DotW: The Rumorville

Pssst! Did you hear that Elan is up for sale? Probably, since it's hardly a secret that the company has been up for grabs since the start of the year, when the Irish biotech hired Citigroup to conduct a review of its business.

On Wednesday, CEO Kelly Martin added fuel to the rumor fire when he spoke at a Goldman Sachs healthcare conference, suggesting a strategic transaction "in the near term" was in the offing. "A lot of people are interested in talking to us," Martin said.

But as we all know talk is cheap. And talk certainly hasn't resulted in a deal with either BMS or Pfizer to date--two pharmas that have in recent weeks been rumored buyers of the perpetually troubled company.

Has Martin's bravuro performance assuaged investors or Elan's board? It doesn't look like it. On Thursday, Reuters reported Elan decided to forgo the proxy fight and nominated two dissidents to the board. (Perhaps Elan's board learned something from the recent experiences at Amylin and Biogen Idec?)Interestingly, Jack Schuler, cofounder of Crabtree Partners and a vocal critic of Martin, is one of the candidates. The annual meeting, scheduled for July 16, promises to be very interesting doesn't it?

What other rumors surfaced this week? Sanofi board members may have nixed a big acquisition according to Les Echos, after major shareholders rejected the planned purchase as too risky. Or maybe not. A Sanofi-Aventis spokesman said the company "formally denied" that a major acquisition project in the U.S. had been presented to the board. (Denial is a river in Egypt, right?) Wasn't it just one week ago that Sanofi's stock was on an upswing as people speculated the company had its eyes on partner Merck's shares of the animal health biz Merial?

And now that the FTC has come out against the 12-14 year exclusivity period for follow-on biologics, rumors are, of course, flying about what's actually feasible. Still think it's possible to get a proposed pathway for FOBs into the healthcare reform legislation happening this summer? According to "The Pink Sheet" DAILY, FDA is likely to be a critical player in this ongoing drama's next act. Will the agency testify before Congress or write a letter supporting a FOB approval pathway? Alternatively, will the agency adopt a cautious tone, much the way the Bush FDA chief medical officer Frank Torti did last September when he warned in a letter to Congressman Pallone of serious questions associated with the approvability of follow-on biologics? (Washington types, what are you hearing through the grapevine?)

Do you have Clorox wipes, Purell, and surgical masks handy? (For you DIY types, eHow.com notes that while pre-fab surgical masks exist, "sometimes it’s more fun to make your own." Somebody has got to get out more.) After weeks of rumors, the WHO finally pulled the trigger and raised the pandemic alert level to 6 (on a six-point scale), the first time in 41 years. What does the new alert level mean? Nothing radically different in the US, where public health specialists and the CDC put pandemic preparations on the front burner some time ago. (I know. You were secretly hoping for an updated color coded warning system ala the Homeland security threat notices weren't you?)

As you mull the events of the week, here are some items that are far from rumor. Your "just the facts, ma'am" analysis, courtesy of IVB's resident Sgt. Friday and...

Merck/Xenon Pharmaceuticals: So much for being distracted by its take-out of Schering-Plough. This week, Merck announced a small deal with privately-held Xenon Pharmaceuticals in the CV space. In what is now becoming de rigueur in the industry, this pact is a low money down (but certainly better than no money down), option-style arrangement that initially provides Xenon with research funding related to the development of its small molecule compounds. Xenon will perform validation studies using its clinical genetics platform, as well as drug discovery for those targets selected by a joint steering committee. Under the terms of the agreement, Merck has the option to exclusively license targets and compounds from Xenon for development and commercialization. In return, the biotech also stands to receive option-exercise fees, and milestone payments tied to research, development, and regulatory progress. Unlike other biobucks deals, milestones aren't sky-high: totaling up to $94.5 million for the first target and up to $89.5 million for each subsequent target selected for drug discovery. In addition, Merck will pay Xenon undisclosed royalties on sales of products resulting from the collaboration. Of course, Xenon retains the right to develop and commercialize certain compounds for which Merck does not exercise its option. Simon Pimstone, CEO of Xenon, waxed poetic in an over-the-top statement announcing the news. "We are very excited to be collaborating with Merck to define new therapeutics in the area of cardiovascular diseases," he said. "With this deal, Xenon is continuing its strategy of risk mitigation by select partnering, while retaining ownership of other programs." (What else was he going to say? "We wanted more money upfront, but we couldn't get it." That would have gone over well with Xenon's existing backers, which include MX Associates, LipoteRx, and Invesco Private Capital.) In truth, the deal probably is a big step forward for Xenon, which hasn't raised money since it pulled in $31 million in private financing in 2006, and hasn't inked a deal since late December of the same year, when it signed a pact with Roche worth $7 million up-front for its anemia inhibitors. Merck, of course, could use an infusion of innovative CV medicines. The drug maker suffered a major setback last week when it announced that preliminary results from the Phase III study of its highly touted rolofylline for acute heart therapy failure did not meet primary or secondary efficacy endpoints. In a note to investors, Sanford F. Bernstein analyst Tim Bernstein noted the setback represented a "psychological negative for Merck." (You think?)

