2009 M&A/Alliances DOTY Nominee: Astellas/Medivation

It's time for the IN VIVO Blog's Second Annual Deal of the Year! competition. This year we're presenting awards in three categories--that's 300% more fake prizes than last year!--to highlight the most interesting and creative deal making solutions of the year. The categories are: Big Pharma Deal of the Year, M&A/Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (roughly half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


Options, Schmoptions. Sure GSK can ink its low-money-down, risk-hedging deals--for now. We'd argue that with pipelines flagging and the general push to look outside, the hottest targets/assets/technologies are still commanding value in competitive auction arrangements, a place where pesky options tend to be problematic. Yep, that's right. Despite the lackluster economy and the biotech financial crisis, it can be a seller's market.

Just ask Medivation. In late October the company announced a tie-up with Astellas to develop its Phase III prostate cancer drug, MDV3100 in a transaction worth $110 million up-front and biobucks of more than $650 million. Moreover, Medivation still keeps significant control of the development program--at least in the US, where the two firms evenly split costs. (Ex-US, Astellas picks up the whole tab for development and commercialization, providing tiered double-digit royalties in exchange for the privilege.)

Why does this deal merit top marks in the M&A/Alliance race? It's not because the upfront topped the chart in terms of dollar amounts. (That distinction goes to the AstraZeneca/ Targacept alliance announced last week.) But it does highlight the kind of deal you can ink when your target is hot-hot-hot. MDV3100 is one of two late-stage compounds seeking approval to treat hormone-refractory prostate cancer. The other? Abiraterone, a Phase III molecule that was J&J's primary interest for taking out its developer, Cougar Biotechnology, in a deal worth roughly $1 billion.

Other reasons to vote for this deal? Cuz Astellas may be "the new little engine that could" of deal-making. When you're Pfizer or GSK or J&J, a product like MDV3100 isn't by itself going to move the needle when it comes to growing the business. But for Astellas this is an important product that builds upon an existing urology franchise--the pharma sells Flomax and Vesicare--and helps create a new presence in oncology. And to get access, the Japanese player was willing to share the wealth with Medivation.

2009 may have been the year of the mega-merger, but smaller companies like Astellas--and the other Japanese pharmas Takeda, Shionogi, Daiichi, Otsuka, and Eisai--are still finding ways to compete. (Other interesting Astellas deals to note: partnerships with Zogenix, NeurogesX, and a joint-venture with Maxygen.) A lot of the draw comes down to one simple fact: a company's willingness to do right by its partner, including an ability to be flexible on the deal structure. (The BMS-Otuska deal is another interesting example of two partners working to find a structure that mutually benefits both.)

But there's also a willingness to play in risky markets like cardiovascular disease and be bold in the process. Recall Astellas tried--and ultimately failed--to acquire CV Therapeutics before it was outbid by Gilead. We think the company's hostile offer was a watershed moment, showing business as usual for the Japanese pharma didn't necessarily have to mean a consensus driven process. And we give Astellas credit for not being drawn into a bidding war, sticking to its price even after Gilead launched its white knight, higher offer.

So vote for Astellas/Medivation: a vote for oncology drug deals, a vote for increasing alliance values, a vote for the continued strength of the Japanese deal makers.

DotW: You Can Get Anything You Want At IN VIVO Blog

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why I called the post Deals of the Week.

You can get anything you want at IN VIVO Blog.
You can get anything you want at IN VIVO Blog.
Log right in, it's a click away.
Just a finger tap. You don't have to pay.
You can get anything you want at IN VIVO Blog.

Now it all started two Thanksgivings ago, two years ago on Thanksgiving, when Chris Morrison and I started writin' a blog about deals, but not every day, just once a week. And writin' about deals once a week, you know it's a lot of work. (Hint. Hint.) And there's a lot of garbage you gotta sift through, but we decided it would be a friendly gesture on behalf of readers.

So we trolled around the Internet with our shovels and rakes and other implements of destruction (aka Elsevier Business Intelligence's Strategic Transactions database) looking for deals to analyze. But then a big bad editor (also known as Officer Roger) said why are you doin' that? We are closed on Thanksgiving.

And we had never heard of a blog closed on Thanksgiving before (we don't get out much) so with tears in our eyes we drove off into the sunset looking for another place to dump our garbage -- I mean our deals.

We didn't find one. So we wrote our post anyway, went back and had a Thanksgiving Day that couldn't be beat, went to sleep, and didn't get up until the next morning when we got a call from Officer Roger...

And it's been a recurring feature here at IVB ever since. (Fortunately, not another case of American blind justice since we always arrive at the truth of the matter and it doesn't even require 27 eight-by-ten color glossy pictures with circles and arrows and a paragraph on the back of each one.)

