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 Screams ¡GOOOOOOOOOLLLLLLL!

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

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

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

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

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

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

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

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

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

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



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

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

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

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

Photo courtesy of flickr user CLF.

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

Washing Away Post-Deal Blues With A De-Sanofizer

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

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

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

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

DotW: The Jury Is Out

Is the biotech financing climate warming? As the WSJ pointed out yesterday, big deals such as Sanofi's licensing of Exelixis' PI3 Kinase Inhibitors (see below) and JNJ's acquisition of Cougar Biotech might suggest it's time for more optimism in our industry, as does the good news we report below for Cytokinetics.

Still, for a large portion of the sector--notably small cap biotechs whose products or clinical trial data are far from perfect--we suspect the struggles to find financing at a reasonable price continue.

Metabasis, a San Diego-based biotech focused on liver and metabolic disease, is a prime example. Unable to get additional funding , the biotech announced on May 27 that it would be reducing headcount by 85% to just 7 employees. Execs at Curagen likely know what remaining staffers at Metabasis are going through. In February the Connecticut company announced it was looking at strategic options; this week comes news of its sale to Celldex Therapeutics (see below).

And it's likely there will be more examples in the weeks to come. According to Simos Simeonidis, a senior biotechnology analyst with Rodman & Renshaw, "there are still a number of small-cap companies that will fall victim to the crisis and will either go out of business, merge or be taken over at low valuations.” (You can read more about Simeonidis' views of the industry in an upcoming Pink Sheet story, scheduled to appear Monday June 1.)

The jury is out on a number of other big issues as well, including CSL's planned take-over of Talecris. Do recent moves by the FTC signal a more judicious view of mergers under the Obama Administration? Shaking our magic eight ball, we say...the jury is still out, but the consequences could be huge--$3.1 billion big to be exact--for Talecris' PE-backers, Cerberus Partners and Ampersand Ventures.

And then there's the niggling question of rights to Remicade and Simponi. J&J finally made a move this week, asking for arbitration regarding ownership of the anti-TNF bluckbuster and its next-generation follow-on. In a press release, the diversifed pharma noted: "As its public statements have made clear, Merck is acquiring Schering-Plough. The acquisition constitutes a change of control that triggers the right of our Centocor Ortho Biotech subsidiary to terminate the agreements." Seems like the pharma wasn't fooled by all that reverse merger mumbo jumbo and Merck CEO Dick Clark may have to pay for his sandwich--and the loss of Remicade and Simponi--after all.

As you ponder these weighty issues and make your own rulings, take time to peruse...


DxS/Boehringer Ingelheim: There's been no official ruling in the industry about the business model for companion diagnostics, but that hasn't stopped DxS from inking deals. The company's latest pact: an agreement with Boehringer Ingelheim to develop a companion test for the pharma's BIBW 2992 (also known as Tovok), a novel tyrosine kinase inhibitor being tested in non-small cell lung cancer that acts by irreversibly blocking two promoters of tumor growth, the epidermal growth factor receptor (EGFR) and HER2 receptor. Because BIBW 2992 is more effective in patients carrying mutations in the EGFR gene, DxS will aim to develop a test to detect those genetic differences, allowing for the potential segmentation of lung cancer patients and a more personalized approach to therapy. Financial details of the deal were not disclosed. DxS is one of a number of companies to embrace the possiblity that there are real revenues to be had from companion tests, especially in oncology, where the drumbeat for individualized therapies grows ever louder. Last December, DxS signed a US-centered deal with Amgen to provide a companion diagnostic for the Big Biotech's colorectal therapeutic Vectibix. The test maker's so-called TheraScreen K-RAS test is already on the market in the EU and is used to help doctors determine which patients are unlikely to respond well to anti-EGFR therapies such as Bristol-Myers Squibb/ImClone's Erbitux (cetuximab) and Amgen's Vectibix. Moreover, DxS and Amgen have collaborated since last year on selling TheraScreen K-RAS alongside Vectibix in Europe, where the drug is cleared for patients with refractory metastatic colorectal cancer in which there is no K-RAS mutation.

