Deals of the Week Decompresses

Sales and earnings season kicks into full swing Jan. 22,so maybe that explains the hush that fell over the deal-making front this week.Or, after hunkering down on the battlefield known as the Westin St. Francis Hotel during the JPMorgan Healthcare Conference last week, the dealmakers went back to their desks to digest what they learned and put up their feet.

The execs at Genentech remained diligent though (theydidn’t have far to travel after all), signing a big deal in the epigenetics spacewith Constellation Pharmaceuticals. The partnership included the biggest up-front payment yet in the emerging area of science - $95 million including both up-front and research funding, way more than the $20 million GlaxoSmithKline paid upfront in its epigenetics tie-up with Epizyme last year.

Then there was the announcement Jan. 17 that Gilead closed on the $11.2 billion acquisition of hepatitis C specialist Pharmasset. Gulp.Maybe that was a big enough deal for the industry to swallow in one week. Notthat you need reminding after Gilead announced the acquisition in November, but Gilead is paying the most ever for a clinical-stage biotech, with the multi-billion dollar buyout representing an 89% premium over Pharmasset’s closing share price before thedeal was announced.

Lastly, there was a deal that fell apart. Though hardly a surprise at this point, Pfizer’s decision to end its collaboration with Medivation to develop Dimebon for Alzheimer’s disease after a second Phase III flop still had to sting. The program represents a whole lot of cash down thedrain, and Pfizer still has bapineuzumab to sweat over. We already had a feeling the dimebon deal was done though, didn’t you? - Jess Merrill

Genentech/Constellation: Cambridge, Mass.-based Constellation Pharmaceuticals is among the best-funded start-ups in the nascent field of epigenetics. Until this week, however, it was the most mature company in the sector without a commercial partner. On Jan. 17, Roche-owned Genentech and Constellation announced a three-year collaboration that covers a broad range of epigenetics programs spanning multiple target classes; Constellation’s two lead programs remain under the start-up’s full control, however. Genentech paid $95 million in up-front and research funding, making the new deal the largest yet in the epigenetics field, which relates to the science of chemically modifying specific DNA sites to amplify or suppress gene expression. For its money, which could also include milestone payments of unspecified size as well as double-digit royalties, Genentech also gets an option to acquire Constellation outright at a pre-determined but undisclosed time in the future, for a pre-negotiated price plus contingent value rights. The deal follows by a year GlaxoSmithKline’s deal with Constellation rival Epizyme, for $20 million up-front, as well as a smaller tie-up between Eisai and Epizyme in March 2011. Constellation has raised $86 million in two rounds of funding from VCs including Third Rock Ventures, the Column Group,Venrock, and Altitude Life Science Ventures, as well as SROne, GSK’s venture unit; most recently, it topped off its Series B with $15 million in June 2011. – Paul Bonanos

Bayer/Ventana: Pharma is the latest in a string of pharmas to partner with Ventana to develop a companion diagnostic for a drug in development, Ventana’s pharma partners have disclosed three other companion diagnostic deals already in the first few weeksof the year. The deal with Bayer, announced Jan. 17, is for the development of a test to identify patients most likely to benefit from a novel andibody-drug conjugate in development at Bayer. The test will be based on Ventana’s immunohistochemistry platform. None of the financials were disclosed, but Ventana President Mara Aspinall told “The Pink Sheet” DAILY that it has signed some “encouraging” deals with pharmaceutical manufacturers. We’d still like to see some actual financials. — Jessica Merrill

Life Technologies/DaAn Gene: Life Technologies, a leading U.S.-based supplier of sequencing systems and other life science tools, and DaAn Gene, based in Guangzhou, have formed a joint venture to develop in vitro diagnostic assays in oncology, infectious diseases, and genetic diseases for wide distribution in China. The first order of things is for the partners to plan the test menu for Life Technologies’ 3500Dx Genetic Analyzer for IVD, which the Chinese regulator, the SFDA, cleared in October. They have collaborated before: working with Applied Biosystems (now LifeTech’s sequencing business) DaAn brought PCR technology to China. Although LifeTech is aiming at the China market, the press release announcing the venture also highlighted DaAn’s intention to bring its products to “the global marketplace,”suggesting the capillary sequencing-based kits it develops may be appropriate for approved uses outside of China as well as within. According to its website, DaAn “claims a presence” in 70% of the molecular diagnostics market in China over the past decade. LifeTech transitioned from a local dealer network to a direct selling model in China for its sequencers in 2011 and after a bumpy start, expects better than 20% organic growth there in 2012. LifeTech declined to comment on how the joint venture will split expenses and revenues from kit development and sales. --Mark Ratner

Genzyme/Veracyte: Sanofi-owned Genzyme broadened its thyroid-related offerings via a partnership with molecular diagnostics specialist Veracyte. In a global deal for undisclosed financial terms, Genzyme said it would co-promote Afirma,Veracyte’s personalized diagnostic analysis platform for patients suspected of having thyroid cancer. Traditionally, co-promotes between pharma and diagnostics companies have been hard to pull off because the economics vary widely for various products, making it difficult for partners to align their incentives. Given the new realities of personalized medicines and targeted therapies, this one should be interesting to follow. Veracyte’s gene expression tests are designed to help cytopathologists classify indeterminate results of fine needle aspirations. The companies say current methods of FNA analysis are so challenging to interpret that most patients also undergo thyroid resection for a definitive diagnosis; even that procedure is highly imperfect. Genzyme and Veracyte claim that use of Afirma in combination with cytopathology expert analysis to interpret FNAs could prevent tens of thousands of surgeries annually in the U.S. The companies will first co-promote the procedure in the U.S., but eventually will do so elsewhere in the world. Genzyme already markets Thyrogen (thyrotropin alfa for injection), a diagnostic and adjunctive therapy for patients with well-differentiated thyroid cancers. Founded in 2008, privately-held Veracyte is backed by Domain Associates, Kleiner Perkins Caufield & Byers, Versant Ventures and TPG Biotech, and raised $28 million in Series B funding in June 2010. – P.B.

Pfizer/Medivation: After more than four years of collaborating on once-promising Alzheimer’s disease drug Dimebon (latrepirdine), Pfizer and Medivation threw in the towel after a second failed Phase III efficacy trial. On Jan. 17, the companies announced plans to discontinue development of Dimebon for all indications and to terminate their collaboration on the drug. The decision followed the failure of a second Phase III trial, CONCERT, to demonstrate efficacy in Alzheimer’s disease. Dimebon failed to demonstrate statistically significant efficacy on either of two co-primary endpoints – the Alzheimer’s Disease Assessment Scale-cognitive subscale or the Alzheimer’s Disease Cooperative Study-Activities of Daily Living. The disappointing results came less than two years after another Phase III Dimebon trial in Alzheimer’s, CONNECTION, failed to meet efficacy endpoint measures of cognition and global function inpatients with mild-to-moderate disease. For Pfizer, Dimebon represented a risky bet from the start. It entered into a development and commercialization deal with Medivation in September 2008. The big pharma agreed to pay $225 million in cash upfront and up to $500 million in development milestones while also assuming 60% of development costs and commercialization expenses, premised upon encouraging results from a Phase II/III study that enrolled 183 Alzheimer’s patients with mild-to-moderate disease at 11 sites in Russia.—Sue Sutter and Joseph Haas

--Photo courtesy of Flickr user slworking2, used under Creative Commons license.