In honor of the day, we hope you consider joining the IN VIVO Blog Movement. All you've got to do is walk into the office wherever you are, just walk in and say ,"You can get anything you want at IN VIVO Blog." And walk out.

You know if one person, just one person does it, they might think he's really sick and they won't take him... And can you, can you imagine fifty people a day, I said fifty people a day (okay, we'd really like 1000) walking in, quoting a line from IN VIVO Blog and walking out?

And friends, they might think its a movement. And that's what it is, the IN VIVO Blog Movement.

Remember Deals of the Week? (This is a post about Deals of the Week.) Without further ado, we bring you this week's installment inspired by Arlo Guthrie. Feel free to sing along in four-part harmony. With feeling. 'Cuz you can get anything you want at the IN VIVO Blog. (Excepting Roger.)

Clovis Oncology/Clavis Pharma: What's a letter of the alphabet between friends? Pat Mahaffy and his former Pharmionites at Clovis have started to spend the huge $145 million A round they announced in May. Their first deal is for intravenous CP-4126, what they hope to be an improved version of Eli Lilly's Gemzar, under development at Norwegian firm Clavis.

Clovis is paying $15 million upfront and up to $365 million in milestones to take over clinical trials in pancreatic cancer and other indications and develop a companion diagnostic. Clovis gets rights in the Americas and Europe and will double enrollment to 250 patients in a recently launched Phase 2 for newly-diagnosed advanced pancreatic cancer. Clavis's proprietary platform adds a lipid vector to existing drugs that, if early data bears out, will boost efficacy without adding safety concerns.

For CP-4126, the proposition is to boost uptake of gemcitabine in patients who fare poorly on the parent drug because they have low levels of a nucleoside transporter protein known as hENT1 required for entry into tumor cells. The lipid vector allows gemcitabine to bypass hENT1 and find another way into the cell, Clavis officials say. No doubt careful attention will be paid to the low-hENT1 population in Phase II studies. Pay careful attention, too, to Clovis, to see how far $145 million can take a specialty-focused cancer startup these days. Let's see, $15 million upfront, plus clinical trial costs (including the diagnostic development), plus milestones to Clavis, plus operations in three locations (Boulder, Colo., San Francisco, London), plus other deals the firm no doubt wants to do...it adds up fast. With its mid-recession A round, Clovis showed it could buck economic trends. Will we see a B round soon? As Clavis CEO Geir Christian Melen told "The Pink Sheet" DAILY this week, Clovis's Mahaffy has "strong shareholders with deep pockets." -- Alex Lash

Novartis/Incyte: To whet your appetite for the multi-layered yumminess of turducken, official Thanksgiving Beast of the IN VIVO Blog, check out the deal Incyte announced this week.
It's not just two drugs wrapped into one deal, it's two kinds of upfront cash! Novartis is paying a $150 million signing fee plus an immediate $60 million milestone for rights to two compounds, an oral JAK1/JAK2 inhibitor in Phase III for myelofibrosis, and an oral cMET inhibitor about to enter Phase 1 for multiple cancers. The $60 million is a reward for INCB18424, the JAK inhibitor, having started Phase 3 in July of this year. Novartis gets ex-U.S. marketing rights to the compound in all hematology-oncology indications and will pay tiered, double-digit royalties. Incyte keeps rights in the States as well as rights in the psoriasis indication. For the cMET inhibitor, INCB28060, Novartis takes over worldwide development after Phase 1 and also has worldwide commercial rights with royalties back to Incyte. Incyte also keeps a co-development and co-promotion option on the compound. Total biobucks for the deal could top $1 billion, though with the cMET inhibitor so early in development, chances of Novartis paying every last dollar are roughly the same as seeing a turducken in the wild. -- Alex Lash

Jubilant/University of Alabama/Southern Research Institute: These days drug makers are looking to trim their overly fat infrastructure even as they bulk up on much needed pipeline products. How best to do this while maintaining a lean budget? One increasingly popular approach is to leverage the lower cost innovation available in India and China. (FIPNets!) Another is to take advantage of the knowledge within the world's ivory towers--in other words, deals with academia. In an interesting twist on the virtual R&D model, Jubilant Organosys, one of the go-to India companies for major pharma players, is seeking out innovation by forging ties with the University of Alabama and Southern Research Institute to develop new meds in the oncology, metabolic disease, and infectious disease space. The press release calls it "a unique US-India arbitraged and leveraged partnership." So based on the trickle down economics theory of deal affordability, transactions with emerging-market players provide pharmas more generous terms than with US or European biotechs, but partnerships with academia are an even better bargain. (What about deals with Indian or Chinese universities?) This is the second academic partnership Jubilant has signed this month--it inked an agreement with Duke University on Nov.10 to translate Duke discoveries into new medicines. Specific financial details of the most recent tie-up with UAB/SRI weren't disclosed. But the three groups are definitely working together to identify and develop the most promising targets discovered at their various organizations with the goal of shepherding programs through Phase II before out-licensing to other drug makers. Should a partnership materialize, revenues stemming from these alliances--presumably milestones and royalty streams--will be distributed to the three investment participants in some fashion. -- Ellen Licking

