Deals Of The Week: VCs Still Hoping To Cash Out But Growing Used To Earn-outs

In 2012, private biotechs and their investors waiting to cash out via acquisition likely will find themselves waiting a bit more, even after the deal is done. As we have noted for some time, biotech investors almost certainly have to exit their portfolio companies through acquisition, and since 2009 more than two thirds of those acquisitions have come with cash doled out after the deal closes – sometimes years after, and sometimes a huge chunk of it.

But venture capital firms are wising up, as we detail in our latest Start-Up magazine feature.

Knowing they’ll have to take some percentage of their returns on a contingent basis, they are negotiating to tie those post-acquisition payments to near-term clinical and regulatory milestones, not to sales figures. They’re also paying attention to the nuances of the clinical milestones and trying to avoid vague triggers that can be re-interpreted by the acquirers. One VC has drawn a line in the sand mandating that no significant milestones can occur more than two years past the closing of the deal.

Shareholders also are turning to escrow-like services that not only keep track of post-acquisition payments but help do a little watchdogging to help make sure acquirers are meeting the terms of the deal. One such service, Shareholder Representative Services LLC, has worked on more than 30 life-science acquisitions with earn-outs since 2008. Executive director Donald Morrissey said that on deals SRS has worked on that are more than six months old: 1) at least one milestone has been paid on about 20% of deals; 2) at least one milestone has been missed on about 50% of deals; and 3) milestone-bearing programs have been terminated on about 20% of deals.

Morrissey also noted that the area is ripe for dispute, especially as the deal flow climbs and the pool of post-deal payments still in limbo grows deeper. He says disputes have occurred in almost 30% of the firm's life-science deals (although not necessarily arbitration or formal litigation, which is the nuclear option), and 20% of deals have been renegotiated (take the Onyx Pharmaceuticals-Proteolix deal, for example).

Is VC adaptation in the age of the earn-outs having an effect? These are early days, seeing how the “age” didn’t really start until 2009. But DOTW did find that in 2011, the average amount of total deal value began to shift back in the sellers’ favor. For deals with a total potential value (upfront and possible earn-outs combined) of $50 million or more, 58% of the cash came upfront, which collectively gave sellers a 4x step-up on the money invested in the acquired companies. The total potential step-up – the fantasy number sellers would hit if every post-buyout milestone came to fruition – has declined, but investors gladly would trade unreachable ceilings for higher, yet-realistic floors.

In 2009 and 2010, the upfront totals were 45% and 35% respectively, and the upfront step-ups were 3x and about 2.5x. (The upfront amount was much higher before 2009, but that was before earn-outs became practically the only game in town for private biotechs looking for acquirers.)

Are milestones actually paying out? Again, these are early days. With so many deals consummated only in the past year or two, many milestones, even near-term ones, haven’t yet been triggered. One deal with milestones that keep rolling in, though, is Cubist Pharmaceuticals’ late 2009 purchase of Calixa Therapeutics. In addition to $93 million upfront, Cubist has paid three milestones totaling $90 million. That adds up to roughly a 6x return on the $30 million invested in Calixa, and another $40 million could come from Cubist later this year.

For a running total of earn-outs that have paid out – and a reminder how opaque some deal details are – visit Atlas Venture partner Bruce Booth’s blog, where he is trying to crowd-source deal information.--Alex Lash

Allena/Althea – Newton, Mass.-based Allena Pharmaceuticals has gained an exclusive worldwide license to Althea Technologies’ hyperoxaluria portfolio, including patents, regulatory information and development data. Althea is a contract manufacturing organization based in San Diego. The deal will help Allena’s research into ALLN-177, an orally delivered enzyme therapy for hyperoxaluria, a disease that can cause kidney stones and eventually lead to full renal failure. “Currently there are no effective pharmacological treatments for hyperoxaluria or the nearly 2.6 million Americans who suffer from kidney stones annually,” said Alexey Margolin, co-founder, president and CEO of Allena. Allena is a privately held company with a focus on protein therapeutics, with a special focus on kidney and urologic diseases. Investors, including Third Rock Ventures, Frazier Healthcare and Bessemer Venture Partners, put $15 million into a Series A to bankroll the company's launch in November. The management team and investors were all involved with Alnara Pharmaceuticals Inc., a company purchased by Eli Lilly & Co. in 2010 for $380 million. Like Alnara, Allena focuses on enzyme-based therapies that can be delivered orally rather than injected and are designed to remain stable in the stomach instead of going into circulation.--Lisa LaMotta

Almirall/Menarini Group – Mid-sized pharmaceutical companies in Europe are turning to each other to achieve the scale and marketing muscle previously only found in the shrinking number of big pharma companies. Such a move is exemplified by Spain's Almirall SA, which has just turned to Italy's Menarini Group to help market its new chronic obstructive pulmonary disease therapy, aclidinium bromide, in Europe. Menarini has more than 5,000 sales reps poised to market the therapy in the countries covered by the commercial alliance: the majority of EU member states, Russia, Turkey and CIS countries. Almirall retains sole marketing rights in the U.K., the Netherlands and Nordic countries. The Italian company is particularly strong in Germany, Italy and France, as well as Central and Eastern Europe. Aclidinium is a long-acting inhaled muscarinic antagonist that has been jointly developed by Almirall and Forest Laboratories and is awaiting regulatory approval in the EU. However, there's been a regulatory hiccup in the U.S., where the product will be marketed by Forest; the companies reported March 29 that the FDA will require an extra three months to complete its review, although no new data were requested.--John Davis

Valeant/Natur Produkt – Valeant Pharmaceuticals International has continued its acquisition spree with further expansion into the Russian market. The Canadian company pledged on March 26 that it will pay $180 million plus the potential for $5 million in milestones for over-the-counter drug maker Natur Produkt International, which had revenues of $65 million in 2011. The company, which makes cough and cold medications, will be the second Russian asset that Valeant has purchased in recent months. Valeant said that it expects the Russian market to grow by 15% annually. A few weeks ago, Valeant acquired branded generic assets from Austrian pharmaceutical company Gerot Lannach Pharma, which generated 90% of its $55 million in revenues from Russia. Terms of the deal were not disclosed. The assets from both purchases will be immediately accretive to the Canadian company and will provide approximately $175 million in pro forma revenues by the end of 2012. The slew of acquisitions that Valeant has made over the last year have helped the company to double its top line, going from $1.18 billion in revenues in 2010 to more than $2.26 billion in 2011. Last August, Valeant acquired Lithuania-based specialty pharma AB Sanitas, giving it access to markets in Poland, Lithuania and Russia.--LL

