Saturday, March 28, 2009

DotW: On the Verge

It was the kind of week where so many important things seemed on the verge of happening. Is the economy sputtering back to life? (We are taking a wait-and-see attitude there.) The calendar says it's spring, but the bone-cold temperatures in Fargo and other parts of the country belie that old adage "March goes out like a lamb."

Meanwhile, the glacial pace of follow-on-biologics legislation seems to have quickened. Does a bipartisan bill in the Senate means we could be on the cusp of seeing major changes in that realm? Let's wait and see which of the competing bills actually gets adopted.

Things on the deal-making front have also slowed a bit. But even as the odds of sizeable deals such as Pfizer/Wyeth or Merck/Schering decrease, a number of large buy-outs seem in the offing. Nearest term, GSK appears to be buying a 25% minority stake in Aspen, the South African drugmaker that markets 450 generic medicines, including antibiotics, antidepressants and HIV drugs. That deal has been on the horizon since Aspen disclosed in January that it was holding negotiations with another party that could affect its share price. GSK, of course, signed a marketing alliance with Aspen last year to build its sales in emerging markets. It's focus on generics is a move replicated by other competitors including Sanofi (Zentiva)and Pfizer (Aurobindo).

Will GSK also fill the wrinkles in it pipeline with Allergan's Botox? What about Lundbeck's potential desire for Elan? (Makes for a nice tidy neuro company after Lundbeck's purchase of Ovation doesn't it?) Which mystery buyer will snatch up Nycomed? Could suitor X, the company that ultimately lost Wyeth to Pfizer, be involved? (According to the WSJ, Infosys is reportedly interested in acquiring pharmaceutical companies too, but of the much smaller variety--$100 million to $200 million endeavors not the tens of billions a Nycomed would cost.)

Meantime, Dyax teeters. Last week's expensive deal with Cowen Healthcare Royalty Partners was followed by news this week that FDA had declined to approve ecallantide, the biotech's drug for hereditary angioedema. The announcement sent the company's share price down double-digits initially. But cooler heads ultimately prevailed as investors saw the silver lining in the news: despite questions about the drug's efficacy in HAE, FDA will not require Dyax to conduct any new studies, but will necessitate submission of a Risk Evaluation and Mitigation Strategy (REMS) prior to approval of ecallantide.

Who else is on the edge? Not Genentech. Roche officially owns the company. Adios, NYSE: DNA. Moody's responded to the news by lowering the Swiss Pharma's rating from Aa1 to A2.

We'd be remiss if we didn't recount the troubled companies on the verge of collapse--Neurobiological and Oscient make this week's list, as does Avigen. Avigen of course, has been embroiled in a public fight with its largest shareholder, Biotechnology Value Fund LP. As part of an offer to buy the company for a $1.20-a-share, BVF sought to oust Avigen's board. But a shareholder vote on the matter went against BVF on Friday, and the company will be liquidated instead.

Are you on the verge? Step away from the ledge. It's time for...

GlaxoSmithKline/Pentraxin Therapeutics:“Small but symbolic” is how this deal earns its spot in this prestigious weekly. GSK this week signed a deal with UCL spin-out Pentraxin to develop a novel treatment for amyloidosis. So what? It means a few things: 1) GSK is serious about investing in very specialist diseases (amyloidosis affects about 80,000 people in the industrialized world, though many more are likely un-diagnosed); 2) Its smaller-is-better R&D structure appears to be helping it do so; 3) With a straight-from-academia R&D chief, expect a bunch of risky, early-stage alliances with old colleagues. GSK’s SVP Drug Discovery Patrick Vallance was Head of the Division of Medicine and Professor of Pharmacology at UCL before joining GSK in 2006, and he made the deal happen, according to Pentraxin’s head, Professor Mark Pepys. Showing GSK’s small-unit R&D structure at work, this deal involves both the pharma’s academia-focused Drug Performance Unit, plus the BioPharmaceutical CEDD. (If you have forgotten what DPUs and CEDDs are, read this.) That’s because Pentraxin’s program combines a small molecule with an antibody—a pairing that’s unprecedented in drug development, according to Pepys. The small molecule component is CPHPC, a pallindromic compound that targets serum amyloid P component (SAP), known to be associated with the deformed proteins involved in amyloidosis. (For more on the complex biology surrounging CPHPC and SAP check out "The Pink Sheet" Daily.) But although CPHPC does a great job clearing SAP from the circulation, it can’t quite eke all of it out of the abnormal protein deposits. Not good enough, then, for the majority of patients who already have major amyloid deposits and damaged organ function by the time they are diagnosed. So Pepys decided to add an anti-SAP antibody to mop up the remaining 10% or so of the SAP protein within organs and tissues. The one-two punch—first the small molecule, then the antibody—works in mice, but is nevertheless a highly risky development prospect. Safety issues multiply by far more than two. But for GSK, the money’s small—undisclosed early stage success-based milestones plus drug development milestones and royalties. What’s more, it gets a shot at what could be an important new therapy, and, possibly, an even longer shot in Alzheimer's and type 2 diabetes, where the treatment might work, too--Melanie Senior.

