On a holiday weekend that celebrates a great nation’s vow to separate from its oppressive parent, we at Deals of the Week are pondering the benefits of going it alone versus being a piece of something bigger. For venture-backed startups on the brink of maturity, that used to mean a choice between an IPO and a sale. But with the former hard to achieve, creative thinking has led to innovative deal structures that deliver returns without following either of the two traditional routes. (We’ve been watching these new strategies emerge for some time.)
How do you sell and stay independent at the same time, bringing returns to your investors without sacrificing autonomy? Forma Therapeutics, for one, has found a seemingly new way, by turning a licensing deal into a potential payoff for its stakeholders. This week, it licensed a tumor metabolism program to Genentech, bringing in an unspecified amount of cash to fund its other oncology programs. The twist in the deal, however, is that Genentech also took an option to buy the program outright, in which case Forma’s VC backers, including Lilly Ventures, the Novartis Option Fund and Bio*One Capital, will receive a cash payment. The arrangement could therefore bring returns to the VCs without diluting their stakes in Forma, which will carry on with its other programs as a standalone operation.
In it's end goal, the deal echos the dividend paid out to Knopp Neuroscience’s shareholders last year when Biogen Idec licensed its Phase II amyotrophic lateral sclerosis drug – a payout without an exit. And while some firms such as Index Ventures and Atlas Venture explore novel asset-based financing structures that effectively match returns with drug candidates rather than whole companies, Forma and its backers have found yet another way to adjust for the changing VC climate.
Speaking of which, we hope Stateside readers find themselves in warm, clear evening weather to watch the fireworks this weekend. (Gosh, we wish there’d been a notable spinout this week, the better to jibe with our Founding Fathers’ document-signing party.) But even if Mother Nature rains on your parade, we hope you find cause for celebration with…
Sanofi/Weill Cornell: In a year marked by numerous tie-ups between pharmas and academic researchers, the latest company to strike a deal with a university is Sanofi, which seeks to develop tuberculosis therapies in conjunction with Weill Cornell Medical College, the New York City-based biotech research facility and medical college of Cornell University. The French pharma said it will supply 80,000 chemical compounds to the laboratory of Cornell researcher Dr. Carl Nathan, which has obtained funding separately from the Bill & Melinda Gates Foundation. Nathan’s lab will determine if any of Sanofi’s compounds has the potential to shorten the course of tuberculosis treatments, which currently range from six months to two years. Sanofi has already ventured onto university campuses twice previously in 2011, launching an interdisciplinary drug discovery deal with Stanford’s Bio-X Center and a diabetes deal with Columbia University Medical Center. The deals build on existing arrangements with Caltech, Harvard and MIT. - P.B.
AstraZeneca/PTC: South Plainfield, N.J.-based PTC Therapeutics struck a deal with Britain’s AstraZeneca to develop up to eight targets across different therapeutic areas using PTC’s GEMS (Gene Expression Modulation by Small molecules) technology platform, which identifies small molecules that modulate post-transcriptional control mechanisms. It yields orally available compounds that act by targeting processes that occur through the untranslated, regulatory regions of messenger RNA molecules. Under the terms of the arrangement, AstraZeneca will pay an undisclosed upfront as well as research funding. PTC will qualify for research, development, regulatory and commercial milestones. AstraZeneca will retain the global commercialization rights to any products that result from the collaboration, but PTC will be able to participate in the development of certain compounds. AstraZeneca will pay PTC tiered royalties on worldwide sales. – Lisa LaMotta