Bausch & Lomb/Ista – Two months after Valeant failed with its proposed takeover of Ista Pharmaceuticals, Ista has again been targeted for acquisition. This time, fellow ophthalmic company Bausch & Lomb has offered $9.10 per share in cash (up from the $7.50 Valeant offered, and an 8% premium to the current 10-day average trading price and a substantially larger premium over the pre-Valeant-offer price), for a total of $380 million. Twenty-year-old Ista reported sales of $160 million last year and had $72 million in cash on hand as of the end of December 2011. In addition to four marketed products – Bromday (postoperative inflammation and pain), Bepreve (ocular itching due to cataract extraction), Istalol (glaucoma), and Vitrase (spreading agent) – Ista has a full pipeline. It is working on Phase III Prolensa (ocular inflammation and pain), T-Pred (ocular inflammation and infection), and several OTC dry eye medications; Phase II Bepomax and Beposone (both for allergic rhinitis); and Phase I bromfenac adjunct for age-related macular degeneration. The deal is a good match as not only do the firms have an overlapping customer base, but Bausch & Lomb has been manufacturing almost all of Ista's U.S. products for years.--Maureen Riordan

Bristol-Myers Squibb/Amylin – In our “No Deal” of the week, with Bydureon’s (long-acting exenatide) initial launch appearing to go better than expected, Amylin Pharmaceuticals has become a takeout target, reportedly drawing a $22-per-share buyout offer from partner Bristol-Myers Squibb. Amylin rejected the offer, prompting its share price to rise $8.38, or 54.5%, to $23.77 in same-day trading on March 28. That values Amylin at a market capitalization of $3.5 billion, amid speculation that it could yet obtain a better offer. Analysts agree, however, that Amylin is ripe to be acquired, potentially at a value higher than the bid reportedly made by Bristol. Bristol’s offer represented a 43% premium over Amylin’s previous day’s closing price of $15.39, but several analysts have revised their forecasts upward on the basis of strong early Bydureon sales and argue the stock could be valued in the high 20s to low 30s. If a bidder believes Bydureon sales could reach $1.5 billion in the U.S. by the end of the decade, with additional sales in Europe boosting global revenues well above $2 billion, the offer should be in the low $30s, wrote Leerink Swann’s Joshua Schimmer in a same-day research note. Meanwhile, reports also surfaced March 29 that Roche has increased its bid for gene-mapping tool specialist Illumina. Roche reportedly increased its hostile bid by 15% on March 28, causing another uptick in Illumina’s share price. The Swedish Swiss pharma, which could use Illumina’s expertise to better target its oncology drugs, said it is giving investors until April 20 to decide whether to accept the tender.--Paul Bonanos and Joseph Haas

Photo credit, Wikimedia Commons

Take the PharmAsia China Survey, Get a Discount to PharmAsia Summit-Shanghai

Our colleagues at PharmAsia News are launching a survey on the China life sciences industry. We encourage all readers interested in China to participate. (Filling out the survey should take five minutes and in exchange you'll be eligible for a 15% discount on the PharmAsia Summit-Shanghai Sept. 24-26.)

The rise of emerging markets like China has provided life sciences companies with significant new growth opportunities, but also the challenge to achieve better health outcomes in regions struggling with affordability barriers and huge unmet medical needs.

China, in particular, is on the radar of most industry executives given its scale. China has risen to become the world’s third largest pharma market, according to data from IMS Health, and some analysts believe China is already the second largest market, trailing only the U.S.

To gain a better understanding of how industry is integrating China into their global strategies, Elsevier Business Intelligence (publisher of PAN, In Vivo, and "The Pink Sheet", among other titles) is teaming up with BayHelix, an organization of leaders of Chinese heritage in the global life sciences community, and the Monitor Group, a leading strategic consultancy, to launch a proprietary survey of PharmAsia News and EBI readers.

To start the survey, please click here.

Findings from the survey will be included in an exclusive report on innovation in China, to be released during the PharmAsia Summit-Shanghai (sponsored by EBI and BayHelix). In addition, selected findings will be covered in PharmAsia News during the weeks leading up to the Summit.

Please note that survey participants will remain anonymous. You will be issued a special code at the end of the survey to receive your 15% discount to the PharmAsia Summit-Shanghai.

Thank you for participating!

photo by Josh Berlin

Supremes' Prometheus Ruling Has Dire Consequences for Personalized Medicine

by Michael Boss

It is astonishing when nine very smart people get it so wrong. I refer to the US Supreme Court decision in Mayo v. Prometheus.

The court’s decision was that Prometheus’ patents are not valid since they are attempting to cover a law of nature. The analogy to E=mc2 is made. All of biology follows the laws of nature!

Prometheus developed an assay to help identify the correct dose of thiopurine drugs in the treatment of autoimmune disease. If the drug is metabolized too fast the level will be too low and so not effective. Too slow a metabolism and the drug can be toxic.

Potentially lost in the supreme circus around arguments addressing the constitutionality of the Affordable Care Act, the court is going to announce today whether it will grant or deny the ACLU’s cert petition asking it to review its suit against Myriad and determine if genes are patentable. Lawyers anticipate the court will grant the petition, vacate the Federal Circuit’s decision in favor of Myriad and remand the case back to the Federal Circuit for reconsideration in light of its ruling in Prometheus.

While the specific circumstances of the Prometheus case revolve around analyte measurements, by simple analogy it seems to me that the argument can be extended to genes and any gene products. So the identification of genetic variants that, say, cause disease or resistance to treatment by a drug or potential toxic response to a drug would all fall under this Supreme Court ruling.

This is a devastating ruling at the dawn of the personalized medicine era. The Court has wiped out any incentive to figure out why certain individuals might do better on drug A rather than drug B and how much of drug B should be given. And what about all the technologies under development to define the optimal treatment of cancer? Again by analogy, finding out which drug kills the tumor cells to select the correct drug for the patient would seem remarkably similar to the Prometheus situation.

The patent laws were developed to foster innovation and development of commercial enterprises. This decision has set back a key field by as long as it takes to get the ruling reversed.

image of Jacob Jordaen's painting, Prometheus having his liver eaten by an eagle (in our version the eagle is apparently the Supreme Court), via wikimedia commons.

