Deals of the Week in a Parallel Dimension

It's ADA season, and this week didn't disappoint with diabetes deals coming out of the woodwork. But if FOTF can go a little off-piste, permit your favorite deals roundup to stray as well , straight into uncharted regulatory and reimbursement territory. (We promise to get to the juiciest deals eventually.)

This week FDA and CMS agreed to routinely share data in what could serve as a first step toward parallel reviews by FDA and CMS for marketing approval and medicare coverage. We're already seeing reimbursement milestones popping up in deal terms, and we can imagine that a parallel review by the massive government insurer would only mean they'd be even more common.

To be sure this isn't a new discussion, as our colleagues from "The Gray Sheet" wrote this week. But there may be more substance to this new effort, under which the agencies are "seriously exploring the ability to start, at a manufacturer's request, a Medicare national coverage determination process" while a medical device is under FDA review. That remark, from FDA center for devices and radiological health director Jeff Shuren, was made before a device-oriented audience, but he clarified that the memorandum of understanding between FDA and CMS will apply "FDA-wide."

Hmmm. Who will be the first to channel his/her inner Ray Stantz and order FDA and CMS to "cease any and all supernatural activity and return forthwith to your place of origin?"

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Before we get to the deals this week please allow us a moment to say GOOOOOOOOAAAAALLLLLLL!

Oh and yes, we did the movie thing last week, but it's hard to resist this one. We had the same reaction as Derek Lowe to the idea of Lilly launching a statin in 2010 -- surely someone threw us in a DeLorean, cranked up the Huey Lewis, scored some Lybian plutonium and sped up to 88 miles per hour, because we all went Back to the Future this week.

Never mind that Biff guy, it's time for ...


Sanofi/Regulus: Sanofi-Aventis made its first foray into the emerging microRNA field by forging a collaborative development agreement with Regulus Therapeutics, a startup co-owned by publicly traded Alnylam Pharmaceuticals and Isis Pharmaceuticals. For an upfront payment of $25 million and an equity investment of $10 million, Sanofi received options to license four Regulus compounds, beginning with a co-development agreement targeting fibrosis. If all milestones are reached on all four, Sanofi could pay Regulus more than $750 million; Sanofi also has a $50 million option to expand the partnership into a broader alliance that to us recalls the first broad RNAi deal between Alnylam and Novartis. MicroRNAs regulate gene expression by binding to target messenger RNA transcripts and developers hope that disruption by a single microRNA can interfere with disease pathways. Nearly all microRNA-based therapies have yet to reach the clinic. Regulus, which has programs in oncology, cardiovascular and metabolic diseases, also has two separate partnerships with GlaxoSmithKline. One gives GSK four options in Regulus’s immunological and inflammatory disease portfolio, and the other pertains to a specific hepatitis C treatment. The deals collectively are a sign of Big Pharma’s renewed interest in innovative early-stage technologies.--Paul Bonanos

Valeant/Biovail: While complementary lines of business played an important role, it was probably Biovail’s advantageous tax setup that led larger specialty pharma Valeant to merge with it in a deal announced June 21. Canada (and hockey?) will be a major focus for the newco – to be named Valeant Pharmaceuticals International but based in Biovail’s hometown of Mississauga, Ontario, rather than Valeant’s current home of Aliso Viejo, Calif. The new Valeant’s four main business areas will be specialty central nervous system (comprising Biovail’s CNS franchise and Valeant’s neurology business), dermatology, Canada, and branded generics/emerging markets. Valeant CEO J. Michael Pearson, who will run the new company, said each firm currently has a roughly $100 million business in Canada, and both are experiencing a better than 20% growth rate. Asked to estimate what the new company’s effective tax rate would be, Biovail CEO Bill Wells, who will be chairman of the new company, said Biovail currently pays in the 5 percent to 8 percent range. The combined company’s rate will be somewhat above that but far below Valeant’s tax rate of 36 percent, he said. Biovail has done its manufacturing in Canada, generating excess net operating losses. Now, those NOLs will help shelter Valeant’s considerable income in Canada. The new company also will retain Biovail’s principal subsidiary in Barbados, where intellectual property is developed, funded and managed, taking advantage of that country’s very low tax rates. The merged company also should realize $175 million in cost synergies in 2011 before tax savings are even factored in, derived partly from combining commercial operations in Canada, which will detail both specialty and primary care products.—Joseph Haas

J&J/Metabolex: Metabolex's first deal this week sees Johnson & Johnson taking time out from their OTC recall issues to boost its diabetes pipeline. In addition to licensing a type 1 diabetes vaccine from Swedish biotech Diamyd (see below), J&J's Ortho-McNeil-Janssen unit snapped up worldwide rights to several undisclosed first-in-class preclinical drug programs for type 2 diabetes from Metabolex. The deal is the companies' second, following on a 2006 alliance around two Metabolex PPAR-gamma programs, which are now both in Phase II development. In the current deal, Metabolex gets an undisclosed up-front payment and the typical assortment of development, regulatory and sales milestones plus royalties. If the stars align, the biotech could see up to $330 million.--CM

