Deals Of the Week Compares the Comparison Shoppers

One of the nice things about JP Morgan is the variety of routes a participant’s attention can take. Within any particular area, moreover, one can go as shallow or deep as desired. Big Pharma’s partnering priorities, for example, are a constant theme, as companies put forth broad comments on their criteria and interests in deal making. Even before the meeting got underway, a deal announced late on Saturday evening Jan. 8 set the tone for discussions on valuation: Bristol Myers Squibb agreed to buy Inhibitex for $2.5 billion in cash – for a nucleotide polymerase inhibitor in Phase II. Was this unique to the particular current situation in HCV and the nature of the competitive bidding process? Or will other highly competitive disease categories see similar reaching? Are expensive HCV regimens even what the market will want in five years?

The topic started off an interview with Pfizer’s Kristin Peck, EVP, worldwide business development and innovation: “I don’t really understand about that one. We at Pfizer are looking at much more risk sharing, collaborative, creative deal making,” she said, alluding to Pfizer’s growing preference for structured deals.

Late stage assets are clearly still on big pharma’s mind, although practically speaking -- i.e. valuation wise -- the pickings are slim; "We're opportunistic with late-stage deals," noted Peck. Much of the attention at JPM therefore focused on the benefits of moving existing assets into emerging markets, or for that matter buying assets in developing countries, although a dose of reality appears to have set in. Peck highlighted Pfizer’s 2010 structured acquisition of 40% of the family-owned Brazilian generics maker Laboratorio Teuto for $240 million, which includes an option to buy the remaining 60% beginning in 2014.

From another angle, GlaxoSmithKline’s CFO Simon Dingemans noted that his company is pleased with its 2009 acquisition of Stiefel, a maker of dermatology medications. “The reason we are so pleased is because we can take the portfolio, combine it with our legacy assets and push through sales into new markets," he said. Emerging markets was never one of Stiefel's strengths, "and now dermatology is one of our fastest growing parts of our emerging markets portfolio … it has had significant synergies above what we expected, improvement in quality, and we were able to fold it into our network. What we look for in our deals is, can we do something different with the asset than the existing ownership has done?”

AstraZeneca’s CFO Simon Lowth, speaking in a break out session, emphasized the company’s commitment to a “disciplined approach to deal-making” -- causing JP Morgan analyst Alexandra Hauber to wonder if strict adherence to discipline, given the competitive bidding environment, will cause AZ to “shrink.”

Loweth’s response: “That is a dangerous path to go down. We have done more than 100 deals in the last five years. The key is in situations where it is very competitive, you have to be very clear on the edge you bring.”

More to come on JP Morgan, but meanwhile as the 2012 deal-making session gets off and running in earnest, here's the latest round up of:

Shire/Janssen:  Resolor has produced minimal sales to date, but Shire increased its bet on the chronic constipation drug Jan. 10, acquiring U.S. rights to the compound from Janssen Pharmaceutica NV. Financial terms were not disclosed. Shire picked up rest-of-world rights to the selective serotonin receptor agonist in its €428 million purchase of Belgian biotech Movetis in 2010. (Like Janssen, Movetis was a subsidiary of Johnson & Johnson before being sold.) Resolor, a 5-HT4 receptor agonist, was approved by the European Medicines Agency in October 2009 for the symptomatic treatment of chronic constipation in women for whom laxatives fail to provide adequate relief. Since launched in the U.K., Germany, Ireland, Greece, Belgium and France, the drug netted Shire only $4 million in worldwide sales through the first three quarters of 2011. Resolor (prucalopride) is not yet approved in the U.S. At the time of its purchase of Movetis, Shire predicted that Resolor could achieve peak sales of greater than €300 million annually.—Joseph Haas

