Saturday, April 04, 2009

DotW: The Pause That Refreshes

Call this week the pause that refreshes. March Madness officially comes to an end (in April) with the men's and women's final four match-ups this weekend. (Go Stanford--hey, we need to bring geographic and gender balance to our sports coverage at IVB.) And Monday is a high holy day for many, with churches (sorry, stadiums) filled to capacity to observe the opening of the 2009 baseball season.

Even as politicos tutored Barack Obama in the finer arts of french kissing--air kissing, people--at the G20 confab, our own industry continued to focus on the deals that might be. Eli Lilly's John Lechleiter avowed that his company is not interested in mega-mergers, but will be on the hunt for acquisitions. (And given the FTC's renewed interest in the Pfizer/Wyeth merger perhaps that makes sense.)

The goal is more deals like ImClone ($6.5 billion for a pipeline of me-toos?) Does this mean Amylin investors are on the phone letting their board know it's time to be finished with that pesky standstill it has with Lilly? (Hmm, Carl Icahn's been pretty occupied with Biogen these days.)

Lechleiter, apparently hungry, told the WSJ "we're planting a garden". And why not? These days there's as good a chance at harvesting a drug from arugula as there is from the research lab.

Also apparently on the deal-making hunt, but playing coy (see below) is Sanofi-Aventis, which continues to be linked in a potential deal with Solvay.

Meanwhile, the San Diego biotech Torrey Pines went virtual, laying off everyone but the company's CEO, CFO, and general counsel, as it mulls strategic alternatives. Such a drastic move is unlikely to be replicated a few hundred miles to the north at Jazz Pharmaceuticals, another biotech that has struggled of late. On Thursday, CEO Samuel Saks quit the troubled firm and hit the road with his singer-songwriter wife, Brigitte DeMeyer. Appropriately, no jazz concerts are part of the road-show, as DeMeyer's oeuvre is primarily bluegrass.

If the dealmakers caught a break this week, that wasn't true for people on the clinical beat. Of particular note, some clarity (?) in the Type II diabetes space, thanks to advisory committee meetings for saxagliptin and liraglutide. Gilead also made a splash with positive news for its hypertension drug darusentan. (Thanks to CV Therapeutics, they have a ready made sales force to sell the med upon approval.)

It's officially the weekend. Have a coke--or something stronger--and dig into another edition of...

Eli Lilly/Zydus Cadila: After striking collaborative research deals with India's Piramal Life Sciences, Jubilant Organosys and Suven, U.S. drug giant Eli Lilly has added Zydus Cadila as its latest partner for drug discovery and development of new cardiovascular treatments. The deal is another example of Lilly’s FIPNet strategy, in which the company aims to tap into interesting novel technologies and science while simultaneously hedging its risk by keeping the up-front monetary payments low. Under the terms of the deal, Lilly will provide Cadila with the chemical raw material and advice as the Indian drug maker shepherds the molecules through preclinical and early clinical stages of development. Lilly has the option to license resulting compounds at proof-of-concept and will pay Cadila potential milestone payments of up to $300 million, as well as royalties on sales if any of the compounds derived from the joint research program make it to market. Of all the Big Pharma, Lilly has been one of the most aggressive in inking deals with Asian-based companies to obtain novel chemical entities that add diversity to its pipeline. Like its counterparts Piramal and Jubilant, Cadila has an interesting pipeline of its own, including a Phase II dyslipidemia compound, ZYH1, and a novel diabetes treatment, ZYH2.

Genzyme/Bayer: This week Genzyme acquired from its partner Bayer Healthcare full rights to Campath, a humanized monoclonal antibody already approved as a first-line agent for treatment of B-cell chronic lymphocytic leukemia (CLL) that is also in multiple pivotal trials in multiple sclerosis. While both parties played up the win-win nature of the agreement, it seems to be an especially good deal for Genzyme, since it also gives the Massachusetts-based biotech two additional established oncologics, Fludara and Leukine, and is structured without an up-front payment. That's right people, three products for no money down. Right from the start, the deal is revenue generating: the Massachusetts-based biotech expects to pull in $185 million in 2009 from the three oncology programs and up to $700 million over the next three years. While Genzyme’s near-term out-of-pocket expenses are limited, it may end up paying big bucks to Schering in the future if Campath proves to be an MS blockbuster. According to the agreement, Genzyme will pay Bayer as much as $1.25 billion based on annual Campath revenues over the next ten years and future milestone payments starting in 2021. (Genzyme can buy its way out of the m/s by paying Bayer an additional $900 million in 2020.) Earn-outs for the oncology drugs aren’t quite so generous, but Bayer stands to receive up to $500 million for Fludara, Leukine, and Campath based on annual revenue and up to another $150 million in milestones beginning in 2011 if certain undisclosed projections are met. Meanwhile, in MS, Genzyme isn’t shouldering 100% of the ongoing development expenses associated with Campath: Bayer continues to pay one-third of the costs associated with the mAB. (Have we said this is a good deal for Genzyme?) Because the deal provides Bayer with the option to co-promote Campath in MS, Wall Street shouldn’t infer from this deal that the German pharma is forsaking a lucrative market that it helped pioneer when it launched Betaseron in 1993. “Bayer is not getting out of MS,” Andreas Fibig, chairman of Bayer-Schering Pharma, a division of Bayer. told sister publication "The Pink Sheet" DAILY.

