Pfizer (NYSE: PFE), Sprint (NYSE: S) and (NASDAQ: SIRI) Have something in common

New York - Shares of these three unrelated companies were the top volume movers on Friday. Pfizer the global pharmaceutical giant, nearly doubled its usual volume of 42 million as traders have been active ahead of their quarterly report, which is set to be released on November 2nd. Shares of Sprint Nextel rose 2%, while AT&T and Verizon fell, as traders bid the company higher ahead of their October 27th quarterly announcement. Sirius Satellite radio which is frequently a top volume mover due to its low share price had 54 million shares sold. However, this is only roughly equivalent to $54 million. The company is set to release its earnings on November 4th.

To see our full Sirius report Click Here

DotW Strategies

As 2010’s days grow shorter, the pharmaceutical industry’s larger players face fundamental challenges, both in how they invest in internal research and how they ensure continued growth commercially for their medicines in the face of increasing scrutiny from regulators and payers. An analysis of Elsevier’s Strategic Transactions database in the October IN VIVO shows that, to date, most companies have adapted with a three-pronged strategy that places an emphasis on externalization, emerging markets, and unmet medical need.

This week’s edition of deals of the week doesn’t stray far from these established themes. (Poison ivy was apparently considered optional.)

Sanofi-Aventis’s alliance with Harvard University illustrates the ongoing allure of academic relationships, as drugmakers look to identify innovative new medicines ever earlier in the development cycle. Meantime, Glaxo’s tie-up with two Italian foundations in the development of a gene therapy to treat a disorder affecting only a few hundred people worldwide shows that no disease is too rare to attract Big Pharma’s interest--as long as the unmet medical need is high. Finally Pfizer’s deal with Indian biotech Biocon, illustrates drugmakers’ growing interest in both diabetes AND emerging markets.

GlaxoSmithKline/Fondazione Telethon & Fondazione San Raffaele: Big Pharma’s interest in rare diseases shows no signs of waning. This week’s rare disease pact – it seems like one a week is now pro forma for DOTW – aligns GlaxoSmithKline and two Italian foundations. On October 18, GSK announced plants to pay Fondazione Telethon and Fondazione San Raffaele €10 million upfront (about $14 million) for worldwide rights to a Phase I/II stem cell-based gene therapy for ADA-SCID, also known as "bubble boy disease." ADA-SCID, a single-gene defect which prevents the body from producing the enzyme adenosine deaminase, afflicts about 350 children worldwide, with about 14 EU patients and 12 U.S. patients born each year. (Thus, this isn’t simply GSK investing in a rare disease; ADA-SCID counts as one of those “ultra” orphan indications, a valid term even if it makes industry and advocacy groups squeamish.) Beyond the ADA-SCID program, the two foundations will partner with GSK on clinical programs in Wiskott-Aldrich Syndrome and metachromatic leukodystrophy, as well as four additional programs, all currently in preclinical development. In addition to the upfront payment, the foundations could earn specified development milestone payments for each program. In a same day business presentation, GSK’s Global Head of Rare Diseases Marc Dunoyer offered additional color about the rare disease unit’s strategic intent. The pharma intends to address 200 rare diseases with a focus in four primary areas: metabolism and inherited disorders, central nervous system and muscle disorders, immuno-inflammation, and rare malignancies and hematology. It continues to build its portfolio via dealmaking, including ongoing collaborations with Isis, Prosensa, and JCR Pharmaceuticals.—Joe Haas

Genentech/Biogen Idec: The longtime Rituxan partners have amended their co-development terms for next-generation anti-CD20 compounds. Biogen now gets slightly higher royalties on sales of the still-experimental compounds ocrelizumab and GA101, and their introduction will not trigger lower Rituxan royalties, as was previously outlined in their agreement. The firms squabbled for years over rights to what comes after Rituxan, and an arbiter ruled last year that Biogen had the right to participate in all anti-CD20 program development decisions. Historically Biogen has received 30% of the first $50 million in US and Canadian operating profits, then 40% of everything over $50 million, a threshold passed by Rituxan in the first quarter in each of the last three years, according to ISI Research analyst Mark Schoenebaum. Commercialization of ocrelizumab will no longer reduce Biogen's share of Rituxan profits, but certain regulatory and sales milestones of GA101 will. Also, Genentech will pay for all ocrelizumab development in multiple sclerosis, with Biogen receiving between 13.5% and 24% of US sales. With GA101, which in 2008 Genentech licensed from Glycart -- itself wholly owned by Roche -- Biogen will now pay 35% instead of 30% of US development costs and receive between 35% and 39% of profits based on certain sales milestones. GA101 is in advanced development for CLL and NHL. Ocrelizumab is in Phase II for multiple sclerosis but is no longer being tested in rheumatois arthritis. -- Alex Lash

Pfizer/Biocon: Pfizer and India's biotechnology flag-bearer Biocon finally -- after months of speculation -- announced a comprehensive global commercialization pact to bring to market a range of insulins including analogs of medicines marketed by Sanofi-Aventis, Novo Nordisk and Eli Lilly. Pfizer is doling out $200 million in upfront payments to Biocon, with the Indian biotech eligible for further milestone payments of up to $150 million. Biocon will also be entitled to additional payments linked to Pfizer's sales of its four insulin biosimilar products across global markets. As part of the deal, Biocon will take up clinical development, manufacture and supply of the biosimilar insulin products and regulatory activities needed for approvals in various geographies. Pfizer has told analysts that the deal will be "incremental," not "instrumental" to its strategy in emerging markets, biosimilars, and established products. Pfizer will be responsible for commercializing the products, while Biocon will develop and manufacture them. "Pfizer's participation in this market does raise the bar for the major producers of insulin over the long term," Leerink analyst Seamus Fernandez wrote in a same-day note. But it won't have a near-term impact because Pfizer brings little to the table beyond marketing muscle and the biggest opportunity lies in developed markets, where some of the products are patent protected for several more years. Sanofi's Lantus, for example, doesn’t lose exclusivity until 2015. – Vikas Dandekar