Michael Boss, a biotech executive with companies including Antisoma, Xanthus, Elan and Athena, is currently an independent consultant. He is also an inventor on a seminal biotech patent.

Financings of the Fortnight Starts Spring On the Right Foot

Happy spring, everyone, though it’s a bit less delicious when in many parts of the Northern Hemisphere, it’s been spring for weeks, even all winter. I give you Texoma, ladies and gentlemen.

Here at FOTF HQ, we’ve got strawberries peeking forth already (pictured above), which is enough to put a spring in anyone’s step. Closer to this column’s topic at hand, however, a couple other trends cropped up this past fortnight with the unveiling of two new funds: European-denominated cash and non-traditional sources. For the former, any cash that increases the chances of funding in the UK and EU biotech sector is a welcome sight after European VCs set a record fundraising low in 2011. For the latter, the alternative sources are Big Pharma – GlaxoSmithKline and Johnson & Johnson are providing half the capital of a new €150 million Index Ventures fund – and the UK’s largest charity, The Wellcome Trust, which unveiled a £200 million fund to invest in diverse healthcare areas with the temporary name of "Project Sigma," which sounds a bit like something James Bond would be assigned to infiltrate and destroy.

The funds won’t necessarily be confined to Europe, and the Wellcome fund is aiming beyond life sciences, but it’s safe to say -- would you please pay attention, 007 -- that a good deal of the new cash from Index and Project Sigma will flow, much-needed, into the UK and EU biotech sectors.

Note we say “sectors,” not “biotech companies,” because the Index fund will focus on developing assets, not building companies. It won’t let a thousand, let alone a dozen, traditional biotech firms bloom. But that’s not the direction the industry is going, anyway. Slowly but surely, venture-type resources are shaking loose to move products forward without traditional infrastructure and into the hands of pharma buyers that increasingly emphasize late-clinical development and marketing. Letting, instead, a thousand freelance project consultants bloom, we suppose.

Other asset-financing schemes of late include CMEA’s Velocity Pharmaceutical Development and the Atlas Venture Development Corp., which combined have publicly disclosed just one project, and Eli Lilly’s Mirror fund program, originally destined to partner with three venture firms but has made little noise since its inception a couple years ago. So we’re under no illusion that the direction is a permanent one.

Permanence is not a question for the massive Wellcome Trust, and with its new fund it has another investment outlet; it’s already been backing startups for years, such as Kymab, which made our 2010 A-List.

We’re highlighting another trend this fortnight: prostate cancer companies raising cash. The disease has seen a groundswell of treatment options in recent years, including several new drugs such as Dendreon’s Provenge (sipuleucel-T). Two more companies vying to bring drugs to market announced new cash raises to help push late-stage programs forward, although not with equal amounts of momentum, as we describe below (see Medivation and OncoGenex Pharmaceuticals).

And at first blush, three stem-cell companies announcing fundraisings in the same two weeks seemed to be another trend, but upon further review it was coincidence. Still, while two of the events were for peanuts -- $9 million for Athersys and $5 million for International Stem Cell – Aastrom Biosciences ended up with a rather convoluted and unusual situation, which we detail below.

When it comes to cell-based therapy, it's best to keep it simple -- like the vitamin D from the spring sunshine on our skin. We also highly recommend an extended dose of acute brain-cell stimulation, courtesy of....

Aastrom Biosciences: The Ann Arbor, Michigan firm said March 9 it has sold $40 million of convertible preferred stock in a private placement to Eastern Capital. The publicly traded firm, with a stock price that hasn’t cracked $3 since last June, says Eastern’s non-voting shares will convert to voting shares upon shareholder approval, required by Nasdaq because the voting shares will give Eastern more than 19.9% ownership. With accrual of shares over five years thanks to an 11.5% annual dividend (payable in stock, not cash), Eastern will eventually own about 25% of the company. Eastern is the investment arm of food packaging mogul Kenneth Dart, a US billionaire who relocated many years ago to the Cayman Islands (read: renounced US citizenship to dodge taxes). The $40 million -- which at the equivalent of $3.25 a share is an 80% premium to the pre-announcement $1.81 per share price -- is Aastrom’s largest single fund-raise ever, according to a blog post from its CEO Tim Mayleben. It gives the firm cash to push ahead with two late-stage trials, including the Phase III pivotal trial of its Ixmyelocel-T autologous adult stem cell therapy in critical limb ischemia. Mayleben also points out that the funding doesn’t have “dilutive warrants or expensive discounts,” which he describes as “expensive inducements [that] often have long-term negative consequences for existing investors.” What Mayleben didn’t mention, however, were Aastrom’s own outstanding warrants, 15 million of them, that could come due in the next few years. Those warrants are baked into analysts’ models, so Aastrom is happy to highlight the fact that the Eastern private placement doesn’t include warrants. Unless, of course, you figure that Eastern’s $40 million worth of preferred shares will eventually turn into 20 or 21 million common shares. “You could say it’s implied dilution,” Aastrom vice president of finance Brian Gibson told FOTF. “But it’s five years away, and most investors don’t have a five-year horizon.” Eastern negotiated other perks, too: The Aastrom board is waiving the shareholder rights plan – the poison pill – that would otherwise kick in, and Eastern also has participation rights for future fundraisings to prevent its own dilution. -- Alex Lash

Tarsa Therapeutics: Tarsa said March 16 it has raised a $28 million Series B round as it heads toward US and European regulatory filings for its oral recombinant calcitonin Ostora by the end of 2012. It would be the first oral formulation on the market of calcitonin, used to treat osteoporosis in post-menopausal women. Tarsa in-licensed rights to the Phase III compound from Unigene Laboratories in 2009. Novartis markets Miacalcin and Upsher-Smith sells Fortical, both nasal-spray formulations. New investor Foresite Capital led the round and was joined by existing A round backers Novo AS, MVM Life Science Partners and Quaker BioVentures. Tarsa raised a $24 million Series A round in 2009, led by MVM. Tarsa is bullish about Ostora’s market potential because Novartis announced earlier this year that as part of a restructuring it was abandoning its own effort to develop an oral version of calcitonin. Recently conducted follow-on market research indicated that Tarsa can hope to pick up about 20% of new and existing post-menopausal osteoporosis patients when Ostora reaches the market, thanks also to diminishing use of bisphosphonate therapies caused by safety concerns, Tarsa CEO David Brand said. Last year, Tarsa announced that Ostora had demonstrated statistically significant superiority and similar safety in a Phase II trial using Fortical as a comparator. -- Joseph Haas