Celldex Therapeutics/Curagen: The jury ruled this week on the case of Curagen and an independent future and decided overwhelmingly against said biotech. On Friday May 29, Celldex Therapeutics, which last year reverse-merged with Avant Therapeutics, announced it was acquiring the Connecticut-based biotech in a tax-free stock-for-stock transaction that values Curagen at approximately $94.5 million. The acquisition adds a portfolio of 11 oncology-focused antibodies to Celldex's immunotherapy medicines, including CR011, a fully human mAB-drug conjugate in Phase II trials to treat metastatic breast cancer and late stage melanoma. Perhaps evem more valuable is Curagen's on-hand cash: the $54.5 million Celldex stands to gain will go a long way to helping fund its pipeline, which includes CDX-110, a potentially break-out cancer vaccine for glioblastoma in Phase II trials and the subject of a partnership with Pfizer in 2008. The news announcement Friday brings to an end the questions about Curagen's specific future, the basic outlines of which had been mapped out in February, when the company disclosed it had hired an investment bank to explore "a broad range of strategic alternatives." The company's stock had been in freefall since a Phase II mucositis drug, velafermin, blew up in clinical trials. The failure of velafermin, and the subsequent decision to exit a partnership with Denmark's TopoTarget for the HDAC inhibitor belinostat, left Curagen a one-trick pony, dependent on the success of CR011. And CR011 is far from a slam dunk. Antibody-drug conjugates have had mixed success in the clinic, with only Wyeth's Mylotarg for acute myeloid leukemia garnering FDA approval.

Amgen/Cytokinetics: With so many option-alliances and option-acquisitions getting signed these days it’s nice to have a reminder that yes, options do in fact get exercised. On Tuesday Cytokinetics said that Amgen was picking up its option on the smaller biotech’s cardiac contractility program, triggering an option payment of $50 million. The program’s lead candidate, the heart failure drug CK-1827452, is a small molecule cardiac myosin activator in Phase II. Back in 2006, when Amgen originally inked its option deal with Cytokinetics, the biotech received a $75 million up-front payment. This latest deal means the small company is now eligible for pre-commercial milestone payments totaling $600 million. What’s more, Amgen now foots the bill for ‘452’s development, cooling the burn on Cytokinetics’ newly boosted $145 million cash balance. It’s all about the runway, people, and Cytokinetics can now see as far as 2012. For a full discussion of Cytokinetics development strategy for ‘452 and a look at how investors in a recent registered direct offering of Cytokinetics shares could make out like bandits, check out the coverage over at The Pink Sheet DAILY--Chris Morrison.

Sanofi-Aventis/Exelixis: One target area the Big Pharma Jury has ruled on: PI3 kinases. And the verdict? KA-CHING! At least that's the case for Exelixis, which cashed in May 28 in a big way in a deal with Sanofi-Aventis. In exchange for $140 million up-front, Sanofi gains world-wide rights to Exelixis's two earlyish-stage clinical compounds, XL147 and XL765 (both are in Phase Ib/II). In addition the two companies will collaborate on the discovery of new, isoform-selective PI3 kinase inhibitors for oncology indications. They will each contribute preclinical compounds for development work, but Sanofi shoulders the cost of the work to the tune of $21 million for the next three years. Importantly Exelixis will reap downstream benefits no matter which companies' molecules are chosen for clinical studies. This latest deal has the requisite biobucks--north of $ 1 billion plus double-digit royalties for XL147 and XL765--that we've come to associate with traditional pharma-biotech deals (it will be quite another matter if said money actually materializes). As Chris Morrison wrote yesterday, IN VIVO Blog is more impressed with the size of the upfront, which is on-par with the biggest clinical-stage deals so far this year: Novartis' global license to Portola's Phase II cardiovascular candidate elinogrel and BMS's deal for Zymogenetics interferon lambda. The out-sized deal price suggests that assets deemed "too good to pass up" still command high value, despite the economic climate. For Sanofi the Exelixis deal is just the latest sign that partnering is in the ascendance at the French pharma, a message repeated recently at BIO, and it allows the company to catch up in an important emerging target area where it lacked in-house programs.

(Image courtesy of flickr user wallyg through a creative commons license.)

Exelixis/Sanofi: The Price of Playing in PI3K

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

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

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

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

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

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

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

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

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

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

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

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

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

image @ exelixis.com

DotW: Meeting of the Minds

It was a slow week on the deal-making front, as industry watchers and biopharma types absorbed the Monday healthcare confab that included all the industry's players except BIO. As we wrote on Tuesday, the event, which was long on soft-focus pr shots and short on details was all about messaging. We remain impressed with Obama's Spock-like abilities to bring the various parties to the table (if, in fact, he actually did.), but admit that we try not to think too hard about the mind-meld with Merck's Dick Clark. (Some of us would rather focus on this.) As we prep for BIO, Amylin's shareholder meeting, ASCO and ADA, here's your weekly round-up of deal-making highlights.

