Friday, April 02, 2010

Deals of the Week Keeps Its Friends Close and Its Enemies Closer

Some say that everything you truly need to know in life you learned in kindergarten: take naps, share with others, don't pick your nose in public.

It's also true that most M&A can be described in the language of the high-school homeroom. Those two CEOs are having such a bromance; they totally think they're BFFs! That company's outside counsel was so lame sauce!

And a hostile bid that goes friendly... kind of? Frenemies!

The latest drug-industry frenemies are OSI Pharmaceuticals and Astellas Pharma. Recall Astellas began stalking OSI more than a year ago, informally offering to buy the biotech for $55 to $57 per share. When OSI wanted nothing to do with the Japanese firm, Astellas announced Mar. 1 a hostile $52-per-share bid. Investors thumbed their noses by immediately running the share price to $60, where it mainly has stayed. OSI has been open to a white knight offer, but none has emerged.

Astellas's tender offer was supposed to end yesterday, but the firm said earlier this week it would extend it to April 23. Separately Astellas said it would accept OSI's offer to check out its data room under a confidentiality agreement. Was this the daylight Astellas needed to slide over to OSI in the cafeteria? Ask it to the prom?

Astellas seemed ready to do its part to be, you know, more than friends. It promised that until May 15 it wouldn't pursue its lawsuit against OSI, press forward with its proxy fight to replace OSI's board, or acquire any tendered shares. (Not that there were many to acquire: as of Mar. 30, OSI owners had tendered 38,000 out of about 58 million outstanding shares.)

But as Astellas shakes with one hand, in the other it still grips a blunt instrument -- perhaps a 竹刀, しない? -- with which to deliver the occasional thwack upside the head. The latest blow came Apr. 1, no fooling, in a presentation in which Astellas aggressively defended its $52-per-share offer. It said OSI management has consistently failed to please Wall Street and warned that a rejection of Astellas's bid could send OSI down the same value-destroying path Biogen Idec traveled after it rebuffed Carl Icahn in late 2007.

For good measure -- though our grandmother would have called it chutzpah -- Astellas cited its own failed hostile $1.1 billion bid for CV Therapeutics as proof of its successful negotiating style: "As evidenced by the CV Therapeutics process in 2009, Astellas is a disciplined buyer that understands intrinsic value, and it will not pay beyond that value simply to win an asset."

How convincing is Astellas's argument? Judge for yourself. The entire presentation is here. Of course, this time around Astellas has painted OSI and its lucrative cancer fighter Tarceva as a key to building a top oncology business in five years. Shouldn't Astellas work a little harder on the "friend" part and not so much on the "enemy"? How about brushing up on its German, Italian, French, and Romansch to see how Roche pulled off two hostile deals for Ventana and Genentech?

As for you, dear reader, you have access to our data room anytime of the day... or night. In fact, come on up right now, and have a long look at...

GlaxoSmithKline/Isis: GlaxoSmithKline added to its option-based development portfolio as well as its RNA drug-discovery capabilities with an alliance with Isis Pharmaceuticals, which it unveiled March 31. The firms will apply Isis's antisense platform, which develops compounds that bind to messenger RNA and inhibit the production of disease-causing proteins, to develop new drugs against five targets including infectious diseases and conditions causing blindness. The emphasis will be on orphan drugs, an area where the big pharma has been building its efforts. Isis will receive $35 million upfront to develop the compounds through Phase II proof of concept, at which point GSK will have an option to license and take over development and commercialization. On average, Isis can reap up to $20 million in pre-PoC milestones per program, with total biobucks for the deal running to $1.5 billion. GSK has been making deals in the RNA space for some time. Partners include Sirna Therapeutics before it was bought by Merck & Co., Santaris Pharma and Isis spin-off Regulus Therapeutics. For GSK, option-based deals are nothing new, either, but this is the first for Isis. "GSK gets access to our technology, but in the meantime, we stay in control, moving through drug discovery in a much more expeditious way," Isis CEO Stanley Crooke told "The Pink Sheet" DAILY. Isis expects to move a first drug from the collaboration into clinical development this year. -- Jessica Merrill