Genentech/Bayhill Therapeutics: Genentech announces a deal and the whole world sneezes. Not really, but we do sit up and take notice. Genentech is definitely not one of the most active deal-makers in the industry; it's focus is typically on access to new technologies or compounds that bolster it's on-going work in cancer. For examples, recall last November's arrangement with Thermo Fisher Scientific for RNAi design and the October 2008 pact with GlycArt. Moreover, this is the first in-licensing deal announced since Roche took the big biotech private, providing an early glimpse in what to expect from Genentech biz dev now that it is a wholly owned subsidiary. (You'll be able to glean even more if you read the upcoming June IN VIVO.) As is typical for most BD deals involving Genentech (unless it's Genentech being bought), there's not a lot of money on the table: just $25 million and that includes an equity stake in the smaller biotech. (There are, of course, the requisite bio-bucks, which could bring privately-held Bayhill another $325 million in the product hits certain sales and regulatory milestones.) Interestingly the deal, which is focused around a Phase I/II compound called BHT-3021, seems to move Genentech into a new direction: type 1 diabetes. '3021 is a DNA-based immunotherapy designed to protect against an inappropriate immune response that triggers the destruction of insulin-producing islet cells. In an interview with "The Pink Sheet" DAILY, Genentech's head of business development, Joseph McCracken explained why the Big Biotech was interested in the compound: "The mechanism of action suggests that it could actually impact the underlying cause of type 1 diabetes, truly be disease-modifying, [instead of] just treating symptoms," he said. Under the deal, Bayhill will complete ongoing clinical work with '3021, to be reimbursed by Genentech. At that point, Genentech will assume all development, manufacturing and commercialization work for the compound, advancing '3021 through Phase II before handing the program over to a joint global development organization that will be managed by execs coming from both Genentech and Roche. Apparently Genentech had been interested in Bayhill's technology for quite some time--long before Roche's bid for the company came to fruition. McCracken's team brought the deal to Roche, explained why it was excited about the science behind '3021 and made the case that Genentech was in position to close the deal. The money should help Bayhill fund the rest of pipeline, including lead program, BHT-3009, a Phase III candidate for multiple sclerosis, and may spark additional deal-making. (If Genentech thinks the immunotherapy technology is a "go" will other Big Pharmas comes to the same conclusion?) That's important--the small company tried to go public last year but ultimately pulled its IPO due to market conditions. To date, it's raised an estimated $63 million in venture funding from backers including, Morgenthaler Ventures and Lilly Ventures.

GlaxoSmithKline/Shenzhen Neptunus: How many buzz words can we include in the write-up of this deal? This week's joint-venture with China-based Shenzhen is noteworthy despite its modest deal size because it seems to bolster the Big Pharma's vaccine distribution network in an important but opaque emerging market at a time when there is renewed fear about the global spread of swine flu. (How's that?) In addition to a cash infusion totaling roughly $30 million, GSK will provide the joint-venture with leading-edge vaccine technology and equipment. Stephen Rea, a spokesman for GSK, told sister publication PharmAsia News that the J/V should be operational by next year. "It might take a couple of years to begin producing vaccines at the joint venture," he explained, noting that the initial focus will be to produce a seasonal flu vaccine, but the outpost could also be used to generate a defense against swine flu. The J/V seems likeley to become a lifesaver for Shenzhen Neptunus, which produces vaccines, and recombinant human proteins, including interferon and interleukin-2. The firm has been fighting to stay afloat, hit hard by earnings losses, and the halt in March of production of its influenza vaccine. In a report submitted to securities regulators at the Hong Kong Stock Exchange--where the firm's shares are listed--Neptunus execs stated that the biotech outfit posted a loss of RMB 5.089 million for the first quarter of this year, compared with a loss of RMB 1.498 million for the corresponding period of 2008. Neptunus also revealed in the report that the Good Manufacturing Practices certification for its interleukin-2 facility had expired, and that to meet higher regulatory standards established by China's State FDA in 2008, they would be forced to make a significant investment into upgrading production.


CSL/Talecris: Ever since the Federal Trade Commission filed a complaint in late May to halt the proposed $3.1 billion deal between CSL and Talecris, a break-up has seemed in the cards. Realizing it didn't have the requisite hand to call FTC's bluff, CSL folded this week, shelving its planned acquisition of P-E backed Talecris, saying it was not worth the money and time to battle the agency in court. In early June, CSL's CEO Brian McNamee offered strong words in protest to the FTC's complaint that the proposed tie-up, which would have created the largest maker of blood plasma products, was not anti-competitive. But despite initially signaling that it would challenge the commision in court, CSL had a change of heart in the intervening week, announcing June 8 that it would pay Talecris a $75 million break-up fee. "CSL's Board of Directors did not believe that entering into a protracted litigation process with the FTC, with its inherent risks, substantial costs and lengthy distraction of CSL management and staff from planning and running our businesses would be in the best interest of our shareholders," said McNamee. That $75 million is likely cold comfort for Talecris and its private equity backers, Cerberus Capital Management and Ampersand Ventures. Back in 2005, Cerberus and Ampsersand put up the capital necessary to buy Bayer's plasma business and found the company, which was originally known as NPS Biotherapeutics. Talecris, which has roughly $1.4 billion in revenues, markets Gamunex, an intravenous immunoglobulin. The company was in the throes of attempting to go public when it pulled its IPO because of CSL's lucrative $3.1 billion offer last August. Because of the specialty pharma's lucrative revenue stream, the company is still a viable acquisition target but the question is who might be interested in picking it up. Bayer and Baxter, the other major players in the plasma market, are out of the running since they would generate the same FTC concerns as CSL. We suppose another private equity group or a big pharma company looking to diversify might make a bid. Alternatively, the company could be one of the first to test the IPO waters.

Image by flickrer Pricklebush used with permission through a creative commons license.