Roche/Tekmira: On Monday Roche became the latest company to turn to Tekmira Pharma’s stable nucleic acid-lipid particle (SNALP, the best acronym we’ve heard in a while) technology for delivery of RNA interference candidates. Tekmira will get up to $18.4 million for pre-IND work and up to $32 million in clinical and commercial milestone payments and royalties spread over two undisclosed drug candidates—Roche’s first two siRNAs to approach human testing. Of all the RNAi delivery technologies out there (and there are a brazillion of them) Tekmira’s has to be counted among the few that the big players are taking quite seriously. Who else is working with the Canadian biotech? Alnylam is using SNALP for its first systemically delivered RNAi candidate, ALN-VSP for liver cancer, which entered Phase I only a few weeks back, and has a 3-year development and manufacturing deal with Tekmira. (Also Roche and Alnylam each hold a 4% stake in the delivery co, dating back to the merger of Tekmira and Protiva in March 2008 that created the company’s current incarnation.) Merck & Co. also has a license to SNALP, under a 2007 deal signed with Protiva. Takeda, BMS and Regulus (the Alnylam/Isis microRNA joint venture) each have access to Tekmira’s technology. All these R&D payments are helping Tekmira to advance its own set of drug candidates. The company says it will file an IND for its lead hypercholesterolemia candidate, ApoB SNALP, in the coming weeks.—Chris Morrison

Sanofi-Aventis/Antisoma: Antisoma sold US rights to its oral version of the oncology drug fludarabine to Sanofi-Aventis in a deal worth up to $65 million: $60 million up-front with another $5mm should the drug not face generic competition—unlikely considering its orphan status. The drug was approved by FDA to treat chronic lymphocytic leukemia in December 2008. The cash will give Antisoma a runway into 2011, and the breathing room necessary to take its two lead Phase III projects through key data-points, and in the case of one, partnership discussions. Antisoma's ASA404, a first-in-class tumor-vascular disrupting agent in Phase III for non-small cell lung cancer, is partnered with Novartis already, and the Big Pharma picks up the development tab going forward; Antisoma has kept a co-promote option in the US. The biotech's AS1413 (amonafide malate, formerly known as Xanafide) is a DNA intercalator in Phase III trials in secondary AML. Antisoma plans to retain US rights to that compound and partner in other territories. Sanofi was not seen as a front-runner for oral fludarabine, which Antisoma has been promising to jettison since before its approval. After Genzyme’s recent oncology pact with Bayer that Big Biotech was largely seen as the perfect home for oral fludarabine. Genzyme gained rights to the now-generic IV version of the drug in the Bayer deal; its interest in hematology products confirmed and the prospect of IV-to-oral switching likely, Genzyme was the obvious destination for the product. "It was a competitive process, there were many interested parties," Antisoma's general manager, autoimmune Mike Boss, PhD, who alongside VP business development Nick Adams ran the divestment process, told us earlier this week. As for the better-than-expected deal terms, Boss points to undisclosed competitors for the deal and also notes that there are few newly approved oncology assets up for sale. "Three new oncology drugs were approved by FDA last year, and this is the only asset that was available for purchase," he says. For Antisoma, beyond the cash the deal brings validation of its acquisition of Xanthus for $52 million in stock in May 2008. That deal brought both oral fludarabine and ‘1413 into the company. It has now paid for itself, and then some.—Chris Morrison

Sanofi-Aventis/Kyowa Hakko Kirin: It has been a sunny sort of week for Sanofi-Aventis. Thursday it bought worldwide rights from Kyowa Hakko Kirin to a pre-clinical monoclonal antibody that targets the LIGHT molecule, a novel member of the TNF superfamily thought to be a key mediator of inflammation. Sanofi hopes to create a first-in-class treatment for ulcerative colitis, Crohn’s disease and ultimately perhaps RA as well, providing an alternative to existing anti-TNFs such as Abbott’s Humira and more recent additions including J&J’s Simponi and UCB’s Cimzia. Unlike some of its Big Pharma peers, Sanofi-Aventis hasn’t relied on a single major biotech acquisition to jump-start its large molecule efforts; instead it has layered a series of licensing deals onto its existing insulin franchise and the vaccine capabilities of the Sanofi Pasteur division. Those deals include a long-standing collaboration with ImmunoGen granting Sanofi access to that company’s cancer-focused antibody platform, a $510 million agreement with Regeneron for a VEGF trap, and a cancer antibody alliance with Dyax from last February. It recently pulled out of a deal with Oxford BioMedica for cancer immunotherapy TroVax, paying $16.5 million for the privilege. The only number revealed in this latest deal is the next-to-meaningless $315 million biodollar figure—which includes the upfront (likely minimal) and milestone payments. But don’t despair, because in a release issued the following day, Sanofi announced the launch of sanofi-aventis tv, “a window on our company”. (Our question: will it become The Desperate Housewives of the pharma world?) We can look forward, then, to a new era of transparency at Sanofi-Aventis, which, to put it politely, wasn’t exactly renowned for its openness during the pre-Viehbacher era.--Melanie Senior

