Friday, August 06, 2010

Deals of the Week's Summer Vacation

It's hard to be clever and insightful when your brain is slathered with sunscreen, so let's get right to...

Shire/Movetis: Specialty pharmaceutical powerhouse Shire has bid €428 million in cash for Movetis, the fast-moving Belgium biotech that received EU approval for its chronic constipation drug Resolor (prucalopiride) in October 2009. It's an aggressive bid for Movetis, which raised more than $100 million in an initial public offering in December and has since been rolling out its product selectively across Europe. The price of €19 per share is a 74% premium to Movetis' stock as of the close of trading on Aug. 2, the day before the companies announced the deal. The move adds to Shire's relatively small GI business consisting of two drugs, the older Pentasa (mesalamine) and its follow on Mezavant/Lialda, both indicated for ulcerative colitis. For Movetis the deal if consummated would cap a whirlwind history. It was founded four years ago by a group of J&J executives who in-licensed from their former employer several GI compounds including prucalopride, then in Phase III. J&J exited the GI business after the withdrawal from the market in the early 2000s of its drug Prepulsid (cisapride) because of severe cardiovascular adverse side effects. J&J has retained US rights to prucalopride and at last look Movetis was advancing the compound into Phase III trials. -- Wendy Diller

GSK/Vectura: GSK has taken a non-exclusive license on Vectura's dry-powder drug formulation to apply to two late-stage respiratory compounds for asthma and chronic obstructive pulmonary disease (COPD), a market in which big drug firms are racing to get new products to patients as generic competition threatens a previous generation of drugs. (Our Pink colleagues provide a market snapshot here.) Announced Friday, August 6, GSK will pay £10 million upfront in September and £10 million more around the time the drugs are launched, Vectura said. It's not clear if the second payment is contingent specifically upon the drugs coming to market. In addition to the £20 million in fees, Vectura can earn up to £13 million a year in royalties from the products. The news bumped up Vectura stock Friday more than 13% to 55 pence a share on the London Stock Exchange. Vectura's most advanced product is an inhaled formulation of glycopyrronium bromide for COPD in partnership with Novartis and currently in Phase III. The firm has one unpartnered product in advanced clinical testing, an inhaled combination therapy for COPD and asthma. -- Alex Lash

GSK/Amplimmune: InterWest/Wellcome Trust-backed Amplimmune signed its first corporate partner this week as GSK anted up $23 million to access the biotech's PD-1 targeting therapies. First up in the queue is Amplimmune's lead (but still preclinical) candidate AMP-224, a 'next generation fusion protein' being investigated against cancer and infectious diseases. AMP-224 is an Fc-fusion protein of the B7-DC ligand; it targets PD-1 and the companies hope it can stimulate immune response to various tumors and pathogens. Targeting PD-1, says the company, can help to improve T-cell function. It's important to remember that GSK does sign the occasional deal that doesn't involve options, and this appears to be one of them. Beyond the $23 million down payment, GSK could be on the hook for $485 million in development, regulatory and sales milestones, though at least some biobucks could come soon based on IND/Phase I hurdles. GSK would also pay double-digit royalties on global sales. Amplimmune will finish up its preclinical program, file an IND, and conduct a Phase I trial of '224 in cancer patients next year. -- Chris Morrison

Lexicon/Symphony: Lexicon Pharmaceuticals said August 2 it has agreed to buy back the gastro-intestinal drugs it licensed three years ago to private-equity investment firm Symphony Capital, but the renegotiated deal leaves a lot of risk on the table for Symphony. Under the original deal, Lexicon was supposed to pay Symphony $90 million if it repurchased its assets after June 2010 and before June 2011. Instead, Lexicon is only paying $10 million upfront in cash. It will defer $50 million in payments between now and mid-2013 and pay up to $30 million more if Lexicon finds partners for the drugs or takes them to market on its own. Symphony will also help pay for clinical development and recoup the cash later. It's the latest deal that Symphony, formed in 2004 to invest in biotech assets instead of entire companies, has renegotiated with a partner, demonstrating the difficulty of the project-financing model amid tough economic conditions of recent years. For the $60 million Symphony originally invested, it received $24 million in Lexicon stock. Symphony's fund life runs through 2016 and the firm is in no rush to cash out. Of the three drugs originally highlighted in the collaboration, LX-6171 for cognitive impairment is no longer in Lexicon's development plans after it failed to show efficacy in elderly patients. Lexicon CEO and president Arthur Sands said the firm is in the midst of partnership discussions for LX-1031 for irritable bowel syndrome and LX-1032 for carcinoid syndrome. Symphony is due 50% of licensing proceeds from '1031, '1032 and preclinical candidate LX-1033. If Lexicon takes a drug to market on its own before reaching a licensing deal, it would pay fees to Symphony. -- A.L.

