DOTW: Passing The Hat

The potential impending government shut-down is the top no-deal of the week as Republicans and Dems struggle with the “c” word. (Compromise is such an adult concept.)But the fall-out from a work stoppage could have real consequences for the drug industry, and not just in the much-discussed delayed food and drug inspections.

As FDA Law Blog spelled out in early March, the practices put in place at the Food and Drug Administration during last year’s Snowmageddon may become the operating standard if a government shutdown causes the agency to furlough a significant number of its 13,000 workers.

Bare minimum, submissions received during the closure are likely not to be marked as “received”, which could delay the time ticking on the regulatory clock. Pending PDUFA and MDUFU decisions would also be extended; that’s, bad news for companies expecting decisions near term such as Eisai and Pfizer (who are expecting a regulatory decision on their transdermal version of Aricept), Shire (Lialda), Horizon Pharma (HZT-501), and Sanofi-Aventis (Menactra). (For more on the potential impact, keep an eye out for coverage from Pink Sheet colleagues, and breaking analysis on the blog.)

This has IN VIVO Blog wondering if it should pass the hat; sadly we don’t exactly have a budget either. Perhaps we can get big tobacco to sponsor? After all, of FDA’s nine centers, only the 275-person Center for Tobacco Products will continue to be fully operational during a shut down since it’s funded by user fees paid by tobacco manufacturers and importers.

In the interim, we never resort to stop-gap measures, somehow finding a way to profile deal makers who--at least this week-- won’t have to sing “Brother Can You Spare A Dime”. It’s time for your favorite Friday column...

Vertex/the Cystic Fibrosis Foundation: Vertex is one company that doesn’t need to pass the hat, pulling in a cool $75 million from the CFF as it expands one of the most successful public-private partnerships in existence. Since its founding, CFF has put hundreds of millions of dollars to work supporting industry R&D via its non-profit drug discovery affiliate, Cystic Fibrosis Foundation Therapeutics Inc. CFFT has worked directly with Vertex since 2001, when the biotech purchased Aurora Biosciences and its first-in-class CF therapy, VX-770. Recently reported positive results from two late-stage trials testing '770 have set the stage for an NDA submission later this year and show Vertex growing beyond its anti-viral bona fides. In the meantime, the latest tie-up is five year deal funding R&D activities related to two other early-stage CF drugs, VX-661 and VX-809, which work by a different mechanism than '770. Of the two, ‘809, which is already in Phase II trials is the furthest along. In return for its support, CFFT gains royalties on future net sales of drugs developed as part of the research collaboration. Despite reporting cash and cash equivalents of roughly $1 billion in its 2010 annual report, Vertex faces some big expenses as it gears up to launch its juggernaut Hep C treatment, telaprevir, in the coming months (the drug has a May 23 PDUFA date). Thus, without additional support from CFF, Vertex might have opted to reduce its R&D burn by developing ‘661 and ‘809 in series rather than simultaneously. Thanks to CFF, however, Phase II trials of ‘661 will commence later this year. The news is a reminder that venture philanthropy is alive and well, and it isn’t just private biotechs who want to avail themselves of all important non-dilutive financing.--EFL

Optimer/Cubist: Optimer, maker of the late stage Clostridium difficile therapy Dificid (fidaxomicin), announced a two-year co-promotion tie-up with Cubist Pharmaceuticals this week. The April 6 deal came one day after an FDA advisory panel backed approval of the drug, 13-0, based on its non-inferiority to vancomycin in producing an end-of-treatment cure. (The drug's PDUFA date is May 30.) After partnering Dificid rights in Europe and other territories earlier this year, it’s a fair bet this wasn’t necessarily the kind of partnering industry wags anticipated, with the most obvious alliance being a US-focused deal for a sizeable up-front that gave Optimer a future co-promotion option. Although the actual deal ensures Optimer retains significant ownership of the product, it means the biotech continues to shoulder significant costs too. As it works with Cubist to reach prescribers in the 1,100 hospitals where 70% of C. diff cases occur, Optimer will hire and train a 100-person sales team of its own. (Cubist, on the other hand, should be able to mobilize its existing crack team of Cubicin sales reps, with Dificid becoming yet another drug it can sell at the same call point.) For its efforts, Cubist will receive quarterly service fees of $3.75 million beginning after the first commercial sale of Dificid. The company is eligible to receive another $5 million in the first year after the first commercial sale and $12.5 million in the second year if annual sales targets are met, as well as a share of Optimer's gross profits from net sales above the annual sales target. – Cathy Dombrowski