Romark/Intercell: Romark Laboratories and Intercell said they will collaborate on their hepatitis C programs by conducting trials on a combination therapy that will include Romark’s anti-viral drug nitazoxanide and Intercell’s HCV vaccine, IC41. The combination will seek to improve on the standard of care by adding IC41’s immune-boosting properties to nitazoxanide’s ability to slow cell replication without inducing mutations. The drug pairing will be studied side-by-side with the currently used combination of Pegasys (peginterferon alfa-2a) and Copegus (ribavirin), as well as a three-way combo of nitazoxanide, IC41, and Pegasys in a European Phase II trial slated for the first half of 2011. Nitazoxanide, an anti-infective agent in the drug class known as thiazolides that appears to activate protein kinase R, is already marketed to treat diarrhea caused by viral infections. It has been studied in conjunction with peginterferon and ribavirin as well. Tampa, Fla.-based Romark and Vienna-based Intercell did not announce financial terms of the deal.—Paul Bonanos

Sanofi-Aventis/Harvard University: Technically the tie-up between Sanofi and Harvard is a deal of last week, but with so much industry activity--and playoff mania--IVB somehow overlooked a deal that ought to be seen as a sign of the times. On October 14, Sanofi and Harvard announced they were joining forces in a broad translational alliance that gives the French pharma an early look at cutting edge science that could be important future pipeline substrate. Deal terms were not disclosed, but the collaboration is designed as a grants program, with a joint steering committee from both entities awarding funding based on scientific merit and “the potential to generate translational insight and value to biomedical research.” The boon for Harvard: scientists get access to flexible and rapidly available funding without spending hours – it’s really more like weeks or months – writing up government grants. Sanofi, in turn, has the opportunity to develop diagnostic, therapeutic, and prognostic applications of any discoveries made under the collaboration. Partnerships with academia have shown a marked uptick in number in 2009 and 2010 compared to years prior. According to Elsevier’s Strategic Transactions, the number of industry-academia partnerships jumped from 6 in 2007 to well over a dozen thus far in 2010. Nor are these the typical outsourcing relationships of yore; most are structured as true partnerships that aim to share both risk and reward. Notable recent examples: AstraZeneca’s alliances with University College London and Cancer Research Technology to create stem cell therapies for ophthalmic diseases and novel cancer medicines, respectively.--EFL

GE/Clarient: With cancer diagnosis and characterization in the vanguard of molecular diagnostics development and investment, it’s no surprise that GE Healthcare chose the area for its first major external investment in molecular test content. On Friday it announced an approximately $580 million tender offer for Clarient, which provides laboratory tests using important clinically validated cancer molecular markers including BRAF, EGFr, and KRAS. The deal, at $5 per share, is roughly a 25 % premium over its closing price yesterday of $3.77. Clarient hit profitability earlier this year, taking in $28.7 million for its testing services in the second quarter ending June 30. It utilizes most of the standard cancer testing technologies including immunohistochemistry, flow cytometry, FISH, and imaging. GE, working through its subsidiary in the UK (the former Amersham, which it acquired in 2003), expects to combine Clarient’s chemistry and molecular platforms with its own diagnostic imaging expertise, which would give it a full suite of triage and cancer diagnostic capabilities. In a sense, the link to imaging brings Clarient full circle. It originated as ChromaVision, a developer of digital microscopes, then morphed from an equipment maker into a service provider. Safeguard Scientifics, a 26% owner of Clarient going back to its ChromaVision days, said it will net approximately $145 million in the deal.-- Mark Ratner

St. Jude Medical/AGA Medical: St. Jude Medical’s announcement on Monday that it would pay $1.3 billion ($20.80 per share, a 43% premium) for AGA Medical, which had sales in 2009 of just $199 million, likely caused jaws around the industry to drop. Pick your chins off the floor, people. The transaction makes sound strategic sense, driving growth in key areas where St. Jude has significant resources but slower growing products. Case in point: St. Jude’s atrial fibrillation business grew by only single digits in the past year in the US, and the cardiac rhythm management sector is forecast to grow on a global basis by only 3% in the coming year. In contrast, AGA, operating in structural heart disease--a product segment that includes heart valves and various closure devices--enjoys double digit growth thanks to its leading share of the $250 million market for PFO closure. AGA also offers a number of new product areas to drive growth for St. Jude, including a next-generation vascular plug technology to replace embolic coils and a proprietary mesh-braided nitinol platform that will enhance the big device maker's product pipeline. In the company’s recent third quarter conference call, St. Jude Chairman and CEO Daniel Starks described the acquisition as a bolt-on to its cardiovascular franchise; the company is keeping on AGA president and CEO John Barr as head of the 550-person division. St. Jude’s recent deal flow indicates the company is trying to enter new markets via the business development suite. In September, the cardiovascular giant invested $60 million in remote monitoring company CardioMEMS, developing an implantable sensor for AAA and congestive heart failure monitoring. Early this year St. Jude also acquired intravascular imaging company Light Lab Imaging Inc. for $90 million.--Mary Stuart

Image courtesy of flickrer Neil Boyd used with permission via a creative commons license.

Deals of the Week Has Playoff Fever and Poison Ivy

Deals of the Week! doesn't usually get up on our soapbox and complain unless it's to gripe about undisclosed deal terms, vaguely worded press releases, or an unwillingness to make CVRs tradeable.

