Deals of the Week Screams ¡GOOOOOOOOOLLLLLLL!

In honor of the 2010 FIFA World Cup, IN VIVO Blog is channelling its inner Andres Cantor. Come on, there’s a little bit of the Argentinian-born sportscaster in all of us. Perhaps you did your best Cantor this morning when South Africa's Siphiwe Tshabalala found the upper right near corner of the net for the tournament's first score. Alas, host South Africa later surrendered an equalizer to Mexico, and the opening match Friday ended in a 1-1 draw.

It wasn't the only tussle this week that ended without a clear winner. Henri Termeer, CEO of Genzyme, and activist shareholder Carl Icahn have been kicking the ball up and down the pitch for months, and the compromise between the two gentlemen announced Wednesday was definitely your humble blogger’s favorite deal of the week, even if it doesn’t count as a traditional tie-up.

In finding a middle path, both parties gave up something. Icahn has to make do with just two Genzyme board seats, and his right-hand man Alex Denner isn’t one of them. Termeer, meanwhile, must satisfy the demands of Icahn’s representatives if he wants to avoid the fate of Jim Mullen, who just stepped down as CEO of Cambridge, Mass. neighbor Biogen Idec.

But both Icahn and Termeer/Genzyme also gained significantly. Termeer, for now, keeps his job and avoids the circus of a proxy fight. With some representation on the board, Icahn can still fight for more seats in the future if he chooses. As Charles Elson, a professor at University of Delaware's Weinberg Center for Corporate Governance, told our sister publication “The Pink Sheet” DAILY, “Whether it’s four [seats] or one, the fact that you have someone express your viewpoint…is [what’s] important.” The upshot: if that viewpoint is convincing enough, other board members will eventually come around.

In addition, both Icahn and Termeer avoided spending the weekend on the phone trying to sway major shareholders to their cause, when all parties involved would no doubt prefer to watch the beautiful game -- including Saturday’s not-to-be-missed England-U.S. tilt.

One set of winners to emerge from the boardroom draw were Genzyme shareholders, according to Bernstein Research analyst Geoffrey Porges. In a June 9 note, he called the solution “logical” because it introduces Icahn’s influence into the company without the conflict posed by overlap with Biogen’s board representation.

Who else scored a gooooooooooooooooal this week? Maybe Alzheimer’s patients and their loved ones. Five major drug makers -- Johnson & Johnson, GlaxoSmithKline, AstraZeneca PLC, Sanofi-Aventis, and Abbott Laboratories -- have joined forces to share data from 11 failed Alzheimer’s-drug clinical trials. (Data will also be available to outsiders who have valid scientific questions.) Under the auspices of the Critical Path Initiative, it’s the latest evolution in private-public partnerships, and it’s hoped that sifting through massive loads of patient data, researchers will glean new insights into this tricky disease. It's also notable for who’s not participating, at least not yet: Pfizer, which suffered an embarrassing setback earlier this year when its collaboration with Medivation for the Phase III Dimebon blew up.

Meanwhile, rumors are swirling that FDA suppressed negative data associated with the controversial diabetes medicine Avandia. That should add even more drama to the upcoming advisory committee review (or as we dubbed it last week, a "re-review") of the ramifications of allowing long-term safety studies of the medicine to commence.

In other news of pharma potentially behaving badly, it seems more likely that subpoenas will fly as Congress aims to get to the bottom of the recent recall of Johnson & Johnson’s children’s Tylenol. According to a Friday NYT story, Democratic Representative Edolphus Towns, chair of the House Committee on Oversight and Government Reform, says the health care giant has used delaying tactics and hasn’t been forthright with his committee. Even as J&J denies these accusations, a key goooooooooooooal for the drug maker has got to be burnishing its public image.

Whether you tune into the ballet of the masses or opt for the opera of the people, remember this essential piece of soccer wisdom: “Soccer is simple, but it is difficult to play simple.” The same could be said for biopharma deal making. Game on.



