Friday, February 22, 2008

Deals of the Week: A Bear of Very Little Brain


On Monday, when the sun is hot
I wonder to myself a lot:
"Now is it true, or is it not,
That what is which and which is what?"

On Tuesday, when it hails and snows,
The feeling on me grows and grows
That hardly anybody knows
If those are these and these are those.

On Wednesday, when the sky is blue,
And I have nothing else to do,
I sometimes wonder if it's true
That who is what and what is who.

On Thursday, when it starts to freeze
And hoar-frost twinkles on the trees,
How very readily one sees
That these are whose--but whose are these?

On Friday------

From Winnie-The-Pooh, A.A. Milne

Oh, help and bother. It's time for deals of the week, where we delve into the details of all things pharma. We admit to suffering an attack of nostalgia for the wisdom of a certain bear, given this week's relentless news coverage of Oscar (what's a girl to wear?), spy satellites, stagflation, and worries over the safety of the pharmaceutical supply chain. (Fear not. It's unlikely to happen again before the next total lunar eclipse.) But whether you are "a bear of very little brain" or an "owl who knows something about something", we pledge that though our spelling maybe wobbly, our analysis is not.

Celgene/Acceleron: This week's bio-bucks winner--and one day, perhaps, and Oscar--has to be Acceleron. On Wednesday, the biotech announced its first major collaboration--a tie-up with Celgene that could be worth more than $1.8 billion. Acceleron's ace-in-the-hole, so to speak, is ACE-011, currently in Phase I clinical trials for bone loss associated with multiple myeloma. In order to gain rights to ACE-011, Celgene agreed to pay a $50 million up-front, plus downstream milestones of up to $510 million. As part of the agreement, Celgene also gains rights to three discovery programs at Acceleron that target bone-loss. (That privilege could cost the New-jersey specialty pharma another $1.3 billion in downstream milestones if the science pans out.) As we noted here, the up-front fee is monstrous given ACE-011's stage of development; and it's yet another piece of evidence suggesting that early stage deal values are sky-rocketing. Though Celgene investors may question ACE-011's price tag, it's hard to deny the logic of the deal. Celgene already markets three multiple myeloma drugs, including Revlimid and Thalidomid; undoubtedly, having a compound that prevents bone loss in the same patient population is a nice strategic fit. (One can almost imagine Celgene's commercial team salivating about "synergies at the point-of-sale".) Certainly, in prior deals, Celgene has shown it's willing to pay a hefty price tag if a deal makes tactical sense. Last November, the spec pharma shelled out $2.9 billion to scoop up Pharmion and gain ex-US rights to Revlimid. We've opined in previous posts about various spec pharmas and their futures as independent entities. Perhaps the Acceleron deal, much like the Pharmion acquisition, will ensure that Celgene's name still exists a year from now.

Pfizer/ Encysive: It's no secret that Encysive has been for sale since mid-summer 2007. Following the FDA's third rejection of its pumonary arterial hypertension drug, Thelin, and deep budget cuts to stem the bleeding, the company retained Morgan Stanley to evaluate strategic options. And this week, a surprise buyer finally surfaced: Pfizer announced Wednesday that it was buying the company in an all cash deal worth roughly $195 million. Pfizer, of course, has its own PAH treatment, Revatio, which contains the same active ingredient found in Viagra. Analysts speculate that the two medications would not actually be competitors for the limited PAH market, because of the possibility of combining them into one treatment. Before that happens, however, Pfizer will need to run its own Phase III trials in the US. (The drug is already approved in several EU nations--including the UK, Germany, and France--and Australia and Canada.) Beyond Thelin, the Encysive acquisition gives Pfizer access to two other compounds: Agratroban, a marketed product to treat thrombosis in heparin-induced thrombocytopenia, and TBC3711, another PAH medication.

Teva/Antisense Therapeutics: It's been a busy week for the folks at Teva. At a Thursday analyst meeting in New York, company execs predicted that the Israeli pharma would double its revenues to $20 billion by 2012. ($20 Billion! Already Teva is big enough to do at-risk launches; two in particular, Seroquel and Nexium, may kill AZ’s dividend. And recall what it's done to Wyeth with Protonix.) But the company is hardly content with its leadership position in the booming generic drug market--and that's led to some innovative deals. Just last month, the company ponied up $400 million for Cogenesys to access technology that could help Teva become a primary player in the follow-on biologics market. (For more on that deal, see here and here.) Anyone doubting just how important that market is to Teva should read the company's Feb. 21, 2008 press release touting its biosimilar G-CSF, which garnered a positive opinion from European regulators. And just one day earlier came news that the pharma had entered into an exclusive, world-wide license with Australian-based Antisense Therapeutics for that company's ATL1102, a second generation antisense inhibitor of Very Late Antigen-4 (VLA-4) originally discovered by Isis Pharmaceuticals and currently in Phase II clinical trials as a treatment for multiple sclerosis. This was not a big money deal: Teva's only paying $2 million up-front. (Down the road, Antisense could receive another $100 million, in addition to royalties in the low double-digit range based on ATL1102 net sales.) But the dollar value isn't what makes the deal interesting. No, what makes this agreement worth noting is that it represents a shift in Teva's strategy as it moves away from generics into branded products-- especially those of the biologics and specialist variety. Indeed, the deal continues to solidify the Israeli firm's desire to be a major player in the MS market. Recall that one of the company's branded drugs is Copaxone, a non-interferon injection widely expected to become the number one MS therapy worldwide sometime this year. And thanks to an alliance with Active Biotech, the company also has access to an oral MS treatment, laquinimod, which is currently in Phase II clinical trials.

Medrad/Possis Medical: At first glance, Medrad’s $361 million acquisition of Possis Medical appears to be an odd combination. But a closer look at each company’s leading product shows that they share common technology and customer bases. Both companies have technologies to deliver fluid under high pressure into the vasculature for cardiovascular applications. For Medrad, this takes the form of contrast injection markers, and for Possis, this involves thrombectomy devices used to clear clots from blocked arteries. The Possis deal gives Medrad’s sales force another tool to offer their interventional cardiologist customers, and with Medrad’s international sales force (as a Bayer subsidiary), this also significantly broadens the availability of Possis’s products, which had little international presence. (To learn more about peripheral vascular disease check out these articles from START-UP and MEDTECH INSIGHT.) NOTE: That we are just now getting round to an analysis of this particular deal--yes, we're aware it happened last week--may prove that we have more in common with Pooh than Owl. What can we say? We've been busy hunting woozles and heffalumps with the short people...

Photo courtesy of Flickr user WallyG via a creative commons license.

1 comment:

Anonymous said...

wow the celg/acceleron piece has some glaring errors. last i looked only rev & thal were the major MM drugs in the CELG portfolio.... secondly PHRM was done for the MDS rev/vid synnergies as well as to consolidate x-US Thal revs and to stabilize the EU MM pricing environment to support Rev's price tag and thirdly the ACE in Acceleron's hole is hardly the bone drug, but more like the MD therapy.