OncoGenex Pharmaceuticals: The 12-year-old Seattle-area firm said March 16 it has raised nearly $50 million in a public stock offering as it revamps its late-stage clinical program for the prostate cancer treatment custirsen, which is partnered with Teva Pharmaceutical Industries. The increasingly crowded prostate cancer field has been shaken up recently by positive data from Johnson & Johnson’s Zytiga (abiraterone) and Medivation’s MDV-3100, prompting Medivation to raise cash through a debt offering (see below). OncoGenex had $65 million in cash and equivalents at the start of the year, which it expected to last only until 2014. Teva is largely responsible for the increased cost of custirsen development and OncoGenex’s $30 million allotment is already set aside. Instead, the new cash will help develop OGX-427 beyond its indications of prostate and bladder cancer, where it’s currently in Phase II testing, CEO Scott Cormack told our Pink Sheet colleagues. Cormack said earlier this month the big shifts in thecustirsen program – cancellation of a trial in second-line castration resistant prostate cancer (CRPC); a new combination trial with Sanofi’s Jevtana (cabazitaxel); and expansion of a currently enrolling trial in a first-line chemotherapy CRPC setting. Custirsen is an antisense agent meant to boost the effects of chemo. Leerink Swann and Stifel Nicolaus Weisel led the offering, with help from Lazard Capital Markets and William Blair & Co. Underwriters have a 30-day option to buy up to 624,750 additional shares. -- Lisa LaMotta

Medivation: The once-high-profile Alzheimer’s company is now a prostate cancer developer, and on the strength of recent data from its new focus the San Francisco biotech raised nearly $260 million in convertible debt in an offering that closed March 19. The firm could join newly approved prostate cancer sponsors J&J, Dendreon and Sanofi, thanks to Phase III data from the AFFIRM trial of MDV3100, its androgen signaling receptor inhibitor, that showed side effect rates tracking those of placebo. MDV3100 also showed an overall survival (OS) benefit of nearly 5 months beyond placebo (18.4 months vs. 13.6 months), and 8.3 months of progression-free survival vs. 3 months for placebo, based on PSA tests. The OS benefit was large enough to spur discontinuation of the trial so all enrollees could go on the drug. It could have other advantages over the recent approvals: unlike Zytiga, it does not have to be administered with prednisone, it’s less complicated to prescribe and administer than Provenge, and it appears much safer than Jevtana. Medivation has partnered MDV3100 worldwide with Astellas Pharma. The notes, due in April 2017, pay 2.625% interest until April 2015, at which point Medivation can redeem them based on certain parameters of its stock price at that time. Citigroup ran the debt sale with help from Credit Suisse Securities Jefferies & Co. William Blair & Co. and Leerink Swann. – Staff reports

Photo "Sympathy for the Strawberry" courtesy of the FOTF Art Collective.

Deals of the Week Seeks the Luck of the Irish

Perhaps you’ll feast on corned beef, cabbage, potatoes and an adult beverage or two this weekend, in honor of St. Patrick’s Day. If your waistline should fluctuate a bit from the indulgence, think of Dublin, Ireland-headquartered Shire plc, a company that fattened up with one deal while trimming down its efforts in another area this week.

Shire’s recent growth has been tied to specialty business areas in which the company believes it can introduce successful drugs supported by small sales forces. Among its strong performers are two orphan drugs for lysosomal disorders, including Elaprase (idursulfase) for Hunter syndrome and Replagal (agalsidase alfa) for Fabry disease. The latter, long marketed in Europe, seemed poised for U.S. approval, thanks in part to a treatment IND that allowed its distribution in the wake of Genzyme’s manufacturing issues around Fabrazyme (agalsidase beta). But Shire’s dialogue with FDA soured as the agency requested a more arduous series of trials than Shire expected, leading the company to withdraw its BLA filing for Replagal on the afternoon of Mar. 14.

Rather than drown its sorrows, though, the company bounced back with an acquisition the following morning. Shire hopes it’s found a four-leaf clover in FerroKin Biosciences, a hematology specialist for which it paid $100 million up-front, in a deal that features an additional $225 million earn-out. FerroKin’s key asset is FBS0701, a Phase II candidate that helps rid excess buildup of iron in the blood and organs, typically found in patients who undergo frequent blood transfusions. Lawson Macartney, senior VP of Shire’s emerging business unit, told The Pink Sheet DAILY that the acquisition is part of Shire’s plan to move deeper into hematology; it already has Xagrid (anagrelide) for essential thrombocythaemia, which generated $90.6 million in revenue last year.

Shire hopes the oral capsule FBS0701 will compete with Novartis’ Exjade (deferasirox), another iron chelator delivered as an oral solution. That drug carries a black-box warning for renal and hepatic impairment and gastrointestinal hemorrhage; Shire thinks its compound can improve on Exjade's safety profile. The luckiest parties in the deal – or maybe they were just good – are FerroKin’s venture investors. They include Burrill & Co., Clarus Ventures, MP Healthcare Venture Management, and HealthCap, all of whom enjoyed a healthy exit two years after FerroKin’s $12 million Series B round.

