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.

Deals of the Week: Holiday Shopping

Having trouble this holiday season deciding what to get for the Big Biotech CEO in Your Life Who Has Everything? Join the bidding for Facet Biotech! The reserve may be quite high--higher than $17.50 per share, anyway--and it's not technically an auction (because Facet isn't necessarily going to sell, which would be sure to garner it some negative feedback on eBay). But is money really a problem when it comes to that special someone?

And don't worry about losing any of Facet's drug candidates if you're the winning bidder. "The Pink Sheet" DAILY noted this morning that while Facet's top compounds are tied up in partnerships, including Biogen Idec's co-ownership of its most advanced drug, daclizumab for rheumatoid arthritis, none of the agreements will be affected by a change-of-control.

"In each of our three collaborations, the non-acquired entity would not have a right to terminate the collaboration," Facet CEO Faheem Hasnain told "The Pink Sheet" DAILY. "In fact, the acquiring entity would step right into Facet's shoes."

Whatever you do, though, just don't materially undervalue those shoes while overstating their liabilities. That approach has gotten Biogen Idec nowhere. Respect the shoes!

Meanwhile the rest of you biopharma dealmakers have had a busy week (makin' AND breakin' deals), so we oughta get to it. The following companies won't be trawling the malls on Christmas Eve, they're ...



GSK/Intercell: Not even Santa Claus himself could earn this much for delivery. This morning Austrian vaccines company Intercell said it licensed to GSK its patch vaccine delivery technology in a deal worth €33.6 million ($49.4 million) in up front cash. GSK also agreed to purchase up to €84 million worth of Intercell shares in a "staggered shareholding purchase option" that could reach a 5% holding in the biotech (€28 million u/f for 0.9mm shares at an 18% premium, other investments milestone-based). The development and commercialization deal will include Intercell's Phase III travelers' diarrhea vaccine, a Phase II pandemic flu vaccine, and future patch vaccines. Intercell will be eligible for a slew of milestone payments and profit sharing on the projects already in development, as well as milestones and royalties for future products that include its patch technology. GSK is now Intercell's second strategic investor--Novartis owns about 16% of the company through a 2006 deal for a Japanese encephalitis vaccine and a monster 2007 deal for the biotech's vaccines for bacterial infections. Intercell has a variety of other partners, including Merck, Sanofi-Pasteur, and Kyowa Hakko Kirin. For more on Intercell and the market for adult vaccines, check out this recent IN VIVO feature.--CM

Novo Nordisk/ZymoGenetics: This is Novo/Zymo IL-21, the Sequel. In a second deal around the IL-21 cytokine, these two companies' long, entwined history continued this week when Novo Nordisk licensed from ZymoGenetics a preclinical anti-IL21 antibody for auto-immune and inflammatory diseases. The terms look good for Zymo: $24 million up-front, reflecting the value of IP around the target that was included in the deal. As Novo EVP and CSO Mads Krogsgaard Thomsen told "The Pink Sheet" DAILY: "we're buying all IP surrounding [the blocking of] IL-21 as a concept, and its utility in different disease areas." That move should provide the Danish firm with "a good degree of exclusivity on this target," he says. "We now have global patent rights to block cytokine IL-21; no one else can do that." (Competitors could block the IL-21 receptor, however, just not the molecule itself.) ZymoGenetics is eligible to receive $157.5 million in potential milestones, up to and including the antibody's regulatory approval in major global markets, and royalties on net sales. ZymoGenetics may opt to co-promote the biologic in the U.S., for a $10 million fee and a 15% contribution to Phase III trial costs. In this scenario, US royalty payments would increase from single to double digits. Novo is familiar with ZymoGenetics efforts in the IL-21 space; until last year when it retrenched into diabetes and opted out of the alliance, it was the biotech's partner on its recombinant IL-21 cancer project. Novo is confident that blocking the cytokine has broad applicability in immune disorders. Hence why it's snapping up that IL-21 IP. --CM/Melanie Senior

Celgene/Gloucester Pharmaceuticals: In a move that adds to its hematological cancer franchise, Celgene purchased privately held Gloucester Pharmaceuticals and its recently approved Istodax (romedepsin) for $340 million in upfront payments, plus potential milestones that could total another $300 million. The deal secures a nice exit for Gloucester’s five venture capital investors – Novo A/S, Apple Tree Partners, ProQuest Investments, Prospect Venture Partners and Rho Ventures – who backed the biotech with a $29 million Series D round in August. Over Gloucester’s six years of operations, the investors kicked in a total of roughly $100 million. Celgene predicts the Gloucester purchase will be accretive to earnings by 2011, in part because it would not need to add to its marketing and sales infrastructure since it already sells hematological cancer drugs Revlimid, Thalomid and Vidaza.--Joseph Haas

