Call it the biopharma deal-making all-star break.
Boy was it quiet this week.
But the lull provided us with opportunity to explore how older deals have fared. In particular, the prompt came from Alnylam and its announcement that Novartis has chosen to continue working on RNAi technology, the second contracted annual extension permitted based on the original 2005 deal.
But how many deals don’t make it? Our hypothesis was that, given all the challenges to deals – financing, new priorities, arguments, changing management – partnerships, like marriages, would fail more often than not.
But a preliminary look through our Strategic Transactions database suggests that, in fact, partners at least stick together for the contracted period.
We took a look at deals signed between 2002 and 2004 (we wanted to give deals, most of which have a contract period of 3-5 years, time to fail), refining our view to those with total upfront fees of at least $1 million (figuring that real money would mean real deals). Of a total of 201 deals (with programs between discovery and phase III), 49 were withdrawn – or 24%. Seems to us that’s a pretty fair recommendation for doing deals.
Now a few caveats. First, we’re not sure we’re being totally comprehensive since private companies don’t have to announce their failures. But as it turns out, roughly half of the total number of deals we covered – 121 – were completed by private companies. And 28 of those deals got terminated. So, percentagewise, roughly comparable to the public side.
We’ll dig into the data a bit more over the next month or two and report what we find. But for the moment, the basic message looks to be: dealmaking looks to be more successful than we, at least, had supposed.
Enough data dredging. Time to review the present with…
Gilead/Johnson & Johnson: In a deal that should help Gilead maintain its market dominance in the HIV space, the big biotech signed up with Johnson & Johnson to create a new triple-therapy that will combine Gilead’s two-drug Truvada with J&J’s investigational non-nucleoside reverse transcriptase inhibitor TMC278 (rilpivirine). Gilead will contribute approximately $101 million to the combo drug’s development, while J&J will provide supplies of rilpivirine at a 30% discount. These kind of triple-therapy deals are becoming a profitable habit for Gilead (for our original analysis, see this IN VIVO story). The new combo drug, which could reach the market by 2011, will compete directly with Gilead’s own $1.6 billion Atripla, which combines the two Truvada components – Viread and Emtriva – with Bristol-Myers Squibb’s Sustiva. With Sustiva losing patent protection beginning in 2013 and BMS charging Gilead the full retail price for its drug, the deal gives Gilead strong incentive to switch patients over to the new drug, Credit Suisse analyst Michael Aberman wrote in a July 16 analysis of the deal. Gilead likely will enjoy higher profit margins with the new drug, added Lazard Capital’s Joel Sendek in a July 17 note.
Gilead will be responsible for manufacturing, registering and distributing the combo, while J&J will continue working toward US and EU approval of rilpivirine as a single agent. The NNRTI, a follow-on to J&J’s Intelence, launched in 2008 for treatment-experienced HIV patients, currently is in a pair of Phase III studies with data expected next summer. Gilead also gets worldwide commercialization rights to the combo, except for Japan and the developing world, where J&J will co-promote the product. Analysts believe the new product might have significant marketing advantages over Atripla, including the potential for a better side-effect profile, and a smaller, easier-to-swallow pill. – Joseph Haas
Hisamitsu/Noven: Mention Hisamitsu Pharmaceutical, a Japanese maker of pain-relieving patches, and you’re likely to meet with a blank stare—even from vets well steeped in the industry. (It’s our US/Euro centric failing, we know.) But after spending approximately $430 million to purchase Noven Pharmaceuticals, the company is adopting a formula frequently employed by other, better know Japanese drug makers to build its US presence. Think of Eisai’s acquisition of MGI Pharma; Takeda’s of Millennium; or Shionogi’s purchase of Sciele. In all cases, the acquisitions were to lay the ground work for a greater US commercial presence; the Hisamitsu/Novel deal, while of a different scale, is no different. “The acquisition will give Hisamitsu a new technology for drug delivery…that will help develop new products. It will also help Hisamitsu establish a US base for prescription drugs,” CEO Hirotaka Nakatomi acknowledged in a press briefing. The purchase could also be the prelude to another take-out: the acquisition of a Noven/Novartis JV called Novogyne, which markets hormone replacement therapy patches including Vivelle-Dot and CombiPatch. That’s because a buy-sell clause in the original Noven/Novartis deal stipulates that if one side offers to buy the partnership, the other side has the right to accept the offer or buy the JV at the same price. According to Caris & Co. analyst Jim Molloy, Hisamitsu’s “next step is to put a price on the table that makes Novartis happy” and doesn’t trigger Novartis to make a competing offer. Molloy told our sister publication PharmAsia News that Hisamitsu will likely have to overpay to get its hands on Novogyne. But that’s not necessarily the end of the world since the JV is considered a cash machine generating $50 million a year. “The cash flow alone will pay for this deal,” he says. —Daniel Poppy and Ellen Licking
Pfizer/Various research institutions in Ontario, Canada: Wherever you look, academics and pharmas are doing their best – define the activity as you’d like – either to end-run venture capitalists or find an alternative now that VCs so assiduously seem to avoid early-stage research. Those efforts range from HS LifeSciences’s QureInvest fund, which seeds innovative academic research and tries to match it early on with potential pharma partners (see Start-Up’s analysis of the model here) to direct pharma investment in university programs, like AstraZeneca's alliance with Virginia Polytechnic Institute and the Mayo Clinic to develop novel compounds for depression, or the tie-up between J&J’s Janssen Pharmaceutica and Vanderbilt's Program in Drug Discovery for a new class of schizophrenia drugs. And Pfizer’s been pretty academically active, too – a broad-based deal with three University of California campuses, and this week a collaboration with a coalition of Ontario, Canada-based research groups, going after colon-cancer biomarkers.