But c'mon, pharma, it's time to develop some new products against poison ivy.

This week we saw loads of deals -- alliances, options, out-licensing, deals, deals, and tweaked deals and no-deals. But were any of them around poison ivy treatments? No. A quick search of clinicaltrials.gov for 'poison ivy' or the dreaded 'urushiol' turn up zilch. Our own databases reveal very little poison ivy dealmaking in the past twenty years. Did Project Bioshield or any of its ilk fund research into this scourge? Nope. This makes no sense. If this blogger's back yard is anything to go by, the market will be huge.

Now please excuse us while we scratch the hell out of our legs and go invest another $50 in bandages and feeble lotion at CVS. Oh, and go Phillies!

You're gonna need an ocean of ...

Fate Therapeutics/Becton Dickinson: Fate Therapeutics of San Diego will bring its induced pluripotent stem (iPS) cells to market thanks to a commercial deal it signed with biomedical equipment provider Becton, Dickinson, the firms said Oct. 14. No financial terms were disclosed, but BD will pay Fate an upfront fee, research funding, commercial milestones and royalties on the products BD sells. Fate is one of a handful of biotechs reprogramming adult cells into iPS cells -- an alternative to stem cells derived from human embryos -- with the goal of using iPS cells as lab tools for drug discovery. BD will be responsible for commercial-scale cell production and marketing. In an interview with the IN VIVO Blog, Fate CEO Paul Grayson declined to say specifically when the cells would reach the market. The partners will only sell what Grayson called "plain vanilla" iPS cells, not yet differentiated into various cell types. Fate is working on differentiated cells but for now keeping them for internal use. With the BD deal, Fate becomes the second firm to sell iPS cells. Cellular Dynamics, spun out of the pioneering Wisconsin lab of James Thompson, has been selling iPS-derived cardiomyoctes for nearly a year. -- Soon to be Disappointed SF Giants Fan Alex Lash

Exelixis/BMS: In a turbulent year during which it changed CEOs and laid off staff, Exelixis’ low point might’ve come in June, when key partner Bristol-Myers Squibb Co. walked away from the companies’ agreement to co-develop Phase III cancer-fighting drug XL184. Yet the two are already working together on new programs in diabetes and inflammation: In a series of deals announced October 11, BMS said it would pay $60 million upfront for exclusive development and commercialization rights to a preclinical Exelixis diabetes program that includes the TGR5 agonist XL475, as well as the right to collaborate on a discovery-stage inflammatory disease program centering on RAR-related orphan receptor antagonists. Milestone payments could add $505 million to the deal, plus Exelixis would garner royalties if the programs produce marketable drugs. Simultaneously, BMS and Exelixis said they would unwind some existing oncology agreements; Exelixis opted out of a co-development arrangement on Phase Ib cancer drug XL139 in exchange for a milestone payment, while BMS waived its final option on a 2006 deal covering three targets. The deals bring much-needed cash to the notoriously spendy Exelixis, which despite some recent cost-cutting is now shouldering the high cost of moving XL184 forward by itself.--Paul Bonanos

Merck/Lundbeck: With a large number of atypical antipsychotics competing for attention, any new entrant will have an uphill battle to gain traction, and so Merck has called in the cavalry. The Big Pharma has licensed to CNS-specialist H. Lundbeck exclusive commercialization rights to its recently approved Sycrest (asenapine) for all markets outside of the US, China and Japan. The Danish company paid an undisclosed upfront fee for the rights, and will also make product supply payments to the US company. Asenapine was launched in the US as Saphris by Merck last year, for schizophrenia and for mania associated with bipolar disorder, but has so far disappointed. Making matters trickier in the EU, the schizophrenia indication was turned down in there because regulators were not convinced of the agent's clinical effectiveness. -- John Davis

Lundbeck/Genmab: When you have a product that accounts for around half of your revenue, and that product is nearing patent expiry, you know you have your work cut out for you. Lundbeck, whose antidepressant Cipralex/Lexapro (escitalopram) accounted for 56% of its revenues in the first half, announced last month that it wanted to work with more external partners, and would cull some of its own researchers, as part of a new R&D strategy. The first fruits of this new policy were seen this week, in the Merck deal noted above and in a tie-up with fellow Danish firm Genmab, which will create novel human antibodies to CNS targets identified by Lundbeck. Genmab will receive an upfront payment of €7.5 million and, if the collaboration is successful, it could receive €38 million in milestones, and single-digit royalties as well. Genmab has an option to pursue non-CNS leads that it identifies during the course of the work, and in that case would pay milestones and royalties to Lundbeck. Genmab has been through a torrid time in the past few months, and wants to use its antibody research capabilities as a “profit center, not just a cost center,” according to newly appointed CEO Prof. van de Winkel. -- JD

Pfizer/King: In its first “bolt-on” acquisition since the mega-merger with Wyeth last year, Pfizer has reached an agreement to purchase King Pharmaceuticals for $3.6 billion. The deal, announced Oct. 12, is subject to a tender offer under which Pfizer would buy up outstanding stock in King for $14.25 a share – a 40% premium over the specialty pharma’s closing price on Oct. 11 – but both companies’ boards have agreed to the sale, with closing anticipated in fourth-quarter 2010 or the first quarter of next year. In recent months, Pfizer has outlined a strategy for bolstering its finances prior to the U.S. patent expiration of Lipitor late next year under which it would look for transactions valued at between a few billion to several billion dollars that complement the company's core businesses and add incremental revenues. King will bring to Pfizer a narrow portfolio of highly specialized pain therapies and a well-trained specialty sales force, as well as Remoxy, a tamper-resistant formulation of oxycodone under review at FDA. Pfizer believes King offers commercial synergies: some of King's drugs can be dropped into the Big Pharma's primary care sales force bags, an area where Pfizer is strong and King is not. Pfizer's two key marketed pain products, Lyrica and Celebrex, in turn, can benefit from the support of King's specialized sales force; currently Pfizer's detailing emphasis for them is on primary care doctors. –Joseph Haas and Wendy Diller