BMS/Tranzyme: In its first alliance with a Big Pharma company, Tranzyme Pharma will receive $10 million upfront plus two years of research funding from Bristol-Myers Squibb in a collaboration to discover potential new macrocyclic compounds, which have potential in a wide range of therapeutic areas, including oncology and metabolic disease. Announced Dec. 7, the deal is not Bristol’s first foray into the macrocyclic space – in April, it paid $5 million upfront plus $7.5 million in research and development funding to Ensemble Discovery to develop macrocyclic compounds called Ensemblins against eight undisclosed targets. It’s likely Bristol is trying to get ahead of the curve on what Tranzyme calls an underdiscovered area – no other Big Pharma companies are doing deals in the space and Tranzyme has thus far not partnered any of its clinical or preclinical assets. The new deal centers on Tranzyme’s MATCH (Macrocyclic Template Chemistry) drug-discovery platform. The biotech will perform early lead discovery against a range of undisclosed targets specified by Bristol, which will then be responsible for lead-optimization, preclinical and clinical development, and commercialization. Tranzyme will receive two years of research funding ranging between $3 million and $6 million and could earn regulatory milestones up to $80 million for each target program, as well as sales milestones and royalties.--JH

Mylan/Pfizer: Details are scant on the authorized generic agreement around the Wyeth antidepressant Effexor XR. But Mylan said early this week it had reached an agreement with Pfizer to sell the long-acting capsule formulation as early as June 1, 2011. Doses equivalent to Mylan's planned generic venlafaxine capsules racked up $2.9 billion in sales in the year to September 30, the company said in its release. Legislation that would curtail or even ban brand/generic settlements is winding its way through Congress these days (it may even catch a ride on the behemoth of health care reform) and we know where the FTC stands on these deals.--CM


Lilly/Isis: Lilly and Isis called it quits this week on their 5-year collaboration on LY2275796, a second-gen antisense compound targeting eukaryotic initiation factor-4E that recently completed Phase I trials in oncology. Isis is paying an undisclosed amount to take back the product, arguing that ‘5796 got lost in the shuffle after the big drugmaker’s 2008 ImClone acquisition. Is this spin control or honest truth? Data related to ‘5796 are sparse, with Isis failing to provide an update at its recent R&D day, leading Joseph Schwartz, an analyst at Leerink, to write in an investor note: “it’s logical to conclude that lack of anticancer activity and/or toxicity may be the reason why LLY [Lilly] is not pursuing it.” As Isis CEO Stanley Crooke points out in “The Pink Sheet” DAILY, Lilly has right of first negotiation to opt back in to the molecule’s development when—or if—it enters Phase III studies. (The two companies are also still partners on a Phase II antisense prostate cancer drug.) So, maybe for Lilly this is about curbing risk: with critical drugs coming off patent near-term (including Zyprexa and Cymbalta), Lilly needs late-stage assets to bolster its flagging pipeline, not early stage, highly risky products that are going to be a drain on resources. Better to let Isis carry the risk—and cost—but keep a just-in-case door open. The central question for many investors becomes will another partner, Genzyme, reach the same conclusion? Recall Genzyme and Isis announced a lucrative tie-up in January ‘08 on the CV medicine mipomersen, with Isis garnering $175 million in upfront cash and another $150 million in equity. Six months later, the two revised the deal terms, with Isis having to pony up more development money after data from a competing trial highlighted the regulatory risks associated with cardiovascular studies. Mipomersen is much further along than the Lilly cancer drug, and recently scored good data at the American Heart Association meeting, giving partner Genzyme some positive news to tout after a string of manufacturing and regulatory gaffes. But the Phase III medicine has also been the subject of questions, especially related to adverse liver side-effects and high clinical trial drop-out rate.--Ellen Foster Licking

GSK/Cytokinetics: Cytokinetics continues to phase out its oncology R&D and on Thursday announced it had scrapped a third and final cancer program with GSK (GSK decided not to opt into two others late last year). GSK will complete an ongoing Phase I trial of the compound, GSK-923295, in advanced, refractory solid-tumor patients. Then rights will revert to Cytokinetics, which says it is de-emphasizing its oncology work in favor of its core muscle-related R&D (which includes the Amgen-partnered cardiac contractility program discussed here). The three GSK-partnered programs were the company's entire clinical oncology portfolio.--CM