Human Genome Sciences/Morphotek: It's so nice when a research-oriented deal can move a company's stock price 10% isn't it? (Course it would be much more impressive if the uptick were more than 8 cents and the ticker symbol was trading above $1.) That's the bounce HGS got this week, when it announced it was pairing up with Eisai's Morphotek to identify promising cancer-fighting and immunology drug candidates. Through this deal, HGS gains access to Morphotek's antibody technology, with Morphotek validating targets discovered during the Maryland biotech's gene hunting days of yore. (Anybody remember when HGS used to do their own validation?) Morphotek will also generate the antibodies and conduct preclinical proof-of-concept studies before handing the molecules back to HGS. For its work, Morphotek retains certain opt-in rights related to the development and commercialization of each antibody developed under the collaboration. Under certain circumstances, HGS and Morphotek may also share other costs, including those related to R&D, manufacturing, and commercialization. Whether or not the deal amounts to much near term for HGS, the announcement is a welcome distraction from the negative news associated with the biotech's late stage pipeline. Earlier this month Human Genome announced disappointing results from its Phase III study of Albuferon, the biotech's hep C drug partnered with Novartis. The drug met the study's non-inferiority requirements but failed to deliver outstanding efficacy results; more troubling it also showed some signs of safety problems.

Biogen Idec/AVEO: If you're having trouble getting to work in Cambridge it might be the multi-trend pileup that is the March 24 Biogen-AVEO deal blocking the road. On Tuesday AVEO said that it entered a strategic alliance with Biogen Idec for the development and commercialization of its ErbB3 targeting antibodies (ErbB3 is an EGFR overexpressed in certain solid tumors). AVEO gets an undisclosed upfront plus milestones, and Biogen gets an option to develop and sell AVEO's (currently discovery stage) mABs for cancer and other diseases outside North America. Biogen's options are exercisable at POC and the big biotech will be responsible for leading global development on programs. The finances were not disclosed. Though the companies have said little about the deal specs we do know that the pact does manage to combine a handful of interesting trends: Optionality, Regionalization, and Corporate Venture (Biogen invested in AVEO's $53mm Series D in May 2007)--Chris Morrison.

Merck/Xencor: Is Xencor on the verge of a big deal-making break-out? The company announced its third deal in three months this week, teaming up this time with Merck in an exclusive licensing deal that gives the Big Pharma access to the biotech's antibody half-life prolongation technology for the development of antibodies around an undisclosed (always!) drug target. Like the Pfizer and CSL deals that preceded this transaction, there isn't a great deal of cash on the table. Xencor gains just $3 million upfront, but could garner an additional payment (value undisclosed) if Merck selects one of its souped-up antibodies. The biotech will also receive the usual--and highly theoretical--commercial development milestones and royalties on product sales. This time around the deal is limited to Xencor's Xtend technology not its Xmab platform, the source of interest for both Pfizer and CSL. (The recent deal with Pfizer gives that pharma access to both technologies.) One tricky problem with Mother Nature's antibodies is they often don't hang around long enough to do the work of wiping out a cancer call or blocking an overactive immune response. So inventive companies like GlycArt, GlycoFi, BioWa, and Xencor have developed patent-protected methods for messing with the mABs to make them last longer. That's the premise of Xtend anyway. "The ability to enhance the pharmaceutical properties of antibody drug molecules and customize this class of drugs for specific therapeutic settings is a central differentiating factor which Xencor will continue to pioneer," commented James Posada, Xencor's acting chief business officer, in a press release accompanying the news. You have to wonder though. Will deals like this one with Merck be enough to sustain the company until it can sign a licensing deal for its lead product, a Phase I anti-CD30 for Hodgkins lymphoma and other T-cell lymphomas? The 12-year-old company is one of the last of the first next-generation antibody engineering companies still left in the private sector. (Most of the others got bought up in the large molecule landgrab.) Just how patient are Xencor's investors? To date the company has raised a whopping $130 million in venture financing, including a $45 million Series E in 2007 with backing from MedImmune Ventures, Novo Nordisk, HealthCare Ventures, Oxford Bioscience Partners and Merlin Nexus.

No comments: