DotW: Straight To It

There's no time this week for snark or clever themes, since the IVB team is also busy pulling together the October issues of START-UP and IN VIVO. (You can rail all you want in the comments section about our slacker attitude.) So we'll get straight to what you all really want: write-ups of the week's most interesting M&A and licensing deals. Herewith your regular analysis...

Sanofi/Fovea: Sanofi-Aventis announced Oct. 1 it would purchase its fellow French company, Fovea, an ophthalmology biotech, for a reported total deal value of €370 million (about $538 million). Fovea CEO Bernard Gilly says his firm will receive a “significant chunk” of the money upfront, with the remainder designed as earn-outs. Fovea will have three years to meet specified clinical milestones in order to obtain the rest of the cash. An increasingly popular characteristic of big pharma acquisitions recently, the earn-out structure also is expected to provide significant incentive for Gilly and the rest of Fovea’s management to stay on. Fovea essentially will become the ophthalmology unit of Sanofi, with Gilly saying his company will have the flexibility to run its programs, but with a reliable source of funds and other resources.
After deciding to get into ophthalmology, Viehbacher and company reportedly scouted out nearly 100 biotechs, many of which were working on vascular endothelial growth factor inhibitor programs. But it selected Fovea, which is not working in VEGF at all. In addition to continuing its own work, Fovea, whose top programs are in-licensed, will be tasked with growing the ophthalmology unit through potential asset acquisitions. It also may get involved with the gene therapy-based ophthalmology programs Sanofi licensed from Oxford BioMedica this past April--Melanie Senior.

Sanofi/Merrimack: The same day as the Fovea acquisition, Sanofi paid $60 million upfront to Merrimack Pharmaceuticals for exclusive, worldwide development and co-commercialization rights to MM-121, a Phase I (yes, Phase I!!!) monoclonal antibody that potentially fights a broad range of cancers by blocking signaling through the ErbB3 receptor. Merrimack CEO Robert Mulroy said his team and Sanofi will spend the next few weeks determining the best cancer indications to pursue with ‘121. Preclinical studies showed the compound inhibited ErbB3 phosphorylation in lung, ovarian, prostate, renal, breast and colon cancer. Meanwhile, in the coming weeks, the Cambridge, MA-based biotech also plans to launch a Phase I/II study of ‘121 in combination with Tarceva in non-small cell lung cancer. The deal specifies that Merrimack will continue clinical development through Phase II proof-of-concept at which point Sanofi will take over development. Better yet from Merrimack's point of view, from this day forward the big pharma is footing the bill for the clinical work. (An enlightened view of alliances, don't you think? Either that or others were competing for the compound.) In addition to the generous upfront payment, the deal also includes significant bio-bucks – Merrimack could earn up to $470 million in milestones plus tiered double-digit royalties on product sales and retains U.S. co-promotion rights to the drug--Joseph Haas.

Johnson & Johnson/Crucell: Taking a plunge into vaccines, J&J will collaborate with Dutch biotech Crucell to develop and commercialize flu-mAB, a monoclonal antibody intended to protect against multiple strains of influenza. Under the deal announced Sept. 28, J&J purchased 14.6 million newly issued shares of Crucell for €301.8 million ($441.8 million), giving the pharma an 18 percent stake in Crucell. (Have you noticed J&J seems to be one of the few companies embracing the partial minority stake ownership model? It's deal with Elan also involved in 18% solution.) With the “swine” H1N1 pandemic strain re-emerging for the Northern Hemisphere’s fall flu season, a combination of public fear, government funding and increased private investment have re-invigorated the influenza market. The U.S. government recently approved and order batches of four H1N1 vaccines, with first doses due this month. J&J’s choice of universal flu vaccine as its first entry into the vaccine arena is viewed as a longer-term play. Crucell, which already manufactures and sells vaccines for a variety of diseases, will retain commercial rights to a majority of European markets for any product resulting from the collaboration. While only preclinical work has been done on flu-mAB so far, Phase IIa proof-of-concept trials are expected to begin in 2010.--Carlene Olsen

Merck/CSL: Merck waited a while to get back into vaccines but on Sept. 28 signed a six-year deal to market Australian firm CSL’s Afluria in the U.S. starting next year. Approved by FDA in 2007 for immunization of adults against virus subtypes A and B, Afluria is a non-adjuvanted trivalent seasonal flu vaccine sold in two different formulations – thiomersal-free pre-filled syringes and multi-dose vials. Previously partnered on the human papillomavirus vaccine Gardasil since 1995, neither Merck nor CSL disclosed the deal’s financial terms. Under the transaction, CSL Biotherapies, a subsidiary of CSL Limited, will supply Afluria to Merck, which will be responsible for all aspects of U.S. commercialization. Marketed in 27 countries, Afluria produced sales totaling $108 million during CSL’s most recent fiscal year, which ended June 30. CSL is one of four firms approved by the U.S. government to provide vaccine for H1N1 influenza this year, and through August it also had sold nearly 4 million doses of standard flu vaccine for this season in the U.S. market.--Emily Hayes

Abbott/Solvay: Abbott has seen the future and the future is Advanced Medical Optics, Visiogen, and now Solvay too. The week's deal winner--in terms of dollar value--was clearly Abbott's $6.6 billion acquisition of Solvay, a company that's been rumored to be up for grabs for months. The deal broadens Abbott's geographic footprint, paves its entry into vaccines and strengthens its ownership stake in the blockbuster TriCor /TriLipix cholesterol-fighting franchise. It also adds more than $3 billion to Abbott's annual sales and will be accretive near term. (Hey, isn't that more important than innovation)? Solvay won't be a complete salve, however. Buying its Belgian business partner increases Abbott's exposure to near-term generic competition, as TriCor loses patent protection in 2011. And the deal doesn't eliminate Abbott's dependence on the anti-tumor necrosis factor Humira, a franchise that is facing increased competition from rival brands. It didn't necessarily satisfy analysts either. "While a Solvay acquisition would likely be accretive to EPS, we would prefer to see Abbott pursue more strategic assets that would add better long-term growth," Credit Suisse analyst Catherine Arnold said in a Sept. 27 research note, ahead of the announcement. Convinving naysayers was a big part of Abbott's strategy in announcing the deal. The focus on the conference call wasn't so much on TriLipix, or Certriad, a fixed dose combo of TriLipix and Crestor that seems likely to be the future growth driver within Abbott's cholesterol franchise. No, Abbott's management played up Solvay's international abd branded generics offerings instead. "We recognized many years ago that growth comes in different forms," CEO Miles White said. "It comes from strong branded franchises in developed economies, as well as from branded generics in fast-growing emerging markets." The focus on high-growth areas such as emerging markets and branded generics is hardly surprising. It's a pattern that has been adopted across the pharmaceutical industry as the U.S. drug marketing landscape has become more challenging and shows again that in the on-going debate about whether to be big or small, most pharma execs say bigger is better.--Jessica Merrill