Pfizer/Zacharon Pharmaceuticals: In the latest big-pharma grab for a tiny patient population, Pfizer has tapped startup Zacharon to collaborate on drugs to treat lysosomal storage disorders (LSDs), a family of rare diseases such as Fabry and Gaucher that have become the basis of big business and mega-deals. Pfizer and Zacharon didn’t disclose the deal’s upfront, but the total package could eventually bring the tiny biotech $210 million, the companies said April 7. As noted in this 2009 START-UP profile, the firm spun out of the Univeristy of California, San Diego with high-throughput screening technology for glycan-targeting small molecule candidates. The deal comes out of Pfizer's newly-formed orphan and genetic disease group, which is scrambling to catch up to Genzyme -- soon to be part of Sanofi-Aventis--and Shire. Pfizer's first big foray was a late 2009 partnership with Israeli firm Protalix BioTherapeutics, in which Pfizer paid $60 million upfront for commercial rights to Uplyso, a Gaucher's disease treatment, as well as access to Protalix's plant-based protein drug production. In February, the FDA declined to approve Uplyso, sending it back to Pfizer and Protalix for more data. In addition to developing drugs, Zacharon is working on a diagnostic tool with the Mayo Clinic to screen newborns for LSDs. The firm has received government grants and private investments, but the only institutional investor so far is Avalon Ventures, which provided a $3.5 million Series A round in 2008. How timely: Avalon and its preference for flying solo in early stage investments is the subject this month of START-UP's inaugural Capital Matters column.-- Alex Lash

Millennium/Biogen Idec/Sunesis Pharmaceuticals: In its first divestment since it pledged last November to get rid of its oncology programs, Biogen Idec transferred rights to two preclinical kinase inhibitors to Millennium, the US oncology subsidiary of Takeda Pharmaceutical. Announced April 5, the deal itself involves little money changing hands, at least publicly. The originator of the two compounds, Sunesis receives a $4 million payment from Millennium. Otherwise, the terms of the licensing deal Sunesis struck with Biogen Idec in 2004 stay about the same, with Millennium taking over from Biogen and responsible for up to $60 million in milestone payments to Sunesis for each compound. Millennium is compensating Biogen as well, but terms were not disclosed. The more advanced compound is a pan-RAF kinase inhibitor that has demonstrated anti-cancer activity in melanoma and other tumor models. In Millennium's hands the compound could begin a Phase I dose-escalation trial in patients with solid tumors this year, according to Sunesis CEO Daniel Swisher. Biogen Idec will keep working on the kinase inhibitors in immunology but has yet to conduct IND-enabling studies, Swisher said. Beyond the kinase inhibitors, Biogen still has a number of oncology compounds for out-licensing or a potential spin-out, including galiximab (originally developed by IDEC), volociximab (in-licensed from Protein Design Labs Inc. in 2006), and the HSP-90 inhibitor BIIB-021. For a recent look at Biogen's strategy see this January 2011 IN VIVO feature.--AL

Merck/Inspire: In one of its biggest deals and only its second acquisition since it bought Schering-Plough for $42 billion in 2009, Merck has agreed to pay $430 million in cash for the specialty pharma company Inspire Pharmaceuticals, the maker of Azasite for bacterial conjunctivitis and Restasis for dry eye At a price of $5 a share, a 26% premium to Inspire's closing stock price on April 4, the deal hardly breaks the bank for Merck—especially when Inspire's $94 million in cash holdings are taken into account. All told, Inspire had sales of $106 million in 2010, bringing the deal multiple to roughly four times sales. The boards of directors of both companies have approved the sale, and Warburg Pincus, the private equity firm that owns nearly 28% of Inspire, has also agreed to the deal. Warburg had invested $75 million into Inspire in July 2007, according to Elsevier's Strategic Transactions database. –Wendy Diller

SuperGen/Astex Therapeutics: On April 6, SuperGen announced it was buying private U.K group Astex Therapeutics in a cash and stock deal designed to create a cancer-focused group with over $120 million in cash, three Phase II pipeline assets and over $50 million in expected royalty revenues for 2011.SuperGen will pay Astex shareholders $25 million in up-front cash, and grant them 35% of the combined company's total shares post-closing. Given SuperGen's current market capitalization of about $200 million, and assuming this represents 65% of the new larger entity, the deal values Astex at about $100 million. Astex's backers will receive a further $30 million, to be paid in cash or stock, over the following 30 months. Although this money is guaranteed, according to Astex CEO and co-founder Harren Jhoti, its timing is linked to milestones within several of Astex's current drug discovery partnerships. As for the up-front cash component: it's roughly equivalent to the £17 million Astex held at the end of 2010. Thus, this deal doesn't represent a great return for Astex's VC backers, which include Abingworth, Advent International and Alta Partners. Astex has raised over £80 million in equity in the eleven years since its inception, according to Jhoti, but thanks to the company's successful partnering strategy, it hasn’t sought VC money since 2003. – Melanie Senior