UCB/Synosia: An accomplished in-licensor of pharma's unwanted assets, Synosia Therapeutics has finally found itself on the other side of a deal: On Oct. 12 the biotech said it out-licensed its two lead Parkinson's disease candidates, SYN-115 and SYN-118, to Belgian CNS specialist UCB, which will conduct Phase III clinical trials and commercialize them. The companies will also set up a broader alliance, under which compounds from either group will be evaluated by Synosia through to the end of Phase II, at which point UCB will conduct further development and commercialization. In return for rights to the two Parkinson's disease products, UCB will make an undisclosed upfront payment and pay regulatory and commercial milestones, which could give rise to an additional $725 million in funding for Synosia. UCB has also led a $30 million series C funding in Synosia with an equity investment of $20 million. The other $10 million came from existing investors, which include Versant Ventures, 5AM Ventures, Novo A/S, Aravis Venture, Investor Growth Capital and Swiss Helvetia Fund. The deal goes some way toward validating Synosia's in-licensing strategy: '115 and '118 came from Roche and Syngenta, respectively. -- JD

Novartis/Immunogen: Last week we at IVB rhetorically asked one another: where are all the deals in antibody-drug conjugation technology, an exiting area seemingly bereft of deals lately. Well well. Just like that, antibody-drug conjugate developer ImmunoGen licensed its platform technology to Novartis for $45 million upfront to create enhanced cancer-fighting antibodies against unspecified targets of Novartis's choosing. ImmunoGen would get up to $200.5 million in milestones for each target that leads to a conjugate, plus royalties on sales if the drugs reach the market. Announcing the deal Oct. 11, the companies declined to say how many targets Novartis has rights for, but ImmunoGen retains ownership of the cytotoxic small molecules and chemical linkers plus other know-how that it contributes to each therapeutic. The Novartis deal comes just as ImmunoGen and Roche released promising interim Phase II data for T-DM1 in first-line treatment of HER2-positive metastatic breast cancer. That compound, a combination of ImmunoGen's small molecule maytansinoid DM1 and Roche/Genentech antibody Herceptin (trastuzumab), is currently industry's most advanced ADC candidate. --S.t.b.D.S.F.G.F.A.L.

Mingsight/Pfizer: Big pharmas are in the throes of revamping their R&D pipelines and that means deprioritizing certain assets. But does that mean outlicensing? Maaaybe. An analysis in the soon-to-be-published October IN VIVO shows that outlicensing volume has declined dramatically since 2007, when a total of 54 programs from big pharma, big biotech, and specialty players were offloaded to new partners. This year through August 31, there have been only 10 such deals. But for the VCs and biotech execs looking to jump-start a newco with already validated molecules, this week’s alliance between Pfizer and MingSight proves that outlicensing in the biopharma wilderness, truly a rare bird, does still exist. MingSight, a still stealthy biotech with bases of operation in both China and San Diego, has acquired exclusive worldwide rights to two preclinical compounds from Pfizer that are being developed as treatments for diabetic retinopathy, and potentially uveitis and dry eye. Under the terms of the agreement (which really weren’t disclosed in any substantive way), MingSight has agreed to pay Pfizer an upfront fee, paid in the form of cash and a convertible note, as well as development and sales related milestone payments, and royalties on future sales. MingSight’s dual citizenship is noteworthy; this kind of hybrid approach, with its emphasis on keeping R&D burn low by moving the work to the still lower-cost China, is becoming an increasingly attractive model in the start-up arena, where the mantra of the day is capital efficiency. In-licensing has been the model du jour for founding ophthalmology companies for much of the past decade, as companies look to repurpose drugs that have already been vetted in preclinical or clinical studies in non-ophthalmic indications for use in the eye.—Ellen Foster Licking

Ablynx/Merck-Serono: Ablynx has proven to be the master of Merck-Serono's domain (antibodies) as the two companies are doubling down on their collaboration in the space. On Monday Ablynx announced it would receive €10 million up-front to develop its proprietary Nanobody domain antibodies against a M-S nominated inflammatory disease target. Ablynx will hand off the package to M-S at the IND stage, handling all discovery and preclinical activities (and covering costs, excluding manufacturing costs) on its own. When (if?) Merck-Serono takes over Ablynx will receive a €15 million milestone and can opt-in to a 50/50 co-development deal on the project -- if not, Merck gets worldwide rights and Ablynx will receive milestones and royalties down the road. The companies have been working together since September 2008, on two targets in oncology and immunology. -- CM

image by flickr user cygnus921 used under a creative commons license

Pfizer’s Adverse Event Reporting Warning Letter: Those Who Don’t Learn History…

Maybe its summer re-run season, or the fact that the hottest new movies are Karate Kid and the A Team, but we are feeling a lot of déjà vu lately.

An FDA advisory committee to review the safety profile of Avandia? We’ve definitely seen that before. A big pharma company in the hot seat for manufacturing/quality control issues? This time its J&J, but Schering-Plough and Wyeth and Warner-Lambert have all seen this movie before. (Hmmm…Though none of those three companies is independent anymore…)

But what really sealed the deal was this item: Pfizer getting a Warning Letter from FDA citing the company for failure to forward adverse event reports to the agency in a timely fashion. Not just the letter, but—as we noted in The Pink Sheet—the fact that the letter leaked to the media shortly after receipt by the company, and hence got much more media attention that it might otherwise have received.

