Even as the country debates the 44th president's emerging administration and the rise of Waxman as powerbroker come signs that a financial winter is upon us: plunging stock market prices and a frozen credit market continue to wipe out the gains of the last decade.
At a time when Citigroup's stock is in free-fall, it's not surprising that one outfit posting positive second quarter profits is foodmaker H.J. Heinz: in these scary times, mothers and fathers can feel good about feeding their children a home-cooked meal that also includes a cheaper vegetable option: ketchup.
Purdue/Infinity: Just how bad are things these days? Bad enough that "extending the runway" a year or two isn't good enough. This week comes news that at least one forward looking company, Infinity, is looking to reprise the Roche-Genentech deal, securing funding out to at least 2013 in return for limiting itself largely to the US market. Indeed, the Purdue/Infinity tie-up announced Thursday wins our award for most creative --and complicated--deal of the week. Under the terms of the global joint development and commercialization agreement, Purdue' Pharmaceutical Product's European affiliate, Mundipharma, gains access to Infinity's entire currently unpartnered oncology-focused discovery and development pipeline for an initial term of three years, with options to extend for two additional one-year terms. As part of the deal, Mundipharma will pay all of Infinity's R&D expenses until at least the end of 2013. Costs associated with Phase III studies beginning in 2014 and beyond will be split equally. Importantly, Infinity retains US commercialization rights to its oncology compounds, paying Mundipharma a double digit royalty on US sales. In return, Mundipharma gains rights to these programs ex-US and pays Infinity a commensurate double-digit sales royalty. As Infinity CBO Adeline Perkins noted in our Pink Sheet DAILY story, "It's a beautiful model of how larger, better-capitalized companies can work with smaller discovery and development biotechs to enable them to flourish" while at the same time tapping into and capitalizing on what makes those more nimble firms successful. We like Infinity science a lot -- we've got a lot of time for CSO Julian Adams, discoverer of two marketed drugs (an HIV drug from Boehringer and Millenium's Velcade). But we also know that Infinity got that rare partner -- a rich private company. A public one might have liked the science just as much but wouldn't have wanted to take the P&L hit from what may be a commitment of $400 million or more in funding. But the Sacklers, who own Purdue, don't give a damn about showing investors EPS growth -- they've got plenty of cash flow and far more interested in cutting their tax bill while positioning Purdue and Munidpharma for what may be a break-out future in oncology.
Archemix/NitroMed: The downward-spiraling economy is also setting the stage for more reverse mergers. Just weeks after the Cardiovascular Systems/Replidyne announcement, comes news of a tie-up between the innovative, privately-held aptamer-focused biotech Archemix and NitroMed, a specialty pharma that made big news by developing the combination heart failure product BiDil. Despite its better efficacy in African American patients, BiDil has proved a commercial disappointment; in late October, the company announced it had sold the business to JHP Pharmaceuticals for $24.5 million in cash and additional payments for product inventory, setting up essentially a Nasdaq-traded cash shell ripe for a reverse merger. Competition for NitroMed's estimated $35 to $40 million in cash was reportedly fierce, but Archemix ultimately won the day. As part of the deal, which is still subject to approval by the SEC and both biotechs' shareholders, Archemix's current backers will retain 70% ownership in the new firm, which plans to apply for listing on Nasdaq under the symbol ARCH and to carry the Archemix name. Curiously, Errol DeSouza, Archemix's CEO will not be taking the helm of the newly formed firm; instead NitroMed's current President and CEO Kenneth M. Bate will hold those same titles. (DeSouza will remain on the company's board, however.) With a number of Big Pharma partnerships but no marketed products--Archemix's most advanced drug is currently in Phase II--the biotech has struggled to gain traction despite the industry's growing interest in large molecule-based platforms. Private investors, which include SV Life Sciences, Atlas Venture and Prospect Venture Partners, have sunk more than $100 million into the company in two large private financings. With the IPO markets frozen shut, Archemix's backers had two choices. They could nurse the biotech baby with additional capital infusions until a pharma proved willing to buy it for some generous mark-up. Or they could reverse merge the company with a public shell in the hopes that positive clinical news--potentially including an approved product--would drive up the company's stock price and give them an exit. According to Michael Ross, managing partner at SV Life Sciences, because all the unwinding of the NitroMed assets "has been done extremely well by the original NitroMed investors," the reverse merger was the best way to access a chunk of non-dilutive cash. The newly public Archemix is estimated to have approximately $55 million to $60 million in cash and equivalents when the deal closes some time in the second quarter of 2009.
United/Lilly: Also this week came news of a deal between United Therapeutics and Eli Lilly for US commercialization rights in pulmonary arterial hypertension to the pharma's tadalafil, better known as the erectile dysfunction drug Cialis. The deal, which is by no means chump change--United will pay Lilly $150 million up-front--is something of a head-scratcher. Cialis is currently under regulatory review by FDA, as well as authorities in Europe, Canada, Mexico, and Japan for this indication and is considered low-risk for a complete response. Moreover, as Lilly increasingly moves in a specialist direction, marketing Cialis for PAH would seem like a natural fit with its global strategy. Indeed, that's the approach Pfizer has taken with its own competitor, another phosphodiesterase-5 inhibitor, Revatio (sildenafil), approved earlier for ED as Viagra. It's certainly not a resource question for Lilly--the Indianapolis pharma has the reach and resources to market the product in PAH if it wants to. Rather it seems a question of focus--and with the company's recent purchase of ImClone, that focus is clearly elsewhere. There's no denying the deal--albeit expensive--gives United some breathing room in terms of its own pipeline. In a same day announcement, United revealed news that Phase III studies of its own oral drug for PAH, treprostinil, failed to meet clinical endpoints. In a conference call detailing the news, CEO Martine Rothblatt insisted that United has "more than compensated for the delay in [approval of] oral treprostinil" with the Lilly deal. Investors hammered the stock, sending United's share pirce down 32% on Monday before the opening bell.