Celgene/GlobeImmune: When GlobeImmune Inc. was founded in the late 1990s, its premise certainly raised eyebrows: stemming from research coming from the University of Colorado, GlobeImmune has developed a genetically modified version of the yeast Sacchromyces cerevisiae (mmm, beer) designed to trigger an immune response specifically directed at a desired target, such as a virally infected cell or a cancer cell. So far the Colorado biotech has raised more than $90 million to advance its targeted molecular immunogen platform Tarmogens—for the treatment of cancer and infectious disease. But while the approach has garnered GlobeImmune investor attention, further enthusiasm—at least in terms of a validating partnership deal—was slow to materialize. "The response [was] 'Show me the data,'" GlobeImmune's President and CEO Timothy Rodell, told START-UP last fall. Validation--to the tune of $40 million up-front and potential biobiocks in the half billion range--came Friday when Celgene announced a world-wide strategic collaboration with the biotech in the cancer immunotherapy space. The deal calls for Celgene to make an equity investment in the biotech, but specific financial details of the ratio of cash to equity weren't broken out in the press release. For the money, Celgene is getting an exclusive option to all of GlobeImmune's oncology programs, including GI-4000, a Tarmogen in Phase II pancreatic cancer. GlobeImmune will continue early development work on GI-4000 and the other drugs, taking them to certain pre-defined endpoints, at which point Celgene can choose to exercise its option--or not. Immunotherapy treatments in oncology--as in the hepatitis C space--remain controversial, Dendreon's apparently stunning Provenge data not withstanding. The novelty of the science likely had an impact on the overall deal price. We could quibble about whether this deal is the knock your socks off kind of partnership that will bring other pharmas to the table to talk deals around GlobeImmune's unpartnered Hepatitis C program. As one of GlobeImmune's backers, Celgene has certainly been an early believer in the technology and is a logical partner--and now, potentially, the most likely acquirer. Still, $40 million in this economy is still $40 million, and we are sure that GlobeImmune's investors, which in addition to Celgene include Wexford Capital, Biogen Idec, and HealthCare Ventures, are glad they aren't being asked to put in additional money.--Ellen Licking

(Image courtesy of flickr user oceandesetoiles used with permission through a creative commons license.)

DotW: Pink Is The New Black

It's official. Pink is the new black. Any doubt, look at the week's most depressing news item: the U.S. government's announcement that 651,000 jobs disappeared in February.

These days everyone knows someone touched by the rapidly deteriorating economy. We are all frugalistas (frugalistos?) now.

The blogosphere has errupted with sites outlining helpful hints for the newly unemployed, designed to help curb spending and add meaning when someone's work identity is in flux. One of our favorites: 100 Creative, Painless (and Even Therapeutic) Ways to Downsize Your Life After a Layoff.

Pharma types could learn a lot from the site, which includes the following suggestions: hold a garage sale; consider a smaller house; use less or reuse. In our lexicon that could be reworded to mean monetize unwanted assets (aka outlicense), accept that your company may need to downsize instead of growing larger (the anti-Pfizer strategy made manifest by BMS), jettison R&D (Sanofi and Valeant are the first to admit they might need less internal research), and utilize a stable of technologies to find new uses for old drugs (an homage to the reprofilers!).

Our own personal favorites from the top 100 suggestions:

58. Discover community theater. Pfi-eth, Roche/Genentech, preemption, the hunt for an FDA commish, and the fall-out from Obama's healthcare budget all seem to apply if you are looking for a biopharma-centric spin to performance art.

45. Collect coins, as in make a game of finding coins on dressers, the floor, or the street, collect them, and deposit them in the bank (Roche are you listening? It's one way to find the extra $4 billion you need for your $93-a-share bid for Genentech).

