Wednesday, December 23, 2009

DotW: Last-Minute Shopping

Nothing like year-end deadlines to get the deal-making juices flowing. This month alone, we've counted 48 announcements of biopharma deals, an average of 2.4 per global business day, and that doesn't include financings. As far as we know, no business-development executives were crushed by a midnight mob, but you can bet lawyers poring over term sheets weren't offering any complimentary gift-wrapping.

You could attribute the flurry to concern about the unknowns of health care reform, worries over some yet-to-be announced new taxes or changes in financial accounting. But it's not quite what it seems: the total is actually on par with 2008 and way down from the Decembers of 2006 and 2007 (71 and 68, respectively). Isn't the New Normal exciting?

Maybe it just seemed like a mad rush because of all the drama outside. Or maybe it's because of all the big names. According to our count, 26 of the December deals involved Big Pharma. Of those, Pfizer seemed to be in the most partner-happy mode, with six deals to its name. Since Dec. 21 -- that's two days ago as of this writing -- it's inked four deals, all small, but all signals of its new preoccupations: in-licensing biotech (the stem-cell deal with Athersys and the Compugen deal for three drug candidates) and licensing out former priorities (The Medicines Co. gets Pfizer's ApoA-I cardiovascular compound). All of these fit with Pfizer's broader strategic intentions announced earlier this year, telling tales of days gone by and yet to come.

But a neat wrap-up wouldn't befit a year filled with unexpected shocks and twists. Despite pharma's ongoing efforts to derisk risk (Sanofi's acquisition of Chattem could fit that bill), the months to come are guaranteed to bring even more uncertainty. Who would have figured 10 or even five years ago that Teva's growth profile would seem more Big Pharma-ish than Big Pharma itself? Meanwhile, the deals announced this week are relatively small (Sanofi's being the exception), and only hint of what lies ahead… -- Wendy Diller

Pfizer/Athersys: In one of several transactions announced this week by the New York-based drug maker, Pfizer provided much-needed validation for Athersys’ transformation from a gene-therapy play to a company focused on stem-cell-derived therapeutics. The Dec. 21 licensing deal brings the Cleveland biotech $6 million upfront and up to $105 million in milestones. Pfizer obtains worldwide rights to develop and commercialize MultiStem, a preclinical stem-cell therapy, for inflammatory bowel disease. On an investor call, Athersys noted IBD affects an estimated 2 million combined patients in the U.S., core EU markets and Japan. Current therapies have limited effect and some chronic IBD cases result in surgery, but even such procedures don’t always produce a cure. Unlike embryonic stem cells, MultiStem is a biologic made from cells extracted from the bone marrow of adult donors. The Athersys collaboration is one of several forays by Pfizer into the stem-cell arena in the past two years. Last December, Pfizer paid an undisclosed upfront fee and research funding to license pancreatic progenitor cells derived from human embryonic stem cells from Novocell. In 2009, Pfizer signed a pair of agreements with academic institutions, licensing its patents related to the use of human embryonic stem cells to the Wisconsin Alumni Research Foundation, and partnering with University College London to develop stem-cell therapies for ophthalmologic indications including wet and dry age-related macular degeneration. -- Joseph Haas

Pfizer/The Medicines Company: Mimicking the risk-averse structures many Big Pharma companies have pursued in 2009, The Medicines Co. will take worldwide rights to the stalled cardiac drug ApoA-I Milano from Pfizer for $10 million upfront, plus milestones up to $410 million and single-digit royalties on sales if a product reaches market. TMC needs to add critical-care products to a portfolio threatened by next year's patent expiration of top seller Angiomax. CEO Clive Meanwell said decision-makers for the product likely will be the same critical care specialists TMC deals with in marketing Angiomax and Cleviprex, and plans to target with molecules in its late-stage pipeline. CFO Glenn Sblendorio noted that development milestones due to Pfizer total only $20 million, with $90 million pegged to regulatory filing and approval and the remainder to sales targets. The relatively low price TMC is paying is in stark contrast to the $1.25 billion Pfizer paid to bring in ApoA-I Milano in its 2003 acquisition of Esperion. -- JH

Teva/OncoGenex: Teva gave $60 million upfront and up to $370 million in milestones to OncoGenex in exchange for a global license to co-develop and commercialize OGX-011, a second-generation antisense compound ready for Phase III. Despite the solid deal terms, the Bothell, Wash., biotech's stock tumbled on the news Dec. 21. After closing Dec. 18 at $29.65 per share, the biotech’s stock dropped to $21.13 the day the deal was announced, though it has since rebuilt some value. Perhaps investors didn't notice that Teva’s upfront included a $10 million equity stake in OncoGenex at $37.38 per share, a level at which the stock hasn’t traded since late September. The firms will collaborate on an ambitious Phase III program – three trials are planned in various cancer types to demonstrate '011’s efficacy as adjunctive to chemotherapy – but Teva will cover all development costs. Should '011 reach market, OncoGenex has the option to co-promote the drug in North America and is eligible to receive sales royalties ranging in percentage from the mid-teens to the mid-20s. -- JH