Grifols/Talecris: Hoping a merger with a smaller company might pass muster with the US Federal Trade Commission, Talecris Biotherapeutics is trying the business combination route again, about a year after its planned merger with Australia’s CSL was shot down by the FTC. (In FIFA terms, call it round 2, Spain vs. U.S.) In a deal announced June 7, Spanish firm Grifols SA, the number four company worldwide in the plasma protein therapeutics space, plans to buy Talecris, the number three player, for $3.4 billion in cash and stock, while also assuming the U.S. co’s hefty $600 million debt. In essence, the merger provides Grifols an increased North American commercial presence, while Talecris aims to accomplish two primary goals: an exit for remaining venture backer Cerberus Capital Management and improved capacity and efficiency in plasma collection. Formed in 2005 when Bayer spun out its plasma business to Cerberus and Ampersand Ventures, Talecris went public last fall. Cerberus, however, remained a 49% stakeholder in the public company. Even though the tie-up reduces the number of plasma protein players from five to four, Grifols and Talecris believe this deal has a better shot with the FTC than the CSL/Talecris marriage, because it won’t create a duopoly controlling 80% of the plasma protein market. Instead the top three players -- Bayer Baxter, CSL, and Grifols/Talecris -- will have a roughly equal share of the market. -- Joseph Haas

Sanofi-Pasteur/Vivalis: This week’s announcement from Vivalis that it was teaming up with Sanofi to discover and develop monoclonal antibodies against several infectious-disease targets marks the fourth time the two companies have teamed up. Apparently they like each other’s company. In this latest pact, Vivalis will receive €3 million upfront plus up to €35 million in milestones, plus royalties per program for access to its Humalex Mab platform and worldwide rights on resulting antibodies. Previously Vivalis has in three separate deals granted to S-P (twice) and Acambis (now part of S-P) access to its various embryonic stem cell lines for vaccine and antibody production. This week’s deal is based on newer technology that Vivalis itself acquired only this year. Humalex came into the biotech through its January 2010 €10.4 million acquisition of compatriot Humalys SAS, a move designed to broaden its product offering and potential biz-dev opportunities. Humalys shareholders are eligible for up to €15 million in milestone payments based on pharmaceutical partnerships for the Humalex technology. So far, so good. -- Chris Morrison

Forest/TransTech Pharma: Forest Laboratories isn't giving up on Type 2 diabetes. Just two months after scrapping an expensive deal with Phenomix for the late-stage dipeptidyl-peptidase-4 inhibitor dutogliptin, Forest is jumping back in. The specialty pharma has, however, learned its lesson: while it’s spending pretty big money -- $50 million up front and potentially more than $1 billion in milestones -- for a suite of Phase I and preclinical compounds, at least they belong to a novel class of medicines. The deal centers around TransTech’s highly selective glucokinase activators, which target an enzyme found in the liver and pancreas involved in glucose sensing. Transtech’s ability to specifically regulate the liver glucokinase enzyme was apparently key to the deal. When the pancreatic enzyme is targeted, it results in excessive insulin secretion, which can result in potentially life-threatening hypoglycemia. But the Forest/Transtech team certainly doesn’t have this target class to themselves. AstraZeneca, Amgen, and Eli Lilly also have GKAs in the clinic. This week’s announcement shows early stage deal-making for potentially first-in-class molecules still has legs--and the terms are on par with Amgen’s December alliance with Array for its Phase I GKA, ARRY-403. Even as analysts lauded the deal for its long term potential, the arrangement does little to help Forest replenish a portfolio that’s facing patent pressure. Forest’s two biggest products, Lexapro and Namenda, go generic in 2012 and 2015, respectively. -- Jessica Merrill