43. Surfing the internet. As long as it includes a visit to IVB and Deals of the Week, of course.


Pfizer/Aurobindo: A year after signing a smaller arrangement with the Indian generics firm, Pfizer signed up again with Aurobindo to sell up to 60 generics, primarily in the U.S. but also in Europe. (We’re not exactly sure what this means for Aurobindo, incidentally — since it also has a growing U.S. presence.) The whole thing is an expansion of Pfizer’s “mature products” strategy — an idea initially articulated as a way of squeezing more profits out of existing drugs largely by selling brands into emerging markets. Such a strategy wouldn’t change the pharma business model fundamentally: Pfizer would still use detail reps to sell brands and the brands, although lots cheaper than they’d be as patented U.S. drugs, would still net some premium. The idea isn’t unique to Pfizer: Sanofi-Aventis acquired Zentiva to sell generics in Eastern Europe, while GlaxoSmithKline teamed up with South African generics company Aspen to sell generics in emerging markets. But Pfizer now is moving wholesale into the U.S. generics business. With the Aurobindo deal, it’ll have approximately 120 generic drugs to sell (injectable and oral) in the U.S. – better than one-third of Teva’s list. Why the relative shift in geographic emphasis? Pfizer’s seen the power of generics to interrupt its own U.S. business (Lipitor U.S. sales fell 12% last year, largely because generic simvastatin has been eating its lunch; even its apparently fast-growing Lyrica has been hobbled by the managed-care driven popularity of its generic predecessor, gabapentin, despite its worse label for pain). And the apparent re-emphasis also may reflect rising pessimism about the health of emerging markets, where the economies have been hurt a lot more than in the U.S by the global crisis. Meanwhile, there’s no question about the health of the U.S. generics market. The problem is that Pfizer now is going directly into competition with companies like Teva, Watson and Mylan, and without an obvious strategic or tactical advantage compared to companies that have been built for the high speeds and narrow margins of the generics world. The generics strategy hasn’t worked wonderfully elsewhere, investors point out — Novartis never has made Sandoz into a top generics performer, despite its size. We see it as further evidence that Pfizer is trying to recreate itself as a truly industrial company, a value stock, with modest if predictable top line growth boosted into less modest bottom line growth by strict limits on the expense line. (You can read more about our thesis in the February issue of IN VIVO.)--Roger Longman.

Pfizer/Bausch & Lomb: But Pfizer's diversification strategy isn't limited to generics. On the same day it announced its deal with Aurobindo, it also announced a U.S. co-promotion tie-up in ophthalmology drugs with privately-held Bausch & Lomb. In an environment in which pharma companies are looking to cut costs and retool selling strategies, the co-promotion offers the opportunity for the two organizations to consolidate their commercial structure without sacrificing breadth and reach. The partnership will market Pfizer’s Xalatan, which tallied total sales of $1.75 billion last year, including $536 million in the U.S., with B&L’s Alrex, Lotemax and Zylet. Pfizer also gets a piece of B&L’s bacterial conjunctivitis candidate Optura, which sailed through an FDA Dermatologic and Ophthalmic Drugs Advisory Committee meeting in December. FDA action on the NDA is expected this quarter--Jessica Merrill.

Vertex/ViroChem: As Vertex anticipates bringing its protease inhibitor for hepatitis C, telaprevir, to market, it expanded its HCV pipeline March 3 with the purchase of privately-held Canadian biotech ViroChem. In the process, the Cambridge, Mass., biotech gained a pair of Phase I polymerase inhibitors. But they didn't come cheap: Vertex reportedly had to beat several competitors for the acquisition, eventually paying $100 up-front and issuing 9.9 million new common shares of its stock, pushing thetotal deal value to nearly $340 million. “It was a really competitive process and there were many large pharma companies that were looking at this with us,” Vertex Chief Commercial Office Kurt Graves told "The Pink Sheet" DAILY. The relationship the two companies built, combined with telaprevir’s lead in the HCV protease inhibitor race, gave Vertex a big advantage, he added. Graves cited several strategic underpinnings for the deal, including the ability of the ViroChem drugs' to enhance the lifecycle of telaprevir-based regimens, establishing the foundation for a franchise of specifically targeted antiviral therapy combinations in HCV that can displace the current standard of care ribavirin and peg-interferon. Of the two ViroChem compounds, Vertex seems most interested in VCH-222, which in a five-patient, three-day trial showed the most substantial viral-load reduction seen so far with an investigational polymerase inhibitor for HCV. Telaprevir and ‘222 are complementary in safety, Vertex says, because they are metabolized differently, and the biotech hopes to begin combination therapy study of the two compounds later this year--Joseph Haas.

Sanofi-Aventis/AEterna-Zentaris: Sanofi-Aventis is hoping to add to its bag of tricks in the U.S. market with a co-development and commercialization deal announced today with AEterna Zentaris. Sanofi gains rights to AEZ’s injectable cetrorelix pamoate, a leutenizing releasing hormone antagonist in Phase III development for benign prostatic hyperplasia. AEZ will receive $30 million up-front and stands to gain up to $135 million in regulatory and commercial milestone payments, plus an escalating double-digit royalty on net U.S. sales; it also will complete the current Phase III program — three Phase III trials involving more than 1,600 patients with symptomatic BPH in Canada, the U.S. and Europe — and handle the NDA submission. Sanofi is responsible for post-marketing studies and AEZ will have access to any data from Phase IIIb and IV clinical trials for use elsewhere, while hanging onto “certain” U.S. co-promotion rights as well. For AEZ, the move provides some additional cash to get cetrorelix across the finish line in BPH. (Cetrorelix acetate is already marketed as Cetrotide by Merck Serono ex-Japan [Shionogi in Japan] to prevent premature ovulation in women undergoing in-vitro fertilization.) The Canadian biotech had sold off non-core assets in 2008 to raise cash to fund the compound’s pivotal BPH program and an earlier-stage oncology candidate, and nearly was down to its last few Loonies when it inked a deal last fall with Cowen Healthcare Royalty Partners bringing in $52.5 million in exchange for AEZ’s royalty income from fertility sales. AEZ shares spiked more than 50 percent on the deal news, but the firm’s market cap remains anemic at about $57 million--Chris Morrison.