Genentech A Wholly Owned Member of the Roche Group/Seattle Genetics: As the Roche Pipeline Purge rolls on, the latest casualty is SeaGen. Genentech paid $60 million up-front for access to SGN-40 (dacetuzumab) in 2007 and at least $8 million more in milestones since then. But this morning the companies said that Roche was giving back rights to the anti-CD40 antibody in development for non-Hodgkin's lymphoma and multiple myeloma. The end of the SeaGen alliance follows Roche's decision this past week to drop partnerships with Actelion and GenMab. But you can't just blame Roche's re-org. Earlier this year a trial of SGN-40 in diffuse large B-cell lymphoma was halted when an interim analysis suggested the trial would not reach its goals. In any case, hold onto your hats, Genentech partners! --CM

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

DotW: State of the Union

Okay, we at IVB know that Tuesday night's speech wasn't really a state of the union address. Call Obama's discourse a precursor, a practice run, a preliminary to the real thing coming in 11 months. Whatever you call it, there's no denying the officially unofficial address will likely go down in history as one of the most important events--after the budget, also released this week--of 44's first 100 days. Not necessarily because, as Ezra Klein at American Prospect notes, it was a particularly inspiring--or terrorizing--speech. But because "he didn’t wrap his agenda in a lot of rhetoric about America’s mettle or hide it behind stories and icons. He just sort of said it." Imagine.

In a week where the Dow plummeted to lows not seen since 1997 and news on rising unemployment and falling home sales only added to the gloom, it's perhaps natural to take stock of the biopharma state of the union. Sadly, as investors worried over the mind-boggling $3.6 trillion federal budget Obama submitted Thursday, the stock prices of pharma companies, med-tech outfits and insurers dropped, illustrating again that there is no such thing as a recession proof industry.

As the saying goes, you can't swing a dead cat without hitting a troubled biotech these days. Elan once again made the news with an announcement that it was shedding 230 jobs--half in Ireland and half in California--as it tries to control costs and marshall resources. (No word on the corporate jets.) Meantime, Vanda is the latest company to experience the full brunt of shareholder activism, while Intercytex shows regenerative medicine is still a tough area to grow a business.

And then there's Dynogen, this week's winner of IVB's little engine that couldn't prize. The company declared chapter 7 less than a year after trying to go public via the SPAC--or is it SCRAP?--route. Even as six law firms kvetched about their unpaid legal fees, Dynogen's venture backers, which include Oxford Bioscience Partners, SV Life Sciences, and Abingworth Management, took it on the chin despite sinking $67 million into the IBS developer.

In what is surely a sign of the times, this week Pfizer announced it was discontinuing work on two Phase III primary care products, PD 332,334 for generalized anxiety and esreboxetine for fibromyalgia, to redirect resources to drug candidates with more potential. The news shows that even Big Pharma face tough decisions these days about which programs to move forward and which to table. Could the news mark the beginning of the much vaunted Pfizer transformation CEO Kindler has talked about in the days since moving to acquire Wyeth? This blogger is reserving judgement until the New York pharma actually does some thing revolutionary, such as not just killing the programs but outlicensing them. (For another opinion on Pfizer's transormation potential be sure to check out this hilarous youtube video by a former Ann Arbor, MI-based employee.)

Meantime when it comes to dealmaking in the biopharma state, the big news this week was partnerships gone awry. Astellas made the decidely un-Japanese decision to go hostile in its quest for CV Therapeutics, despite the fact that the decision means Astellas violates a longstanding standstill agreement tied to the California biotech's Lexiscan imaging agent. The Roche/Genentech saga continues apace, with Roche marshalling its economic might by issuiing over $30 billion in bonds in the past two weeks, and Genentech preparing to woo investors at its annual R&D day in NYC on Monday. (Better be some good danish at that meeting...)





Synta’s shocking news that it was halting a Phase III trial of metastatic melanoma drug elesclomol due to excess mortality likely portends an end to its rich partnership with GlaxoSmithKline. Originally inked in 2007, the agreement has added just over $100 million to Synta’s coffers. And, as we wrote on Monday, Johnson & Johnson and Basilea seem poised to begin a very public fight over milestone payments tied to regulatory approval of the antibiotic ceftobiprole. Frustrated over European and US regulatory delays associated with the drug, Basilea announced it was seeking arbitration to obtain compensation from partner J&J for outstanding milestones and the value of the opportunity lost in not having ceftobiprole on the market.