Pfizer/SFJ: Why pay for Phase III trials if someone else will do it for you? That’s the spirit of Pfizer Inc.’s development agreement with SFJ Pharma Ltd., announced Jan. 9. Global development company SFJ, backed by venture capitalists, has agreed to fund and supervise a Phase III trial in Asia of Pfizer’s axitinib for the adjuvant treatment of patients at high risk of recurrent renal cell carcinoma (RCC) following nephrectomy. California-based SFJ – nominated for our financing Deal of the Year for a similar pact with Eisai -- will be owed milestones, but only if the drug is approved in certain Asian territories. In that case, Pfizer is obliged to commercialize the drug in that indication, according to SFJ CEO and President Robert DeBenedetto, and would owe SFJ royalty payments “for a fairly lengthy period of time.” The milestone and royalty rates are undisclosed. But you can be sure that they’re calculated to provide a healthy payback to SFJ and its backers -- Abingworth Management Ltd., Clarus Ventures and FinTech Global Capital -- in exchange for the risk incurred. Granted, with axitinib already filed for approval in the U.S., Europe and Japan, there isn’t a ton of risk. SFJ Pharma is essentially ensuring that Pfizer’s clinical data for the adjuvant indication is ideally designed and presented to maximize the chance of regulatory approval in the Asian territories involved; the Phase III trial is being conducted in six undisclosed Asian markets. The deal frees up Pfizer to focus on other programs and compounds and, importantly, removes or at least delays a cost that it would otherwise have incurred. – Melanie Senior

Pfizer/Cell Signaling Technology/Ventana: The latest link up among Pfizer, Ventana Medical Systems Inc., a subsidiary of Roche, and Cell Signaling Technology to develop the first fully automated and standardized immunohistochemistry companion diagnostic for ALK gene rearrangements illustrates how much the company’s – and Big Pharma’s -- thinking on companion diagnostics has evolved over the past decade. The test would be linked to Pfizer’s Xalkori (crizotinib), which FDA approved with a companion diagnostic for ALK gene rearrangements in August 2011. The label specifies Xalkori is intended for non-small-cell lung cancer (NSCLC) patients who test positive for the ALK mutation on an FDA-approved test. The companion diagnostic – the Vysis ALK Break Apart FISH Probe Kit – was developed by Abbott Molecular and approved simultaneously with the drug, also ahead of its user fee deadline. Pfizer and Abbott had agreed to collaborate on a test in August 2009. But Pfizer, apparently, isn’t satisfied with just the FISH probe – FISH is a common, although manual and somewhat complex and therefore somewhat subjective method of analysis. The Ventana test will identify NSCLC patients with ALK (anaplastic lymphoma receptor tyrosinekinase) genetic mutations, who may benefit from Xalkori (about 6% to 7% of the total patient population). The test will be based on CST’s D5F3 antibody and Ventana’s Optiview DAB detection and is aimed to run on the diagnostic system’s maker’s automated testing platform. It was only seven or eight years ago that AstraZeneca PLC struggled with the best way to identify patients who would benefit from its own NSCLC targeted therapy Iressa, initiating a model trial, I-PASS – after multiple setbacks and failed approaches – that had important implications for subsequent targeted therapies.—Wendy Diller

AstraZeneca/ IMS Health: AstraZeneca PLC’s deal with information provider IMS Health Inc. to generate real-world outcomes data from European patients should give the drugmaker a leg up as it makes a value case for new products, but more fundamentally, the firm hopes the collaboration can create a clearer picture of how medicines are being used across the region to help drive research and development decisions. The three-year deal, announced Jan. 11, comes less than a year after AZ’s similar tie-up in the U.S. with HealthCore, the health outcomes research branch of insurer WellPoint Inc. It follows a broader flurry of pharma-payer collaboration driven by the need for more value-focused data to support drug reimbursement. Indeed, AstraZeneca is hoping that this partnership will, in the near-term, help it support newly-launched treatments such as clot-buster Brilinta (ticagrelor) by providing payers with the real-world evidence of a drug’s benefit, how it’s being used, and the outcomes achieved. “We see a lot of [the deal’s] value in this launch-support space,” said Greg Rossi, AZ’s VP of Payer Evidence in R&D. But ultimately, he claimed, the deal’s biggest impact will likely be further upstream, in informing early-stage R&D, helping pick rel evant comparators and “endpoints that are important to various stakeholders in the health care system.” No financials were disclosed for the IMS deal. But besides granting AZ access to clinical outcome, economic and treatment pattern data derived from IMS’ electronic health records, it also includes plans to jointly develop an IT platform that integrates disparate datasts across diverse disease states and geographies.—Melane Senior

