Friday, September 02, 2011

Deals of the Week Hopes Its Labors Aren’t Lost

When bidding for a union contract, it’s essential that one’s proposals wind up in the right hands. That’s one lesson that can be taken from Shakespeare’s Love’s Labour’s Lost, which draws much of its comedy from a series of letters whose private content ends up in more public hands. As the characters’ secrets are revealed in a sort of 16th Century version of a botched reply-to-all, hilarity ensues. All’s well that ends well in this one, because everyone wants to get together as the curtain falls.

But unwanted and misdirected proposals are a lot less funny. In matters of love, they break hearts. In other realms, the results can be disastrous as well – like, say, the realm of biopharma deals. (Ham-fisted a transition as that may be, you knew I’d get there somehow, didn’t you?) For example, if you’re Canada’s Paladin Labs – last spotted in another recent literary-minded installment of this column, complete with dusty Brit – you’ve laid down a glove for cold medicine maker Afexa Life Sciences, only to witness the gallant entry of a white knight from stage left, Valeant Pharmaceuticals, ready to exeunt with its prize. (More on that later.)

Sometimes, though, all it takes a little persistence to be appreciated. Pfizer, for example, has been courting pain drug developer Icagen for years – their partnership was initiated in 2007 – but only recently expressed a desire to put a ring on it and acquire the company outright. But although its $6-per-share offer for the portion of the company it does not already own has garnered the support of Icagen’s board, it hasn’t yet won over all the necessary shareholders, some of whom are holding out for what they perceive as fair value for the company’s assets.

As of this writing on Friday morning, the deal is very close to being done, with just a few thousand shares standing between rejection and betrothal. Pfizer has extended its tender (trap) offer twice, with Icagen’s decision expected by late Friday afternoon.

With that in mind, perhaps we’ve got a rarity for this Labor Day weekend: a cliffhanger episode of…

Valeant/Afexa: With two highly acquisitive companies bidding for Afexa Life Sciences, the maker of Cold-FX flu medicines, only one could win its heart. Already in the midst of a buying spree, Canada’s Valeant Pharmaceuticals proposed a sweeter -- and friendlier -- deal than rival bidder Paladin Labs for Afexa, swooping in with a white-knight offer on Aug. 30. Valeant’s cash bid is worth 71 cents per share, or about $76 million, a 29% premium to Paladin’s hostile bid of 55 cents per share, or $56.7 million. The new offer from Valeant will give Afexa another 30 days to weigh any other better offers. Valeant has the option to match any higher offers or opt for a $3.75 million termination fee. Valeant has made several acquisitions this year, largely adding to its dermatology business. Afexa, however, is destined to be slotted in with Valeant's over-the-counter products portfolio, according to CEO Michael Pearson. Paladin, meanwhile, has been on a spree of its own, most recently acquiring drug formulator Labopharm last month; it hasn't yet decided whether it will improve its offer. – Lisa LaMotta

Merck/ZymeWorks: Privately-held ZymeWorks of Canada inked its first Big Pharma partnership this week, worth an undisclosed upfront plus research, development, and regulatory milestones totalling up to $187 million (that’s US dollars). As early stage research collaborations go, the Merk/ZymeWorks deal is pretty standard. There’s no yearly R&D support in addition to the upfront; the relationship is also target specific, meaning it doesn’t preclude the start-up from partnering its technology, which creates so-called bi-specific antibodies, with other interested parties. Because it raises the 8 year-old company’s profile far higher than the biotech’s prior deals (which in terms of industry have been limited to Xoma) and therefore could be the springboard to larger, more lucrative alliances, the Merck tie-up is an important landmark. That’s undoubtedly what CTI Life Sciences, ZymeWorks’ main backer is hoping. Whether an acquisition eventually transpires will likely depend on how well molecules derived from the biotech’s proprietary Azymetric platform perform in the clinic. Back in the 2006 to 2007 time frame, biopharma rushed to lock up next-generation antibody capabilities, as companies like Bristol-Myers Squibb (Adnexus), GlaxoSmithKline (Domantis) and Merck (GlycoFi) tried to bolster their in-house biologics expertise while accessing validated targets locked up by first generation technologies. That trend has largely switched to licensing – most next-gen antibody players are still so early that risk averse pharma doesn’t want to spend the money acquiring platforms that may only be useful in the creation of specific compounds. – Ellen Licking