Pharmexa/Affitech: Eager not to miss out on the high-value antibody shopping that big pharma have indulged in over the last few years, Norwegian private group Affitech is reverse-merging into Denmark’s listed Pharmexa. The idea is to create a fully-integrated antibody group quickly, combining Affitech’s phage-display-based antibody discovery technology and expertise (similar to that used by CAT, acquired for about $1 billion in 2006 by AstraZeneca) with Pharmexa’s immunology and product-development skills, hitherto focused on vaccines . The new company, to be called Affitech and headquartered at Pharmexa, will be listed on the Nasdaq OMX Copenhagen exchange and owned 70 percent by Affitech shareholders, 30 percent by Pharmexa. Standalone Affitech didn’t have the development capability likely to attract Big Pharma partnerships or acquisitions—they want technology and product candidates. That helps explain why certain antibody companies, including Dyax and Sweden’s BioInvent, haven’t been snapped up: they started product development relatively late. So Affitech needed a quick way to fix the situation—since its shareholders, some of which have been around since 1999, were starting to get itchy for an exit. “Organic growth would have taken too long,” says Affitech’s CEO Martin Welschof, who will become Chief Technology Officer of the new group. He claims the company already is discussing potential partnerships, but not a trade sale — at least, not quite yet--Melanie Senior.

Novartis/Proteon: Anyone following IVB's twitter feed know that corporate venture financings have been prominent news lately. This week came news that the MPM BIO IV NVS Strategic fund, Novartis' corporate venture gambit with MPM Capital, invested in the $38 million Series B financing of Proteon. Similar to other recent MPM/Novartis deals, the financing gives Novartis the option either to buy the Waltham, Mass.-based biotech or acquire a global license to said start-up's lead compound, PRT-201, at the conclusion of the recombinant human elastase's Phase II program. The drug currently is in Phase I/II studies in end-stage renal disease patients undergoing surgery for arteriovenous fistula creation. While specific details of Novartis' option were not disclosed, Proteon said acquisition and regulatory milestones could exceed $550 million. These kinds of option arrangements were tricky to negotiate just a few years ago. When VCs were flush with cash, many thought twice about signing off on a deal that capped the ultimate upside of a portfolio company. With Novartis taking an option on a significant program, what other pharmas would think seriously about acquiring said biotech at a premium? And what if they pharma didn't actually exercise the option? These kinds of agreements didn't protect the start-up in the event of such negative news. But in an environment where cash is king--and cash now is even more important--corporate venture groups looking to broker option-style deals ala Novartis might be gaining more leverage. Certainly this is the second deal in recent months for the MPM/Novartis group. In January, they invested in Peptimmune, with Novartis optioning worldwide development and commercialization rights to PI2301, a Phase Ib multiple sclerosis candidate.

(Image by flickr user my hobo soul used with permission through a creative commons license.)

DOTW: Short, Sweet, and Not Just Roche

Thanks to some well-timed vacation for a few members of your hard-working blog team here at IVB things might be a little quiet for the next week or so. Not entirely so, but just enough that you'll have a dull ache somewhere in the bottom of your soul. Take an antacid, you'll be fine. Probably.

But what a week it has been, and we're not just talking about the NL East race. Roche has kept us all entertained with its bear-hug of Genentech and--as if to say, hey, its business as usual here in Basel--two further acquisitions: RNAi delivery play Mirus and the antibody screening platform company Arius.

We hope we've entertained you with our coverage here and elsewhere within the broad FDC-Windhover family of fine publications, and we've had a good response to our poll about the wisdom of Roche's $44 billion move: 54% of the nearly 200 responses we've had thus far think that the Roche/Genentech relationship wasn't broke and so Roche is stupid for trying to fix it. If you haven't voted, go ahead, the poll is still open. And don't forget to suggest other ways Roche could spend all that money: we've started a list here.

Of course this week hasn't been all hand-wringing about Roche's moves, other companies have been busy as well. GE bought Vital Signs for $860 million. Summit and Biomarin teamed up to develop Summit's Duchenne muscular dystrophy preclinical candidate. GSK pronounced its tie-up with the South African generics player Aspen a "transformative" deal. Sanofi-Aventis' Sanofi-Pasteur vaccines division today snapped up UK vaccine play Acambis. And Lilly decided to find an alternative way to finance its Alzheimer's pipeline with a deal involving Quintiles' NovaQuest division and the massive investor TPG-Axon (see their earnings release for more details).