Eli Lilly/Kowa: Lilly will help commercialize Livalo, a synthetic statin used to treat primary hyperlipidemia and mixed dyslipidemia, which are characterized by abnormal levels of cholesterol and fatty substances in the blood. Kowa Pharmaceuticals America, a U.S. subsidiary of the privately-held Japanese firm, will get an undisclosed upfront payment. Both companies will copromote in the U.S., with both supplying sales reps and sharing marketing and development costs. Kowa, which is based in Montgomery, Ala., will record all U.S. sales and pay Lilly an escalating co-promotion fee based on net sales. Lilly has exclusive rights to commercialize Livalo in Latin America. Livalo has been tested again Pfizer’s Lipitor and Merck’s Zocor in patients with primary hyperlipidemia or mixed dyslipidemia. -- Ed Silverman

AstraZeneca/Novexel/Forest Laboratories: About a month ago, we noted that deals for clinical-stage antibiotics or their sponsors were topping off around $500 million. Bingo! AstraZeneca is buying antibiotic developer Novexel for $350 million, plus cash and contingencies that could bring the deal to $505 million. Note, however, that Astra will get a big chunk of the cash back from Forest Labs in a complicated shuffle. Paris-based Novexel’s lead compound, NXL-104, is a beta-lactamase inhibitor that fights resistant gram-negative bugs, a growing threat in hospital settings. The compound is in Phase 2 testing in fixed-dose combination with Forest’s ceftaroline, and Forest has North American rights. Once the AZ buyout closes early next year, Forest will pay AZ $210 million for global rights to the '104/ceftaroline combo, then it will license rights outside North American and Japan back to AZ. Forest will also gain partial rights to the combination of ‘104 and ceftazidime, an off-patent antibiotic that Novexel has been testing with '104. Novexel spun out of Sanofi in 2004 and took €90 million ($129 million in today’s dollars) across two rounds of venture funding. Shareholders get the $350 million cash payout, plus reimbursement for the estimated $80 million cash left on hand at the close of the deal, along with potentially $75 million more for an undisclosed milestone. -- Alex Lash

Incyte/Lilly: Less than a month after scoring a big-bucks deal with Novartis for its lead myelofibrosis candidate, Incyte received another vote of confidence for its JAK inhibitor program. Lilly bought global rights to an early-stage molecule aimed at inflammatory diseases for $90 million upfront, $665 million in potential milestones, and up to 20 percent royalties on future sales for the JAK1/JAK2 inhibitor INCB28050 and follow-on compounds. Incyte will get an option at the start of Phase IIb to co-develop on a compound-by-compound and indication-by-indication basis. The firm expects upfront and milestone payments will fully cover its share of late-stage expenses. Royalties could stretch to the high 20s if Incyte takes advantage of the co-development option. Last month, Novartis agreed to pay $150 million upfront plus a $60 million retroactive milestone payment for development and commercialization rights outside the U.S. to INCB18424, a JAK1/JAK2 inhibitor in Phase III for myelofibrosis. More than $1 billion in potential milestones are also part of that deal. -- Emily Hayes

Seattle Genetics/GlaxoSmithKline: GSK is licensing Seattle Genetics' proprietary antibody conjugate technology, a move that further confirms Big Pharma's growing interest in antibody adjuvants to enhance their immunotherapy initiatives. Glaxo will pay $12 million upfront for rights to use the biotech’s ADC technology with multiple antigens. Glaxo will be responsible for research, product development, manufacturing and commercialization of any ADC products that originate from the deal. In return, Seattle Genetics could snare up to $390 million in milestones if all ADCs in the collaboration are commercialized, plus mid-single-digit royalties on worldwide net sales. The companies didn't disclose the specific targets or therapeutic areas, but cancer immunotherapy seems a likely focus. It's the third deal for SeaGen in nearly as many weeks. In November, the biotech announced it was expanding its 2007 licensing deal with Agensys, a subsidiary of Astellas Pharma, to include more targets. On Dec. 15, the firm announced a deal involving rights beyond the U.S. in which Millennium, a subsidiary of Takeda Oncology, gained marketing rights to its lead product, SGN-35 (brentuximab vedotin). -- EH

Chattem/Sanofi-Aventis: Sanofi-Aventis will try its hand at over-the-counter sales in the U.S. with its $1.9 billion offer to buy U.S.-based Chattem. Announced Dec. 21, the deal will further diversify the Paris-based pharma before some of its major prescription brands, notably the Plavix bloodthinner, face generic competition. Since Chattem is an established player in the U.S. OTC market, the acquisition would enable Sanofi to switch its antihistamine Allegra into an OTC product without losing a significant chunk of profits to licensing deals. At the same time, the deal allows Chattem to take advantage of Sanofi’s global network and market its products outside the U.S., including the emerging markets that Sanofi is now targeting. The U.S. OTC market was worth $21 billion in 2008, or 25 percent of global OTC. The U.S. market also is a "relatively fragmented" one, making the field more open to new players, and it is growing at a rate of about 4 percent, noted Sanofi executives. -- EH

Photo courtesy of flickr user donebythehandsofabrokenartist.

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