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.

Swiss Addex Now on BVF's Watch List

Biotechnology Value Fund is making moves. Public records show the high-profile public investor recently grabbed a 6.6% share of the staggering Swiss firm Addex Pharmaceuticals. BVF sometimes makes public its reasons for piling into a stock, but the Feb. 5 document held no clue, and so far BVF hasn't gotten back to us. (We'll keep you posted.)

Allow us to cogitate upon the news. BVF could be making a straight value play. Addex closed today at 11 CHF per share. That's down nearly 75% from a high of 41.95 CHF just before safety data for its lead candidate tanked the stock in mid-December.

Addex pulled the plug on its lead candidate ADX10059, a metabotropic glutamate receptor 5 (mGluR5) modulator, when its Phase IIb data for migraines revealed elevated liver enzymes. Addex immediately halted another Phase IIb, for reflux. The company was expected to pull in a big licensing deal, but hope for that vanished with the safety revelations.

Obviously BVF thinks the company is undervalued. Addex, after all, has generated a pipeline of molecules via its allosteric modulation platform. But how much will it push for managerial and/or strategic change? CEO Vincent Mutel said in December he didn't think the safety failure of '059 was a class effect that would cripple another important compound in Addex's pipeline. It remains to be seen if BVF will attempt to steer Addex's R&D efforts in a different direction.

Given BVF has done its share of cage-rattling recently, it certainly might. Recall the fund used its 30% stake in Avigen to steer the firm into a merger with MediciNova last August. And last week BVF went public with a suggestion that diagnostics firm Celera, of which it owns nearly 10%, spin out the royalty stream associated with the Phase III osteoporosis drug odanacatib.

Merck is developing odanacatib as a potential replacement for its now-generic Fosamax (alendronate), once a $3 billion annual cash cow. Celera, which has reinvented itself several times since its founding by Craig Venter, doesn't do drug development anymore--its main business is developing diagnostic tests, including ones for cystic fibrosis and HIV genotyping. Still it's owed a "mid- to mid-high single digit" percentage royalty on sales if odanacatib comes to market.

BVF wrote in the Feb. 9 filing that, "if successful, the royalty asset could generate tremendous free cash flow for the Issuer’s shareholders and, accordingly, this single asset could be worth a significant multiple of the Issuer's current market value."

Since October BVF has bought about a million shares of Celera, all in the range of $6.09 to $6.30 per share. Shares closed Thursday at $7.01, giving it a market cap of $574 million.

With at least one portfolio company, however, BVF has bided its time. It holds a 16% stake in Facet Biotech but agreed not to tender its shares when Facet development partner Biogen Idec went hostile with a $14.50-per-share bid last fall. In exchange for permission to up its Facet stake above 15% without triggering a poison pill plan, BVF held fast when Biogen upped its offer to $17.50. Biogen dropped its bid in mid-December. -- Alex Lash

Photo courtesy of flicker user kevin.

Genzyme: Contents Under Pressure

Friday's announcement that bits of rubber and other detritus were found in vials of five different drugs manufactured at Genzyme's beleaguered Allston Landing plant was worthy of the satirical publication "The Onion"--except that it was true.

The picture grew murkier over the weekend, with the arrival of another Form 483 missive from FDA about ongoing manufacturing issues and a complete response for Lumizyme, Genzyme's enzyme replacement therapy for Pompe disease has been subject of more regulatory twists and turns than the plot of a Dan Brown novel. (Note this is the second time the Big Biotech has been dinged by regulators in the span of months. In September, FDA also shot down plans to expand the indicated use of pediatric leukemia drug Clolar to adults.)

The sad thing is the situation is entirely of Genzyme's own making. Don't think so? Let's review.

The origin of the problem goes back three years, to the original approval of Myozyme, basically the same drug as Lumizyme only manufactured on a much smaller scale, at a 160-liter scale facility in Framingham. Genzyme underestimated the demand for the drug, and plans to shore up capacity with a 4000-liter facility in Belgium were put in place. Only as a stop gap, the company also decided to devote 1/6th of its manufacturing capacity at Allston to the making of the drug.

