2011 Exit/Financing of the Year Nominee: Eisai/SFJ Pharma

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're once again 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 (a half 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™.

With development budgets stretched, it's difficult for burn-minded companies to conduct multiple late-stage clinical trials simultaneously. Biopharma firms with promising assets can always try to find a partner to share the risk and widen the development funnel -- but that means giving up back end rewards. Unless of course you can find someone to foot the bill without asking for a slice of the commercial pie in return.

Enter this year's latest DOTY candidate, Eisai/SFJ.

In their deal announced in September, Eisai is handing the development bill on its thyroid cancer treatment lenvatinib to SFJ, which will pay for Phase III studies. Eisai will pay milestones to SFJ only if lenvatinib gains regulatory approval, and Eisai itself conducts the global trials and also keeps all commercial rights. The financial details weren't disclosed. Levantinib, a home-grown tyrosine kinase inhibitor, is one of Eisai's three oncology assets that have reached Phase III globally; the SFJ deal will allow Eisai to spend its own cash elsewhere in its late-stage pipeline.

Though SFJ isn't conducting the lenvatinib Phase III, it's a CRO itself, and presumably has a pretty good inkling that the drug will eventually get approved. Well, SFJ isn't a CRO, exactly, but nor is it typically simply an investor, as appears the case here. It bills itself as a specialty pharma, and it raised a $45 million Series A round in early 2009, with Abingworth Management and Clarus Ventures in the lead. It hopes to in-license drugs and bring them to market in Japan itself, but has not done so yet (or at least hasn't said so publicly). In its two deals prior to Eisai, SFJ has written the clinical protocol and is conducting the trials. Data from one were supposed to be due in December.

SFJ, which limits its development and commercialization ambitions to the Japanese market, was founded by a former executive at NovaQuest, the ex-financing arm of Quintiles. (It has since split off from Quintiles.) Quintiles has a risk-sharing deal with Eisai in oncology in which the two sides develop an unspecified number of Eisai compounds to proof-of-concept. We asked SFJ President and CEO Bob DeBenedetto about the NovaQuest/Quintiles influence, and he said SFJ's partnering terms and structures were different. But that hasn't prevented them from working together. DeBenedetto told the IN VIVO Blog recently that SFJ and Quintiles are teaming up on other pharma clinical deals for which SFJ provides the cash and the two conduct the trial.

Here, SFJ is again the bankroller, but Eisai holds the clinical reins. The deal -- a straight financing -- allows Eisai to boost the bandwidth of its late-stage development program in the highly competitive oncology space. SFJ is simply making what it hopes is a solid bet -- with a near-term payout.