Deals of the Week: Going Green

There were lots of reasons to evoke the color green this week. Lest you've forgotten, Tuesday was Earth Day. The IN VIVO Blog team hopes you celebrated appropriately--perhaps by replacing those incandescent light bulbs with compact fluorescent ones or off-setting the carbon dioxide emissions from a recent plane trip. (What? You have an alternate suggestion?)

It was also earnings week--that time in the fiscal calendar when certain big pharma are forced to admit to investors and analysts that "it's not easy being green" to quote an overly analytical Muppet. Among those posting quarterly losses were Bristol-Myers Squibb (thanks to charges associated with cost-cutting measures), GlaxoSmithKline (profits down 5% on tumbling Avandia sales), and Schering Plough (down 48% due to costs related to the integration of Organon as well as the Vytorin mess). Pfizer, the industry's favorite punching bag, opted to announce its bad news late last week in advance of a shareholder meeting in Memphis.

But if the quest for greenbacks was onerous, it certainly wasn't impossible. A number of companies posted positive news, including Amgen, Bayer, and Novartis. We confess color-blindness when it comes to Merck and Lilly. Merck's first-quarter earnings rose to 89 cents a share, beating analysts' expectations. Unfortunately, sales missed their mark, edging up only one percent. Lilly meantime posted lower than expected earnings, mostly due to disappointing Byetta sales.

The preoccupation with quarterly earnings meant deal flow was lighter than average, but still we found other green examples--of the biobucks variety.


Astellas/CoMentis: We'll give top-billing to the latest entrant this week, and it's a doozy. In another big win for Japanese pharma, Astellas Pharma said this morning that it licensed worldwide development and commercialization rights to CoMentis' beta-secretase inhibitor programs--for $100 million up-front (80/20 cash/equity split) plus up to $660 million in pre-commercial milestones on the program's lead Phase I compound, CTS-21166, and additional milestone payments on any next-gen compounds discovered as part of a joint research program. CoMentis retained a co-promote/profit share in the US and elsewhere will receive undisclosed royalties. Astellas will fund development up to Phase III and the companies will split the cost of a (probably very expensive) Phase III program. Inhibition of beta-secretase has long been an unrealized goal of industry and CoMentis' ability to get its program into the clinic made it the subject of takeover rumors, as we noted in this September 2007 feature on early-stage Alzheimer's programs. Back then, CoMentis CFO John Donovan told us that the company wasn't being managed toward a quick acquisition. But rather the goal was to partner the beta-secretase program sooner rather than later, he explained, while keeping a significant piece of the back-end value—half of US rights, for example. "Most of the top 20 companies are in this space, and the top five view it as a must-win," said Donovan.

Cubist/Dyax: Cubist Pharmaceuticals signed a licensing and collaboration agreement with Dyax to develop that company's DX-88, an intravenous product in mid-stage clinical trials for the prevention of blood loss during surgery. Deal terms were smallish: Dyax will get $15 million up-front, plus another $2.5 million later this year in milestones. The company is also eligible for an additional $214 million in clinical, regulatory, and sales-based milestones. For good measure, Cubist has generously offered to pay for costs associated with the on-going Phase II trials (known as Kalahari 1), and will thow in tiered, double-digit royalties based on DX-88 sales and an option for Dyax to co-promote the product in the US. If the up-front seems low, at least Dyax gets to keep exclusive rights to DX-88 in all other indications, including its hereditary angioedema program, currently in its second Phase 3 trial.

GSK/Sirtris: Sirtris was the big winner this week. After the markets closed Tuesday, the biotech announced a stunner of a deal: GSK had agreed to acquire the early stage company for $720 million. Yep, that's right. Nearly three-quarters of a billion in cold hard cash for a company with just one less-than-exciting Phase II product and a raft of interesting molecules that have the potential to treat a variety of diseases, including Type II diabetes. IN VIVO Blog frequently writes about pharma's acquisitive nature, especially in areas where it needs to bulk up, such as biologics. But by and large, the out-sized price tags have been associated with platform biotechs such as Adnexus or Sirna. Thing is, Sirtris isn't really a traditional platform company. Its value lies in its targets and we've never seen a target-focused deal command this kind of price tag. Until now.

Shire/Zymenex: Shire agreed to pony up $135 million for global rights to Zymenex's enzyme replacement therapy, Metazym, designed to treat a serious neurological disease called metachromatic leukodystrophy (MLD). Zymenex recently finished a Phase Ib trial of Metazyme in Europe and plans for a Phase II trial in the US are in place. Just 2000 patients suffer from MLD, and Metazyme has been granted orphan drug status in both the US and EU. Genzyme, of course, is the company that pioneered the specialist strategy focused on ultra-niche indications. But with its 2005 acquisition of TKT for $1.6 billion, Shire is now definitely playing in Genzyme's sandbox. Interestingly, Shire's most recent deal comes at a time when Genzyme is facing its own struggles. On Tuesday, federal regulators rejected Genzyme's request for permission to sell a version of its Pompe disease drug, Myozyme, that is made at its Allston manufacturing plant. The FDA decision shows just how difficult the road may be for certain follow-on biologics makers.

Medtronic/Restore Medical: On Tuesday, Medtronic agreed to acquire Restore Medical for $29 million, lured by the company's minimally invasive Pillar palatal implant and demonstrating that the market for obstructive sleep apnea devices is no snorer. (Just before the new year, Philips Medical Systems made a $5.1 billion all cash offer for Respironics, the leader in the sleep apnea market.) The deal makes perfect sense for both companies. First, it gets Medtronic into the new area of sleep disorders, by way of the Ear, Nose & Throat (ENT) market where it’s already a leader. And since many start-ups are hoping to address obstructive sleep apnea with implantable neurostimulators this could be an area where Medtronic can take advantage of its existing expertise. For Restore Medical, the acquisition gives the company access to Medtronic's deep pockets. In addition, via Medtronic, Restore is much more likely to persuade ENTs of the value of its minimally invasive device. Currently, sleep medicine pulmonologists and neurologists dominate sleep medicine; ENTs, meanwhile, have been relegated to an ancillary role, stepping in only when invasive palatal surgery (which is rarely chosen) is the treatment recommendation. Restore execs knew that mounting successul patient education and marketing campaigns would be a nightmare. Now that Medtronic has agreed to acquire them, it's sweet dreams.

TopoTarget/CuraGen: This week's NDotW concerns the future development of the small molecule HDAC inhibitor belinostat. In 2004 Danish biotech TopoTarget licensed rights to the then-Phase I compound to Curagen. The latter company has invested a total of about $44 million in the project which is now in Phase II for a variety of oncology indications (including NCI-sponsored studies there are now 18 trials ongoing). And on Tuesday, TopoTarget bought it all back for $39 million u/f (two thirds cash, one third stock) and a potential $6 million in milestones. In other words: lets just pretend the past four years never happened. Those years haven't been kind to CuraGen which now has $145 million of cash and equivalents on hand to go with its $50 million post-deal market capitalization and $70 million in convertible debt. It plans to focus its energy and that cash on development of another Phase II oncology candidate CR011-vcMMAE. TopoTarget doesn't plan on hanging on to all rights to belinostat; partnering discussions, it said, are already ongoing.

Flickr image courtesy of user The Gansta the killer and the dope dealer's photostream through a creative commons license.