Cephalon/Ception: Okay, it's not really a "no deal"; the Cephalon/Ception transaction is more accurately described as a "no deal yet." That's because Cephalon is extending (we'd say postponing) its option-to-acquire Ception Therapeutics after a Phase II/III study of the smaller co's lead compound, reslizumab, yielded disappointing results in treating the rare autoinflammatory disease eosinophilic esophagitis (EE). Recall that way back in January, Cephalon acquired the rights to buy Ception for $250 million on top of a healthy $100 million upfront pending a positive outcome in the EE trial. It's possible the deal may still come to fruition -- reslizumab isn't leftover turkey, yet -- but now Ception has to prove the drug has the goods (i.e. Phase II data) in a different indication, eosinophilic asthma, before Cephalon ponies up the money. Results from these asthma studies are expected to be revealed sometime in the first quarter of 2010.

There's no question reslizumab, an anti-interleukin 5 monoclonal antibody, is an important asset to Cephalon. It's one of the company’s only near-term pipeline opportunities given the pending genericization of Provigil. Indeed, Cephalon execs highlighted reslizumab and its expected mid-2010 BLA filing as a near-term growth driver during a recent R&D day. It's also clear Cephalon is hitching its wagon to therapeutics that treat inflammation. In addition to the Ception transaction, in the past year the company has inked three deals in the space, with ImmuPharma, Arana, and most recently BioAssets. -- Jessica Merrill and Ellen Licking

Saving Money on Volume: Obama Advisor Talks Cost Control With ASCO

Sometimes less is more. At least where healthcare reform and oncology are concerned, bringing volume down is the best path to reducing healthcare costs, according to Obama administration health advisor Ezekiel Emanuel.

Emanuel--an oncologist, a senior advisor in the Office of Management & Budget, and brother of White House Chief of Staff Rahm Emanuel--addressed a rapt audience at the American Society of Clinical Oncology annual meeting in Orlando, Fla. His May 30 presentation featured a polished presentation painting a vivid picture of escalating health care costs in a slide show reminiscent of Al Gore’s “An Inconvenient Truth.”

In this case, the inconvenient truth is not climate change, but the need to contain health care costs. “We cannot – in a responsible, sustainable way – get to universal coverage unless we’re going to take cost control seriously,” Emanuel said.

Emanuel boiled it all down to a simple equation: the combined pressures of price and volume combine for a constant increase in health care costs. That means continued, unsustainable growth unless there is a direct effect on price or volume.

Driving prices down would be great, he said. But for now, at least for Emanuel and for the medical practitioner audience at ASCO, the focus is volume – specifically, reducing unnecessary services. “I go where the money is,” he explained afterwards. Most of the increase in health spending comes from volume, not price, so that’s the appropriate target. “By and large affecting price will have … a relatively small effect" on overall cost trends.

"If you really want to hit the big time and bend the curve so it doesn’t go up exponentially, you’ve got to do volume," Emanuel says. "There’s just no two ways about it."

In oncology especially, the payment system tends to reward utilization rather than encourage evidence-based practice decisons. For instance, Emanuel argues, there should be a reduction in imaging and other screening practices since evidence doesn’t support a distinction in survival with high intensity follow-up.

For biopharma companies concerned about the prospects of price controls, Emanuel's analysis suggests attention will be focused elsewhere. Drugs, though a high value target for public and media attention, just are not a big enough driver of cost to focus on when it comes to generating dramatic reductions in healthcare spending in the U.S. (Emanuel noted the widely accepted estimate that prescription drugs are only 10% of overall healthcare costs.)

That’s not to say there won’t be some push for realizing the gains that can be squeezed out of the pharmaceutical slice of the pie. The savings on price are relatively small "but they are not negligible," he says, estimating that as much as 20%-25% of growth trends are affected by price.

Emanuel stressed generic utilization can make a difference. In cholesterol medicine, he says, 95 percent of patients can get as much benefit from the off-patent simvastatin as from the much more expensive Lipitor brand. Or, he suggested, generic albuterol versus branded asthma inhalers. “There you can make a difference in price.”