We couldn’t shake the strange feeling that we had seen this one before too. It took some digging in the archives, but we were right. In April 1996, Pfizer got a letter from FDA citing the company for failure to submit adverse event reports to the agency in a timely fashion. Not only did Pfizer get the letter, but FDA leaked it right away to the AP—the exact same outlet to get the letter this time around.

They say history doesn’t repeat itself, but this is as close as it gets. Different products, but same company, same issue, and same attention getting strategy by the agency, 14 years later.
Okay, so what does that tell us, other than that The Pink Sheet’s archives are an incredible resource, and that FDA’s communication tactics are tried and true?

Well, first off there is some sort of lesson in this for Pfizer. Yes, 14 years is a long time and it is ridiculous to draw any conclusions from that coincidence about some sort of corporate history of sloppiness in adverse event reporting. Heck, the latest letter focuses computerized systems that apparently didn’t work as well as Pfizer hoped; the very idea of computerized adverse event reporting was new in 1996.

But still, it does say something about Pfizer’s failure to learn from experience. After all, FDA used the exact same playbook on this issue that it followed 14 years ago, by coincidence or otherwise. For the same company to be the same target when FDA decided to set an object lesson is at least a little bit embarrassing.

There is a more important implication for everyone else. Today, just like 14 years ago, the point of FDA’s strategy is clear: the agency wants to get everybody’s attention on the issue of adverse event reporting. Picking on Pfizer is one thing, but the purpose of the leak is to make sure other companies review their systems and correct any similar problems. It is much easier to leak one letter than to inspect every pharma company for similar issues.

Here’s a bit more history. At the start of 1999, FDA sent two more Warning Letters, citing Novartis and Berlex for failure to submit timely adverse event reports.

That suggests that most manufacturers got the message when Pfizer was warned, and that FDA was willing to give them a bit of time to adjust. But, in FDA’s eyes at least, not everyone got the message quickly enough.

We’ll see if that piece of history repeats this time around.

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

2009 Big Pharma DOTY Nominee: Pfizer/Wyeth

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™.
This, surely, is The One. Whether or not you agree with Jeff Kindler's strategy for Pfizer (plenty don't), the $68 billion Wyeth acquisition, announced on January 26, has to be the most obvious candidate for Big Pharma Deal of the Year.

Are we saying it's 2009's "most interesting and creative" deal making solution, in line with what these illustrious award nominations are supposedly rooting out? Creative, no. It was another, even-more-mega, mega-merger that cynics saw as a means to mitigate the impact of Lipitor's genericization. Solution? Too early to say. But what the deal perhaps lacked in creativity--at least, at first sight--it surely made up for in interest.

For this is the deal that marked the beginning of a new kind of Big Pharma. For better or for worse, it turns Pfizer from an R&D-focused, high-risk, high-reward company into a diversified, industrialized group whose investment appeal is less about growth than about dividends, efficiency and value.

In its scale, the transaction symbolized the scope of Pfizer's--and other Big Pharma's--challenges, and in its content, it captured--in one fell swoop--many of the individual strategies drug firms are pursuing in order to escape from their R&D productivity problems. The deal furnished Pfizer with biologicals--supposedly faster-to-develop, easier-to-protect than small molecules--and thus with a chance to compete in the much-vaunted biosimilars opportunity, too, which management is beginning to talk up. The deal also provided vaccines, once a dowdy corner of health care but now Big Pharmas' ticket to good government relations, emerging market access and--exemplified by the ongoing swine 'flu outbreak--pumped up revenues.

And Wyeth brought to Pfizer a significant consumer business (not as big as the one Pfizer sold to J&J only a few years ago, but still ...) thereby offering access to non-Western markets, and, as importantly, to a new, lower-cost range of products.

And that's the point: Pfizer has decided its only way to survive is by providing a far wider range of medicines, at a range of price-points, across a range of markets. What it sorely lacks in innovative R&D output it will make up in breadth-of-offering, economies of scale and lower costs. As a senior Pfizer source was quoted in this IN VIVO feature:

"The way to deliver earnings growth isn't what we did in the go-go days of the '90s, but rather, it's emulating what the consumer package goods companies, Coke, Pepsi, Procter & Gamble did. There was never great top-line growth there--3-8%. But if you grow your expense line at a much slower rate you can still achieve double-digit bottom-line growth--a predictable 10-13%."

All that makes sense, surely, in a payer-constrained world with increasing generics and where most future growth is predicted to come from generic- and OTC-dominated developing markets like China.

Maybe. But, you ask, isn't Pfizer chickening out of blue-sky R&D? If it's not the end of the story it's certainly the end of the chapter on blockbuster, primary care drugs. Pfizer isn't giving up internal R&D, but it's definitely demoting it, betting that purchases can fill the gaps. And it's betting, too, that it can create the kind of small-unit creativity within its far-larger walls that GlaxoSmithKline has so vocally advocated.

The deal's critics say Pfizer should have gotten smaller, not larger. It should have followed Bristol. Pfizer considered shrinking, and spin-offs, according to strategy SVP Bill Ringo. Too complicated and risky, he and his colleagues concluded.