MDRNA/Cequent and Ipsen/Dicerna: What is this, RNAi week? The so-called "second generation" of RNA interference companies, trying to maneuver around the patent shadows cast by Alnylam Pharmaceuticals and Merck's Sirna, are cutting deals of their own as the big guys have fallen quiet. Both deals we're highlighting this week relate to an "alternative" RNAi technology based on the Dicer substrate, an enzyme complex that lies "upstream" in the chain of events that lead to gene silencing. Both MDRNA and Dicerna licensed the technology from the City of Hope research center near Los Angeles. But MDRNA, whose CEO Michael French was a top exec at Sirna before the Merck acquisition, is grabbing a second RNAi platform. The suburban Seattle firm once known as Nastech is buying privately held Cequent Pharmaceuticals of Cambridge, Mass. for $46 million in stock, which comes to about 37.4 million shares based on MDRNA's $1.23 share price just before the deal was announced. Cequent's engineered non-pathogenic bacteria both manufacture and deliver RNA molecules into the target cell. MDRNA nabs the platform and an early stage pipeline with a lead candidate soon to enter Phase 1 for the genetic disorder familial adenomatous polyposis. Perhaps more importantly, it also gets cash. It didn't say how much, but it made clear that Cequent's green will fund the combined firms' operations into December. In the second deal, French specialty firm Ipsen is paying an undisclosed amount to Dicerna Pharmaceuticals to build RNAi-peptide conjugates that focus on oncology and endocrinology. Unlike a previous license deal with Kyowa Hakko Kirin, Dicerna keeps a lot more downstream rights but also bears some of the price tag-- a 50/50 split of costs and profits, in fact.--Alex Lash

Sanofi-Aventis/AgaMatrix: Sanofi-Aventis is bolstering its diabetes business through an agreement announced March 31 with privately-held AgaMatrix to co-develop and commercialize blood glucose monitoring devices. The deal follows soon after Sanofi's Feb. 10 year-end earnings call, during which executives said the addition of blood glucose monitors and insulin pumps would give their diabetes business a competitive edge as they cast a wary eye on the market debut of Novo Nordisk's long-acting GLP-1 Victoza (liraglutide). New Hampshire-based AgaMatrix will develop BGMs exclusively for Sanofi using its WaveSense technology, which aims to improve the accuracy of glucose readings. In return, AgaMatrix should benefit from Sanofi's global brands and marketing reach. Sanofi's long-acting insulin Lantus brought in $4.2 billion in sales in 2009, while short-acting insulin Apidra reaped $185 million. Sanofi is AgaMatrix's largest partner to date. Financial terms of the agreement were not disclosed, though AgaMatrix cofounder Sonny Vu told "The Pink Sheet" DAILY the five-year contract does not give Sanofi rights to acquire AgaMatrix or take an equity stake.--Carlene Olsen

Takeda/AMAG Pharmaceuticals: On Thursday April 1, Takeda and AMAG Pharmaceuticals announced the Japanese firm would commercialize ex-U.S. the smaller co's Feraheme, an intravenous iron already approved in the U.S. to treat iron deficiency anemia (IDA) associated with chronic kidney disease (CKD). A deal was not unexpected: AMAG has been saying for months that one of its top goals is to partner rest of the world rights to a company with global reach. Under the agreement's terms, Takeda gets exclusive rights to the iron deficiency anemia drug in five regions, including Europe and Canada. It will pay AMAG $60 million up front and another $220 million tied to downstream milestones for the privilege. Interestingly, AMAG will continue to oversee and pay for ongoing clinical trials of the medicine--even in the territories Takeda licensed. (Phase III trials in the U.S. and Europe to demonstrate Feraheme's utility treating non CKD anemia are due to begin later this year.) The tie-up is logical for both partners. There's no doubt Takeda has global ambitions, and its adding capability in critical areas--i.e. the U.S. and Europe--primarily via the dealmaking table. A commercial stage product that Takeda can sell alongside the synthetic ESA Hematide in-licensed from Affymax makes a lot of strategic sense. Similarly, Takeda's knowledge of the ESA market implies AMAG can have confidence the Japanese firm has the marketing chops necessary to sell the drug in Europe's CKD market. Moreover, Takeda's primary care and oncology focus should stand in AMAG's favor as it tries to move Feraheme into newer markets including the treatment of abnormal uterine bleeding, GI bleeding, and cancer-caused anemia.--Ellen Foster Licking

Photo courtesy of flickr user

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