Then there is also the issue of utilization of high-priced therapies. Emanuel cited a favorite example--the low level of evidence to support use of Genentech’s Avastin – an argument he makes in his book Health Care Guaranteed. (See “The Avastin Dilemma: Two Personalities and Two Points of View on Cost Effectiveness,” The RPM Report, April 2009).

However, he added, if Avastin were a home run like the benefit from HER2-targeted breast cancer treatment (Genentech’s Herceptin), then it would be worth paying “almost anything.”

It’s a hard sell to think in terms of cost to society when there’s an individual patient looking for their best hope for life, and an especially hard sell in oncology where patient advocacy organizations push hard for access to experimental therapies. But Emanuel doesn't shy away from hard truths, pointing out that all the innovation in oncology still hasn’t cured the disease.

Of the seven years that have been added to overall life expectancy since the 1960s, only two months can be attributed to new cancer treatments, Emanuel says. In contrast, he says, the impact from use of diuretics in hypertension can be measured in years.

For biopharma companies hoping to sell the next Avastin, the notion that health care reform advocates are touting the virtues of diuretics may be the most inconvenient truth of all.

-Mary Jo Laffler (m.laffler@elsevier.com)

While You Were at ASCO

Hey you'll never guess, but there was an oncology meeting down in Mickey-Mouse land this weekend. No, seriously. Small group of cancer docs, it flies below the radar. Yeah that's probably why you hadn't heard of it. Say it with us: Aaasssssccccoooooohhhhh. No, ASCO.

There have been announcements galore from the annual meeting, and some interesting discussions as well. Mary Jo Laffler reported last night on a compare and contrast of FDA and EMEA, where FDA's oncology chief Richard Pazdur observed “EMEA is not the FDA of Europe, and the FDA is not the EMEA of the United States.” And this morning we wrote that Merck and AstraZeneca are announcing a tie-up in the oncology space, a rather limited but still significant deal to test the industry's most advanced mek and AKT inhibitors together in an early-stage clinical trial. We'll have more on that deal in The Pink Sheet DAILY later this morning.

Did you take the weekend off (god forbid!)? Well then, get ready for an onslaught of oncology development news. While you were winning #250 ...

• Some non-cology news to cleanse the palate: WSJ reported late friday night that Elan was close to selling a minority stake to Bristol-Myers. Reuters follows that up with this update, which includes a rumor of a second suitor (no word if second suitor is positioned on the grassy knoll). [UPDATE: Or, maybe BMS isn't buying, says Bloomberg.]
  
• Herceptin boosts survival in Her-2 positive stomach cancer patients.
  
• That fluorinated version of Nexavar that Onyx isn't happy about? Seems to be working just fine, says Bayer.
  
• Calistoga's PI3k inhibitor advances through Phase I, with flying colors.
  
• Genentech has released full results of its C-08 trial of Avastin in the adjuvant colorectal cancer setting. Full coverage from The Pink Sheet DAILY, here.
• Good data in lung cancer from (separate) studies of Lilly's Alimta and OSI's Tarceva.
• Glioblastoma data on drugs from Merck KGaA and BMS/Exelixis look good.
• There are six hundred more press releases and probably six hundred more on the way. Tell you what, get the rest of the headlines here and check back in with us later today. More to come!

image from flickr user StevenM_61 used under a creative commons license.

Merck/AZ Cancer Deal: Will Intra-Big Pharma Development Deals Move Beyond the Serendipitous?

Is that a mek inhibitor, sir?

Merck and AstraZeneca are expected to announce today that they're teaming up to test a combination of two early-stage oncology candidates. The companies are billing the deal as a first-of-its-kind collaboration--and fair enough: we can't think of another time two large companies have done this kind of deal with two molecules so far from the market.

The Big Pharmas will test Merck's MK-2206 and AZ's AZD6244 (a.k.a. ARRY-886, the compound was acquired from Array Biopharma in 2003) in a Phase I safety and tolerability trial. Costs will be split evenly, the program will be steered by a joint committee, and Merck is the sponsor of the trial.

The reason so few Big Pharma-Big Pharma development deals get done is that they're very tricky; control, valuation, overlap with other, non-partnered projects--these and other things present high hurdles for two large companies to come together in even basic ways. Of course there are plenty of reasons to take a stab at such deals--several of which are outlined in this February IN VIVO piece from Bain & Co. But if these alliances aren't discouraged institutionally, they're certainly not highly sought after either. In fact this deal came about not through any lets-be-friends business development outreach program at Merck or AZ, but by chance encounter.

"This was driven by two scientists meeting at an airport security checkpoint," Merck chief strategy officer and SVP worldwide licensing and external research Merv Turner told The IN VIVO Blog.

