Friday, March 28, 2008

Deals of the Week: Dark Clouds

It seems we'll end the month without a big oldfashioned biotech-pharma licensing deal to crow about in Deals of the Week. A few pharma-pharma co-promotes, a handful of biotech acquisitions, sure. Probably a coincidence, right? But maybe this observation from earlier in the week is the metaphorical dark cloud on the horizon (the actual dark cloud above was in this blogger's backyard on Wednesday afternoon). Will investor antipathy and skepticism toward biotech dealmaking generally (and the validation that used to come with a Big Pharma's stamp of approval specifically) put a semi-permanent funk on the sector's alliance activity? Here's to going out like a lamb. On to ...

Lilly/Sanofi-Aventis: Sanofi-Aventis sales reps have some extra time on their hands – thanks mostly to the regulatory delay – kindly put -- on rimonabant (for analyses and summaries, see here, here and here). Meanwhile, Lilly, slicing the erectile dysfunction market yet thinner with its recently approved low-dose, daily version of Cialis, needs some sales help. On March 13th, they signed a two-year co-promotion with a one-year option, which we learned about from our smart friends at The Wall St. Journal Health Blog.

We wish them both luck. In apparent anticipation that the co-promotion, like many others, will stumble a few times before hitting its stride, Pfizer has increased its Viagra sales calls by about 25%, according to ImpactRx (Viagra was approved 10 years ago yesterday, notes the WSJ in another post). Indeed, the advantages of the new low-dose Cialis hardly seem easy to explain. The daily version is for men who want to have sex more frequently – say, twice a week, says a Lilly website. But for twice-a-weekers, old Cialis – with its 36-hour window –works just fine. And there’s no cost difference between the low- and high-dose versions. On the other hand, the new dosage – which can be taken daily -- may help Lilly position ED in the patient’s mind in the same way he thinks about his chronic diabetes or hypertension. If you’re taking an ACE inhibitor every day, why not just pop a low-dose Cialis along with it?

Shire/TAP: Shire has teamed with recently torn-asunder TAP Pharmaceutical Products to co-promote its once-daily mesalamine (Lialda) mild-to-moderate ulcerative colitis treatment in the US. Specifically Shire is tapping (sorry) the former Abbott/Takeda JV for the services of 500 GI-focused and primary care sales reps to augment its current 120 specialty-rep efforts. The three-year deal should give Lialda quite a boost. The relatively new formulation of mesalamine (approved in January '07 and launched last March) has enjoyed a quick start in the market, taking an 8% share in its first nine months on the market (sales in '07 were about $50mm in the US). The terms of TAP's dissolution entitle Takeda to the group's GI assets (which include the soon-to-be-genericized blockbuster PPI Prevacid) while Abbott takes over oncology assets including the JV's only other marketed drug leuprolide (Lupron), and $1.5 billion paid out over five years. TAP had sales of $3.1 billion in 2007, dominated by $2.3 billion in Prevacid revenue. Surely the addition of Lialda will help take the sting out of that drug's impeding genericization. Terms of the Lialda deal weren't disclosed.

Philips/TOMCAT Systems: Philips Healthcare has entered into quite a few partnerships recently, but it’s not just tomcatting around. In February the Healthcare IT business of Royal Philips Electronics NV announced that it was restructuring its informatics strategy for the hospital in order to “seamlessly integrate islands of information, rather than focus on a single application or department” according to a press release. To that end, the company’s been on a tear, acquiring eight companies since early 2006 in various segments of IT and patient monitoring, (we list them in our discussion of the Respironics acquisition in January’s IN VIVO) Yesterday Philips snared a ninth acquisition target, TOMCAT Systems Ltd., the leading provider of information systems to hospital cardiology operations in the UK and Ireland. TOMCAT offers a comprehensive and integrated system for managing all of the clinical and administrative needs of cardiology patients in the hospital, that means everything from displaying test results to making appointments for patients, and it fits into Philips’ goal of offering a continuum of care in clinically focused business segments. Building the infrastructure that follows a patient from the home to the hospital and then back again is a daunting undertaking involving many moving parts, but Philips appears to be tackling it single-handedly, and if any company can succeed, it probably can. The parent company posted 2007 revenues of $36.8 billion in revenues, with the Healthcare division accounting for $8.9 billion of that Royal sum.

... and finally, your Howie Mandel/Noel Edmonds moment and excuse for us to break out the best example of our MS Paint skills comes courtesy of the on-second-thought termination of Raven Biotechnologies and Vaxgen's reverse merger agreement, announced this morning. Chalk one up to shareholder activism, and we suppose in this case, good sense. MPM BioEquities opposed the deal back in December along with other investors. MPM wrote at the time:

"VaxGen had over $75 million in cash and marketable securities, or over $2.30 per diluted share at the time of the proposed merger, yet management is still supportive of a merger with the stock trading at a market value of approximately $15 million, or $0.42 a share. Even with an outstanding convertible loan due in 2010, VaxGen owns other substantial assets, including a state-of-the-art biologics manufacturing facility, a clinical- ready anthrax program, and significant tax loss assets that net to a substantial premium over the current market valuation. In any scenario other than the current merger proposal, we believe VaxGen is worth over $2.00 per share."

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