And that decision has proved problematic. The stress of running an aging plant full tilt meant there was no time for necessary facility upgrades that might threaten the inventory of drugs manufactured at Allston, among them Cerezyme for Gaucher disease and Fabrazyme for Fabry disease. Genzyme CEO Henri Termeer admitted as much in the Nov. 16 investor call, noting "the introduction of the production of Myozyme in Allston was a very significant factor in the complications we have experienced there."

Too bad that realization didn't happen one year ago. That's when regulators started sending warning letters outlining concerns related to what sound like bread-and-butter manufacturing issues: microbial monitoring, equipment maintenance, and process controls.

What's most amazing is that problems are ongoing. Recall that six-week interlude this summer when the firm took the entire plant offline to sterilize it after discovering yet another unrelated problem--several bioreactors contaminated with a non-lethal to humans but problematic Vesivirus.

On the company's Nov. 16 call to investors, management confirmed that the latest 483 letter relates not to a new problem created by Genzyme's decontamination efforts but arising because of "an older piece of equipment". As Genzyme's EVP of Therapeutics, Biosurgery, and Corporate Operations said during a Q&A session with analysts, "There was a number of issues there that they [regulators] highlighted and many of which we were very aware of and working to address."

Management's solution? Take the plant off line again for a few weeks to, as Meeker puts it, "allow us to move more quickly to address those issues." Does everyone feel better now?

In some strange way, the very minor nature of these gaffes is the most damning element of the story. It throws management's judgment into question and again casts doubt on the ability of the current team to resolve a situation that should never have escalated to this level. True, the most recent news has changed little for the company near-term. The complete response on Lumizyme was widely expected by analysts and, amazingly, the particulate contamination didn't provoke a demand from regulators that Genzyme recall the product.

But regulators' hands were likely tied, in part because of the life-saving nature of Genzyme's medicines and the current lack of approved therapies that could substitute for Cerezyme and Fabrazyme. By the middle of next year that won't be the case. Shire is clearly gunning to steal market share from Fabrazyme with its Replagel product, which has been approved in Europe since 2001. In October, Shire announced plans to submit a BLA for its medicine in the US before year's end.

And the potential competitive threat to Cerezyme is even greater. The FDA has already authorized the use of competing products from both Shire and Protalix despite lack of formal regulatory approval. To date, the headaches required to negotiate the administrative hurdles of the emergency access programs have limited the erosion to Cerezyme's market. But note that Shire filed its NDA for its Vela product in September; if the agency grants the drug a priority review, it could be on the market by March 2010.

That's only four months from now. Can Genzyme get its act together in the meantime? The firm is increasingly vulnerable; it can't afford another announcement like Friday's. The summer shut down already created an opening for competing products to cannibalize on one of Genzyme's main money makers. Another "Dear Health Care Practitioner" or Form 483 letter and the current rumblings of dissent will move from the fringe as patients and investors rightly demand to know: who's minding the store, and why didn't Genzyme execs ensure supply of its most important drug by building up reserves when they had a chance?

Moreover, the company's share price is under pressure, hovering perilously close to its 52-week low and Genzyme has cut its earnings forecast four times this year alone. According to Adam Feuerstein over at The Street.com, adjusted earnings are now expected to fall 43%, from $4.01 a share in 2008 to $2.27 a share this year.

Much as we were ridiculed for discussing a potential sale of the company three months ago, its impossible to deny that Big Pharma's love affair with hyper-specialist products continues unabated. Any doubts, look at the recent deal between GlaxoSmithKline and Prosensa in Duchenne muscular dystrophy.

Oh, and did we mention that Carl Icahn, who has a reputation for homing in on troubled biotechs and turning them around in time to sell them, disclosed a stake in the Big Biotech on Monday night? Coincidence, you say? (We have 1.45 million reasons to say that's not likely.)

Would GSK or that other convert to ultra-niche, Novartis, pony up the money to buy Genzyme before the biotech cleans its own house? It's unclear. But one thing seems obvious: if Termeer can't clean up the mess that's been brewing in Allston, someone else--either Icahn or another shareholder activist--will.

Image courtesy of flickrer massdistraction via creative commons license.