Whether you indulge yourself or not, we hope you’ll enjoy the holiday responsibly. A-rovin’, a-rovin’, a-rovin’ we go, with the latest installment of…

Merck/Calibr: Merck renewed its commitment to academic research, and to San Diego, making a $90 million investment to create the California Institute of Biomedical Research, or Calibr. The funding, announced Mar. 15, will span seven years, and Calibr will be run by prominent Scripps chemist and entrepreneur Peter Schultz. Schultz has had his share of experience with biotechs, founding eight himself: Affymax Research Institute, Syrrx, Kalypsys, Phenomix, Symyx Therapeutics, Ilypsa, Ambrx and Wildcat Technologies. He also founded and was the institute director of the Genomics Institute of the Novartis Research Foundation in San Diego from 1999 to 2010. Backing Schultz’s leadership will be a scientific advisory board led by Harvard's Christopher Walsh, and will include Merck Research Laboratories president Peter Kim. A board of directors led by 5AM Ventures founder and managing partner John Diekman will also help run the show. The staff at Calibr, which will eventually include 100 to 150 people, as well as the board of directors and the scientific advisory board will collaborate to choose the projects that the institute will take on. Schultz estimates that once everything is up and running, the institute will handle 15 to 20 ongoing projects at any given time. Projects will be chosen from academic institutions and will be based on “novel biology.” Merck is one of many Big Pharmas trying to bridge the gap between industry and academia, including Pfizer and Bayer, which have also established similarly structured institutes in scientific hotspots around the country. – Lisa LaMotta

GlaxoSmithKline/Epistem: GlaxoSmithKline and U.K. biotech Epistem PLC announced a three-year collaboration March 9 around using Epistem’s proprietary RNA-Amp technology platform to identify biomarkers useful in development treatments for and/or treating fibrotic disease. Financial terms were not disclosed. Several companies, including Bristol-Myers Squibb and Gilead Sciences, are competing to bring the first drug therapy for idiopathic pulmonary fibrosis to market in the U.S. – worldwide, IPF is thought to offer a potential blockbuster market. As of March 2012, GSK’s pipeline lists 15 compounds in clinical development for respiratory and immuno-inflammation indications, most of them targeted at asthma or chronic obstructive pulmonary disease, but none specifically cited as a candidate for fibrotic disease. The collaboration with Epistem will focus on identifying key characteristics of diseased fibrotic tissue – RNA-Amp is a highly sensitive amplification technology that can derive gene-expression data from minimal tissue samples and/or numbers of cells. Previously, the biotech partnered in 2009 with Novartis to collaborate on development of new therapeutic candidates for epithelial conditions, including cancer and gastrointestinal disorders.—Joseph Haas

Biogen Idec/MAKScientific: Discovery firm MAKScientific LLC has signed a big partner, Biogen Idec, in a small deal that gives Biogen an option to select discovery-stage drug candidates for the treatment of multiple sclerosis and other neurodegenerative diseases. The privately-held, Boston-based drug discovery firm works in cannabinoid pathways. In the partnership, announced March 14, Biogen gains an exclusive worldwide option to select discovery-stage drug candidates for all indications worldwide. The company will pay up to $3 million if it chooses to exercise the option and an additional $31 million in milestone payments for clinical development. – Jessica Merrill

Sanofi/Pluromed: Sanofi has today announced the acquisition of Mass.-based surgical goo maker Pluromed for undisclosed terms. The deal brings Sanofi's biosurgery division Pluromed's proprietary polymer technology Rapid Transition Polymers and the FDA-approved LeGoo, a gel used during surgeries to temporarily plug blood vessels. (Conveniently for Sanofi and for our half-grasp of the language, LeGoo probably means The Goo in French.) The LeGoo goo was approved by FDA in September and in today's release Pluromed CEO Jean-Marie Vogel gives Sanofi a vote of confidence for its ability to launch the goo and drive adoption. Formerly Genzyme Biosurgery, Sanofi's biosurgery unit markets a suite of products focused on cartilage repair and osteoarthritis treatment. The deal underscores Sanofi's willingness to further diversify away from its core drugs business. -- Chris Morrison

GSK/Omega Pharma: European consumer health care products firm Omega Pharma bolstered its already broad OTC portfolio with six brands from GlaxoSmithKline, but GSK’s sluggish consumer business remains saddled with the once-prized weight-loss drug Alli. Omega Pharma will pay €470 million ($619 million) for six brands – Lactacyd feminine wash products, Abtei supplements, Solpadeine analgesics, Zantac antacid, Nytol sleep aids and the allergy drug Beconase, the firms said March 15. The combined sales of the Glaxo brands exceeded €200 million in 2011, and “will significantly strengthen Omega Pharma’s product portfolio and will create critical mass for the company in key markets including Germany, the U.K., Poland and Italy,” the Belgian firm said. Included in the deal, part of GSK’s plan to simplify its consumer business by selling 19 OTC brands worth about 10% of the firm’s total consumer business, Omega will also acquire the Big Pharma’s Herrenberg manufacturing site in Germany. GSK originally wanted to sell the brands to a single global buyer, but parceled out 17 North American OTC lines to Prestige Brands Holdings in December. GSK says it “remains in active discussions” about the sale of the few lingering brands it wants to sell outside of Europe and North America – including the beleaguered Alli, the lower-dose version of Roche’s prescription weight-loss drug Xenical that has seen sales fall steadily and sharply since its much-anticipated and briefly successful launch in 2007.—Elizabeth Crawford 

Alcon/ThromboGenics: Having previously planned to market its lead compound itself, Belgian biotech ThromboGenics has now taken a different tack, and licensed ex-U.S. commercialization rights to its vitreomacular adhesion therapy, ocriplasmin, to the Novartis eye care unit, Alcon. ThromboGenics says it still wants to build up a marketing organization in the U.S., and will work closely with Alcon on ocriplasmin's marketing in the top five European markets. However, Alcon will market the product in more than 40 countries when approved – it is awaiting approval in Europe, and is expected to be resubmitted for priority review in the U.S. shortly. The agreement between ThromboGenics and Alcon is valued at $500 million in total, with ThromboGenics receiving a hefty upfront payment of $100 million, and just over a similar amount in milestone payments, which will probably push the company into profitability this year. Ocriplasmin stops the vitreous humor from sticking and pulling on the retinal membrane at the back of the eye, which causes blurred vision and, in severe cases, macular holes and central blindness. The product also has potential in the treatment of age-related macular generation, and could be combined with a VEGF inhibitor such as Novartis's Lucentis (ranibizumab). The deal is the first in the biopharmaceuticals area to be concluded by Alcon since it was acquired by Novartis last year. - John Davis

 

Pfizer/Biocon: In our "No Deal" of the week, Pfizer walked away from a $100 million-plus investment on March 12, terminating its biosimilars partnership with Biocon Ltd., India's largest biotechnology firm, under which it would have commercialized generic versions of four diabetes drugs worldwide. Both parties said the split reflects a desire by each company to focus on "individual priorities for their respective biosimilars businesses." Pfizer said it remains committed to biosimilars development, particularly in the areas of monoclonal antibodies and recombinant proteins. Biocon will continue its effort to develop and market biosimilar versions of recombinant insulin as well as of Sanofi's Lantus, Novo Nordik's Novolog and Eli Lilly's Humalog. At the time the agreement was signed in October 2010, Pfizer, not a traditional player in the diabetes space, projected a growing diabetes market that would reach $40 billion a year for drugs and devices, with insulin products controlling about 35% of that business, or $14 billion. Pfizer was to pay Biocon $200 million up-front, with the potential for up to $150 million in development and regulatory milestones, along with potential sales royalties on the four products. As of the split, Pfizer had paid Biocon $100 million, with the other $100 million kept in escro, tied to progress on building a biosimilars manufacturing and R&D facility in Malaysia. Biocon will continue building that facility, with the funds from Pfizer. - J.H.