GlaxoSmithKline/Laboratorios Phoenix: Will the sun never set on the Glaxovian Empire? GSK's latest international foray has the US/UK behemoth spending $253 million cash for Laboratorios Phoenix, an Argentinian branded-generics firm with about £70 million (US $101 million) in annual sales last year, making it the eighth largest drug seller in the country according to IMS. GSK will add products in areas that include cardiovascular, gastroenterology and urology, plus a primary sales force and a manufacturing plant near Buenos Aires. GSK already has an Argentinian division with 2009 sales of £100 million, £56 million of which came from pharmaceuticals, but it said it would keep the entity legally separate from Phoenix. Dust off your atlases and grab your Rick Steves packing cubes, here's a list of GSK's regional deals since the start of 2009. Last month it bought a nearly 10% stake in South Korea's Dong-A Pharmaceutical and in December it snapped up 12.6% of Japan's JCR Pharmaceuticals, after also creating joint ventures with two different Chinese biotechs, Jinagsu Walvax Biotech and Shenzhen Neptunus Interlong Bio-Technique. Don’t forget its purchases of UCB's emerging markets business for €515 million (US $621 million) and Bristol-Myers Squibb's branded-generics operations in Lebanon, Syria, Yemen, Jordan and Libya for $23 million. Piled onto all this pharmerging goodness is Glaxo’s deal to sell Dr. Reddy's products in several regions and its 19% stake in South African generics firm Aspen Pharmacare. At risk of making light of pharmaceutical colonialism, we point out that GSK is one of several massive drug makers playing a "Great Game" of international acquisition. Our colleague Wendy Diller renewed her passport to sort out the emerging-market land grab in this IN VIVO feature. -- Alex Lash

Photo courtesy of flickr user CLF.

Editor's note: This post was updated on June 14th to indicate the top three players in the plasma protein market: Baxter, CSL, and Talecris/Grifols. Bayer was inappropriately mentioned as part of an editing error.

Washing Away Post-Deal Blues With A De-Sanofizer

There's nothing like a gathering of insiders to generate some candid chat about the latest doings, and that's what you can hear at the BioWindhover Pharmaceutical Strategic Outlook conference this week at the Grand Hyatt Hotel in New York. Despite threatening forecasts of snow and more snow (and it's falling heavily right now), some 300 or so people have gathered to swap tales and insights into the latest dealmaking trends.

On the topic of back-end loaded deals, Shelagh Wilson, a GlaxoSmithKline vice president who heads the European arm of the drugmaker’s Center of Excellence for External Drug Discovery, said Glaxo is making a point of adding milestones for achieving reimbursement, not just for achieving regulatory or sales goals. "What is driving all of this is the pressure from the payers for us to produce differentiated medicines, and the risk associated with that,” she said. “We’ve got to be innovative, not just in the drugs we bring forward, we’ve got to be innovative in the early stages of drug discovery, and that means taking more risk."

Of course, a perennial wild card for investors is gauging the FDA's next move, not only as a result of safety scandals - can you spell Vioxx or Avandia? - but with the hiring last year of FDA commish Margaret Hamburg, who continues to insist the agency will become more responsive to such problems. "The biggest issue with us for our in-licensing deals (for our portfolio companies) is misprojecting where FDA is going with regards to safety or efficacy," said Brian Atwood, managing director of Versant Ventures, explaining why his firm doesn't make investments in cardiovascular or metabolic opportunities.

Hoyoung Huh, meanwhile, garnered the day's biggest laugh. The chairman of BiPar Sciences, which Sanofi-Aventis acquired last year for $500 million and now operates as a wholly owned, independent subsidiary, confessed that retaining BiPar's culture can be challenging. So what did some employees do to underscore the point? "If you walk into the BiPar offices, the first thing you do is walk up to a hand sanitizer and it's called 'de-sanofizer,'" he said with a big grin. "It's not that we're trying to be rambunctious or nasty, though." And who was sitting two seats away? Sanofi's Philippe Goupit, vice president of corporate licenses.

DotW: IPO Medicine

The big news this week for early stage biotechs and their VC backers: The IPO Window is Officially Open!

Or maybe not.

As my colleague Alex Lash describes in this week's issue of "The Pink Sheet", Ironwood Pharmaceuticals' $188 million IPO is the proverbial elephant among the blind men. How you perceived it, depended upon where you touched it.

Let's start with the good news. Ironwood raised more money with this offering than any U.S. biotech in the past 10 years, nabbing a $1 billion post money valuation. (Only Eyetech Pharmaceuticals' 2004 $150 million raise comes close.) The company's stock price has even increased, albeit only modestly since the debut.

