Thursday, December 15, 2011

Deals of the Week Notes the Holiday Generosity

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This week's Reata/Abbott deal with the monster upfront (as opposed to last year's Reata/Abbott deal with the monster upfront) got us thinking about the vague notion we get around this time each year: that up-front payments tend to get larger after the leaves have fallen off the trees.

Do buyers really get into the holiday spirit, or have we just had too much of a different sort of spirit to keep us warm? This year it seemed simple enough to dig up the data in Strategic Transactions, and so we have.

Above you can see that upfront payments really have trended upward (at least according to Excel's trendline tool). To create this chart and trendline it's important to note we didn't include every biopharma alliance. Rather we used our favorite dataset: alliances/licensing deals where the licensing partner or senior alliance partner was a commercial-stage pharma or biotech company (so that's Big Pharma, Big Biotech, the large Japanese and European players, and revenue generating specialty pharma companies of all stripes), and where we know the up-front payment. The data charted above ranges from 2007 through this week, and comprises 329 datapoints.

UPDATE: See below for Median (blue) and Mean (red) charted by month.

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If the Reata deal described below does skew the results, it's only by the tiniest smidgen. And -- we went back and checked! -- looking at each year on its own, this upward trend is the case for every year individually, since 2007, even the years when Abbott doesn't throw down a multi-hundred million up-front. Some years the trend is more pronounced than others, but each year it's pointing in the same direction.

So what to make of this fourth quarter generosity? It probably has something to do with buyers wanting to get deals done under the year-end budget wire. Or maybe it's a holiday miracle. Also miraculous? 2011's penultimate ...

Abbott/Reata: Another financial record in biopharmaceutical deal-making tumbled as Abbott Laboratories Inc. agreed Dec. 12 to pay Reata Pharmaceuticals Inc. $400 million upfront in exchange for a worldwide license to co-develop and co-commercialize the biotech’s preclinical antioxidant inflammation modulator (AIM) compounds. Reata has discovered and developed AIM compounds to treat central nervous system, respiratory and autoimmune diseases. The previous recorded high amount paid upfront for a preclinical biopharmaceutical asset was Celgene Corp.’s 2010 deal with Agios Pharmaceuticals Inc., in which Celgene paid $130 million upfront for a three-year exclusive option on Agios’ cancer candidates based on “metabolic rewiring." With Reata’s upfront take more than tripling the previous record, recent weeks also have seen deals in which Gilead paid the highest buyout fee for a clinical-stage biotech in its $11 billion tender for Pharmasset, while Janssen Biotech NV paid the largest single-asset upfront this year less than a week ago for the right to co-develop Pharmacyclics’s Phase II hematological cancer candidate PCI-32765. Reata is extending an existing relationship with Abbott, which previously filled its coffers in a 2010 licensing agreement for bardoxolone methyl, considered to offer the potential to become the first treatment to reverse the progression of chronic kidney disease. Reata is funding Phase III development of bardoxolone under its partnership with Abbott, but the big pharma will play a much larger development role in the AIM programs. The global agreement covers a broad range of molecules in several therapeutic areas, with the two companies slated to split development and commercialization costs, as well as profits, equally, except for rheumatoid arthritis and other autoimmune indications. In those categories, Abbott will cover 70% of costs and also take 70% of any profits.—Joseph Haas

Bristol-Myers Squibb/Simcere: Bristol-Myers Squibb Co. and Simcere Pharmaceutical Group have inked a second collaboration to develop a BMS drug candidate in China. The companies said on Dec. 13 that they will co-develop the CETP (cholesteryl ester transfer protein) inhibitor BMS-795311, with Simcere holding exclusive development and commercialization rights in China. Simcere will pay all development costs. The arrangement in essence is an out-licensing deal involving a drug candidate that BMS stopped working on in preclinical development because of “portfolio reasons,” although it “continues to believe in the scientific promise of the compound.” At least three multinationals have CETP inhibitors already in clinical development in Western markets, making BMS a late-comer. Moreover, the class was notoriously set back by Pfizer’s catastrophic experience with torcetrapib, which dramatically increased the rate of cardiovascular events in a Phase III trial. Nevertheless, initiating development in China could be a good option for a high risk project because of the lower trial costs and the country’s large, treatment-na├»ve population. Simcere is becoming the go-to local company for MNCs. BMS and Simcere say the business model is similar to a deal they signed in Nov. 2010. That deal involves the preclinical MET-VEGFR-2 inhibitor GMS-817378. Under that deal, Simcere is responsible for obtaining clinical trial approval in China and conducting those trials through proof-of-concept Phase IIa. BMS’ involvement with the drug in later stage trials is yet to be determined. –Dan Poppy