Thanks to Jessica Merrill, who reported on the Shire/FerroKin deal for Pink Sheet DAILY. Magically delicious leprechaun cake image courtesy of Flickr user Signature SugarArt, reproduced under Creative Commons license.

Financings of the Fortnight Puts On The Weight

Was FOTF the only one to notice that anti-obesity drug maker Vivus aced its FDA advisory committee review on Feb. 22, one day after Mardi Gras?

It didn't take long for the company to digest the impact: one week later, it went to the public markets for a stock sale, which we describe below. And Vivus' two main competitors, both of whom have had the FDA send their dishes back to the kitchen at one time or another, saw action as well. Arena Therapeutics spiked briefly to $2.11 a share on Feb. 23 with about 8 times its typical trading volume, only to drop back down under $2. The firm also triggered a sale of 14.4 million shares to Azimuth Opportunity that netted nearly $25 million; not exactly selling high. It's part of a $50 million line of credit opened last November that lets Arena put a sale of stock to Azimuth at a pre-arranged discount.

Arena is next up at FDA, with an advisory committee hearing scheduled in the second quarter, but by then Vivus could know its fate, with a PDUFA date of April 17. Orexigen Therapeutics' shares have traded as high as $4.37 a piece since the good Vivus news, their highest in about a year. So far Orexigen hasn't made any related financing moves, but it did announce Thursday that it would slim down at its San Diego-area headquarters.

Meanwhile, the prospect of a new fat-fighting drug finally reaching the market has generated takeover talk as breathless as Dom DeLuise trying to run up a flight of stairs. Potential buyers might want to wait to see if FDA requires a pre-marketing cardiovascular outcome study. Our Pink Sheet colleagues noted recently that the advisory committee seemed satisfied with the prospect of a post-marketing study, but as we all know, it's not unusual to see a gap between the ad-com opinions and final FDA rulings. An overview of cardiovascular assessments by the Endocrinologic and Metabolics Drugs Advisory Committee in late March could shine more light on what extra clinical hoops the three drugs -- Vivus' Qnexa, Arena's Lorquess and Orexigen's Contrave -- will have to pass through.

If any of those drugs actually work, perhaps we'll pay more attention to what Shakespeare called the food of love than the love of food. Which brings us to our off-topic financing of the fortnight: our favorite pending IPO is Fender Musical Instruments Corp., which wants to go public after 65 years of shredding, twanging, picking and reverberating. We wouldn't care if those shares were a good investment as long as owning them made us sound, at least in our mind, just a little bit like this guy. Or perhaps more appropriately, The Ventures. This is, after all...

Vivus: Following the old adage to strike while the FDA is hot, Vivus parlayed the green light an FDA advisory committee gave its Qnexa (topiramate/phentermine) weight-loss drug into a $202 million public offering on Feb. 29. The San Francisco Bay Area company sold 9 million shares at $22.50 a piece, and underwriters led by J.P. Morgan could sell up to 1.35 million more. The funds will go in part to build a sales force for Qnexa, which has navigated a tortured path to date. It received strong backing last month from the FDA's Endocrinologic and Metabolic Drugs Advisory Committee, a 20-2 vote, in part because panelists were assured that Vivus would be held accountable if it didn't conduct a post-marketing cardiovascular outcomes study. The near-unanimous vote more than doubled the price of Vivus shares, from $10.55 on Feb. 22 to a high of $25.14 on Feb. 27. It closed March 6 at $21.52. Rejected by the FDA in 2010, Vivus resubmitted its marketing application last October with a curtailed patient population, excluding women under 55 to eliminate the chance of the topiramate component of the drug causing birth defects. If approved, Qnexa  initially will be indicated for obese patients with a body mass index (BMI) over 30 or overweight patients with a BMI over 27 who do not have child-bearing potential, and who have at least one comorbidity such as high blood pressure, type 2 diabetes, or abdominal obesity. Qnexa's PDUFA date is April 17. -- Staff reports

Aragon Pharmaceuticals: After mulling an IPO and a partnership, cancer drug maker Aragon Pharmaceuticals opted for door number three: a $42 million Series C round that CEO Richard Heyman said strengthens the company if it eventually chooses to pursue either of the first two. The Topspin Fund, the personal investment vehicle of a small group of high-net-worth individuals including billionaire hedge fund manager Jim Simons, led the round, investing alongside existing backers Aisling Capital, OrbiMed Advisors and The Column Group. Along with former Honeywell executives Leo Guthart and Steve Winick, Simons also manages $213 million fund Topspin Partners, but the three chose to invest in their sidecar fund instead; Guthart said the primary fund is “fully invested.” There are personal connections behind the scenes: Simons also is an investor in OrbiMed's funds and Guthart is treasurer of Cold Spring Harbor Laboratory, where Aragon co-founder Charles Sawyers is on the board of trustees. Aragon intends to complete Phase II work on ARN-509, a candidate for castration-resistant prostate cancer that eventually could compete with Johnson & Johnson’s Zytiga (abiraterone) for the sub-market of men in whom prior treatments have failed. It also intends to bring a selective estrogen receptor degrader into Phase I for breast cancer. If Aragon aims for an IPO, it hopes Topspin's experience investing in public companies could lead the firm to cross over and take a piece. Having insiders take part in an IPO has practically become a prerequisite for going public these days. -- Paul Bonanos

4s3 Bioscience: An investment firm connected to one of the world’s wealthiest families has supplied a $20 million Series A round to 4s3 Bioscience, a start-up investigating new treatments for rare muscular disorders. KLP Enterprises, a trust managed by the family office of Karen Pritzker and Michael Vlock, made the investment. The Pritzker family’s legacy includes ownership of the Hyatt hotel chain, electric and industrial equipment holding company Marmon Group, and credit bureau TransUnion. KLP’s investment builds on a seed round from Genzyme Ventures in 2008, as well as grant funding from Massachusetts Life Science Center, the Muscular Dystrophy Association, National Institute of Health and the HHS Therapeutic Discovery Project. 4s3 is developing drugs that use an antibody technology to deliver muscle-building proteins and enzymes into cells, which could yield treatments for muscular dystrophy and other disorders affecting skeletal muscle. The start-up is housed at the University of Massachusetts-Boston’s Venture Development Center, and its founders are working closely with KLP drug development subsidiary Alopexx Enterprises as they build the company. -- P.B.