Leo Pharma/Virobay: The Danish dermatology specialist, Leo Pharma A/S, has made no secret of its plans to use acquisitions and in-licensing deals to further its global growth strategy, and this week supplemented its R&D pipeline with an unnamed preclinical psoriasis candidate from the U.S. virtual biotech Virobay. The two companies are to collaborate on developing the compound, with Leo paying $7 million up-front, milestone payments of up to $300 million, and tiered royalties, in a deal announced Jan. 9. The compound, likely a small-molecule cysteine protease inhibitor as that is the research focus of Menlo Park, California-based Virobay Inc., is expected to enter Phase I studies in the fourth quarter of 2012, and could be the first in its class to reach the market. There are only a small number of oral psoriasis therapies on the market, and all are associated with potential side effects and the need for monitoring, according to Leo. In 2009, the Danish company, which is owned by the Leo Foundation, an independent private institution, re-acquired U.S. marketing rights to its psoriasis therapies Taclonex and Dovonex, from Warner Chilcott, and in January 2010 it established U.S. headquarters in Parsippany, New Jersey.—John Davis

Shire/ICON: Shire PLC's specialty pharmaceuticals division has selected fellow Ireland-headquartered contract research organization, ICON, to be its sole provider of central laboratory services, and one of two providers of clinical trial services. ICON will provide Shire with clinical site and study team support, medical management and medical data review, clinical trial monitoring and regulatory submission services and Shire will also use ICON's global network of central laboratories. Strategic partnerships are bringing a rich vein of new business to ICON – during 2011 it became one of two preferred global providers of clinical trial implementation services to Pfizer Inc., and extended its agreement with Bristol-Myers Squibb to include not only providing support services for BMS clinical development pipeline, but also its early-phase clinical development as well. In the third quarter of 2011, ICON's success in attracting strategic partners led it to recruit more than 500 extra staff in the quarter. That was a rare bit of good news for the pharmaceutical sector on the recruitment front, which today learnt that the Swiss company Novartis is to cut nearly 2,000 positions at its U.S. subsidiary. –John Davis

Genentech/Xenon: Known for its expertise in oncology and immunology, Genentech Inc.—then independent and now a division of Roche -- said in 2008 it would explore neuroscience more deeply. Its pipeline in that area has barely materialized since, with only one Phase II Alzheimer’s drug in the clinic. Now, thanks to a new deal with Canadian start-up Xenon Pharmaceuticals, Genentech will add pain therapeutics to its portfolio. The Roche subsidiary will pay an undisclosed amount upfront to discover and develop new drugs and companion diagnostics to treat pain. Milestone payments could bring the deal’s overall value to $646 million, if multiple products of the collaboration reach their full potential. The companies aren’t discussing specific targets of the agreement, but Xenon specializes in voltage-gated sodium channels. Genentech says it’s expanding beyond neurodegenerative diseases, with an interest in spinal cord injuries and psychiatric disorders as well. Privately held, venture-backed Xenon’s lead pain program, XEN-402, is unaffected by the new deal. The start-up struck a deal with Roche in 2006 for a program using hemojuvelin inhibitors to treat anemia of inflammation; it has other relationships with Big Pharmas, including Novartis in metabolic disease and Merck in cardiovascular disorders. – Paul Bonanos