Here at IVB, we know that not all deals are created equal. We, the bloggers, in order to form a more perfect industry, provide for the common defense and promote the general welfare, bring you another edition of Deals of the Week. (Domestic tranquility is not, however, guaranteed.)

Merck Serono/Ambrx: Merck Serono and Ambrx formed a more perfect union this week as they expanded their existing relationship to include the development and commercialization of a preclinical biological multiple sclerosis candidate, ARX424. According to the deal, announced Feb. 24, Darmstadt, Germany-based Merck Serono gains exclusive global development and commercial rights for the MS compound. In exchange, Merck Serono will pay an undisclosed sum to Ambrx, plus pick up an equity stake. Ambrx also stands to receive undisclosed clinical, regulatory and commercial milestone payments for drugs that make it to market, plus royalties on global sales, as part of the package. Furthermore, it has the option down the line of converting royalty rights in the US to a profit-and-loss sharing agreement. San Diego-based Ambrx is one of those increasingly rare beasts: a biotech with plenty of cash resources that's announcing staff increases rather than layoffs. In the last 20 months, Ambrx raked in $60 million thanks to the recent equity deal and milestone payments from its alliance partners, which also include Merck and Eli Lilly. Thanks to these resources, CEO Steve Kaldor says, conservatively speaking, his firm should be able to get through late 2011 or early 2012 with no need for new financing or equity deals. "We continue to sustain a multi-year runway while growing our biologics product portfolio and innovative platform" he said. Of course, it helps that Ambrx's RECODE (reconstituted chemically orthogonal directed engineering) technology allows the company to endow native proteins with new therapeutic propertis. And readers you know what that means. Even if the company is devoting much of its efforts to creating first-in-class molecules, there is the potential to use RECODE to create follow-on biologics, be they true generics or copy cat molecules with a twist. It's an area of intense interest to Big Pharma these days, especially given the Obama Administration's willingness to include FOB legislation in the most recent Congressional budget. (Teva and Merck dominate the Big Pharma FOB horse race currently thanks to their deal making in recent months, a topic highlighted in the February issue of IN VIVO.) As for the MS compound that was central to the Merck Serono/Ambrx deal, there are few details on the exact nature of the protein in question. "It may be a pioneering target or a follow-on biologic. We are not divulging what class it is," Kaldor told our sister publication "The Pink Sheet" DAILY. Whatever class it is, it's IVB's bet that Ambrx will not long remain an independent company. Merck Serono is our pick to buy it.

CSL/Xencor: Any doubts about interest in next generation technology that provides souped-up antibodies, look no further than news that Aussie biopharma company CSL signed an R&D alliance with Xencor to gain access to the privately-held biotech's Xmab technology, which allows the optimization of antibodies to create molecules with increased potency and longer half-lives. Details of the agreement--from its apparent breadth to the size of the upfront payment and downstream milestones--were lacking. It's the second such alliance Xencor has signed this month. Earlier in February, the biotech announced it was teaming up with Human Genome Sciences to use Xmab to create better versions of the Rockville, Maryland-based company's antibodies. Details of that transaction weren't disclosed, either. For the privately-held Xencor the two transactions--even if modest in size--likely provide much needed non-dilutive funding. The company, which has raised $130 million since its 1997 founding, last raised money in Oct. 2007 when it tacked an additional $15 million onto a 2006 $45 million Series E, which was led by MedImmune Ventures with additional backing by Novo Nordisk and HealthCare Ventures. (New investors in the Series E extension included Oxford Bioscience Partners and Merlin Nexus.) It's hard to tell how long Xencor's backers are willing to subsidize the company, but despite numerous partnerships--including deals with Centocor, Genentech, and Boehringer Ingelheim, no suitors have been sufficiently impressed with the technology to want to acquire the Monrovia, CA-based company despite pharma's 2007 land-grab for next generation antibody technologies. It could be that companies are still waiting for validation that the technology works as advertised: molecules in Xencor's internal pipeline are still at a very early stage. The biotech's lead product, an anti-CD30 for Hodgkin lymphoma and other T-cell lymphomas, is only in Phase I development.

