Saturday, January 30, 2010

DotW: State of the Union

In case you missed it, President Obama peeled back the layers of the onion this week, causing U.S. generals, Supreme Court Justices, and the Republican minority to week. The prez reaffirmed his belief in the necessity of health care reform but offered no concrete specifics about what it would take to actually get a bill signed.

Meanwhile the state of the biopharma union is decidedly mixed. Johnson & Johnson announced the first drop in sales since the Great Depression; Lilly’s earnings were less than stellar thanks to a lagging Effient launch; and AstraZeneca announced additional job cuts across its far-flung organization. (In case you are wondering, R&D will be hit again, as the company seeks to reduce its internal R&D footprint.)

Shareholder activism continues to be the rage in our industry, prompting WWCID moves from Genzyme. The Big Biotech announced it was changing executive compensation, backing away from salaries and bonuses only tied to operating income, and also strengthened the role of its independent director this week. Will such moves appease Icahn and other major institutional investors? It’s hard to say but you can bet Genzyme is paying close attention to events happening at its nearby neighbor Biogen, given Icahn is aiming to put another three members on that company’s board.

The state of biopharma dealmaking was decidedly light this week. Perhaps the flow of information related to the poorly named iPad distracted. Whatever the reason, IN VIVO Blog, in an effort to provide for the common defense and promote the general welfare, brings you another edition of Deals of the Week. (Domestic Tranquility is not, however, insured.)

Flexion/AstraZeneca/Merck Serono/Unnamed Big Pharma: Flexion Therapeutics raised its profile on Jan. 29, announcing it has licensed in four clinical-stage compounds from a trio of drug makers: AstraZeneca, Merc Serono, and an undisclosed drug maker. It topped off its $33 millions Series A with another $9 million from Pfizer Venture Investments. (Oh, corporate venture, how we love you.) According to CEO Mike Clayman, the various deals came together over recent months but the company decided to announce them all at once. Flexion's original model supposed that pharma companies would be more eager to part with their shelved compounds if they held "clawback" rights, but Clayman said only one of its four programs has such a provision. He was unable to disclose which of the candidates it was or any of the financial terms of the various deals. (Want more? Check out this January 2010 IN VIVO feature.) Founded in November 2007 with $3 million in seed funding, Flexion seeks to take advantage of large pharma's excess discovery capabilities by licensing potential high-value specialty compounds and developing them through proof-of-concept and beyond. It's no coincidence that the company's business plan resembles that of Eli Lilly's Chorus unit - Flexion principals Clayman and Neil Bodick founded Chorus before striking out on their own. The company is focused on specialty products so that it won't have to partner them to advance to market, Clayman added.—Joseph Haas

UCB/Sanofi-Aventis/Teva: UCB has slowly but surely been paring down its primary care activities in favor of specialty products, even garnering an IN VIVO Blog Deal of the Year nomination for its emerging markets deal with GSK. Today, the company announced it would accelerate that process by offloading US rights to its soon-to-be-off-patent allergy drug Xyzal to Sanofi-aventis and end its co-promotion around Teva’s albuterol ProAir. The future of UCB now rests largely on the emerged-market performance of its immunology and neurology franchises, dominated by Cimzia, Vimpat and Neupro. It will hang on to Tussionex, its cough remedy, but will cease using a sales force to promote the drug. UCB didn’t mention the terms of either the Sanofi agreement or the Teva deal cancelation, nor how many jobs would be affected by the move. It did note that these moves, along with previously announced restructuring in Europe, would result in a €70 million post tax charge that will lower 2009 earnings accordingly.—Chris Morrison