But for investors and would be IPO candidates, the offering was a lesson in caution. Several weeks prior to Wednesday's debut, Ironwood made the gutsy move of actually increasing its offer price 28%, confident that investor appetite for its shares would be robust based on the pre-come-out road show.

Let's just say things didn't exactly go as forecast. On Feb. 3, the company sold 16.7million shares at $11.25, significantly below its revised target range of $14 to $16 a share, and modestly below the $11.75 target predicted in SEC filings in November 2009. Moreover, nearly half the offer went to Morgan Stanley, one of Ironwood's top private investors and a banker on the deal. "There were unorthodox methods used to place shares," Cabot Brown, of San Francisco boutique bank Seven Hills, which had no connection to the deal, told our sister pub "The Pink Sheet" DAILY. "This was half a public offering."

Indeed, taken together, Ironwood's close shave and the apparent lack of widespread interest in the offering suggest investors pushed back hard or Ironwood's attempts to hit a grand slam instead of a home run.

And that could be a problem for IPO wannabees in the queue. After all few venture-backed, pre-commercial biotechs can match Ironwood's profile. The 10-year-old company's Phase III compound, linaclotide, is backed by strong clinical data and partnered on three different continents. It faces only two competitors, one in the U.S. (Amitiza from Sucampo and Takeda) and one in Europe (Resolor from Belgian firm Movetis, which incidentally managed a lucrative IPO last December).

So if investors aren't lapping up Ironwood's offering, will they have greater interest in a company like Tengion or Trius Therapeutics or Anthera, or any of the other 7 biotechs that have declared their intent to go public? (On the same day as Ironwood's debut, Anthera priced its offering at $13 to $15 a share, for a total expected raise of slightly less than its original $70 million target. It's slated to debut the week of Feb. 22.)

And should these subsequent offerings fall flat--or worse--how will that, in turn, impact the IPO climate? According to Elsevier's Strategic Transactions database, there are at least 10 privately-held biopharmas with compounds in Phase II development or later who are--how can we put this delicately?--long in the tooth when it comes to fund raising. Indeed it wouldn't surprise IN VIVO blog at all to learn companies like Portola Therapeutics, Helicon Therapeutics, and Biolex were mulling potential IPOs.

Still, venture's inability to finance itself adequately means there could be a movement to push some of these fledgling biotechs out of the financing nest before they are ready to fly solo. And rest assured, a few lackluster offerings won't just close the IPO window for brave biotechs. It will slam shut faster than Washington D.C. in a snowstorm.

Big questions to ponder as the snow falls--#snOMG!--and you rate the ads from Careerbuilder.com, Budweiser, and Frito-Lay. (Wait, there's a game?) For now, it's on to Deals of the Week.


GlaxoSmithKline/Apeiron: GSK continues to access early stage innovative programs through small, back-end weighted licensing agreements. This week the big pharma inked a deal with privately-owned Apeiron worth $17.5 million in upfront cash and equity for full rights to the biotech’s Phase I biologic for acute respiratory distress syndrome (ARDS), an adverse event associated with sepsis, trauma, and post-operative complications that affects approximately 1 million people annually in emerged markets. Glaxo could be on the hook for another £207 milllion in development milestones as well as sales royalties should Aperion’s asset, APN01, a recombinant human Angiotensin Converting Enzyme-2, succeed in three indications. Although this is far from big money for GSK, the upfront payment exceeds the £10 million Apeiron has raised from Austrian and European grants and angel backers. (Apeiron is one of a growing number of companies eschewing VC.) GSK’s respiratory CEDD, one of the half-dozen semi-autonomous therapeutic areas focused units comprising GSK’s R&D operations, gets credit for the deal. But it may have its hands full when it comes to APN01’s development. As “The Pink Sheet” DAILY notes, the track records for drugs for similarly complex—and associated—conditions such as sepsis show why the unmet medical need remains high. (Xigris anyone?)—Melanie Senior

