Thursday, December 01, 2011

2011 Exit/Financing of the Year Nominee: BMS/Amira

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

Perhaps you're wondering why we've nominated Bristol-Myers Squibb’s $325 million buyout of fibrotic disease specialist Amira Pharmaceuticals in the exit/financing category, not under M&A. It's for the fecundity. No less than five new entities have origins tied to BMS/Amira, a deal whose creative structure gives it additional importance beyond idiopathic pulmonary fibrosis, the disorder that Amira’s lead molecule is designed to treat. It also doesn't hurt that the deal delivered a double-digit return multiple for Amira’s earliest investors; but the union mainly merits the Roger because of the way it’s produced descendants. So when you vote, please, we beseech you, think of the children.

As buyers circled prior to Amira’s late July sale, the startup and its board found plenty of interest for the fibrosis program, but potential suitors were concerned about one complicating factor: Amira’s existing partnership with GlaxoSmithKline for a FLAP inhibitor for asthma, with a milestone and royalty stream hanging in the balance, still carried risk for a buyer. Not every acquirer was interested in Amira’s DP2 antagonist for chronic obstructive pulmonary disease, either. Rather than bundle the assets the buyers didn’t want with the one they did, the two were spun out in separate companies so that the IPF program could be sold with Amira itself. (BMS also acquired Amira’s preclinical autotaxin program, which addresses chronic pain and cancer metastases.) And so the first two descendants were born: FLAP LLC and Panmira LLC, each created as a limited liability corporation for tax-saving reasons. Each could be sold or partnered relatively easily.

But the deal’s fertility didn’t stop there. Versant Ventures, one of the firms that cashed out in the sale, drew up a whole new investment model designed to avoid Amira’s complications – and hired Amira’s chief scientist, Peppi Prasit, to get it off the ground, formally establishing three new companies in the process. Versant first established Inception Sciences, a drug discovery “mothership” that will spin out asset-focused companies to house drug candidates as they reach maturity; the firm also invested $5 million apiece in Inception I and II, the first two LLCs that will shepherd those assets along. Versant’s Brad Bolzon said the “gymnastics” of the Amira deal inspired him to create a model in which assets could be lodged in separate companies much earlier in the development process, rather than spinning them out when a sale became imminent.

Progeny aside, the deal gives BMS a hard-charging horse in the race to own the first IPF drug approved in the U.S.; LPA-1 receptor antagonist AM-152 could bring relief to a U.S. patient population of about 100,000. The drug is thought to have disease-modifying properties, setting it apart from InterMune’s Esbriet (pirfenadone), already approved overseas, and other candidates in the hands of J&J and Boehringer Ingelheim that slow progression but do not alter the disease itself. Amira’s price tag was higher than that of Arresto Biosciences, another startup with an IPF drug that was acquired by Gilead Sciences in late 2010 for $225 million; the deal also intensifies competition for Stromedix, the last venture-backed startup left with an IPF-fighting asset that holds similar promise.

Moreover, Amira’s high up-front price also led to a generous payout for its shareholders. Novo Ventures’ Heath Lukatch confirmed to "The Pink Sheet" DAILY that Series A investors Versant and Prospect Venture Partners would receive double-digit returns on their 2005 investment, while Novo would receive roughly seven times its investment, provided the first milestone payment appears as expected by year’s end. It’s just one more way BMS/Amira was the year’s most fruitful deal – and most deserving of a Roger.

Photo courtesy of Flickr user anyjazz65, reproduced under Creative Commons license.

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