Actelion/GeneraMedix: In a continuing bid to strengthen its position in the pulmonary arterial hypertension market, Switzerland's Actelion announced Monday that it would pay an undisclosed amount for worldwide development and commercialization rights to an IV formulation of epoprostenol from the injectable generics group GeneraMedix. Approved by FDA in June last year, this improved formulation of GlaxoSmithKline's (now generic) Flolan offers more convenient storage options than epoprostenol alternatives, including another generic from Teva approved last year. While not likely to be a large deal, the tie-up makes sense. It allows Actelion to leverage its existing infrastructure and expertise in this specialist field, where it already sells the lead drug Tracleer (bosentan). But there is no way epoprostenol will come anywhere close to replacing Tracleer, which sold CHF 1,294 million in 2008, and is under increasing pressure from contenders marketed by Gilead and United Therapeutics. (A generic version will also be available come 2015 for those keeping track.) According to analysts at Piper Jaffray, who estimate total worldwide sales of IV PAH therapies are worth about $200 million to $300 million, epoprostenol may add $30 million to $50 million in sales before 2014. To make up the revenue gap from potential lost Tracleer sales, look for Actelion, which has a sizeable war chest--approximately CHF 1.1 billion in cash at the end of 2008--to sign additional deals in the coming months.

Cephalon/Arana: Arana's mystery buyer has a name: Cephalon. On Feb. 26, Aussie biotech Arana announced that it was involved in take-over discussions. Trading on the Australian Stock Exchange was halted in anticipation of a buy-out. One day later Cephalon revealed that it intends to offer A$1.40-a-share for the biotech, a 69% premium to Arana's closing stock price on Feb. 25. If the offer goes through at the current price--and it does have the support of Arana's independent directors absent a superior proposal from another party--it will be worth approximately A$318 million ($207 million USD). In support of its bid, Cephalon took steps to secure nearly 20% of Arana's issued shares from the Aussie outfit's two largest shareholders, Start-Up Australia Ventures and Rockwell Securities Ltd., before launching the formal offer. The deal represents a slight shift in Cephalon's deal-making strategy in recent months in that it is not tied to any contingent value rights. Recall that Cephalon's recent $100 million tie-up with Ception was an option-based deal that gave the Frazer, PA-based company the right to buy the smaller biotech for an additional $250 million plus milestones and earn-outs if a Phase IIb/III trial of Ception's antibody reslizumab for eosinophilic asthma panned out. But the recent deal is certainly in-line with Cephalon's stated desire to build a larger presence in both biologics and inflammatory disease. Together with the ImmuPharma compounds Cephalon recently locked up and Ception's reslizumab, Arana's portfolio of tumor necrosis factor (TNF) alpha blockers, gives Cephalon a tidy pipeline of drugs aimed at diseases such as lupus, rheumatoid arthritis, and psoriasis. Indeed, Arana's Phase II novel anti-TNF domain antibody for psoriasis, ART621, was the primary driver of the deal. Of course, it helps that in addition to a novel pipeline of products, Arana also comes with a guaranteed revenue stream: thanks to strong IP in the anti-TNF space, the biotech receives royalties from Abbott Laboratories and Johnson & Johnson on Humira and Remicade.

Medtronic/CoreValve: As we wrote earlier this week, you know Medtronic's $1.03 billion buying spree is only the beginning, not the end, of the long-anticipated land grab around the percutaneous valve replacement field and its two major sub-markets--aortic and mitral valve devices. There has been a lag of several years since Edwards Lifesciences did the first major deal in the space, acquiring aortic player Percutaneous Valve Technology (PVT) in late 2003. But the promise of the market has continued to grow as investment remained active, technology improved, and the competition increaed. Give Medtronic credit for the executing the old "shock and awe" routine with perfection, by picking up a pair of percutaneous players in quick succession: CoreValve Inc. and Ventor Technologies Ltd. For Medtronic, these deals represent not just an investment in technology building. In CoreValve, the device behemoth gets a company that is already competing aggressively in the European aortic market, where CoreValve's smaller-sized system is running neck-and-neck with long-time leader Edwards. The deal could spark a torrent of additional partnering, especially as Edwards Lifesciences and St. Jude looked to build armamentariums competitive with Medtronic's.

Interested in future deals-of-the-week candidates? Check out the the January issue of Medtech Insight for the full story on percutaneous aortic valve players, and the technical and operational challenges facing the field.

(Photo courtesy of flickr user tsevis through a creative commons license.)