Friday, April 15, 2011

Deals Of The Week: Moving On

Finally. The months of waiting are over. (No, we aren’t talking about the Phillies’ attempt to dominate in the National League (it's a long season); or, in the AL, the rise of the Cleveland Indians.) We are referring instead to the resolution of one of the major overhangs to the 2009 Merck/Schering Plough reverse merger: ownership of distribution rights to the juggernaut rheumatoid arthritis franchise Remicade/Simponi.

Just in time for the quarterly earnings show (it’s nice to have something positive to talk about, isn’t it?), Merck and J&J settled their ongoing dispute. The terms of the agreement require Merck to relinquish marketing rights in three territories comprising 30% of total Remicade/Simponi sales: Canada; Central and South America; and the Middle East, Africa, and APAC. The resolution, which also requires Merck to make a one-time $500 million payment to J&J, means the Whitehouse Station, NJ-based drug maker will forgo an estimated $900 million in ongoing sales in these regions. In territories where Merck retains marketing rights—EU, Turkey, and Russia—its profit share of the drug drops from 58% to 50% this July, instead of the more gradual decrease outlined under the original Schering/J&J alliance.

Analysts covering both Merck and J&J reacted positively to the news, albeit for different reasons. For Merck, the settlement takes off the table a bothersome question that has routinely cropped up on quarterly calls and lets Merck begin to spin a more positive story. Analysts anticipate that narrative to include a dividend hike to offset some of the recent negative clinical trials results and potentially, a spin-off of the consumer biz, which includes the Coppertone and Dr. Scholl’s brands. (Hey, it’s hip these days to copy BMS and shed business units outside the innovative core.)

For J&J, the 50/50 profit split in the territories retained by Merck is a bonus, and you can’t deny the allure of cold hard cash. Morgan Stanley analysts predict the resolution will be roughly 2 to 2.5% accretive to 2014 earnings per share. (Don't forget, though, about other tailwinds affecting J&J, including the dilution it took to acquire 100% of Crucell.)

With J&J and Merck moving on to more important matters (Merck: Pipeline! J&J: Quality Control and a Synthes acquisition(?)), it’s time for IN VIVO Blog to get going with another edition of…

Axcan Pharma/Mpex Pharmaceuticals: Privately-held specialty pharma Axcan will buy Mpex for an undisclosed amount, the firms announced April 14. The deal, which contains an unspecified upfront and milestone payments, gives Montreal-based Axcan full rights to Aeroquin, Mpex's lead product, a proprietary aerosol formulation of the antibiotic levofloxacin in Phase III trials for the treatment of pulmonary infections in patients with cystic fibrosis. It's one of several antimicrobials currently in the late-stage pipeline for CF patients; as a group, these anti-infectives have been the subject of recent regulatory debate over endpoints. The companies said Axcan would spin out all Mpex assets not associated with Aeroquin into a new company that will remain in San Diego, Mpex's hometown. Mpex's investors include Investor Growth Capital, which led the firm's $40 million Series D round in 2009, SV Life Sciences, RiverVest Venture Partners, and others. The deal comes two months after Axcan completed its $583 million takeover of Eurand, a Belgian specialty firm that last year celebrated the approval of its lead product, an enzyme replacement treatment of exocrine pancreatic insufficiency. -- Alex Lash

BiogenIdec/Amunix: Any doubts about Biogen’s ongoing commitment to the hemophilia space, look no further than this week’s research collaboration with Mountain View, Ca.-based start-up Amunix. Founded by serial entrepreneur William “Pim” Stemmer, Amunix uses its proprietary protein engineering technology to create longer-acting versions of clinically validated molecules. Biogen, of course, has been talking up its “focused diversification” strategy, bolting on capabilities in neurology outside its MS warhorses Tysabri and Avonex, even as it sheds its oncology assets. But Biogen’s nearest opportunity to diversify is via its recombinant protein therapies to treat hemophilia A and B, respectively in Phase II and III trials. Biogen’s molecules have significantly longer half-lives than competing marketed products and offer a significant dosing advantage over current standard-of-care that’s likely to be well received by patients, physicians, and payors. But that also means the big biotech must make sure its late-stage products aren’t obsolete when a new technology allows for the creation of even longer-acting molecules. Hence the tie-up with Amunix. No financial deets were disclosed, but the two firms are jointly conducting preclinical research, with Biogen paying an upfront plus R&D funding in exchange for clinical development, manufacturing, and commercialization rights of any therapeutic candidates. Amunix also stands to receive future milestones and royalty payments. -- EFL