Pfizer/Conatus Pharmaceuticals: Pfizer spun out more assets this week to familiar faces. For an undisclosed amount, the drug giant sold to Conatus Pharmaceuticals the rights to its Idun caspase inhibitor pipeline -- drugs it bought in the $298 million purchase of Idun Pharmaceuticals in 2005. Conatus CEO Steve Mento is the former Idun chief, and he told Pink Sheet that Pfizer could earn milestones on some but not all of the compounds Conatus is buying, which includes emricasan, a Phase II treatment for liver disease. It's at least the third time since 2008 Pfizer has sold at fire-sale prices an acquired asset to a group with connections to the original owners. In December 2009, a venture team including Vicuron Pharmaceuticals’ senior staff created Durata Therapeutics to reclaim part of Vicuron’s pipeline from Pfizer. Pfizer bought Vicuron in 2005 for $1.9 billion. In 2008, Pfizer spun out a piece of its cardiovascular portfolio to a reincarnated Esperion Therapeutics. Pfizer bought the first version of Esperion for $1.3 billion in 2004 for what it hoped would be the follow-on to the blockbuster Lipitor (atorvastatin). Pfizer had stopped developing the Idun portfolio amidst its massive R&D overhaul and merger with Wyeth. Mento said the company did not have to raise additional money. Conatus is still running off its Series A round, which raised $27.5 million in 2007, so it's fair to assume it used a fraction of that total to buy the Idun assets. -- Paul Bonanos

Genentech/Seattle Genetics: Adding to the considerable pile of biobucks it has realized from licensing deals for its antibody drug conjugate technology platform, Seattle Genetics announced Aug. 4 an extension of its existing deal with Genentech, under which the Roche affiliate will target additional antigens beyond those specified under the two companies’ original 2002 deal. Seattle Genetics, which says it has earned more than $30 million in fees and milestones related to the initial Genentech collaboration, will collect $12 million upfront for the extension. If all targets yield drugs that reach market, Seattle Genetics could realize up to $900 million in milestones and other payments through the deal along with royalties. Overall, the company estimates its biobucks total at $2.7 billion related to outstanding ADC collaborations. So far in deals with the likes of GlaxoSmithKline, Astellas, Takeda and MedImmune, the Bothell, Wash.-based biotech has realized a fraction of that -- about $130 million in platform-derived payments over the course of its deals, helping defray its costs for developing an ambitious internal pipeline, led by ADC candidate SGN-35 in lymphoma. The company, expecting data from a pair of pivotal trials in the next three months, plans to file an NDA for that program in 2011. -- Joseph Haas

Cypress/Forest & Cypress/Ramius:
This week we've got a special on DOTW-NO DEALs, two for one. Call right now and we'll throw in a copy of Freedom Rock! But that's not all! Oh, actually, that is all. But two no-deals involving the same company is pretty special. It's certainly less common than baseball's version of the no-no, the no-hitter, which has become downright pedestrian in comparison. What's that? Get to Cypress? On August 4 Cypress Biosciences said it was discontinuing its co-promotion of the fibromyalgia drug Savella, which is primarily sold by Forest Labs under license from Cypress. As part of the 2004 deal with Forest, Cypress held onto co-promotion rights, which it had exercised since the drug was launched after approval in early 2009. Now, backed into a corner and needing to conserve cash, Cypress is accepting $2 million from Forest to cease the co-promo. The company says it will cut about $10 million in operating costs and retain its royalty on the drug, as well as a maybe-possibly-someday right to get back in the Savella-selling game, pending negotiations with Forest. You know who's not happy about all of this? Ramius. Recall that Ramius, which holds about 10% of Cypress' stock and thinks the company is being mismanaged into the ground, made a $4-per-share offer to buy the biotech a couple weeks ago. And that brings us to our second Cypress No-Deal of the Week. In a letter to Ramius managing director Jeffrey Smith, Cypress concluded that the investor's offer "grossly undervalues our current business and future prospects." Cypress chairman/CEO Jay Kranzler goes on to rebut each of Ramius' points and refuses to open the company's books and records to the shareholder. Kranzler signs off: "On behalf of the Board of Directors, thank you for your continued interest in Cypress." Nice touch. -- C.M.

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