But far from choosing the easy option, it's arguable that buying Wyeth was equally, if not more, risky. Even following the R&D re-org, headcount cuts and a 35% reduction in global R&D square-footage, questions remain. The Big Pharma-turned-GE hasn't yet proven that it has a new, sustainable lease of life, far from. But that it's daring to try--well, that deserves a gold-plated* DOTY award, surely? (*not really)

DotW: Party Crashers

The IN VIVO Blog was in Washington, D.C. this week and stood, as giddy as school kids, at the fence to watch the White House glow in the mid-Atlantic night just across the North Lawn. As we ogled the staff coming and going through the checkpoints (Ron--I mean Rahm--is that you?), we pondered the question of access. Who's got it? How do we get it? What do we do with it once we have it? In this town, a lot of people spend a lot of time wondering. You know: Who's in, who's out, who, ahem, left their invitations in the car.

If you're going to party-crash, you might as well go for the most exclusive club imaginable. It's a hell of a lot better than crashing with one of the most exclusive clubs imaginable. In your car. Sticking out the window. If you know what we mean. Go ahead, be a Tiger.

We poke fun, perhaps too easily, but you can be sure every pharma corp-comm exec double-checked last weekend that Tiger Woods wasn't a spokesman. (He isn't, as far as we can tell.) Domestic troubles, car wrecks, and....erectile dysfunction! Have fun with that one, folks.

Pfizer knows what we're talking about. After all, it's had baseball player and steroid user Rafael Palmeiro touting Viagra, and Robert Jarvik, non-practicing doctor who didn't even row his own boat, pimping Lipitor. So it's no surprise that on the heels of Pfizer's latest mega-blunder, its $2.3 billion fine for illegal marketing practices, CEO Jeff Kindler stuffed a couple meas in his culpa for his "Kindler, Gentler" tour this week. He praised health care reform -- at least the Senate version -- and promised Pfizer would stop helping doctors improve their golf games. (He said nothing, however, about helping golfers improve their driving records.)

As our colleagues reminded us at the FDA/CMS Summit this week, so much of health care reform revolves around getting in so you don't get left out. That's why Pfizer and the pharma industry pledged this summer to kick in $80 billion toward the reform bill. When centers of power shift, all kinds of people start to scramble. Which, wouldn't you know, brings us to...

Pfizer/Protalix: There was no greater example this week of shifting power centers than Pfizer's Dec. 1 deal with Protalix. By buying global rights to the enzyme replacement therapy taliglucerase for the treatment of Gaucher disease, Pfizer becomes the latest big pharma to crash the orphan-drug club. Because Israeli firm Protalix uses a plant-cell expressed form of the missing enzyme glucocerebrosidase, analysts speculate Pfizer could sell it at a 20 to 25% discount to Genzyme's mammalian-cell expressed Cerezyme, currently the only drug approved to treat Gaucher's. (How's that for exclusive?) The deal pays Protalix $60 million upfront for worldwide rights except in Israel, with milestones up to $55 million. Pfizer and Protalix will split revenues and expenses 60/40. The deal also plays into two of the company’s strategies, first to expand into niche areas that address serious unmet medical needs and secondly, to move into biosimilars. Pfizer will fold the drug into its Established Products Business Unit, the operation charged with maximizing sales of Pfizer’s mature brands. That’s one hint Pfizer views taliglucerase as something of a biosimilar opportunity, despite the fact that it is a new drug. Protalix is currently finalizing a rolling NDA submission for taliglucerase to FDA. Having an experienced marketer like Pfizer move into Gaucher disease is bad news for Genzyme, which is facing manufacturing problems that have led to a supply shortage of Cerezyme. -- Jessica Merrill

AstraZeneca/Targacept: With one successful partnership under their belts, AZ and Targacept are trying again, with the Big Pharma paying $200 million upfront for global co-development and commercialization rights to TC-5214, an antidepressant that recently completed Phase IIb. Yes, that's $200 million upfront. In the past two years, only the Pfizer/Medivation alliance for Alzheimer’s disease candidate Dimebon has brought a bigger upfront payment for a neuropsychiatric drug -- $225 million. Beyond the upfront, the deal also could provide up to $1.04 billion for development, regulatory and sales milestones. In addition, Winston-Salem, N.C.-based Targacept would receive stepped up double-digit royalties on worldwide sales should ‘5214 reach the market. Despite elbowing its way into the $200-million-upfront party, Targacept saw its stock price fall more than 6 percent the day of the deal. In 2005, the two companies partnered on a compound for Alzheimer’s disease (AZD3480), and since then AstraZeneca has licensed the rights to two additional compounds under the deal, while switching ‘3480’s development path from Alzheimer’s to attention deficit/hyperactivity disorder. –- Joseph Haas

MedImmune/Trellis Biosciences: But wait, there's more! Through its biologics group MedImmune, AstraZeneca also made a play in the antibody space, licensing a pool of antibodies from Trellis Biosciences with the potential to fight respiratory syncytial virus, or RSV, which occurs most commonly in the elderly, the immunocompromised, and small children. Trellis could realize up to $338 million plus royalties under the deal, but didn't disclose specifics. MedImmune currently markets the only preventive therapy for RSV, Synagis (palivizumab). There is no approved therapy for treatment, but Trellis says its antibodies have shown ability to both prevent and fight the virus in animal models. Based in South San Francisco, Calif., Trellis uses its proprietary CellSpot high-throughput screening technology to identify and extract promising antibodies from human blood samples. For its RSV program, the company screened 20 million B cells from 30 donors who had recovered from RSV. CFO James Posada told "The Pink Sheet" DAILY that Trellis hopes to bring more antibodies through preclinical and license them to partners who would take over at the IND-enabling stage. -- JH