Cephalon/Mepha: Generics, that low margin, but inherently stable business, remains a sexy proposition. Any doubts look no further than Cephalon’s purchase this week of the private Swiss generics firm Mepha for $590 million. One year after it launched the option-to-acquire party with its $100 million bid for Ception, a privately held biotech developing the Phase IIb/Phase III reslizumab for the rare autoimmune condition eosinophilic esophagitis, Cephalon is now talking up diversification and internationalization. (Or is the internationalisation?) “This is about growing top-line and bottom line, and generating cash,” Cephalon CEO Frank Baldino said on a conference call announcing the deal. Like other drug makers (including Pfizer), Cephalon’s late stage pipeline is thin and the specialty pharma faces revenue pressure given the 2012 genericization of its juggernaut, Provigil. In addition to providing much needed near-term revenue, this deal is also about building a European commercial infrastructure. Thanks partly to Mepha, 30% of Cephalon’s global sales will now be ex-US. Bidding for Mepha, owned by Germany’s Merckle family and sister to ratiopharm, another generics firm on the auction block, was apparently competitive. Still the ultimate price tag for the deal was just 1.5 times Mepha’s 2009 sales.—Jessica Merrill and Ellen Licking

Medco/DNA Direct: On Feb. 2, the pharmacy benefits manager Medco announced the acquisition of privately-held DNA Direct, a decision support services outfit for payors, providers, and patients to help ensure the appropriate use of more than 2,000 available genetic and molecular diagnostic tests. Financial terms of the deal were not disclosed. Five-year-old DNA Direct, which had backing from Firefly Investment and Lehmi Ventures, will become a wholly-owned Medco subsidiary and its current prez, Ryan Phelan, will remain at the helm. The deal was apparently driven by Medco’s need to bolster its commercial side rather than its R&D capabilities, according to “The Pink Sheet” DAILY. DNA Direct charges fees only for its consulting services; it does not make money on the tests it recommends and supplies to individuals. The company started out focused on the consumer, but has shifted to a B2B model in which it helps health plans choose appropriate genetic tests for their physicians and members. Thus, it’s a good fit with Medco's personalized medicine program. The deal comes approximately three years after Medco reorganized the front end of its pharmacy operations into Therapeutic Resource Centers, a network of six sites each focused on one disease. Medco is not the only PBM to tap into the burgeoning genetic counseling market. In November, CVS Caremark announced a partnership with genetic benefits manager Generation Health.—Mark Ratner

Abbott/Pierre Fabre: Abbott continues to look for alliances or acquisitions in high growth therapeutics areas, this week inking a deal for Pierre Fabre’s preclinical antibody targeting the cMet receptor, h224G11. cMet’s definitely a target that’s caught Big Pharma’s attention. Late last year, Novartis ponied up $150 million (plus $60 million in near term milestones) to acquire Incyte’s Phase III JAK 1/JAK2 inhibitor and its Phase I oral cMet inhibitor. In that transaction, acquiring rights to the late stage JAK1/JAK2 inhibitor clearly drove the deal economics, so it’s a bit surprising to discover Abbott is paying $25 million upfront, plus two years of research expenses and undisclosed milestones to get its hands on Pierre Fabre’s not yet studied in humans mAB. (Who says you have to get to POC to make money on a deal?) Under the terms of the collaboration, Abbott will be responsible for all further development of h224G11, which has shown promising results in treating a range of solid tumors (including prostate, lung and gastric cancers), as well as the mediation of chemotherapy resistance. The addition of h224G11 bolsters the Big Pharma’s oncology pipeline, which also includes a PARP inhibitor and a monoclonal antibody targeting a unique epitope of the epidermal growth factor receptor. Beyond oncology, other priority therapeutic areas include cardiovascular disease, immunology, and pain. In November 2009 Abbott paid $170 million to acquire PanGenetics’ treatment for chronic pain, an antibody targeting nerve growth factor.--EFL