Adimab/Novo Nordisk and Adimab/Biogen Idec: Adimab, a purveyor of yeast-based antibody discovery technology, this week announced separate two-program discovery deals with Novo Nordisk and Biogen Idec (pdf), and said it was on pace to double its number of partnered candidate programs for the second straight year. Adimab CEO Tillman Gerngross said the privately held company now has 24 partnered programs and is aiming to finish the year with 35 - five in 2009, 10 in 2010, and 20 this year. Two programs might not sound like a lot, but unless either of those companies -- or any of Adimab’s eight other biotech or Big Pharma partners – wants to ante up some serious cash to bring Adimab’s technology in-house, that’s all they’ll get. Currently, explained Gerngross, Adimab limits partners to two programs apiece. Biogen and Novo, for example, each have selected two undisclosed targets against which Adimab will deliver fully human antibodies. The big biotechs get options to commercialize antibodies generated through their collaborations and Adimab gets upfront payments and preclinical and clinical milestone payments and royalties. Those and other existing deals are structured as project-based research licenses and companies later can opt for a commercial license around a program (so far only Merrimack Pharmaceuticals has done so, around MM-151, a three- antibody cocktail designed to bind three distinct epitopes of the epidermal growth factor receptor). Gerngross says the company typically commands $10 million to $20 million in total pre-commercial milestones and a mid-single-digit royalty per program, a price he describes as "in-line with competing technologies." Adimab's involvement in the programs begins and ends with antibody discovery, a process that typically takes eight weeks. So far Adimab has built a successful business on discovery, on the cusp of positive cash flow and no need to raise additional cash. Time will tell if it can sign the kind of big-money partnerships that would give its venture investors a successful return. - Chris Morrison

Teva/Sinclair IS Pharma: As part of its gradual transformation from a generic drug company to a full-fledged pharma with its own branded products, Teva Pharmaceutical Industries Ltd. licensed commercialization rights in specified EU markets to oncology supportive product Episil from Sinclair IS Pharma on Aug. 31. Terms of the licensing deal were not disclosed. Teva obtains commercial rights to the drug in Germany, Spain, Poland, Switzerland and the Czech Republic, while Sinclair IS Pharma, a U.K. specialty firm formed by the April 2011 merger of Sinclair Pharma PLC and IS Pharma PCL, will retain rights to co-market the product in Spain and Germany, where it has an existing sales force. Episil is an oral spray to treat pain associated with oral mucositis, a side effect of chemotherapy and radiotherapy during cancer treatment. Sinclair IS Pharma was created through a stock-for-stock transaction valued at 53.2 million ($85.3 million) with the intention of establishing a specialty pharma with pan-European exposure. In a statement, the firm’s CEO Chris Spooner said the rationale behind the merger was to broaden the sales reach of IS’ portfolio through Sinclair’s commercialization operations. “This is the first in what we expect to be a number of marketing and co-marketing partnerships,” he said. — Joseph Haas

Merck/Addex: Addex Pharmaceuticals said on Sept. 2 that Merck was returning rights to the companies’ programs targeting metabotropic glutamate receptor 4 (mGluR4). Addex pledges to push forward with development of the small molecule positive allosteric modulators in CNS diseases, namely Parkinson’s disease. The companies have been working together on mGLuR4 programs since the research collaboration began in 2007. Merck took sole responsibility for the programs about a year ago, and now returns the rights just about the time it would be expected to pick a clinical candidate (Addex’s pipeline chart shows the programs nearing the end of the lead-optimization stage); not only would that likely trigger a milestone to Addex, but it also represents a point when development costs increase. The mGluR4 deal may be a delayed casualty of the Merck/Schering-Plough megamerger which added Schering’s now-Phase III preladenant (MK 3814, nee SCH420814) to the mix in 2009. That adenosine 2A receptor antagonist is jockeying with a similarly late-stage molecule from Kyowa Hakko for the lead in the class. But the mGluR4 space has seen its share of attention too – albeit earlier stage – with investments from the likes of the Michael J. Fox Foundation, Novartis and Merck-Serono, the last of which is teamed up with Domain Therapeutics. With CHF 50 million in the bank as of the last quarterly statement but later-stage fish to fry, Addex is likely to look for a new partner to fund development of the program, sooner rather than later. – C.M.

Genzyme/PTC Therapeutics – As part of its portfolio review following its acquisition earlier this year by Sanofi SA, Genzyme has decided to restructure its partnership with PTC Therapeutics around ataluren, a small molecule in development for genetic disorders caused by nonsense mutations. In 2008, Genzyme paid $100 million upfront, with potential for as much as $337 million in development, approval and sales milestones, for commercial rights to the protein restoration therapy in all territories outside the U.S. and Canada. In 2010, however, ataluren failed to demonstrate a statistically significant effect, as measured by distance improvement in the six-minute walk test, in nonsense mutation Duchenne/Becker muscular dystrophy. On Sept. 2, PTC announced that Genzyme had returned its commercial rights to ataluren in that indication, but would retain an option to commercialize the drug outside the U.S. and Canada in other indications. PTC said it would continue development of the compound in both nmDBMD and nonsense mutation cystic fibrosis. Citing its portfolio assessment, Genzyme Chief Operating Officer David Meeker said, “our option to reengage the collaboration reflects our belief in the potential of this approach for the treatment of nonsense mutation genetic disorders.—J.H.

Image courtesy of Flickr user UMTAD, the University of Minnesota's Theatre Arts & Dance program, reproduced under Creative Commons license.

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