Chiesi/Phenomix: Speaking of exclusive clubs, Europe is rather posh, innit? What young American biotech doesn't want to leave its footprint on the Continent? Phenomix went abroad this week, sealing a deal with Chiesi Farmaceutici to commercialize the DPP-4 inhibitor dutogliptin for type-2 diabetes in Europe. Phenomix gets up to $28 million in near-term cash and the total value, which includes milestone payments, could reach $163 million. It comes more than a year after Phenomix partnered with Forest Laboratories to develop dutogliptin in North America. Dutogliptin is now part of a Phase 3 clinical development program that includes five studies of 3,000 patients. The first results are due for release in the second quarter of 2010, according to Forest. Chiesi, of Parma, Italy, will be responsible for product development, regulatory approval and commercialization in the territories covered by the deal. Phenomix, based in San Diego, Calif., will also receive an undisclosed cut of sales. Following the Chiesi deal, Phenomix is now in an “excellent cash position,” said CEO Laura Shawver. Previously, the company gained $75 million upfront from Forest and it has raised $141 million since its 2002 founding. -- Emily Hayes

Centocor/Xencor: Building on a strategy that brought to market therapeutic antibodies like Stelara for severe plaque psoriasis and Simponi for rheumatoid arthritis, Johnson & Johnson’s Centocor unit announced Nov. 30 a deal with antibody developer Xencor for the rights to Xencor’s XmAb and Xtend platforms. Centocor will use them to create antibodies that are more potent and last longer. Centocor has the right to develop and commercialize several optimized candidates, and in exchange, Xencor gets an undisclosed upfront fee, an annual maintenance fee and potential milestones and royalties on products commercialized under the collaboration. Looking back for comparables, we found what appears to be a less comprehensive deal Xencor signed with Merck in March. Merck paid Xencor $3 billion upfront to license Xtend for the development of antibodies towards an undisclosed drug target, as well as agreeing to clinical development milestones and royalties. Privately-held Xencor is still swinging solo, despite the fact that M&A activity has been hot in the space as drug makers look to enhance their pipelines with therapeutic antibodies that are more effective and longer-lasting than those already on the market, especially given the increasing threat of biosimilar drugs. -- JM

And finally, a tale of an outsider in the medical device space getting invited to the dance by one of the cool kids...

Stryker/Ascent Healthcare Solutions: For years, surgical product makers have called medical device reprocessing a threat and pointed to the potential safety hazards. Now one of their own is primed to take over the market. Orthopedic firm Stryker said this week it is paying $525 million in cash to acquire Ascent Healthcare Solutions, and in doing so will control about 65% of the fast-growing $175 million device reprocessing sector. Ascent develops processes to clean, sterilize and generally refurbish used disposable devices. It submits, in most cases, the processes for FDA clearance then resells the devices for about half price. Many of the targeted products, such as cardiac ablation catheters and surgical trocars, are labeled by the original equipment manufacturer for single-use only, so reprocessing can really cut into sales volumes for OEMs, who have also complained that they are vulnerable to lawsuits when reprocessed versions of their products cause adverse events. But the move by Stryker underscores that device reprocessing has become an accepted reality and a successful business model, particularly as hospitals look to cut costs in the current economic and reimbursement environment. And despite periodic graphic reports in the media of reprocessed devices gone wrong, increased government oversight has put the recycled products in the regulatory mainstream. Stryker says it envisions a $1.8 billion opportunity in reprocessed devices and plans to make a strong pitch to hospitals about the potential to slash supply chain costs.-- David Filmore

Big Pharma ISO Big Democrat: Who Will Pfizer Land?

If you walk by Pfizer’s Manhattan headquarters, you might spot a “Help Wanted” sign in the window. Something like “World’s Largest Pharma Co Seeks Big Name Democrat to Shape Policy in Era of Health Reform. Contact: J.Kindler.”

As we reported here, Pfizer is revamping its government affairs group to align better with the Obama Administration. Its first recruit is transition team member Greg Simon.

That’s a great hire, but the company wants to land a really big name Democrat to head its public policy and government affairs operation. And we mean big. After all, it’s a big job. Really big. Pfizer is already the world’s biggest pharmaceutical company, and it keeps getting bigger. And the policy stakes are big. Health care reform big. And, no matter how the reform debate turns out, the role of government in driving pharmaceutical markets will be bigger too.

There’s just one big problem: every leading Democratic political figure wants to be part of health care reform, so its not like there’s lots of big names available for Pfizer to hire.

Gee, if only they’d done this when the Republicans were in charge they could have had anyone they wanted….

Okay, that would have been suicidal. In fact, we have to give Pfizer credit. Their last “big name” policy hire, Tony Principi, was not only a former cabinet secretary in the Bush White House, he reached retirement age at the end of the Bush Administration. (He turned 65 in April). No need for a messy separation on Inauguration Day!

So far, we’ve heard only two candidates for the Pfizer job: Former House Majority Leader Dick Gephardt (picture below) and former White House Press Secretary Michael McCurry.

Those are two strong candidates. Gephardt ran for President twice, (even though he got fewer votes than Pfizer has employees), and he remains a nationally known figure. He certainly seems interested, having teamed up with the Pharmaceutical Research & Manufacturers of America to promote innovation in health care reform via the Council for American Medical Innovation-though we're not sure the made-in-the-USA theme is the best fit for Pfizer's emerging markets strategy.

McCurry never held elected office, but he has more than three decades of experience as a political operative and would bring great contacts with the Democratic establishment. Like Gephardt, he has engaged with PhRMA, offering advice on dealing with the industry’s chronically poor public image. (Read more here.)

So Pfizer would probably do well to land either of those two.

But, come on, there have to be more possibilities right? Here’s a few to get you thinking—and please give us your suggestions as well.

Tom Daschle would be an obvious choice, so obvious that we assume he must have said no already or he would be on the list of candidates we heard about.