The biomarker goals of the Pfizer/Ontario partnership (called POP CURE -- an acronym of acronyms that’s just not worth explaining unless you’re writing the press release) might never have been commercial enough to form the basis for a venture-backed start-up. Moreover, Pfizer probably wouldn’t want to turn a biotech for biomarker development at this stage anyway given the commercial uncertainty of drug-linked biomarkers. For more on why alliances between biomarker companies and pharmas are relatively rare, read this article from The Pink Sheet). In this case, what helps keep them rare is government funding – the Ontario government’s $900,000 contribution to what will in effect be Pfizer’s commercial opportunity (granted any opportunity at all). Unlike a biotech, Ontario isn’t after financial support – it’s looking for jobs. And since VCs aren’t likely to provide them without actually starting companies (something they do only rarely these days), Ontario’s hoping some government cash will prompt Pfizer to at least maintain its Canadian employment.—RL
GSK/Abbott: All our skepticism about biomarker development deals aside, pharma is most certainly interested in using diagnostics companies to product-ize companion diagnostics based on a pharma’s own biomarker discovery work – at least in those rare instances where they seem to want companion diagnostics. Among those rare territories: oncology. This week comes news of another drug/dx partnership that moves the field beyond Her2 expression and KRAS testing and towards the use of molecular markers to select patients that have the best opportunity to respond to a particular new drug. GlaxoSmithKline broke new ground this week with the announcement of a deal to create a companion diagnostic for an immunotherapy that arose from its ongoing Antigen Specific Cancer Immunotherapy (ASCI) program. Abbott will develop a PCR-based test to screen non-small-cell lung cancer tumors for expression of MAGE-A3, an antigen expressed only on the surface of on NSCLC, melanomas, and other solid tumors but absent from normal cell types. GSK is currently enrolling patients in two global Phase III studies of its awkwardly named but potentially elegant MAGE-A3 ASCI therapeutic vaccine: one in NSCLC and a second in melanoma. Like most immunotherapy endeavors, ASCI is a long-term bet for GSK--don't look for a commercial product for at least five years--and the MAGE-A3 trials have been underway since 2002. Based on several studies, scientists at the Big Pharma discovered a set of genes that when present at the tumor site prior to MAGE-A3 ASCI administration were predictive of a clinical response to the vaccine. Further work internally and by Roche and Roche's partner Response Genetics (NOTE: an earlier version of this story incorrectly referred to Response Genetics as part of Roche) has given GSK greater confidence about the validity of this biomarker set—and presumably the immunotherapy as well. Now the Big Pharma is turning to Abbott to develop a companion diagnostic to be marketed alongside the drug. Out of 20 potential partners GSK picked Abbott based on criteria that included “the ability to have a strong distribution network in 5-10 years,” notes GSK’s Vincent Brichard, VP and head of immunotherapeutics. More about the Abbott perspective on this deal in the upcoming July/August IN VIVO.-- Mark Ratner
--BY ROGER LONGMAN
Image courtesy of Flickr user dmealiffe and used under a Creative Commons license.
Friday, July 17, 2009
Call it the biopharma deal-making all-star break.