Qiagen/Pfizer: Pfizer has enlisted Qiagen to develop a companion diagnostic for its experimental glioblastoma immunotherapy PF-04948568, which Pfizer licensed from Celldex Therapeutics in 2008. The diagnostic, a real-time PCR assay to detect the EGF receptor variant vIII RNA, was one of the programs underway at DxS, which Qiagen acquired in September and has now established as its Manchester, UK, Center of Excellence for Companion Diagnostics. Terms were not disclosed, but it’s always good news for the field of personalized medicine when a pharma company reaches out for development of a companion diagnostic – especially when it’s done early in clinical trials, in this case at Phase II. Qiagen is among the more interesting emerging players in molecular diagnostics. Historically a supplier of kits and reagents, not a developer of tests (at least that was the case prior to its acquisition of Digene), Qiagen’s emphasis has always been on simplicity of processes and procedures. It appears to be adopting the same philosophy with molecular diagnostics development: in the press release announcing the deal, it specifically noted that the new test was designed for a simple workflow.--MR

Image courtesy of flickrer higlu via a creative commons license.

DotW: Damned If You Do, Damned If You Don't

Alliances are a necessary evil.

Despite all the verbiage around the softer virtues of collaboration, the fact is that most companies would just prefer to be left alone. Doing the tango, as the Argentian exhibitors at BIO demonstrated, takes too much work. And frankly costs too much.

Thus this week: Onyx is now suing its partner Bayer for double-crossing it on a next-generation Nexavar (see Ed Silverman's Pink Sheet Daily analysis). Naturally, Bayer would love to find a compound of its own that’s as good as Nexavar and which doesn’t cost it a profit-share. For its part, Onyx says the follow-own is a close chemical brother to Nexavar, discovered as part of the collaboration (well – legally, that is: anything discovered in the field by either company before January 31, 2000 counts as part of the collaboration).

Think about the big acquisitions – most of them are transformations of alliances that looked more expensive than they were worth. Pfizer’s acquisitions of Warner-Lambert and Pharmacia were most fundamentally about the larger company getting 100% of the jointly promoted products (respectively: Lipitor and the Cox-2 franchise, including the star player Celebrex). By our reckoning, Roche’s acquisition of Genentech was fundamentally a response to that extraordinarily successful alliance’s costs – in duplicate infrastructure, royalties, joint decision-making.

And to our minds, the most interesting alliances of the last few months aren’t really alliances but tactics to pool resources without having to actually do all that much ongoing collaboration. The GlaxoSmithKline/Pfizer joint venture in HIV creates an independent company which starts out buying its research from its parents – but can go its own way later. Meanwhile, the Purdue/Mundipharma/Infinity deal seems to be as much an anti-collaboration as an alliance: the funders (Mundipharma and Purdue) basically don’t interfere in any way with Infinity’s research or development or, for that matter, the registration process.

Even most of the option deals we’ve seen recently (and which will be the subject of an in-depth analysis from Ellen Licking in the coming issue of Start-Up) are anti-alliance alliances – the small company does a bunch of work independently; the big company then decides whether there’s enough evidence to buy the thing. Novartis just made that logic explicit – see below in our write-up of its re-arrangement with Elixir.

Novartis announced another variation of the non-alliance alliance this week in its re-structuring of its respiratory collaboration with Schering-Plough. Which is probably a good deal to start with in this week’s edition of ...

Novartis/Schering-Plough: Why share two pies, when you can have one each? Especially when each gets to eat the one it prefers. Novartis and Schering-Plough this week undid two previous co-development and co-commercialization deals around two respiratory combination drugs, each agreeing to instead take full rights to one.

In what’s essentially an un-deal, Novartis gets exclusive worldwide rights to develop and market QMF 149, a fixed-combination of its own indacaterol (a long-acting beta-2 adrenergic agonist) with Schering-Plough’s inhaled corticosteroid mometasone (un-doing this 2006 deal). Schering-Plough, meanwhile, gets similarly full rights to a combination of mometasone with Novartis’ formoterol, another long-acting beta-2 adrenergic agonist (un-doing this 2003 deal).

