DotW: The Inaugural Edition

It may have been a short week stateside, but it certainly wasn't devoid of news. Americans reveled in the opportunity to feel smug as they watched the peaceful transfer of power from Bush II to Obama, our nation's first African-American president.

They also got a civics tutorial thanks to Supreme Court Justice John Roberts's mangling of the historic oath--an event that confirmed our inalienable right to boldly split infinitives, according to Harvard psychology professor and chairman of the American Heritage Dictionary Usage Panel Steven Pinker.

To stamp out conspiracy theories, Chief Justice Roberts and President Obama took a mulligan on the solemn vow. In a private ceremony held Wednesday night, the two Harvard braniacs faithfully--and slowly--repeated their duet in the White House Map room.

Here in biopharma-land, meanwhile, a number of companies boldly muddled along...if not where no man has gone before. In a show-down of the diversified giants, Abbott took the bragging rights from J&J--at least in terms of quarterly earnings reports. One day after J&J announced less than stellar news, Abbott announced that its fourth-quarter net income jumped 28% to $1.54 billion, helped out by increased sales of the company’s Xience heart stent and Humira arthritis drug.

Meantime the lackluster economy has forced smaller players to take a hard look at their assets and either off-load them to interested parties for a song (Panacos, see below), fold-up shop (Akesis), or find ways to spin them off (e.g. Abraxis's announcement of its intention to create Abraxis Health).

Oh, and did we mention Pfizer's desperate attempt to avoid falling off the patent cliff?

According to Article Two, Section One, Clause Eight of The IN VIVO Blog Constitution, this blogger does solemnly swear to faithfully execute--and even execute faithfully--the office of under-paid analyst, bringing context and snark to the week's most important deals...

Pfizer/Wyeth: Okay, maybe we ought to peg Pfizer's rumored interest in Wyeth as a future deal of the week. Rumors have been circulating for months that Pfizer was interested in buying Wyeth or Bristol-Myers Squibb or ImClone Systems or... pick your favorite company and insert name here. Speculation of an impending deal intensified on Friday when the WSJ reported that unnamed sources close to Pfizer and Wyeth had confirmed the two companies were in negotiations. The proposed take-out price for Wyeth? Somewhere north of $60 billion.

There are lots of arguments against this mega-merger. For starters, it seems entirely antithetical to the new business model structure Pfizer created just last fall, which puts a premium on flexibility and quick decision making. At a time when Pfizer is already over-infrastructured, the addition of whatever-remains-post-synergizing of Wyeth's more than 50,000 employees and additional facilities seems counter-intuitive -- or at least a move back to the future (remember Pharmacia and Warner Lambert?)

Nonetheless, such a deal may be the only possible way Pfizer can recoup sales as its flagship brands Lipitor, Aricept, Geodon, and Caduet go generic in the 2011 - 2012 time frame. According to Credit Suisse analyst Catherine Arnold, Pfizer is on track to lose 70% of its 2007 revenues by 2015. And it's possible to make the case that as tortured as the Pharmacia acquisition was for Pfizer -- largely thanks to the post-Vioxx collapse of the Celebrex business, for which Pfizer had bought the company in the first place --that deal and the mammoth take-out of Warner-Lambert for full rights to Lipitor ensured Pfizer's continued existence as a corporate entity. In a Jan. 23 research note Sanford Bernstein analyst Tim Anderson summed up Pfizer's spot between Scylla and Charybdis: "Is buying Wyeth an ideal solution for Pfizer? No, but we're not sure Pfizer has any other realistic choice."

So what would Pfizer get for its $60 billion? Biologics and vaccines, including the controversial Phase III bapineuzumab and the pneumococcal conjugate vaccine Prevnar. Perhaps as importantly, the move would allow Pfizer to surreptitiously re-enter the consumer health biz after selling its stake in that arena to J&J in 2006. Pfizer's premature exit from the consumer business is one that has apparently caused much hand-wringing, especially given J&J's success launching an OTC version of Zyrtec.

And it's probably a mistake to assume that Pfizer intends to handle this merger the way it has previous big take-outs. In addition to the normal cost-cutting efforts that accompany such moves, Pfizer may try and bundle unwanted assets together and spin them off (that Pfizer hasn't yet managed to spin off the assets it's already said it was going to spin off does, however, make us wonder about the likelihood of even bigger deals). Still the move comes at a curious point in time. Even though Pfizer has plenty of cash on hand, it seems likely that it will have to finance the deal with at least some debt. As executives at Roche and Teva well know, accessing that amount of capital ain't easy these days. And granted Pfizer does pull the financing together -- what effect will that have on its already threatened dividend...the generous size of which is the only reason a lot of investors are holding the stock.