Lilly/Amylin/Altea Therapeutics: It looked like a sensible deal, if small. Lilly/Amylin announced earlier this week a tie-up with Altea to develop a daily transdermal formulation of the GLP-1 analog exenatide (currently sold as a twice-daily subcutaneous injectable, Byetta). For an undisclosed up-front and total milestones including post-approval of up to $46 million, why not take a punt on an alternative delivery form? Lilly’s competitor in the diabetes space, Novo Nordisk, made a similar move last year, signing up Emisphere Technologies to develop oral versions of its own GLP-1 candidates, committing $10 million in first-year payments. Despite the disastrous failure of Pfizer’s inhaled insulin Exubera failure, which demonstrated needles aren’t as bad as cumbersome inhalers, needles are still a problem for some people. And that problem is perhaps worth spending a few tens of millions of dollars to find a way around. An FDA advisory committee’s decidedly lukewarm response yesterday to Novo’s GLP-1 analog Victoza throws a spanner in the works, though. (And we can’t help noticing that the Lilly/Altea deal was signed on April 1: a Fool’s deal?) The panel was concerned by a possible risk of thyroid c-cell cancer which may blight the entire longer-acting GLP-1 class. We’re not quite sure where the cut-off is between ‘long-acting’ and ‘short-acting’. And no-one seems to understand enough about the mechanisms behind the thyroid cancer risk to predict whether it’s relevant to humans anyway. (Signals were found only among rodents.) But if once-daily liraglutide is long-acting, it's likely Altea’s transdermal patch is too since it's "designed to be applied once per day to provide sustained levels of exenatide" according to Altea’s PR. If this turns out to be a drug-class that’s only safe in a short-acting form, clever sustained-release technologies will be redundant. We’re not saying the deal was a waste of money. It’s too early to tell what will happen in the GLP-1 space (other than that liraglutide’s approval will be delayed). But we wonder whether Lilly/Amylin would have signed the same deal, say, next week, given the outcome of Victoza’s grilling--Melanie Senior.

Sanofi/Kendrick: Sanofi seems to be slipping semi-secretively around the world with an open pocket book – if one goes by the number of times its name crops up on wire services as a potential acquirer, and the number of times it actually enters into deals. In March alone, rumors spread that it is after the pharmaceutical business of the Belgian chemicals company Solvay—only days after it appeared to be interested in Indian vaccine maker Shantha Biotech, and weeks after it appeared to be interested in buying out Merck, its partner in an animal health vaccine joint venture, Merial. On April 3 Le Figaro, citing unnamed sources, reported the company will spend $700 million to purchase Brazilian generic drugmaker Medley next week. Such a move would continue Sanofi's march on emerging markets, and is perhpas presaged by an actual confirmed tie-up. On April 2, Sanofi snapped up Laboratorios Kendrick, one of Mexico’s leading generics manufacturers. Terms were not disclosed, but Kendrick had revenues of about $34.9 million in 2008 and employs about 400. Sanofi is already the largest pharmaceutical company in Mexico with 2,500 employees and $805 million in 2008 sales, and the eighth largest generics player. The Kendrick acquisition will make it the leading generics player in what Sanofi characterizes as a branded generics market. This deal comes hot on the heels of Sanofi’s much, much bigger acquisition of Zentiva, which made it the number one branded generics manufacturer in some parts of Eastern Europe. Branded generics in particular seem to be a high priority for Sanofi and it's no wonder why. Eastern Europe and Mexico are among the fastest growing generics markets worldwide and are largely constructed around branded generics, according to IMS Health. Sanofi certainly expects to keep looking for regional generics acquisitions because it is a fast-growing and “very local business,” a spokesman said--Wendy Diller.

PPD/Magen: This week comes news of the sale of a derm player, but it wasn’t the big take-out many were expecting. In late March, reports surfaced that Stiefel Laboratories had hired Blackstone Group to seek offers—potentially as high as $3 billion--from interested parties. Even as that information gets under the skin of would-be acquirers there's news that privately-held Magen Biosciences, a Waltham, MA-based company focused on novel dermatology treatments, will be acquired by the contract research firm PPD for $14.5 million. The firm was founded in 2006 by a well known group of biotech entrepreneuers and investors, including Rich Aldrich, founder of RA Capital, David Fisher, chief of dermatology at Massachusetts General Hospital, and Christoph Westphal, co-founder of Sirtris Pharmaceuticals. Having raised $17 million in seed and Series A financing from a syndicate of backers including ARCH Venture Partners, TVM Capital, and IDG Ventures (now Flybridge Capital Partners), the purchase price is unlikely to result in an exit for Magen’s backers. Back in 2008, Magen inlicensed for an undisclosed sum a number of derm compounds from Eli Lilly that showed positive anti-inflammatory and anti-proliferative results in preclinical studies. It's a good thing they did: those compounds were the primary reason for PPD’s interest in the biotech. The buy-out gives PPD an entrĂ©e into the specialist field of dermatology. In a press release announcing the news, PPD CEO Fred Eshelman noted that dermatologic treatments generally have a “more straightforward path to regulatory approval.” That’s certainly part of the logic behind moves of another specialist drug maker, Valeant, which is trying to brand itself as a derm power-house thanks to the recent acquisitions of Coria Laboratories, Dow, and DermaTech.

(Photo courtesy of flickr user solidstate through a creative commons license.)

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