We're tired just thinking about all that.

image from flickr user Derek Farr used under a creative commons license.

Deals of the Week: All Star Break

In a week when the AL (again) defeated the NL 4-3 in a marathon 15-inning All-Star game at Yankee Stadium (thanks, Billy Wagner, for blowing the save and losing home field advantage for the World Series-bound Phightin' Phils), there were a few all-stars in the pharmaceutical world as well.

The buzz word this week was diversification, with health-care behemoths Johnson & Johnson and Abbott Labs posting better-than-expected quarterly results. J&J was buoyed by its consumer products business and Abbott had both stents and Humira to thank for its performance. On the other hand Novartis--an increasingly diversified company--grew in spite of its non-branded Rx divisions: its consumer medicines and Sandoz generics business enjoyed only moderate success thanks to tough times in the key US market, but that didn't stop the Swiss company from posting solid second quarter numbers. (We'll have more to say on Big Pharma business models and the yin and yang of focus and diversification in an upcoming IN VIVO piece.)

Keeping with the baseball theme: we're not a blog to steal signs but we couldn't help but pick up on something earlier this week. On Tuesday we gave you all free access to the denosumab record from Elsevier's Inteleos database and noted that Amgen has suggested it would be open to licensing the project, at least for the primary care indication of post-menopausal osteoporosis (PMO).

The challenge? For all of you expert dealmakers out there to add your two cents regarding the value of the project and potential deal strategies for Amgen. We can only assume that the dearth of comments suggests that all of you are in preliminary or even final-stage negotiations with Amgen and therefore recuse yourselves from the prize-less competition. Wink wink, we get it. Slackers.

You know who hasn't been slacking off? Those intrepid dealmakers responsible for ...



GSK/Actelion: The week started off with a bang when on Monday Glaxo fronted CHF 150 million ($148 million) in a worldwide (ex-Japan) co-development and co-promotion pact with Actelion for the Phase III orexin receptor antagonist almorexant. The Big Pharma pledged an additional CHF 415 million in pre-commercial milestones for the drug’s first indication of primary insomnia and an absolutely filthy figure for total milestones in two additional indications. Reactions to this deal were varied, to say the least. One analyst called it "the largest-ever partnering deal in the history of the industry," while others pronounced themselves decidedly "underwhelmed." Certainly you can't please everyone. But allow us to be the voice of reason, the voice of moderation, the voice of baby bear, when we say that GSK's figure was probably "just right." Why's that? Well forgetting the non-insomnia terms and taking into consideration the fact that GSK will help Actelion get its primary care field force off the ground by paying it to promote an undisclosed GSK drug prior to almorexant, the upfront payment may have been low for a Phase III primary care drug circa 2000-2003, but not anymore. The few primary care drugs available for licensing in Phase III, with novel mechanisms of action designed to treat non-life-threatening diseases, come saddled with higher than ever clinical development hurdles and increased regulatory scrutiny. GSK’s ante for almorexant—though large enough to put the deal in the upper echelon when it comes to guaranteed money—might seem small were it not for those circumstances. The fact that the Big Pharma is only chipping in for a minority of almorexant’s pivotal development program (which aside from the ongoing RESTORA 1 study will include at least two more Phase III trials) is further evidence that GSK is hedging its bets here.

Genzyme/PTC: We'll spare you the "London buses" reference but suffice to say it's unusual to see one $100 million+ upfront licensing deal and to see two in a week--well, that's plain crazy. But score another one for the orphan drug seekers. On Thursday, Genzyme paid $100 million to PTC Therapeutics to enter into a global collaboration to develop and commercialize PTC124, PTC's novel oral therapy in late-stage development for the treatment of genetic disorders due to nonsense mutations. The drug is in Phase IIb trials for Duchenne muscular dystrophy and is scheduled to enter a Phase IIb in cystic fibrosis later this year. PTC will cover the cost of 124's remaining Phase II program--which is slated to include four trials--and from there the parties will split development costs 50/50. PTC is eligible for $165 million in development and approval milestones and $172 in sales milestones. PTC will commercialize in the US and Canada (where it is responsible for all commercialization costs) and Genzyme takes responsibility for marketing and associated costs for the RoW. In addition to Genzyme's up-front contribution PTC pulled in up to $25 million from the non-profit Cystic Fibrosis Foundation the day before the deal was announced to support development of '124 in CF.