One scientist from Merck, one from AZ, they got chatting, and presumably between removing their laptops from their cases and putting their shoes back on, the special and awkward intimacy that comes from publicly surrendering all liquids and being patted down by a stranger wearing latex gloves worked its magic. WSJ's Ron Winslow has more color on the actual conversation, which apparently included that old chestnut "Are you the mek guy?"

"Of course through competitive intelligence they had some information about what each company was up to ... and they said to one another, there’s a compelling rationale for getting these molecules together," lets get the business development groups on the case, says Turner.

That airport rendezvous was in Dublin in November 2007. That it took more than 18 months to ink a deal to conduct a combination Phase I program says as much about the complexities of oncology drug development as it does the difficulties of intra-Big Pharma dealmaking.

Merck's MK-2206 is, according to Merck and AZ, the most advanced AKT inhibitor in development. AKT acts just downstream of PI3k in that important cancer cell survival pathway (the one generating all those deals lately); Phase I data on the drug were presented at this weekend's ASCO meeting. AZ's '6244 hits mitogen-activated protein kinase 1 (mek), an actor in an important parallel signaling pathway. Like the Merck compound, '6244 is further along than its competitors; the candidate has completed several Phase II monotherapy studies and its Phase II program continues apace.

A greater understanding of cancer biology, says Turner, should drive more deals like this one, where "the potential to short circuit what could otherwise be a long and combinatorial approach to finding the right pairs" of oncology therapies "becomes quite compelling."

There are over 800 molecules in development for various cancers. "We're learning more and more about the nature of tumorogenicity and the pathways involved and therefore how to select targets and populations expressing those targets ... and as we go forward into the new mechanism-driven approaches to tumor biology the rationale for combining agents which target complementary pathways becomes more clear," explains Turner.

Of course Merck is developing its own mek inhibitor and AZ its own AKT inhibitor, there are multiple targets in each pathway, and such compounds could be useful in a variety of cancers where the companies have individual ongoing programs, all which could complicate a more extensive deal.

"When we set out on this, to try to think through all the possibilities, we soon realized that the number of branches that arise if you try to construct a decision tree of all the things that might happen in development, it just becomes overwhelming," says Turner. So the companies are starting slowly, taking a step-wise approach to collaboration that need not go beyond this Phase I program.

We decided, "let's start with the easy part, work out how we'll do these experiments together in patients in Phase I, and if that succeeds, we'll go on to the next part," he says.

If the eventual goal is some sort of fixed-dose combination the companies will eventually have to jump in with two feet, perhaps partnering on multiple compounds or even entire pathways. But that need not happen at all. "The first goal could be to have each party arrive at the marketplace [independently], with a label statement that supports use of the other agent in combination," says Turner.

A small step, but a step forward, and the kind of thing that if repeated often enough could have some meaningful impact on drug development costs and speed to market, eventually advancing the standard of care in difficult diseases.

We presume this means taking another step, beyond chance encounters in airports or the DMV or even Starbucks. "If this works as advertised," sums up Turner, "we can think of it as a template for future similar deals."

Exelixis/Sanofi: The Price of Playing in PI3K

During Exelixis' year-end pipeline update in December 2008, following the biotech's lucrative XL184 et al. deal with BMS, Exelixis R&D chief Michael Morrissey said that the company's two PI3 kinase programs, XL147 and XL765, would likely be out-licensed in the near term.

"We want to partner these compounds outright," Morrissey said. "Qualitatively, the interest in the PI3 pathway is today where MET was four or five years ago," he said. "Every major drug maker is trying to work in this space, [but] we're clearly in the lead." See this Pink Sheet DAILY piece about the pipeline review for more.

Today Exelixis cashed in, inking a deal with Sanofi-Aventis for worldwide development and commercialization rights to the two early-stage clinical compounds (both are in Phase Ib/II). In addition the two companies will collaborate on discovery of new, isoform-selective PI3k inhibitors for oncology indications, sharing R&D responsibility through preclinical development, after which Sanofi takes the lead. The companies' press release is here.

Exelixis' development lead in the space translated into a pretty impressive price tag. The biotech gets $140 million up-front plus guaranteed research funding totaling $21 million over three years. The biobucks milestone total exceeds a stratospheric $1 billion, which includes some notoriously difficult commercial hurdles, plus royalties. Still, even just the guaranteed money is massive. Practically mini-bar pricey. In fact (figuring each compound was valued equally) by up-front payment it's on par with the biggest clinical-stage deals so far this year: Novartis' global license to Portola's Phase II cardiovascular candidate elinogrel, signed in February, which included a $75 million up-front payment, and BMS's deal for Zymogenetics interferon lambda, a Phase I biologic that fetched $85 million up-front in January.

