DotW: Earn, Baby, Earn

What, you thought we’d go all Sarah Palin on you? We're guessing the phrase “Drill, baby, drill!” is about as popular as that oil slick inexorably spreading toward the Gulf Coast right now. Anyone out there scrambling to remove a certain bumper sticker?

In case you were partying with the Dendreon crowd or locked up in a dark room practicing the pronunciation of what used to be an obscure Iceland volcano -- for the record, it’s ay-uh-fyat-luh-yoe-kuutl -- you must have tweaked that it was another heavy earnings week in biopharma land.

And yes, the handwringing over costs tied to healthcare reform continues, at least if you are BMS, which reported one of the most significant hits on its first quarter earnings call this week. Meanwhile, the EU-based pharmas seem a bit blasé about the issue, or at least they're good at hiding their concern. Execs on GSK’s, Sanofi’s, and AstraZeneca’s earnings calls all sounded the same theme: forecasts already bake in the impact of US healthcare reform.

Of course, the U.S. was a problem territory for many of the multinationals long before health care reform, which is why companies like GSK and Sanofi have been on such a tear in the emerging markets. As the week ended, Pfizer looked to pull a page from Sanofi’s playbook: the world’s biggest pharma is rumoured to be sniffing around the Brazilian generics maker Teuto. Perhaps nabbing Teuto will make up being on the losing end of the RatioPharm deal. (Or maybe Pfizer CEO Jeff Kindler just needs an excuse to visit Brazil.)

Here at IVB, we do our best to earn our keep with a regularly occurring column loaded with insight and levied with snark that we like to call….



Charles River/WuXi AppTec: As top pharmas look to China to outsource more and more of their early stage R&D, the contract research organization, Charles River Labs, deepened its presence in the country this week with its proposed purchase of WuXi for $1.6 billion. The proposed tie-up would create a CRO with end-to-end capabilities, marrying WuXi’s chemistry expertise with Charles River's in vivo biology business. At a 28% premium to WuXi’s closing stock price on April 23, the deal has the blessing of both companies’ boards. To become a reality, however, it must also win approval from shareholders and China’s Ministry of Commerce. Ge Li, WuXi’s founder, and a rock star in the Chinese biopharmaceutical community, will continue to play a key role in the combined company post-merger as an EVP and president of global discovery and China services. As our sister publication PharmAsia News points out, Charles River/WuXi, if approved, represents the third major acquisition of Chinese CRO in recent month following PPD’s buy-outs of smaller players BioDuro and ExcelPharma Studies. Analysts generally hailed the deal but cautioned that even as the combined company provides one-stop shopping, it could face increased price competition from Chinese CROs capable of greater pricing flexibility. -- Kevin Holden and EFL

Aton Pharma/Bristol-Myers Squibb: Advancing its strategy of acquiring underappreciated mature products, Aton paid an undisclosed upfront to BMS April 26 for the US commercialization rights to the off-patent Parkinson’s disease drug Lodosyn. “Our strategy is [to] assume ownership of a product that does not have great awareness within the marketplace,” Aton’s CEO Michael Wells said in an interview with “The Pink Sheet” DAILY. This tactic isn’t exactly new, and it isn’t without risks. ViroPharma employed exactly the same logic when it in-licensed Vancocin from Eli Lilly in 2004 and quickly grew sales of the product. But once it demonstrated a demand for the C. difficile drug, generic competitors quickly piled in, putting pricing pressure on the medicine. For Aton, this deal represents another step in its evolution from oncology-focused biotech to specialty firm. Purchased by Merck in 2004 due to its work in HDAC inhibitors, Aton was bought out by Wells in 2006 (backed by Cerberus Capital Management and his own Princeton Pharma Holdings). Until the Bristol deal, Aton’s entire suite of products, including the Timoptic line of glaucoma drugs in-licensed last year, were originally Merck products. -- Joseph Haas

Merck/Nycomed: Days after Nycomed's Daxas, a potential first-in-class phosphodiesterase 4 enzyme inhibitor for COPD, got a positive nod from the European Medicines Agency, the drug landed a new commercial partner. On April 26, Merck and Nycomed announced a co-promotion agreement for the medicine in Canada, and certain European countries, including France and Germany. (Merck gets exclusive commercialization rights to Daxas in the UK.) The financial terms of the deal were not disclosed, but Nycomed will receive an undisclosed upfront and is eligible for regulatory and commercial milestones. Daxas already has a U.S. commercial partner in Forest Labs, which acquired rights to the drug for $100 million upfront in August 2009. At this juncture it looks like Merck, in the near-term, may have gotten the better deal. Daxas’s regulatory path to approval in the US is far less certain; earlier this month, FDA’s Pulmonary-Allergy Drugs Advisory Committee recommended against approving the medicine due to the drug's apparent modest efficacy and serious side effects. It’s possible FDA still could approve the drug, which has a May 20 PDUFA date. -- Jessica Merrill

Therabel/BioAlliance Pharma: BioAlliance Pharma of Paris announced Monday that privately-held European specialty pharma Therabel is taking an undisclosed equity stake in the company. The ownership stake isn’t unexpected. Therabel and BioAlliance announced an alliance April 6 around the European commercialization of the biotech’s Loramyc, an antifungal drug for use in immunocompromised patients, and Setofilm, an anti-nausea medication for the prevention and treatment of chemotherapy, radiotherapy, and post operative-induced vomiting. The deal includes a €6.5 million upfront and up to €48.5 million in milestone driven payments, and at the time BioAlliance hinted an equity stake worth €3 million was on the table. It's worth noting the April 6 deal holds one of the first examples of a trend we’ve long been predicting would materialize: milestones tied not to a drug’s sales but to its reimbursement. The press release clearly states, “additionally €3 million will be linked to Loramyc reimbursement in three EU countries.” The prospect of a reimbursement driven milestone was a subject of much debate at our recent Pharmaceutical Strategic Outlook meeting, where some dealmakers argued that the hedge was already included in sales milestones. What do you think, IVB reader? Are more reimbursement milestones on the way? -- EFL

Image courtesy of flickrer TW Collins through a creative commons license.