Debiopharm Group/Aurigene Discovery Technology: A long-running research collaboration between the Lausanne, Switzerland-based developer Debiopharm and India’s Aurigene has yielded a promising approach to an undisclosed target in oncology. This week Debiopharm licensed worldwide development and commercialization rights to the lead compound, named Debio 1142, with plans to take it through clinical development and registration before outlicensing to an interested drug maker. Financial details were not disclosed, but Aurigene will receive milestone payments as the compound progresses. The stated plan is right in line with Debiopharm's usual business model. For example, it in-licensed oxaliplatin from Japan’s Nagoya City University, relicensing the product to Sanofi-Aventis for sale as Eloxatin. It’s also a variation on the European specialty pharma model that seems to be working well for Debiopharm. (See the April IN VIVO for more on various models in play.) -- John Davis

Daiichi/Pieris: Privately-held Pieris announced Tuesday, April 12 a two-target partnership with Tokyo-based Daiichi Sankyo. It is the latest in a string of alliances the German firm has inked to demonstrate the utility of its proprietary anticalin scaffolding technology. As part of the deal, Daiichi agreed to pay more than €7 million ($10 million) upfront for worldwide rights to two undisclosed targets, as well as dedicated research funding and milestones that could reach €200 million if both products reach the market. The Japanese pharma will also pay tiered “mid- to mid-high” single digit royalties on sales of any compounds that result. While the structure and limited scope of the Daiichi deal hews closely to Pieris' previous deals, the biotech’s CEO Stephen Yoder told “The Pink Sheet” DAILY that these alliances are designed to showcase the wide potential of the platform. Alliances are important, of course, but they don't provide Pieris' backers with an exit. Next-generation protein players such as Domantis, GlycArt, and GlycoFi were gobbled up during 2006 and 2007 thanks to a wave of biotech M&A as big drug firms attempted to strengthen their biologics capabilities. Since then, however, licensing deals have become the preferred transaction type, making an exit by acquisition more difficult. Since its inception in 2001, Pieris has raised €45 million in cash from a syndicate that includes OrbiMed Advisors, Novo Nordisk Biotech Fund, Global Life Science Ventures, Gilde Healthcare Partners, and Forbion Capital Partners. -- EFL

Endo/American Medical Systems: Valeant’s dogged pursuit of Cephalon is just one example of the anti-R&D movement at work within the biopharma industry. This week comes news of another deal exemplifying the trend: Endo’s $2.9 billion acquisition of urology device specialist American Medical Systems. The proposed deal represents a 34% premium over AMS' April 8 closing price, and it's three times the device maker’s 2010 sales of $538 million. Once dependent on Lidoderm (lidocaine 5% patch) for revenues, Endo has undergone a makeover under CEO David Holveck. Since he took the helm of Endo in 2008, the company has completed four acquisitions, all to position the company as a diversified healthcare solutions provider focused on pelvic disorders and pain: Qualitest Pharmaceuticals ($1.2 billion); Penwest Pharmaceuticals ($168 million); HealthTronics ($223 million); and Indevus Pharmaceuticals ($370 million). The acquisition of AMS is Endo's largest yet, and it substantially alters the company's portfolio and reinforces its commitment to devices, which sets Endo apart from other specialty players of a similar size who haven’t sought this kind of diversification. More and more, drug makers have been talking about moving into the device space as the traditional pharmaceutical R&D model has come under increasing pressure, in part because devices, at least historically, have shorter, less expensive product development time lines, as well as favorable pricing and reimbursement. The grass is always greener. -- Wendy Diller & Jessica Merrill

Takeda/Heptares: Takeda, which has targeted new central nervous system drugs as a core therapeutic research area, entered into a back-end loaded research collaboration April 11 with U.K. biotech Heptares Therapeutics to characterize a G-protein coupled receptor (GPCR) believed to play a role in CNS disorders. Takeda will pay $7.4 million in upfront cash and equity to Heptares, and milestone payments of up to $100 million, plus royalties on product sales. The tie-up is Takeda's second research collaboration in CNS this year. In March, the Japanese pharma agreed with New York-based Intra-Cellular Therapies to co-develop phosphodiesterase type 1 inhibitors for cognitive impairment associated with schizophrenia, in a $500 million-plus deal. In October 2010, Takeda signed a deal with Jupiter, Fla.-based Envoy Therapeutics to research new schizophrenia therapies. In the current two-year deal, Heptares' technology will be used to stabilize and characterize an unnamed GPCR thought to be important in CNS disorders but intractable to approaches to make it “druggable." Takeda researchers then will collaborate with Heptares researchers on generating leads, and the Japanese company will assume responsibility for preclinical and clinical development of any new drug candidates. The Takeda collaboration is Heptares’ second big pharma partnership, showing that its ability to go after difficult targets –- the so-called high hanging fruit –- is a strategy that can pay off. -- JD

Image courtesy of flickrer themonnie used with permission through a creative commons license

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