Intarcia/Quintiles: Diabetes treatment developer Intarcia Therapeutics says a pharma partnership is imminent for its implantable pumps that deliver the GLP-1 analog exenatide. But first, Intarcia has worked out a deal with Quintiles, the world’s largest contract research organization, to conduct six Phase III trials on its product. Specific financial terms weren’t released, but Quintiles revealed that it made two simultaneous investments in privately-held Intarcia. One is non-dilutive, designed to bring returns as the product, ITCA-650, reaches unspecified milestones. Quintiles also took an equity stake, although finance group global VP Chip Gillooly said that investment was smaller than the product investment. Intarcia CEO Kurt Graves said the company is in late-stage discussions with two “finalist” pharma partners, with the aim of retaining 50% of U.S. rights. Negotiating both a CRO deal and a pharma partnership simultaneously saves several months’ worth of time on ITCA-650’s development clock, he added. The devices, which can be implanted for up to a year, delivers a controlled-release formulation of exenatide, the compound in Amylin’s Byetta and Bydureon that’s known for regulating insulin and glucagon production in the pancreas. Graves said that Amylin has no composition-of-matter patent on the drug, leading Intarcia to believe it has freedom to sell the drug in another form. – Paul Bonanos

Enlight Biosciences/ AstraZeneca and Enlight/ Novo Nordisk: Enlight Biosciences announced on Dec. 15 the identities of its two newest partners: AstraZeneca, and Novo Nordisk. The Pink Sheet previously wrote about the formation of the partnerships, but at the time, Enlight could not reveal the companies’ identities. Terms were not disclosed, but the deals give each drug company an opportunity to participate in Enlight's novel business structure in which pharma companies collaborate at a pre-competitive stage to exchange ideas about unmet medical needs, contribute to the evaluation of technology solutions, and select and guide early development of novel technologies, with opportunities to make investments in commercialization. To fund these endeavors, each pharma “member” pays an upfront fee (the figure for its first six members was $13 million, according to its website). Once an opportunity is identified, Enlight proposes an idea for launching a start up company around the technology and members have the option to invest at varying levels. They will, in exchange, have opportunities to participate in any returns that accrue. So far, Enlight has launched two companies, Endra (molecular imaging) and Entrega (oral delivery of proteins). For AstraZeneca, and its biologics arm, MedImmune, it’s an opportunity to collaborate with peers and contribute to development of novel tools, the company said in a statement. Novo Nordisk expects to apply its expertise in protein engineering and expression, formulation and delivery to bring new therapies to market. – Michael Goodman.

Eli Lilly/TransPharma: In a "No Deal" signaling just how tempting - and how hard - it is to improve osteoporosis treatment, Eli Lilly & Co. has dropped its options and licensing agreement with Israel’s TransPharma for a transdermal patch formulation of Forteo (teriparatide), Lilly's well-established injectable parathyroid hormone analogue. The companies formed the collaboration in June 2008, when Lilly committed $35 million upfront to development of TransPharma's ViaDor-PTH1-34, a then-Phase II-ready patch-formulation of teriparatide. The Big Pharma chose not to pursue its option on the product after the drug failed to meet its primary endpoint in a Phase II trial, despite showing strong efficacy and safety results in a Phase Ib trial. Forteo has a niche in osteoporosis, for difficult to treat cases, because it is the only drug on the market with bone building properties, despite a black box warnings. But its sales -- $830 million in 2010 -- are flattening. The race to create a more convenient version of Forteo is hotly contested, with California-based Zosano Pharma Inc. also competing to get transdermal delivery systems for PTH approved. Lilly is also developing a nasal spray version of the drug. Zosano recently secured an Asian partner to market their drug and is preparing for a phase III trial. Both companies have planned to seek shortcut approval via the 505(b)(2) pathway, so the distinctions between their technologies – and how well they work-- will be crucial in the long run. -- Lisa LaMotta, Malorye Branca.

Actelion/ Trophos: Lilly isn’t the only company to pass on an option this week; Swiss biotech Actelion Pharmaceuticals Ltd. decided not to exercise its option to acquire privately held Trophos SA, after the French company reported Dec. 13 that its lead compound, olesoxime, had not reached its primary endpoint in a Phase III study in amyotrophic lateral sclerosis, better known as Lou Gehrig's disease. Actelion and Trophos paired up in 2010, providing Trophos with a $13 million upfront and Actelion with the option to buy the company for $163 million. --John Davis

Takeda/Affymax: And Takeda Pharmaceutical made a no-go decision on a regional deal, by deciding to pass up on the opportunity to market partner Affymax's anemia drug Hematide, in Japan. The companies are partnered elsewhere in the world, including in Europe and the United States. Takeda said in a statement that the drug was not a good fit for its strategy in Japan, although it has survived most of the final-phase trials there. The partners plan to explore other options for the drug in Japan. --Wendy Diller

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