Why the flashy price tag? PI3 kinases are important in cell signaling pathways that influence a range of fundamental cellular activities including growth, migration, proliferation and survival. Various PI3k isoforms have been implicated in a variety of cancers as well as cardiovascular, neurodegenerative and immune-inflammatory diseases.

And the space has been hot for some time. Last April, Roche bought PI3k-focused PIramed for $160 million and a potential $15 million earn-out (a solid return for JPMorgan and Merlin, the biotech's two backers who had invested only ₤10 million). Last September GSK essentially made Cellzome its center for kinase drug discovery in a $25 million up-front deal that includes an option on some undisclosed programs (a dual-targeted PI3k-delta/gamma program may be included, though not Cellzome's lead PI3k-gamma inhibitor). And investors in Calistoga Pharma's May 2009 $30 million Series B--Alta, Amgen, Frazier and Three Arch--are certainly betting on PI3k's potential in both oncology and inflammatory diseases like asthma and RA.

As Exelixis' Morrissey noted back in December, the space is crowded with pharma players as well: Novartis, Wyeth and AstraZeneca have ongoing home-grown programs (Novartis and Wyeth in oncology, AZ in thrombosis), for example. BMS accessed some PI3k assets via its acquisition of Adnexus. And in addition to Cellzome and Calistoga a bunch of small biotechs have PI3k projects in the works, including Avila Therapeutics and Semafore Pharma.

For Sanofi the Exelixis deal is just the latest sign that partnering is in the ascendance at the French pharma, a message repeated recently at BIO, and it allows the company to catch up in an important emerging target area where it lacked in-house programs. The move is the Big Pharma's third significant oncology deal in just over a month, building on the purchase of oral fludarabine from Antisoma earlier in May ($65 million) and the structured acquisition in April of BiPar Sciences (up to $500 million).

Exelixis can now boast a cash runway that should last it at least four years (about $238 million as of the end of March, bolstered slightly by an R&D deal with Boehringer Ingelheim signed a few weeks ago). With that cushion (augmented by a line of credit from Deerfield), and having fulfilled yet another dealmaking promise, the company is the modern model of a successful R&D-focused biotech.

UPDATE: this morning's conference call shed a little more light on the companies' discovery collaboration. Each company will contribute multiple preclinical compounds targeting the alpha and beta isosomes of PI3k to a pool of assets. No matter who originated any of the assets chosen to go forward, the companies will share in the the rewards (though Sanofi will foot the development and commercialization bill).

Also: Exelixis' royalty on '147 and '765 will be in the "healthy double digits," according to CEO George Scangos. Royalties on compounds out of the discovery collaboration will vary depending on multiple factors.

Exelixis wouldn't give a firm estimate on their cash runway--above we suggested four years, on the call they were hesitant to go beyond their December commentary, though Scangos noted because of reimbursement from Sanofi "the fraction of our spend covered by partnership revenue goes up. The pressure on our bank account goes down" because of this, but R&D expenses may not plummet because "We're still going to show that spend."

On the general interest in PI3k, Morrissey noted that "the vast majority of pharma companes are very interested in PI3k inhibition," suggesting it would be easier to list the ones that do not have interest than to list the ones that do. Which could eventually mean another PI3k deal for Exelixis, outside of oncology. Non-oncology directed PI3k inhibitor programs in its pipeline remain Exelixis' sole property, outside the scope of the Sanofi deal.

image @ exelixis.com

JNJ Likes it Some Cougar. Rwwwaaarrrr!

Last night (alas, not at "midnight" like the Cougar in the above ad--email subscribers if you can't see the ad [you want to, it's a classic] click here.) Johnson & Johnson bought Cougar Biotechnology for $43/share in cash, or approximately a cool one billion dollars. To which we say: rrrwwwaaaar!, and, Ka-Ching!

OK a few caveats on the terms: minus Cougar's existing cash reserves the deal's valuation drops to about $870 million. And that price was only a 16% premium to the shares' previous close--by no means near the top of the list in takeout premiums.

But still the acquisition demonstrates the value of late-stage oncology assets (see Cougar's pipeline here), and Cougar hasn't exactly been kicking around forever--it was founded only six years ago. And despite the relatively small premium Cougar's institutional investors will have made out very well here.

The company, since going public via reverse merger with public acquisition shell SRKP4 in April 2006 (THIS is what VCs dream about when spending all those weeks and months trying to pull together a reverse merger) has raised a couple hundred million in private placements at per-share prices ranging from less than $2 (in 2006 in conjunction with its reverse merger) up to $29 (in 2008).