GlaxoSmithKline/Amgen: Split indications are a potentially messy reality for biologics with potential wide-ranging utility. Amgen knows that all too well given the fracas that ensued over Epogen. But the company seems willing to tread in those churning waters--as long as the partner is Glaxo. In in its second indication-specific deal with the Big Pharma in less than a year (Prolia for PMO was the first), Amgen this week announced a co-promote agreement with GSK's derm division, Stiefel, around its flagship tumor necrosis factor drug Enbrel. The agreement--a defensive move on the part of Amgen designed to help the company maintain its leadership position despite an increasingly competitive and crowded field--has Glaxo's sales reps promoting the drug to U.S. dermatologists. Terms of the deal weren't disclosed. Importantly, the marketing relationship extends only to dermatologists and has no impact on Amgen's existing promotional agreements with Pfizer, which co-markets the TNF-alpha inhibitor with the biotech in the US and has sole marketing rights to the drug in other parts of the world. In the psoriasis market, Enbrel is now the elder statesman, facing stiff competition from other anti-TNFs such as Abbott's Humira as well as more novel agents, including J&J's recently launched Stelara, a first-in-class interleukin-12 and 23 blocker. It's not clear whether the move will be enough to bolster Enbrel's long-term market share, however. While Enbrel remains "the first-choice biologic" for now, Decision Resources analyst Irene Koulinska told "The Pink Sheet" DAILY that she "expect[s] Humira to continue to steal patient share.--Jessica Merrill

Bristol-Myers Squibb/Eli Lilly: Who says earnings calls can't be a source of deal news? (A pox on such cynicism.) In their same day earnings calls on Jan. 28, Bristol and Lilly revealed they'd reached a d├ętente regarding ownership rights to necitumumab, a fully humanized version of the epithelial growth factor blocker Erbitux that has shown encouraging results in Phase II studies in lung and colorectal cancer. Specific details of the co-development/co-promotion agreement weren’t disclosed on the call, “The Pink Sheet” DAILY reports BMS will pay 55% of the costs associated with U.S. clinical studies and 27.5% of the price tag for global trials. Assuming necitumumab actually makes it to the market, BMS will book sales of the drug in the U.S. and Canada and keep 55% of the profits, with marketing costs split evenly between the two firms. In Japan, the two pharmas will split commercialization costs and profits equally as well. Necitumumab became a bone of contention back in 2008 when Lilly won bragging rights as the ultimate acquirer of ImClone Systems for $6.5 billion. Just how important will necitumumab be to Bristol, which is aiming to be a major oncology power house? Bristol didn't offer any guidance on the earnings call, but at least one analyst is predicting peak annual sales of $300 million by 2015. That's hardly a blockbuster.--JH

Sanofi-Aventis/Minsheng Pharmaceutical: Sanofi likey consumer health and emerging markets. And boy, when you can use those two phrases in the same sentence, it’s guaranteed to be a deal. On Jan. 29, the French pharma announced an agreement with Minsheng Pharmaceutical to create a new consumer health care joint venture in China focused on vitamins and mineral supplements. Financial terms of the deal, which has apparently been in the offing since Oct. 2009, weren’t disclosed but Sanofi will own a majority share in the J/V. Minsheng currently produces the most popular supplements in China, including the 21-Super Vita multivitamin-mineral tablets. But the Hangzhou-based firm is struggling to maintain its preeminent sales position, facing growing competition from foreign supplement brands, especially Amway’s Nutrilite and Pfizer/Wyeth’s Centrum. Sanofi’s rationale for the deal is pretty easy to understand: access to one of the fastest growing OTC markets in the world. Analysts estimate the Chinese OTC market, which is dominated by vitamin and mineral products, generated just over $10 billion in 2008. In addition, it is forecast to grow by double-digit percentages over the next 5 years. (That’s a whole lot of gingko biloba.) Moreover, Sanofi has clearly shown its commitment to the consumer sector as a way to diversify away from the development risks associated with its branded pharmaceuticals and the potential vagaries of health care reform. In December the company spent $1.8 billion to buy the OTC and personal care product specialist Chattem to gain a coveted toe-hold in the U.S. consumer space. Beyond Chattem, the company has also in recent months scooped up Medley Pharmaceuticals, Symbion CP Holdings, Laboratoire Oneobiol, Kernpharma, and Laboratorios Gramon in attempt to double its consumer product offerings via bolt-on acquisitions.—Ellen Licking

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