Bill Clinton is the biggest name out there, and if his wife weren’t the Secretary of State, we’d be prepared to make the case that he is exactly the person for Pfizer to go after. But she is, so we won’t.

Jimmy Carter’s a non-starter. Too old. Plus he’d laugh in Pfizer’s face.

Al Gore? Interesting…he’s probably tired of looking at the Nobel Prize and Oscar Statuette display by now.

Actually, when it comes to Tennessee politicians, Harold Ford would be a great choice. The only hitch: everyone thinks he has a bright future ahead of him in politics, so why give that up now?

That’s it! Eliot Spitzer! He’s available, and he’s local.

GSK and Pfizer's HIV Joint Venture: Why It’s a Path Forward

Real innovation in dealmaking, like pharma R&D, is a rare commodity. As with R&D, dealmaking innovation often gets blocked by entrenched interests or misunderstanding or simple inertia. There are lots of reasons not to repeat the single most innovative and successful transaction of all time – Genentech/Roche – but none of them outweigh the spectacular opportunity that deal created.

We’re not going to say that the GlaxoSmithKline/Pfizer joint venture in HIV is, itself, comparable to Genentech/Roche. (See some short reports with some additional transaction details on the JV here and here and a more in-depth analysis here). But it could solve a set of knotty problems that by and large companies have, for whatever reason, failed to address.

First, earnings-pressured pharmas need help financing their pipelines. One option seems to be disappearing – getting investors to directly fund development (like the Lilly/TPG/Novaquest arrangement on a group of Alzheimer’s projects). Besides the market meltdown, which has taken cash away from speculative, illiquid investments, the parties’ goals were, in the dealmaker’s parlance, unaligned. Investors want to cherry pick the pieces of the pipeline they’d most like to fund, Pfizer EVP and chief strategy officer Bill Ringo told us the other day, almost as if they wanted to guarantee themselves a return (which, in the good old days, was something they could pretty much get just by investing in Pharma). The more risk they run, of course, the more upside they want (ideally, to be able to sell successes to the highest bidder) – which naturally limits the upside, and strategic value of the asset, for the pharma partner.

Here’s another problem. Most Big Pharmas want to be big and diverse enough to balance out the risks of development – but also want to be small enough to encourage biotech-ish entrepreneurialism. Various companies are trying to have their cake and eat it too by splitting into divisional enterprises (specialty pharma, or primary care, or oncology) with their own CEOs and CSOs and P&Ls. But we remain firmly Missourian about the whole idea. Will the commercial groups be able to buy research wherever they want – or remain saddled with what’s provided internally? Will research be able to sell its best fruits to the highest bidder in order to maximize their value? And for all their divisionality, how much of the corporate infrastructure – IT, manufacturing, finance – will these divisions have to absorb?

The GSK/Pfizer HIV joint venture is an interesting solution to both problems – the big/small paradox and the funding troubles. The new company is relatively small (first year projected sales: $2.4 billion); it’s got its own managers; it makes its own R&D decisions. The research stays within the parent companies and the JV pays its expenses – but if the pipeline projects don’t work out, and the JV doesn’t like what GSK and Pfizer are producing, the JV can buy their research from wherever they want. “It puts pressure and accountability onto the scientists,” GSK’s chief strategy officer David Redfern told us, echoing a favorite theme of GSK’s R&D boss, Moncef Slaoui.

Meanwhile, Pfizer doesn’t have to pay for a new worldwide commercial HIV organization on the basis of its underperforming HIV assets (maybe underperforming because it doesn’t have the commercial group it needs); GSK gets the near-term HIV pipeline it had otherwise failed to deliver. Far as we can see, no cash changes hands.

The biggest negotiating obstacle, apparently, was the equity split (right now, 85% GSK, 15% Pfizer) – but according to Redfern, once they’d abandoned the attempt to price the pipelines, and instead started to adjust ownership based on cash flows, “the heat went out of the valuation debate.”

And then there’s the optionality of the thing – one of its main advantages, believes Redfern. The JV could fund its business development with its own equity rather than dipping into cash. When the financial markets get friendlier, the whole thing could be spun off. And presuming success even close to what Gilead has achieved, the JV owners would get big stakes in a growth company that would theoretically trade at a significantly higher PE.

And that same equity would reward the JV’s employees in a way Pfizer and GSK stock simply can’t. Not to mention the fact that it’s a lot easier for an employee to see his personal contribution to growing a company 1/29th the size of Pfizer.

And one other aspect of optionality, notes Bill Ringo: if this works, “it provides us a model we can duplicate elsewhere.” He hasn’t apparently talked to GSK yet about repeating the idea in another therapeutic area, “but if there were another opportunity to do the same thing again with GSK, we’d do it.”

We recognize that plenty can go wrong with this deal. GSK’s firmly in the driver’s seat, with seven members of the nine-person board. And Pfizer could get tired of that. We also sense that Pfizer and GSK are not on the same page when it comes to R&D accountability (we think GSK is going to be tougher on its researchers than Pfizer will –rewarding more and firing more).

But whether it works or not, the drug industry should be paying close attention to this deal. Even more attention than to the big mergers. All of those are one-time events; it’s hard to see that they’ll be in any significant way transformational. Mostly, they’re stop-gap measures. (OK, we did argue the opposite way around about Pfizer/Wyeth – though most of the reader response was pretty skeptical).

But the GSK/Pfizer JV is repeatable. And scalable. It moves the industry in the direction it needs to go: smaller, customer-focused, financeable. And it gets our vote for the most innovative deal we’ve seen so far this year.

Image from flickr user joefutrelle used under a creative commons license.