It’s certainly neat—no money changed hands according to Novartis’ CEO and Chairman Dan Vasella, who added that “we wanted to complete that disentanglement.” Indeed, history has shown that co-developments, co-promotes, co-anything is generally more complicated and likely to end in tears than a pure-play effort—particularly perhaps in this case with newly-enlarged Schering-Plough (though the parties had been discussing this divorce well before the Merck merger was announced, according to Vasella).

Behind what looks like a tidy sharing of the booty, we’re sure there’s some small print (or an awfully complicated equation around the sales-based royalty-sharing arrangement on the compounds). But by and large, it appears that Schering-Plough was happy to accept a later-stage compound (Phase III completed) with less risk and cost to come, in exchange for granting Novartis a combo that’s still in Phase II, but which uses Schering-Plough’s Twisthaler device.

Novartis is taking on more cost, then, but reckons it’s worth it to build up its own respiratory franchise around indacaterol (currently under review as a standalone, and a component of other development combos including one with a compound from UK biotech Vectura)—and to avoid the tangles of co-development and co-commercialization. – Melanie Senior

Shionogi-Sciele/Victory Pharma: And you thought the Chinese were financing the US economy. The Japanese have spent more than $18 billion buying US and European biopharmaceutical companies since 2007. And if you figure CV Therapeutics wouldn’t be part of Gilead had not Astellas launched its hostile bid, well, add another $1.4 billion to the total. Now some more deals – Takeda’s acquisition of IDM (see below) and Sciele’s $150 million acquisition of Victory Pharma, bankrolled by Sciele’s still brand-new owner, Shionogi. Essex Woodlands and Ampersand had committed $45 million to the company back in March – which means that, at least for Essex (Ampersand had been in the company longer, through an acquisition), its IRR on the deal has got to be pretty impressive (and its limiteds pretty happy with the new fund). Indeed, Essex is one of those venture funds sitting pretty right now -- $900 million in a new fund, mostly raised pre-crash, and half a dozen exits over the past year or so (most recently from Dow Pharma for Valeant’s $285 million plus earnouts and – ok, sort of an exit – its $100 million option-to-sell Ception to Cephalon). Essex has been focused on growth companies (revenue generating and close to, or at, profitability, like Victory). But with all that cash, a plethora of cheap deals, and most of the early-stage venture guys sitting on their hands, Essex is probably going to move further upstream and start bankrolling some of those discovery guys.

GSK/Oxford BioTherapeutics: Bankrolling discovery is exactly what GSK has been doing with its seemingly neverending string of option-alliance deals. But this one announced early in the week by Oxford BioTherapeutics has a bit of a twist: GSK will be doing some of the early stage work itself, generating antibodies to oncology targets provided by OBT. GSK will also get an exclusive option to license a monoclonal antibody that OBT will develop through to clinical proof-of-concept. OBT got an undisclosed up-front payment and will receive clinical, regulatory and commercial milestones plus a double-digit royalty on any sales for products OBT took to POC, and single-digit royalties on GSK mabs against OBT targets. If GSK opts out of any programs, OBT has the option to pick them up. OBT's target expertise comes from its Oxford Genome Anatomy Project database, which it calls the world's largest cancer protein database. OBT has one other antibody discovery deal, with Amgen, signed back in 2007 when OBT was still Oxford Genome Sciences.

Takeda/IDM Pharma: It's roughly a week until ASCO and--here's a surprise--cancer immunotherapy is back in the news. But even though Dendreon's positive Provenge results prove naysayers wrong (for now--the drug still isn't approved) Big Pharma is still in "show me the data'' mode when it comes to this novel form of therapy. The upshot? Companies can find partners--or even buyers--but those deals aren't likely to happen until there's been a major de-risking of the compound. That was the case this week for IDM Pharma.

On May 18, Takeda announced it would acquire the immunotherapy developer for $75 million. The Big Pharma waited until the biotech's novel therapeutic for osteosarcoma, Mepact, was approved by European regulators. That Takeda held off until there was regulatory approval shows that you can teach an old pharma new tricks. Recall that last year Takeda bet $50 million on a partnership with Cell Genesys for its GVAX vaccine for prostate cancer. Let's just say things didn't exactly work out as planned; by year's end the two parties had called off the realtionship, thanks to the failure of GVAX.