J&J/Diamyd: The same day OMJ inked its deal with Metabolex it also signed up Sweden's Diamyd, paying $45 million up-front for that company's Phase III type-1 diabetes vaccine. The vaccine could slow or halt the disease by protecting insulin producing pancreatic cells. Development and commercial milestones on the deal total $580 million, and Diamyd is eligible for tiered royalties on potential sales. The companies are sharing the costs of the vaccine's ongoing EU Phase III trial, and J&J can take over development if it chooses based on the results of that study. J&J's strategy is clearly one designed to leverage its presence in diabetes devices -- it does not market any diabetes drugs, yet, but its two deals this week augment an internally and externally sourced suite of compounds the roots of which goes back at least ten years to a research deal with Mitsubishi-Tanabe in 2000. --CM

Sanofi-Aventis/Metabolex: Sanofi-Aventis may not be making big news at this year's 70th Scientific Sessions of the American Diabetes Association but that doesn’t mean it isn’t creating its own buzz—and no vuvuzelas required. On June 25, the company announced its third deal since March 31 in the diabetes space, becoming the second pharma to ink a deal this week with Metabolex. The global licensing agreement is for the biotech’s Phase II, oral GPR119 receptor agonist, MBX-2982, for the treatment of type 2 diabetes. Specific deal terms of the Sanofi partnership weren’t disclosed but biobucks could total $375 million. It’s no secret that Sanofi has grand ambitions to become one of the leading players in diabetes but to do that, the company will need to diversify beyond its juggernaut Lantus. As Sanofi bolsters its pipeline, the focus has been on novelty and diversification—the March alliance with Agamatrix gives the French firm a foot in the blood glucose monitoring space; the tie-up with privately-held CureDM gives Sanofi a potentially first-in-class compound in the islet cell regeneration space. Agonists of GPR119 represent a first-in-class oral treatment for type 2 diabetes that simultaneously increase insulin secretion while stimulating the release of GLP-1 from the intestines. (They are also an au courant target as evidenced by last week’s deal between Neurocrine and Boerhinger Ingelheim.) —Ellen Foster Licking

Gilead/CGI: Finding a use for some of the $4.6 billion of cash it has on hand and also seeking some diversification beyond the antiviral space, Gilead Sciences June 25 announced that it would buy privately held CGI Pharmaceuticals for up to $120 million in cash. Gilead said the majority of the payment would be an upfront purchase price with the remainder paid out in clinical development milestones but did not break down the exact amounts. CGI, formerly known as Cellular Genomics, has nothing in the clinic but is doing discovery and development in three platform areas, of which Gilead seems most intrigued by its spleen tyrosine kinase inhibitor (Syk) program, which includes a lead preclinical compound with potential to treat rheumatoid arthritis. Under the deal, CGI would continue operating as a fully-owned Gilead subsidiary at its current headquarters in Branford, Conn. Gilead Chief Scientific Officer Norbert Bischofberger cited CGI’s scientific expertise as “a strategic fit with Gilead’s existing research organization” and said Gilead will work to move CGI programs into clinical development. Standard & Poor’s analyst Steve Silver called the transaction a “modestly priced opportunity to broaden Gilead’s long-term pipeline.” GCI's backers are probably seeing about a 2x multiple on the deal, should those milestones materialize; the company had not raised money since a 2004 Series C led by Lilly Bioventures that brought in $34.9 million.—JH


Bristol-Myers Squibb/Exelixis: Exelixis revealed June 21 that Bristol is walking away from its late-stage partnership on the biotech's lead compound XL184, a multikinase inhibitor in Phase III trials for medullary thyroid cancer (MTC). GlaxoSmithKline had an option on '184 but passed in late 2008, soon after which Bristol swooped in with a lucrative deal, $240 million in upfront and near-term milestones. With Bristol's decision, the question becomes whether Exelixis can find another home for the drug. It insisted the data were sound, and officials on both sides of the no-deal talked vaguely about portfolio conflicts and pipeline reviews. Two investigators working on XL184 trials told "The Pink Sheet" they knew of no clinical problems serious enough to merit BMS's decision, but some analysts were skeptical that Bristol would give up rights, given what it has already spent, on a drug with serious potential. Fresh from layoffs of nearly 30% of staff, Exelixis said it will push on with XL184 and start a Phase III trial in glioblastoma by the end of 2010 and file an NDA for MTC in the second half of 2011. The firms' partnership on XL281 remains intact. -- Emily Hayes

Image courtesy of flickrer TheAlieness GiselaGiardino23.