While early investors in Cougar like RA Capital, T. Rowe Price, Tavistock and others are counting their money, the deal will also throw a spotlight on a few other compounds. Medivation's MDV3100 is in the same class as Cougar's lead Phase III program abiraterone; both target androgen signalling. Algeta's prostate-cancer bone metastases candidate and "next-generation alpha radiopharmaceutical" Alpharadin, which we recently discussed here, is also in Phase III. A review of other companies in the space, including some earlier-stage companies, appeared in our March 2009 START-UP.

The deal may also be a 'win' of sorts for UK biotech BTG, which originally held rights to the abiraterone compound after funding the UK's Institute of Cancer Research's program in that area, and licensed it to Cougar in 2004 (not as big a win had BTG developed the candidate itself, of course). Looking at the disclosed terms of that deal it doesn't seem that BTG will get a payout as part of the JNJ acquisition, unless a 'milestone' was tied to a Cougar takeout.

Notes From BIO: The Pathology of Personalized Medicine

Translating the vision of personalized medicine into reality is no simple matter, but here's an obstacle we hadn't considered before: the need to update the 19th century science of tumor pathology to address 21st century demands for biomarkers.

Pathologists rely on microscopic analysis of formalin-fixed, paraffin-embedded dead tumor cells--an analytical process that is logistically complicated and involves destroying most of the biological information contained in living tumor cells. For biopharma companies hoping to develop more targeted cancery therapy, there has to be a better way.

That, in a nutshell, is the business plan for Baltimore-based Biomarker Strategies, a 2007 start-up formed by Johns Hopkins professor of pathology and oncology Douglas Clark. Clark described the problem--and his company's proposed solution--during a panel discussion this morning on Integrating Genetic Markers in Drug Development.

Biomarker Strategies is developing an ex-vivo life tumor cell biomarker identification device--called SnapPath--which, Clark says, can help identify appropriate biomarkers and guide treatment choices, essentially at the patient's bedside.

We have no idea if SnapPath is a viable solution, but we appreciate the case study in the complexity involved in making targeted medicine a commercial reality. The science is revolutionary, but it will work only if there are also revolutionary changes in the practice of medicine to enable their use in the real world.

Von Eschenbach Maps Out Role In Health Reform

“I’m not going to go fishing and play golf.”

That is how former FDA commissioner Andrew von Eschenbach describes his post-government plans after leaving the Food & Drug Administration: a consulting gig at Greenleaf Health LLC, a return to MD Anderson and any “other opportunities,” should they present themselves. Von Eschenbach left FDA in January when President Barack Obama took office and has kept mum about his future plans.

Until now. On the policy side, von Eschenbach is teaming up with an old FDA colleague—his former chief of staff Patrick Ronan. Von Eschenbach will be a senior adviser at Greenleaf Health, a regulatory consulting firm that Ronan founded upon leaving FDA in 2006. Ronan was von Eschenbach’s chief of staff for his first year on the job, and the two have kept in touch after Ronan left the agency, von Eschenbach said.

Greenleaf’s clients include medical device companies, pharmaceutical manufacturers and public relations firms, but Ronan says Greenleaf’s sweet spot is with smaller biotechs without a Washington presence that need regulatory guidance. Ronan and von Eschenbach are the two principle advisors; Greenleaf also has a chief marketing officer.

Of course, as a former government official, von Eschenbach is restricted in the work he can do as an industry consultant. For the next year, for example, he cannot advocate directly to FDA on behalf of a third party. And he has a lifetime ban on lobbying the agency on the rules and regulations upon which he worked on or influenced while he was commissioner.

But in speaking to von Eschenbach, that doesn’t sound like the type of work he’s interested in anyway. In a phone interview, von Eschenbach talked broadly about “contributing to a more strategic discussion of the future of health care” and helping to find “integrated solutions” for diseases like cancer and Alzheimer’s—all in the context of the greater health reform debate.

As he was at FDA, von Eschenbach is interested in issues like personalized medicine, genomics and informatics, and ways in which the system can prepare for a more patient-centric health care environment. Greenleaf, he says, is a great “launching pad” by which to contribute to those kinds of macro health care issues, and participate in a “greater conversation on a global perspective.”

Von Eschenbach is also “deeply interested” in directly contributing to health reform efforts—one of President Obama's priority issues for his first term. Von Eschenbach says he is open to talking to policymakers (without directly lobbying anyone) about changes that are needed to support the types of products—like personalized medicine and drug-diagnostic combinations—that he believes will be the future of health care. (Von Eshenbach offered thoughts on that topic during a recent health policy conference sponsored by The Atlantic. You can read more in an upcoming issue of The RPM Report.)

If that weren't enough, he's also returning to academia. As we predicted in an earlier blog post, Von Eschenbach is returning to University of Texas MD Anderson Cancer Center in Houston, where he spent 25 years of his career in various leadership positions before being named director of the National Cancer Institute in 2000.