Amicus Therapeutics: The developer of treatments for lysosomal storage disorders and other rare diseases topped off its public stock offering March 7 with underwriters taking their full over-allotment, making a total of 11.5 million shares sold at $5.70 a share for net proceeds of $62 million. The firm, whose tale was told in the film Extraordinary Measures (with Brendan Fraser playing CEO John Crowley), last raised cash when it sold worldwide rights to its lead drug Amigal (migalastat HCI), for Fabry disease, to GlaxoSmithKline for $60 million upfront in October 2010. Part of that payment bought GSK a 19.9% equity stake in Amicus at $4.56 a share, at the time a 15% premium. Announcing the GSK deal, Crowley said it would sustain Amicus at least until U.S. approval of Amigal, which has not proved out. The drug is currently in Phase III in a monotherapy trial co-sponsored by Amicus and GSK and in a separate combination therapy trial that is still recruiting patients. -- A.L.

This fortnight's column powered by Mavis Staples.

Deals Of The Week: U.S./Russia Biotech Joint Venture Driven By An All-Too-Familiar Catalyst

Finding creative ways to fund the lifecycle of biotech companies is not a new issue, but turned out to be the catalyst behind an intriguing joint venture unveiled this past week between U.S. venture capital firm Domain Associates  and the sovereign Russian nanotechnology investment fund Rusnano. On March 6, the pair announced the expansion of a previous working agreement that now will include investments of up to $330 million apiece in biotechs under the Domain portfolio and up to $190 million total to build a GMP-compliant manufacturing facility in Russia.

Rusnano, Domain and its syndicate of investors will back roughly 20 new and existing portfolio companies working in the life sciences field – biopharmaceuticals, medical devices and diagnostic products – creating a multinational medical products company in Russia that will make and market innovative products in Russia, Eastern Europe and the Commonwealth of Independent States.  Last year, Rusnano and Domain had announced a $300 million effort to build from scratch a Russia-based pharmaceutical company from Domain’s portfolio companies. This latest announcement expands each partner’s proposed investment. The investments will lean more heavily to biopharmaceuticals than devices or diagnostics, said Domain Partner Brian Dovey, but there are no pre-set ratios.

“The initial aim is to build a kind of consortium of intellectual property from Domain’s portfolio companies and on that basis establish a recognized regional pharmaceutical company which will develop, conduct clinical trials, manufacture and sell a spectrum of innovative products,” in the specified markets, Rusnano USA CEO Dmitry Akhanov explained.

The Russia-headquartered company and facility that will result from the joint venture will leverage innovations created by the Domain portfolio firms and will obtain exclusive rights to manufacture and market products based on these innovations. The JV also will manage late-stage Russian clinical trials, which will support regulatory approval in Russia, the U.S. and other nations.

“The idea would be to do some clinical trials there – it is less expensive to do them there but that’s not the driving force,” said Domain Partner Brian Dovey. “The driving force is really to include the Russians in the worldwide clinical program, so the products would be [approvable] in Russia. We do have experience with some of our companies doing clinical trials in Russia, and by and large, it’s been a good experience. It’s a pretty well established industry there.”

New streams of cash for Domain’s portfolio companies also drove the deal, he added. Domain and other VCs are discovering that even when they can find an exit for a portfolio company, all too often the transactions are structured exits involving milestones and other earn-outs.

"That’s pretty much the benefit – getting our and [syndicate investors’] companies financed,” Dovey explained. “I think the concept of selling our companies at the end of Phase II leads to a lot of these structured deals, which are less than optimal. If you take your companies further, I’ve been told by big pharma, they’ll pay a lot for more data.”

Much is yet to be determined about the Domain/Rusnano JV – the amount of equity Rusnano will take in a specific company will be determined deal-by-deal, Dovey said, and earn-outs certainly may come into play in those agreements, as well. “[Rusnano will be] just like any other equity owner – there will be a Series C, E or G, [and] all of the investors in that round will be under the exact same terms and conditions as the insiders and new investors,” he added.

Dovey and his team sounded out the other investors in their portfolio companies before making the deal with Rusnano – “Clearly a situation I didn’t want to have occur was to get this whole thing done and then nobody comes to the party.” he said. “It’s been pretty clear to the co-investors as to what I am doing and why … and I think there’s a consensus that it’s a good idea – it’s a whole new source of capital.”

There was some initial pushback when syndicate investors heard the word “Russia,” Dovey added, but as they learned the particulars, they weren’t very difficult to sign on. Speaking of which, there has been a lot of signing on during the past week – more than a dozen deals, from which we offer highlights in our latest edition of  …

Mersana/Endo – Mersana Therapeutics and Endo Pharmaceuticals Holdings are teaming up to challenge Seattle Genetics and other players in the burgeoning antibody-drug conjugate (ADC) space. In a deal announced March 7, the two firms will combine Mersana’s proprietary Fleximer conjugation technology with anti-cancer antibodies discovered by Endo to produce novel ADC candidates against a single, undisclosed oncology target. Most deal terms were not disclosed – Mersana will receive an upfront payment and can earn greater than $270 million in “progress-dependent” milestones, although the extent of the earn-outs will be contingent on whether the duo expands the arrangement to two additional targets. In an interview, Mersana Executive VP and Chief Operating Officer Michael Metzger indicated that expansion of the partnership to additional targets might result in additional up-front money to his firm, but would not specify. “You can make the assumption that the terms replicate deal to deal,” he said. Under the collaboration, Mersana will conduct research and create the ADCs combining cytotoxic payloads with Endo’s antibodies. Endo then will be responsible for product development, manufacturing and commercialization. In addition to milestones, Mersana can earn royalties on worldwide sales of any product reaching market from the collaboration.--Joseph Haas