Teva/Lonza:Big Pharmas interested in follow-on biologics better watch out. Even as companies such as Merck, AstraZeneca, and GlaxoSmithKline attempt to develop their FOB strategies, Teva took a step this week to solidifying its position as a leader in the biosimilar movement. On Jan. 20, the world's largest generic company announced a tie-up with the privately held Swiss contract manufacturing group Lonza. Financial details of the partnership were lacking, but the companies, who will develop, manufacture, and market "generic equivalents" of selected biological products, expect to begin their collaboration some time this quarter. Teva indicated its intent to compete in the US biosimilars market in early 2008 when it purchased privately-held CoGenesys for it's next-generation protein fusion technology. If that deal added novel biologics capabilities, Teva's subsequent acquisition of Barr seven months later gave the company considerable muscle in the space, providing a means to extend the Israeli firms's valuable Copaxone franchise. The Lonza tie-up, meanwhile, ensures Teva will have the requisite capacity it needs to make a big splash in FOBs as soon as a US pathway for their approval is achieved. That could happen in 2009 given the health care goals of the incoming Obama Administration and Henry Waxman's leadership position at the House Energy & Commerce Committee.

GSK/UCB: GlaxoSmithKline's continued interest in emerging markets is illustrated in its Jan. 23 €505 million deal with UCB for that mid-sized European's commercial operations and product distribution rights in selected Far Eastern, Middle Eastern, Latin American and African markets. The UCB deal follows on GSK's earlier "transformational deal" with Aspen Pharmacare Holdings as well as its $210 million and $36.5 million acquisitions of BMS’s Egypt and Pakistan businesses. The moves are part of a broader diversification strategy that also includes bulking up on consumer medicines. The overarching goal: to be less reliant on risky traditional pharma R&D output and collect some more stable and reliable--if less exciting--revenue streams. But this is more than a geographic strategy to breathe new life into so-called mature (a nice way of saying generic) products. There is clearly a recognition by many Big Pharma that their continued future growth depends on developing successful sales outlets in rapidly developing countries where rising incomes and the lifestyle changes that come with them have resulted in a steep increase in chronic diseases such as hypertension and obesity, as well as the economic wherewithal to treat said conditions. If they can develop those sales channels now, while simultaneously extending the runway for their older products, why wouldn't they? The choice to play in emerging markets is tougher for a smaller specialty-focused plays like UCB, however, which run the risk of spreading themselves too thin if they try to play in all world markets. Better to be targeted—focusing on the countries most likely to give steady revenue growth nearer term. Indeed, that’s likely why the tie-up with GSK explicitly excludes hot emerging markets such as Brazil, Russia, India, and China, as well as Mexico and South Korea. Moreover, UCB has made sure to retain worldwide rights to "core products" such as Vimpat, Neupro, and Cimzia.

Myriad Pharmaceuticals/Panacos: As Myriad Pharmaceuticals prepares to spin out from parent Myriad Genetics, it strengthened its clinical pipeline with a deal that illustrated the value-for-money available thanks to the troubled economic climate. For just $7 million--and no downstream sales milestones or royalties--the company in-licensed all rights to Panacos Pharmaceuticals' Phase II HIV maturation inhibitor, bevrimat. It's been no secret that Panacos has suffered its own economic woes: as of late November that company had just $4.7 million in cash after paying Hercules Technology Growth Capital $17.9 million to resolve a dispute over whether the biotech had defaulted on a 2007 loan. But even as the news broke that Panacos was off-loading its promising product at a fire-sale price, the Watertown, MA-based biotech attempted to dispel rumors that additional, darker announcements were forthcoming. "We now turn our full attention to our other promising HIV programs and seeking additional financing and partnerships to continue the development of our spectrum of HIV programs," Panacos CEO Alan Dunton said in a release. Although financially healthier than Panacos, Myriad has had its own troubles, including the spectacular failure of its Phase III Alzheimer's Disease drug Flurizan. The growing divide between the Salt Lake City biotech's profitable testing franchise, which includes BRACAnalysis, Colaris, and Melaris, and the money-losing pharmaceutical division pushed the company to announce its intention in October to spin out Myriad Pharmaceuticals. As it takes baby-steps toward an independent future, the subsidiary has pared its clinical focus to focus on infectious disease and oncology. Importantly, Panacos's bevrimat nicely complements the company's preclinical and Phase I HIV maturation inhibitors MP-461359 and Vivecon.

Tragara/S*BIO: Singapore-based S*BIO announced a licensing deal with San Diego-based Tragara for its multi-kinase inhibitor for leukemia, SB1317, on Jan. 21. The back-end loaded deal could total as much as $112.5 million for S*BIO: it includes an undisclosed upfront fee, plus sales milestones and double-digit royalties should SB1317, which appears to work via a unique mechanism involving both the cyclin dependent kinase pathway as well as the FLT3 pathway, make it to market. While the up-front money is presumably not outstanding, the deal is a major milestone for S*BIO, which was founded in 2000 as a joint venture between Chiron (now part of Novartis) and the Economic Board of Singapore, for it represents the Singapore biotech's first outright licensing deal. Just two weeks ago S*BIO signed another agreement--an option-type arrangement with Onyx Pharmaceuticals related to two JAK2 inhibitors. As our sister publication PharmAsia News notes, the most recent deal has S*BIO handing over all IND-enabling development and commercialization to Tragara. Pharmas and biotechs have been looking to the Far East as a means to outsource their manufacturing and IND-enabling chemistry for some time. But drug firms haven't necessarily gone East in search of innovation (one notable exception: Eli Lilly which has teamed up with Hutchison MediPharma on some early stage development work).

Photos courtesy of flickr users scarlatti2004 and Mike Licht through a creative commons license.