Deals of the Week: Divine Intervention

Christmas came early for the faithful this week, many of whom flocked to the nation's capital to see His Holiness Pope Benedict XVI on his first official visit to the US. Among those celebrating the Pope's crossing: Comedy Central's Stephen Colbert and NBC Today show host's Kathi Lee Gifford, who was so moved by the Pope's arrival that she actually "teared up" during her Pilates session.

Pharma executives--at least those with the word STRATEGY in their titles--might do well to say a few "Hail Mary's" of their own. The list of companies who might benefit from a miracle is growing longer every week. Take Merck and Schering Plough, which continue to suffer the ramifications of the ENHANCE conflagration. (Merck actually suffered a double whammy: Vioxx reared its ugly head again with the publication of a JAMA article claiming company-paid ghostwriters authored many research articles written about the drug.) Roche appears to be in need of help too: the company reported lower than expected earnings this week thanks to weak Tamiflu sales and an even weaker dollar. But the company most in need of divine intervention? Pfizer. The company pflopped big-time, with profits down 18% for the quarter thanks to generic competition for Norvasc and Lipitor.

Can't get to DC or New York for a papal blessing? Fear not, IN VIVO Blog offers a benediction of a different sort...

Roche/ PIramed: Earlier this week Roche agreed to buy UK-based PIramed for $160 million. (The biotech will get another $15 million is payable on the achievement of a relatively easy milestone: initiation of Phase II studies on PIramed's oncology program.) PIramed is at the vanguard of PI3-kinase inhibition, a position that attracted attention from Genentech--and an oncology deal worth up to $230 million--back in 2005, and we surmise Roche decided to share the love. Only last month Genentech and PIramed announced progress in the collaboration, as lead compound GDC-0941 hit the clinic in the US and the UK. PIramed even managed to hang onto an option to commercialize compounds emerging from the collaboration ex-US. (Our 2004 profile of PIramed is here, and our 2006 analysis of the Genentech deal is here.) Roche's acquisition of PIramed is, in contrast to the miserable news of late from Blighty Biotech, a jolt of good fortune. Merlin and JPMorgan, PIramed's two backers, have made a solid return--their original ₤10 million investment (then worth about $17 million) has blossomed rather nicely.

Natus Medical/Sonamed: Natus Medical is all grown up. The child care health products company announced its plans to purchase Sonamed, a privately held maker of products that screen newborns for hearing problems. Terms of the deals weren’t disclosed, but both boards have approved the deal. In the announcement, Natus Chief Executive Jim Hawkins says Sonamed’s Clarity screening device will fit into Natus’ current line of products for hearing loss, brain injury, jaundice and other maladies afflicting newborns. Two-thirds of the Sonamed’s $3.5 million in annual revenue came from the sale of disposable products, giving it a high gross profit margin, a possible boon to Natus. Just a week ago, Natus wrapped up $15 million in a secondary sale of stock, possibly to help finance the deal. This is Natus' fourth acquisition in three years. Earlier this year, Natus announced a broad restructuring plan that would help it digest its three previous buy-outs: Excel-Tech, Olympic Medical, and Bio-Logic Systems.

CV Therapeutics/ TPG-Axon: One week after receiving regulatory approval for Lexiscan, an injection that increases arterial blood flow during heart tests, CV Therapeutics sold a 50% interest in its North American royalties to private equity player TPG-Axon Capital in a deal worth up to $185 million. In 2000, CV inked a deal with Fujisawa Healthcare (now Astellas Pharma) in which it gave up North American rights to Lexiscan in exchange for milestone payments, development funding, and double-digit royalties on the product. CV retains ex-North American rights to the product and expects to submit a marketing authorization application to the European Medicines Agency by the end of the year. TPG-Axon is a spin-out of Texas Pacific Group. Financings of this kind have become increasingly common in recent months as private equity players come to the rescue of needy companies unable to tap the stingy public markets. Two weeks ago, IN VIVO Blog noted similar cash-for-royalties tie-ups between Paul Capital and Plethora Solutions and Deerfield Management and VIVUS Inc.

Pfizer/Avant: Another week, another Pfizer deal in a specialty-focused market. (Have we mentioned this is a trend?) On Wednesday came news that Pfizer was licensing Avant Immunotherapeutics' vaccine for a rare brain cancer called glioblastoma multiforme (GBM) for an initial sum of $40 million, as well as a $10 million equity stake. If Avant's Phase II immunotherapy, called CDX-110, continues to meet its clincal and regulatory endpoints, the Needham, MA-based biotech stands to receive milestones of more than $390 million as well as royalties. CDX-110 targets a tumor-specific variant of the epidermal growth factor receptor (EGFR) called EGFRvIII that researchers believe contributes to malignant cell growth in about 40% of GBM tumors. This is the second big immunotherapy deal we've seen in as many weeks: on April 2 came news that Takeda was teaming up with Cell Genesys to develop that company's GVAX Prostate immunotherapy. (We'll have more in this month's START-UP about the deal.) It seems highly unlikely that Pfizer's bus dev team would have signed this kind of deal just five years ago: after all, there are just 10,000 new cases of this kind of brain cancer annually in the US. But Pfizer has been eager to build capability in oncology, especially in the area of so-called cancer vaccines. Recall that last November the company purchased Coley Therapeutics for $164 million.

GSK/Regulus Therapeutics: GSK announced its second deal in the young field of microRNA inhibition yesterday. The pharma plans to team up with Regulus Therapeutics to develop microRNA antagonists against four undisclosed inflammatory targets through proof-of-concept, at which point GSK can claim an option. For this privilege, GSK will pay the biotech $20 million up-front, including a $5 million note that will someday convert to Regulus common stock. Total milestones (both pre- and post-POC) are up to $144.5 million per project, and Regulus will receive up to double-digit royalties on sales. If the deal seems a bit familiar that may be because only a few months ago, in December 2007, GSK's infectious disease CEDD inked a similar deal with Danish microRNA player Santaris for up to four different virology programs, that includes an option on Santaris' SPC3649 program targeting microRNA-122 in HCV. (That program was recently the subject of a write-up in Nature). Though only a few months old, Regulus is not a typical start-up; it is a well-funded JV between antisense leader Isis and RNAi leader Alnylam. (Look for a feature about Isis and its platform strategy in the April IN VIVO.) Part of Regulus's strategy is to quickly establish a base of IP around microRNA targets, as Isis did with antisense and Alnylam with RNAi.


Wyeth/ ViroPharma: It's official. Wyeth and ViroPharma officially called an end to their hepatitis C partnership around ViroPharma's small molecule non-nucleoside inhibitor, HCV-796. In August, the companies announced potential safety concerns--including an increasd risk of liver disease--associated with the medicine and halted a mid-stage clinical trial of the drug. "Significant activities were undertaken to determine a clear path forward for HCV-796; however, the risk associated with potential hepatotoxicity ultimately posed too high of a hurdle to merit further development," said Vincent Milano, who just took over as ViroPharma's president and CEO last month from Michel de Rosen. ViroPharma's HCV-796 is by no means the only hepatitis therapy dogged by safety concerns. Both Idenix and Anadys and their pharma partner Novartis were forced to retrench after bad news about their HCV drugs surfaced last year.

Image by Flickr user davescunningplan used with permission through a creative commons license.