Valeant/Meda: Valeant Pharmaceuticals International and Sweden’s Meda this week announced the terms of a deal that the two companies agreed to in April. Under the agreement, Valeant will pay $76 million upfront for the U.S., Canadian, and Mexican rights to dermatitis cream Elidel (pimecrolimus) and cold sore treatment Xerese (acyclovir/hydrocortisone). Meda is also eligible for $130 million in milestones and royalties over the next 18 months. Valeant will pay further double-digit royalties totaling $120 million from 2013 to 2015 on Elidel and Xerese sales, as well as sales of Valeant’s oral antiviral drug Zovirax (acyclovir). Meda announced in April that it was buying the global rights to Elidel from Novartis for $420 million. That same day, Meda also announced a commitment in principle to sell the U.S., Canadian, and Mexican rights for Elidel to Valeant. The addition of Elidel and Xerese expand Valeant’s slowly growing dermatological franchise. The Canadian biotech re-acquired the U.S. and Canadian rights to cold sore treatment Zovirax in February. It also paid Allergan CA$500,000 ($519,000) upfront plus royalties for rights to the acne medication Aczone (dapsone) in Canada. - L.L.Flamel/Digna: Spanish university spinout Digna Biotech revealed an agreement with French drug developer Flamel Technologies that entails joint development of three early-stage compounds. Flamel will apply its proprietary drug delivery techniques to Digna’s compounds, creating new drug candidates on which Digna will conduct studies. The two will share costs, although they didn’t discuss financial terms of the agreement; the companies eventually expect to partner the drugs with larger pharmas. The first drug, P144 (disitertide), is already in Phase II trials in a topical formulation for scleroderma but is considered a candidate for pulmonary fibrosis in an injectable form featuring Flamel’s nanogel technology. The same formulation of Digna’s P17 is thought to have potential in treating cirrhosis and in halting angiogenesis, with further implications in oncology. Lastly, an oral formulation of Digna’s methylthiadenosine is a candidate for multiple sclerosis, an area in which Flamel has experience, having developed a long-acting beta interferon in conjunction with Merck Serono that’s now in the clinic. Flamel’s partnering strategy also includes a joint development deal with French pharma Theralpha, under which it developed an injectable form of pain relief candidate THA-902. Funded by Spanish investors, Digna was spun out of the University of Navarra in Pamplona, Spain, in 2003. – John Davis and P.B.Gilead/Tibotec: Two prominent HIV drug makers have agreed to a deal that will combine a marketed drug with a late-stage candidate. J&J-owned infectious disease specialist Tibotec Pharmaceuticals agreed to license Gilead Sciences’ Phase III therapy cobicistat in order to create a new pill combining the drug with protease inhibitor Prezista (darunavir), which Tibotec will formulate, manufacture and sell, pending approval. Gilead will retain rights to cobicistat, thought to boost levels of anti-HIV drugs in the bloodstream, as a standalone agent and as a combination therapy with other drugs. The two companies also revealed plans to combine Prezista with cobicistat and two other Gilead therapies, the already-approved Emtriva (emtricitabine) and the Phase I candidate GS 7340, although they’re still negotiating terms for that single-tablet therapy. The deal tightens the two companies’ relationship beyond an existing partnership forged in 2009 to combine Gilead’s Truvada (emtricitabine and tenofovir) with Tibotec’s Edurant (rilpivirine). - P.B.
Astellas/Royalty Pharma: It's been a while since we've sunk our teeth into a royalty monetization deal, but we do have a soft spot for these cash-money-now transactions. This week Astellas sold off the royalties from a portfolio of diabetes-drug-related IP to Royalty Pharma for $609 million. The patents, largely around DPP-IV inhibitors and held by a subsidiary called Prosidion that the Japanese pharma acquired when it bought OSI Pharma, turned out to be a solid investment. Prosidion acquired the IP in 2004 from Probiodrug for $35 million and since then the revenues from the likes of BMS's Onglyza and Merck's Januvia have rung the till to the tune of more than $200 million in revenue -- and will continue to generate income until they expire in the 2017-19 timeframe. While there's something to be said for a steady stream of cash, the bolus paid by Royalty Pharma can be put to use now, and will be reinvested in strategic initiatives, Astellas president and CEO Yoshihiko Hatanaka remarked in the statement announcing the transaction. The deal should be no surprise to readers of our sister publication PharmAsia News, which reported in January that Astellas was likely to dispose of its Prosidion assets; the unit's drug development candidates are also being considered for disposal. -- Chris Morrison