeutics. “The larger issue here is that the success of our whole industry is built on deals like this,” Gilman said in a statement to Endpoints News on Thursday. “Now they’ve advanced one of our antibodies into the clinic. We believe they owe our shareholders — which includes our scientific founders and advisors and all of our employees, as well as the venture investors — a contractually agreed milestone payment. They disagree. So we’ve gone to court on behalf of the shareholders.” The lawsuit showcases the risk that biotech investors and shareholders take when selling startups on a tiered payout schedule contingent upon milestones. At least 15 of the approximately 45 biopharma M&A deals tracked by Endpoints News this year have involved milestones or contingent value rights. “BMS has always complied with its obligations in connection with its acquisition of Padlock,” a BMS spokesperson said in a statement to Endpoints News on Thursday. “We will respond to these allegations in court.” BMS was also recently sued by former shareholders of Celgene, which it acquired in 2019. Last month, they claimed BMS delayed seeking approval of certain drugs, including Breyanzi, by certain deadlines so it wouldn’t have to make payments to the shareholders, according to Reuters . The Padlock deal was an outright acquisition, but many collaborations are also structured via upfront and biobuck payment schedules. A review of 128 biopharma deals showed that 53% of milestone payments were pending and 30% had been missed, according to a report last year from M&A services provider SRS Acquiom. It also found that, out of 211 earnout deals with at least one milestone due by mid-2023, 28% had a dispute regarding milestones. Padlock was focused on a class of enzymes known as protein-arginine deiminases, or PADs, which drum up inflammation. Gilman and the Padlock team invented PAD inhibitors that can break up the inflammatory cycle and stop the damage that PAD enzymes unlock on the body, according to the legal filing. The inhibitors are thought to have the potential to treat RA, lupus, multiple sclerosis and other autoimmune diseases. Their work gained the attention of blue-chip investors like Atlas Venture, Johnson & Johnson Innovation, MS Ventures and Index Ventures, which invested in Padlock’s $23 million Series A. In his statement, Gilman said he was “thrilled BMS is taking one of the Padlock antibodies into the clinic.” “Fast forward eight years, and I believe this target is even better validated and more valuable,” Gilman said. “BMS presumably believes that because they’ve continued to invest in the Padlock molecules all this time.”

Bristol Myers Squibb recently presented for the first time data from its clinical trial of a cell therapy for autoimmune diseases, which has quickly become one of the most crowded fields in biopharma. Bristol Myers is developing an experimental cell therapy that uses the same construct as its approved blood cancer CAR-T treatment, Breyanzi, but with a shortened 5-day manufacturing process. The clinical study is still in its early days and includes people with several autoimmune conditions. So far, the company has reported clinical responses in all seven lupus patients with at least one month of follow-up. Bristol Myers, as well as the biotech companies Cabaletta and Kyverna, presented their respective clinical data over the weekend and on Monday at the American College of Rheumatology annual meeting. “There has been a burst of clinical studies in this field, and that’s very exciting,” said Georg Schett, the pioneering rheumatologist from the University Hospital Erlangen who first treated autoimmune patients with CAR-T cell therapy. “Nothing can grow within a day, right? It needs to be set up. But when you look at the field now, two years ago at the ACR, nobody spoke about cell therapy. And now this is really [something] everybody knows about.” Schett presented the Bristol Myers data at the conference and also sits on the scientific advisory boards of both Kyverna and Cabaletta. Safety of these cell therapies has become more closely watched after Cabaletta reported in August that a patient experienced grade 4 ICANS, which is a form of neurotoxicity associated with immunotherapy treatments like CAR-T cells. Bristol Myers also reported one case of grade 3 ICANS in a lupus patient that it said was “transient and resolved completely.” The patient experienced symptoms including “waxing and waning mental status” and “decreased level of consciousness,” according to the company’s presentation. But perhaps most intriguing was that one patient in the Bristol Myers study became pregnant within a few months after treatment. Schett highlighted that the case shows that fertility was not impaired by the conditioning treatment needed to receive the cell therapy. He added that the patient’s lupus did not flare up despite the fact lupus can be exacerbated in pregnancy. The patient was not taking any treatments for lupus after receiving the CAR-T cell therapy. The baby was born with normal counts of B and T cells. Cabaletta also shared new data showing that eight patients, including four lupus patients, treated with its cell therapy were able to stop immunosuppressants. As for Kyverna, it said Monday that it has now treated over 50 patients with its experimental CAR-T cell therapy across over 15 autoimmune conditions. But it’s actively running clinical trials for five diseases: lupus nephritis, systemic sclerosis, myasthenia gravis, multiple sclerosis and stiff person syndrome, its new CEO Warner Biddle told Endpoints News in an interview Monday. In lupus, it reported responses in all four patients who received its target dose of 100 million cells with at least 6 months of follow-up, and that none of the patients have required immunosuppressants following treatment. Kyverna also reported no cases of grade 3 or 4 cytokine release syndrome and no grade 2 to 4 ICANS across its 50+ patients. The company in September hired Biddle , who was previously head of commercial at Gilead’s cell therapy subsidiary Kite. Biddle said, “A big part of me coming to the organization is shifting the foundational work that we’ve done across these 50 initial patients, starting to focus in on the clinical trials that can get us to the first BLAs and getting access to a broader set of patients.” Kyverna expects to provide more details on its path to commercial approval in 2025 Biddle said.