Upon his return to MD Anderson—which is still in the works—he will be an adjunct professor and will serve on the advisory board of the David Koch Center for Applied Research in Genitourinary Cancers. His first board meeting is April 3.

Even Cancer Ain't Exempt

No drug is exempt from FDA’s ultra-conservative stand, it seems, even those, like GPC Biotech’s satraplatin (Orplatna), that allegedly improve survival among cancer patients with few if any treatment alternatives.

An oncology advisory committee (ODAC) yesterday recommended that FDA delay considering prostate cancer candidate satraplatin for approval until overall survival data from the company’s 950-patient SPARC study is available. This recommendation came despite interim analysis strongly supporting the efficacy and safety of satraplatin, which was granted priority FDA review in April 2007.

Still, it wasn’t a complete surprise, at least since the rather negative FDA briefing documents released last week. These raised five “issues” including questions over the company’s assessment of pain progression, and, more importantly, over the definition and composition of one of GPC’s two key primary end-points used in the trial, progression free survival (PFS).

According to GPC’s “greatly disappointed” CEO Bernd Seizinger, GPC had communicated intensively with FDA throughout the application process and amended various aspects of the trials in accordance with FDA suggestions—including suggestions on what pain score to use. In sum, they’d done everything possible to make this work. (Listen for yourselves here.)

But FDA wasn’t having it. According to one analyst, “GPC walked into a complete stitch-up—FDA primed the advisory committee that they didn’t want this to happen.” Reading the briefing document, we’re inclined to agree.

Now, sources tell IN VIVO Blog that there’s no love lost between GPC and FDA—the ODAC meeting was “hostile and antagonistic,” according to one observer. Combine this with FDA’s overall caution (the last thing they want is to be hauled in front of the Senate for injudicious approvals) and you have a recipe for delay, if only temporary.

Still, GPC isn’t just an innocent victim here. Let’s go back to that issue of end-points. The briefing documents state that FDA had all along warned GPC that a PFS end-point may be problematic. Yet GPC failed to communicate this concern to the investment community.

That’s why analysts are so pissed—many had buy ratings on the stock, even after the review documents were released last Thursday. GPC shares fell 35% back then, and about the same again today. “Trust has been lost,” says one in London. “When it comes to the investment community, GPC are on their own.” (They can sulk in a corner beside Sanofi Aventis, which hasn't won any prizes for transparency among the investment community either, particularly with regard to Zimulti's rocky ride, on which we've reported extensively, including here.)

It’s a worrying time for the German biotech. All of a sudden, the overall survival data for satraplatin—which is the other primary end-point, alongside PFS--has become a make-or-break issue for the company. If it’s positive, the drug will probably still make it, although not in an accelerated fashion. If it’s not, the drug may not get onto the US market at all—which could prove fatal for GPC.

The rest of the sector has cause for concern, too, though (not to mention androgen-independent prostate cancer patients that have failed first-line therapy). This bleak little episode—besides showing up personal clashes between applicants and the agency, which, it seems, do matter—may mean that regulators’ caution is spreading beyond primary-care drugs like Avandia or the Cox-2s, where the main concern is safety.

Today, it seems, the tough hurdles can come from anywhere--including from non-safety-related issues like how pain is measured. Some might call this nit-picking.

Genzyme Buys to Build in Oncology, Again

In a move reminiscent of its 2004 acquisitions of ImPath and Ilex Oncology, Genzyme is taking out Bioenvision, its biotech partner on the drug clofarabine, for $345 million in cash. The buyout is the Big Biotech's first move to create a global oncology business--Bioenvision launched the drug in Europe last year, where it is sold as Evoltra--and its first acquisition since its hostile takeover of Anormed last year for $580 million. Evoltra sales over the past nine months in Europe were just over $9 million.

The price represents a 50% premium over the 20-day average price of Bioenvision's shares, and is the latest in a long string of acquisitions of biotech development/marketing partners: see Genentech/Tanox, Lilly/Icos, Shire/New River, Amgen/Abgenix, etc. We expect more of these ally-to-buy scenarios: sometimes having a partner is just too expensive.

Genzyme's share of clofarabine comes via Ilex, which it bought for $1 billion in stock in February 2004 as an early step in building its oncology presence. The drug is marketed as Clolar for pediatric acute lympoblastic leukemia (ALL) since its FDA approval in December that year. The companies are aiming to expand the drug's remit into adult indications such as acute myeloid leukemia (AML).

Genzyme chairman and CEO Henri Termeer noted on a call a few moments ago to discuss the deal with analysts that the companies expect roughly $600 million in peak sales from clofarabine, and stressed the efficiencies of combining Genzyme's and Bioenvision's efforts under one global clofarabine program.