For IDM Pharma, the news couldn't have come at a better time. About a week ago, the struggling biotech disclosed first-quarter earnings, noting cash and cash equivalents of $7.4 million as of March 31, down from $12.8 million at the end of last year. To survive, IDM shut down all development programs except Mepact and slashed staff headcount from 80 to 15.

Cancer vaccine makers probably shouldn't expect partners to come courting just because the field's seen one small-ish deal. While Takeda's interest in Mepact was great, IDM's other products, which include a dendritic cell-based melanoma vaccine called Uvidem, were less appealing because of their risky profile, according to the deal's orchestrator, Anna Protopapas, SVP corporate development at Takeda's Millennium Pharmaceuticals unit.

Interestingly, this is the first deal Protopapas and her team have announced since Takeda purchased Millennium for nearly $9 billion one year ago. Thus far, the aim to run Millennium as a stand-alone biotech seems to be working. We aren't exactly sure if Millennium is the Takeda oncology company or simply a Takeda oncology company, however. A closer look at the Mepact arrangement has Takeda Cambridge, the drug firm's European outpost, handling the immunotherapy's commercialization, not Millennium--which also happens to be in Cambridge--Ellen Licking.

Novartis/Elixir Pharmaceuticals: Another week, another option based deal. On Tuesday, Elixir announced that it had granted Novartis the option to acquire the biotech in a deal worth more than $500 million. The acquisition is dependent on Elixir's ability to move it's preclinical oral diabetes drug--a ghrelin antagonist--through successful Phase IIa trials. The announcement was actually just one of two made by Elixir: in addition to Novartis staking a claim on the company, the Novartis/MPM side-fund, which was created in 2007 as an attempt to more closely align Novartis' corporate venture and business development efforts, participated in the biotech's $12 million Series D.

This is actually the second option style deal Elixir has done with Novartis. Back in 2007, Novartis/MPM invested in the biotech, with Novartis taking an option on a different program--a ghrelin agonist. As part of the agreement announced earlier in the week, the two companies have terminated their earlier pact, and all rights to the oral ghrelin agonist compound revert to Elixir.

The equity financing, plus the non-dilutive funding from the option (believed to be nominal--we couldn't identify the actual amount Novartis paid on top of the financing to acquire the company though we tried), put Elixir in a far more secure cash position. According to Elixir's CEO, Paul "Kip" Martha, the company was one of many in the industry operating with less than six months worth of cash. "This is a dramatic turn-around for us," he said in an interview with IN VIVO Blog.

This is the third option-style deal Novartis has done since the start of 2009 and its structure recalls almost exactly the March deal brokered for the rights to acquire Proteon, which is developing a recombinant human elastase designed to improve the outcome of arteriovenous fistula procedures in patients with end-stage renal disease. It used to be hammering out the terms for these kinds of arrangements was tough--traditional VCs and biotech CEOs worried that the option might cap a company's upside. That's less of a concern these days when cash is a biotech’s most important resource; thus, CEOs have accepted the hard reality that non-dilutive funding now and the greater certainty of a deep-pocketed partner or buyer in the future outweigh the potential reduction in overall deal economics necessitated by option arrangements.

Finally this tie-up highlights a potential advantage of the option structure--keeping a Big Pharma engaged and potentially deepening the relationship. In 2007, Novartis's option was much more limited--it was strictly a licensing deal. This latest announcement suggests Novartis is impressed enough with Elixir’s pipeline that it sees value in owning the company outright--Ellen Licking.

Johnson & Johnson/Cougar Biotechnology: Finally, we should note that this has been -- on the investment front -- a relatively good week for biotech. We haven't seen this many acquisitions for a while. And thus, last night, J&J provided us with a pleasant send-off for the Memorial Day Weekend: its $870 million acquisition of Cougar (for more in-depth comments, see this post from earlier today).

Image from Flickr user Mike "Dakinewavamon" Kline used under a creative commons license.