ViroPharma/Lev: Specialty pharma outfit ViroPharma announced it was entering the hereditary angioedema (HAE) space with its $443 million acquisition of Lev Pharmaceuticals. The linchpin of the deal is Lev's C-1 esterase inhibitor Cinryze, a biologic that has been available in Europe for 35 years to treat this rare and life-threatening condition, which causes inflammation of the larynx, abdomen, face, and extremities. Lev filed a BLA for Cinryze in July 2007, seeking approval for both prophylaxis and acute treatment of HAE. The product faces competition from CSL Behring's C1 inhibitor Berinert and Jerini's Firazyr. Our sister publication Pink Sheet Daily has more on the HAE market and Cinryze's chances of success. For ViroPharma, the deal marks a shift away from the antiviral space, which has long been its focus, into the hospital/ transplant arena. And with the addition of a soon-to-be marketed product, it continues the company's trend of playing to an investor base attracted to fully-baked and largely derisked assets. Recall this is the company that made a tidy profit on Vancocin, a decades old product it inlicensed from Eli Lilly, to treat Clostridium difficile outbreaks. ViroPharma's timing on Vancocin was exquisite. It brought in the product just when very nasty strains of the bacterium were causing large scale hospital outbreaks of the disease; given the market forces, ViroPharma was able to raise prices of the drug considerably. It is currently working on a follow-on to Vancocin, NTCD. Meantime, there's little information available about ViroPharma's hepatitis C program: ViroPharma discontinued its HCV-796 program, partnered with Wyeth, earlier in the year. According to ViroPharma's website, the two companies continue to exlore follow-on molecules to treat the disease.--Ellen Foster Licking

MacroGenics/Raven: Raven Biotechnologies finally found a buyer in MacroGenics. Last November, Raven announced a tie-up with VaxGen worth about $39 million. But VaxGen's shareholders revolted and scuppered the deal this past spring. MacroGenics, in turn, has been working to build a fully integrated biopharmaceutical company (how quaint) around its Fc antibody engineering and dual affinity re-targeting (DART) programs. It has a large deal with Lilly to develop and commercialize its anti-CD3 mAB for use in the treatment of autoimmune diseases, icluding recent onset-type 1 diabetes. On July 17, MacroGenics and Raven announced their tie-up. Financial terms weren't disclosed but it seems unlikely that Raven got more than what VaxGen originally offered. For MacroGenics, the acquisition provides additional preclinical assets, including more than 1300 monoclonal antibodies that Scott Koenig, CEO of MacroGenics, claims can rapidly be developed using their optimization platforms. In addition, the deal gives MacroGenics access to a portfolio of proprietary cancer stem cells from many types of primary tumors that could be an important addition to MacroGenics R&D capabilities. --EFL

Teva/Barr: What's $7.6 billion buy these days? Maybe a top-five starting pitcher, but those are hard to come by. No, this week it was Barr Laboratories. This late-breaking deal of the week is the latest chapter in the ongoing consolidation of the generics sector, but the bigger story here is the combination of Teva and Barr's biologics programs. Teva also noted Barr's legal prowess and at-risk launch capabilities. Under the terms of the deal, each share of Barr common stock will be converted into $39.90 in cash and 0.6272 Teva ADRs and Teva will assume Barr's $1.5 billion in debt, to boot. In other generics news, Czech generics play Zentiva is now telling investors to reject Sanofi-Aventis' attempt to up its stake in the company, saying the $2 billion play is a lowball offer.

photo by flickr user mori claudia used under a creative commons license.

While You Were Dominating the Competition

If you were too busy playing in the Wimbledon semis and finals this weekend (or maybe just watching) to keep up with the news, IN VIVO Blog is here to help.

• Inhibition! Some news out of the International Society on Thrombosis and Haemostasis in Geneva this weekend. First up, Bayer's rivaroxaban was significantly more effective than Sanofi-aventis' Lovenox in preventing blood clots after knee surgery, Reuters reports. Rivaroxaban, a Factor Xa inhibitor, is being developed with Johnson & Johnson. Another Factor Xa inibhitor, Pfizer and BMS' apixiban (which is approximately a year behind rivaroxaban in development), also posted solid results, in a mid-stage trial. Reuters has the story.
  
• Indecision! UK's National Institute for Clinical Excellence (NICE) has changed its mind, and now considers Eli Lilly's Alimta cost-effective in treating mesothelioma in certain patients.


• Interference!! Roche and Alnylam announced this morning a broad alliance in RNAi therapeutics, worth up to $1 billion. Alnylam gets $331 million up-front in cash and equity payments. We hope you're not all RNAi'd out cause there'll be more on this later ...

Overheard at the London Stock Exchange Mediscience Awards Dinner

IN VIVO Blog went to tonight's LSE Mediscience awards dinner in London. A quick anecdote:

Person 1: "They sold their drug to Sanofi-aventis."

Person 2: "Sanofi-aventis? They'll buy anything. I could sell my grandmother to Sanofi-aventis!"