Friday, September 04, 2009

DotW: On the Front Burner

It's one of life's great ironies that the minute children head back to school, the mercury soars. It isn't just the temperature that's heating up, however.

The tepid deal-making climate of recent weeks came to a slow boil this week with Dainippon Sumitomo showing the Japanese aren't afraid to pay a bundle to build a presence in the U.S. market (see below). Too bad the seventh largest Japanese drug maker is late to that party--Takeda, Eisai, and Shionogi get bragging rights for being early adopters.

DxS continued to get in on the companion diagnostics action, with a tie-up with Lilly's ImClone division for a diagnostic test for Erbitux. Talk about serial monetization--DxS has partnered with nearly every developer of an EGFR inhibitor, from AstraZeneca to Boehringer Ingelheim to Amgen. Will the company's strategy work? The debate over business models for companion diagnostics rages on...

So, too, does the ongoing debate over health care reform. (It never did get back burnered, did it?)

Congress won't be back in session until next Tuesday but already President Obama is stirring the pot with an address on the hill set for next week. It's likely to be the most important speech of the Prez's career to date--his honeymoon lasted a little bit longer than 100 days, but poll numbers show he's got some work to do, especially on the health care front.

Meantime things are heating up between Biogen and Elan. In a surprise ruling yesterday, Judge Deborah Batts ruled in Biogen's favor, giving Elan just 23 days to sort out some new deal with J&J that doesn't infringe on the two biotech's change-of-control provision for Tysabri. (Note to Elan's CEO Kelly Martin: good luck with that. And fear not, if things don't work out, there's always a nice "no deal of the week" write-up as compensation.)

Like health care reform, swine flu never really got off the front burner either. It may not count as a four letter word (yet)--unless you are Miss Piggy--but if you need a refresher on proper "H1N1 etiquette" Elmo's your guy--er, muppet.

We hope the three day weekend provides a chance to cool down. Until then, here's another edition of

Dainippon Sumitomo/Sepracor: Stop the presses! Another Japanese pharma wakes up to the challenges of selling in its home market and wants to diversify, buying a toe-hold in the U.S. In 2007 Eisai got the ball rolling with its acquistion of MGI Pharma; last year saw the billion dollar deals by Takeda (Millennium) and Shionogi (Sciele). Now it's the turn of Japan's seventh largest drugmaker, Dainippon, which officially announced Sept. 3, it was buying specialty pharmaceutical player Sepracor in a deal worth $2.6 billion. At $23-a-share, Dainippon's cash offer represents a 27.6 percent premium over Sepracor's Sept. 1 closing price of $18.03. The deal gives Dainippon a portfolio of marketed and pipeline medicines, including the sleep aid Lunesta (don't forget the moth!), the asthma medicine Xopenex, and anti-epileptic Stedessa, which is under review at the FDA. Perhaps more importantly, the deal also provides Dainippon with a ready-made commercial group, including 1,200 sales reps and an experienced regulatory team. That's important because the Japanese pharma is in the throes of preparing an NDA filing for its novel schizophrenia drug lurasidone. Phase III data released in August showed lurasidone was significantly more effective than placebo in treating schizophrenia with similar effects on weight and total cholesterol. But the anti-psychotic market is crowded, and positive data alone will not be enough to grab market share, especially come 2011 when Eli Lilly's Zyprexa is scheduled to go generic.

Leo Pharma/Peplin: The privately-held Danish firm Leo Pharma scooped up the Aussie turned U.S. biotech this week in a deal worth about $287.5 million in cash. It's proof yet again that medical dermatology has gotten under the skin of at least some biopharma cos. (Want other proof? Think GSK/Stiefel Labs. On a much smaller scale 10-year-old SkinMedica sold two derm assets this week to Bayer for an undisclosed price) In the case of Peplin, the purchase price, which involves a CHESS Depository Interest (hey, it's still partly Australian), amounts to a 72% premium to the company's Aug. 31 close of A$0.60. Leo is far from a household word stateside, but that doesn't mean it's not bringing home the bacon--a sizzling $1.1 billion in 2008, up 9% from 2007. As part of the transaction, Leo is also providing Peplin with access to credit of up to $24 million until the deal closes. Peplin didn't say what the money would be used for, but it has a substantial - and costly -- development program underway for its late stage actinic keratosis medicine, even as it sits on just $17.6 million in cash and cash equivalents. For the money, Leo gets Peplin's lead product, a gel called PEP005 currently in Phase III clinical trials for treatment of actinic keratosis, a common skin lesion, on both head and non-head extremities. AK lesions can lead to cancer if they are not treated, but current therapies are cumbersome and not effective enough.

Bayer/Algeta: Interest in phase III oncology products continues to bubble too. Bayer fell hook line and sinker for Norwegian cancer therapeutics maker Algeta's radiopharmaceutical Alpharadin this week, inking a deal worth $61 million upfront and $800 million in extra bio-bucks. The German drug maker has agreed to foot the bill for most future development costs of Alpharadin as a treatment for bone metastases from HRPC and other cancer indications.
A formulation of radium 223 chloride, Alpharadin is being tested in men with late-stage, hormone refractory prostate cancer, an indication where the only drug approved is the chemotherapeutic agent docetaxel. Big Pharmas have been keenly interested in therapies for HRPC despite some late stage flame-outs such as satraplatin. Recall Johnson & Johnson snapped up the oral, Phase III abiraterone (CB7630) for advanced prostate cancer via its nearly $1 billion planned acquisition of Cougar Biotechnology earlier in the year. For recent investors in Algeta--the company raised a $37.5 million PIPE earlier in the year with backing from Abingworth--the partnership news provided a quick return, and showed the wisdom of VC investment in public companies. Abingworth and its co-investors got their shares at a 28% discount when they did the deal in February; the stock price has been on a steady climb from 10.90 Kroners ever since, with the company's share price reaching 56 Kroners Sept. 3, the day the Bayer deal was announced.

Roche/PTC Therapeutics: PTC Therapeutics' GEMS technology platform certainly has lived up to its name of late. The privately held biotech announced a new R&D collaboration with Roche on Sept. 2 that could yield nearly $1 billion in milestones over the life of the deal. (In your DOTW two-fer, the biotech also reported that Celgene exercised its option to advance work on a joint oncology discovery project.) As part of the Roche deal, PTC gains $12 million upfront, as well as all important research funding (every little bit helps, we say). In exchange the biotech will use its GEMS (Gene Expression Modulation by Small molecules) technology, designed to yield orally available compounds that modulate post-transciptional control mechanisms, to identify candidates for four central nervous system targets the companies will select jointly. Of course, Roche handsomely threw in some healthy bio-bucks: PTC could earn up to $239 million per target in research, development, regulatory and commercialization milestones, as well as double-digit royalties on sales from any resulting product, under the deal. (Nice, but if that works out PTC will be a Roche subsidiary long before investors see that money.) Meantime, PTC continues to push forward with its Duchenne muscular dystrophy therapy, ataluren. The orally available compound, which is partnered with Genzyme in a deal that leaves PTC with North American commercialization rights, is also being studied as a potential treatment for cystic fibrosis and hemophilia.

Image courtesy of flickrer dan_greenberg used with permission through a creative commons license.

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