Nuron/Akshaya – Exton, Pa.-based specialty biologic drug and immunotherapy developer Nuron Biotech said March 5 that it had acquired license to a platform to develop multi-antigen vaccines for the hepatitis B virus from Akshaya Bio of Edmonton. Financial terms weren’t released. Nuron acquired technology and rights to Chimigen, a chimeric vaccine platform with which it says it can discover both therapeutic and prophylactic vaccines that provoke T-cell and B-cell immune responses. The platform could yield its first clinical candidate by next year, Nuron said. The company also acquired an option to license Akshaya’s hepatitis C virus immunotherapies, which also include therapeutic and preventative vaccines. The deal diversifies Nuron’s offerings, such as the Phase III candidate NU100 (interferon beta-1b) for multiple sclerosis; it also is working on a re-launch strategy for the HibTITER vaccine, marketed in the 1990s by Wyeth to prevent Haemophilus Influenza Type B infections in infants and children. Nuron licensed Japanese rights to the HibTITER product to Mitsubishi Tanabe Pharma Corp. last month.--Paul Bonanos

Foundation Medicine/Array BioPharma – Array BioPharma and Foundation Medicine announced a partnership March 6 in which Array will use Foundation’s next-generation sequencing technology to analyze tumors and identify patients who may best respond to its targeted therapies. FMI, which emerged from stealth mode in 2010 advised by a team of experts in next-generation sequencing, has already has signed five other pharma partners, including Sanofi and Johnson & Johnson. In February, Foundation received Clinical Laboratory Improvement Amendments (CLIA) certification from CMS for its genomic sequencing lab, allowing the company to receive clinical samples from most U.S. states. The company is developing a test that will transition next-generation sequencing from research to routine clinical practice.--Jessica Merrill

Apexigen/GDBP – Shanghai’s Gansu Duyiwei Biological Pharmaceutical (GDBP) has negotiated a licensing agreement with privately held Apexigen to develop its VEGF2-targeting humanized monoclonal antibody APX004, for the treatment of certain cancers and angiogenic diseases. Under the March 6 agreement, GDBP receives exclusive rights to research, develop and commercialize the drug in China. Apexigen will retain all rights to APX004 outside of China. While financial terms were not disclosed, Apexigen did receive an upfront payment and is eligible for milestone payments based on the progress of the drug and royalties. Spun out from Epitomics in July 2010, Burlingame, Calif.-based Apexigen also has a partnership with Simcere, a Chinese drug manufacturer. Simcere filed an IND in China in March 2011 for APX003, another monoclonal antibody from Apexigen’s pipeline. Apexigen is focused on developing biobetters for inflammation, cancer and metabolic and immune disorders, and has rights to Epitomics' high-affinity rabbit monoclonal antibody technology, RabMab, and mutational lineage-guided humanization technologies.--Lisa LaMotta

Medicago/Mitsubishi Tanabe – Mitsubishi Tanabe Pharma Corp., which claims to be the top domestic vaccine company in Japan, is attempting to stave off ambitious vaccine plans from competitors via partnerships. The company signed a deal with Medicago Inc. for next-generation vaccines, starting with a rotavirus vaccine that would take on Rotarix, Japan's first and only rotavirus vaccine. Mitsubishi Tanabe signed the deal with Medicago, based in Quebec City, Canada, March 7, disclosing only that the companies will collaborate on several vaccines using Medicago's virus-like particles (VLPs), starting in the spring on a rotavirus vaccine project. Since VLPs mimic native viruses but cannot replicate in the body, Mitsubishi Tanabe says it aims to "create a new rotavirus VLP vaccine that overcomes challenges associated with existing live virus vaccines." If Mitsubishi Tanabe and Medicago do manage to develop a rotavirus vaccine, it would compete with GlaxoSmithKline's Rotarix, a live virus vaccine that entered the Japanese market in 2011. GSK co-promotes Rotarix in Japan with Daiichi Sankyo, and the two companies formed a joint venture last week to collaborate on development and commercialization of vaccines in Japan. That JV was announced just a few days after Japan’s largest pharma, Takeda Pharmaceutical, outlined an ambitious plan to join the top-tier of global vaccine manufacturers – such as GSK – within just a few years’ time.--Daniel Poppy

Photo Credit: The Catalyst Museum, courtesy of Wikimedia Commons and the publication Chemical Engineer

Deals of the Week Sets Sail For The Galapagos

Abbott is readying for two major steps in its evolution. Most prominently, it’s preparing to split its pharma division from its diversified medical products business this year, creating two public companies from one. But it’s also preparing for December 2016, when its best-selling drug loses patent protection. Abbott’s injectable Humira (adalimumab) for rheumatoid arthritis and other autoimmune diseases is currently among the world’s top sellers, with $7.9 billion in 2011 sales, representing more than 46% of Abbott’s global sales of proprietary drugs. With less than five years’ time left on the clock, not to mention a looming threat of competition from oral drugs or lower-priced alternatives, Abbott is already looking for a successor.

With that evolution in mind, Abbott made like the HMS Beagle and set sail for the Galapagos this week – specificially Galapagos NV of Belgium, where among the tortoises and finches lay the crown jewel GLPG0634, a selective JAK1 inhibitor that’s already shown promising data in a Phase IIa study in rheumatoid arthritis, and is expected to enter a Phase IIb dose-range-finding study soon. In an extremely rich deal for a mid-stage candidate, Abbott paid $150 million up-front to claim worldwide rights to the drug, and will pay a second $200 million licensing fee if the Phase IIb study yields data that satisfy a set of pre-determined but undisclosed criteria. Additional milestone payments could add $1 billion more to the deal, while Abbott remains on the hook for double-digit royalty payments if GLPG0634 is ever commercialized.

For Abbott, it’s a way to make doubly sure that its autoimmune franchise is extended. Last summer, the company paid $85 million up-front to license German biotech Biotest’s BT-061, a Phase II antibody that binds to the CD4 protein and slows overreactions of the immune system. That gives it two potential successors to the same blockbuster drug, providing insurance that its sales force will have something else to sell once Humira begins to fade. And it gives Abbott another promising molecule to talk up on its current road shows, in anticipation of the looming split and the public offering that will accompany it.

It’s also just the latest in a series of deals in which Abbott has outbid and outspent its peers for assets that still carry plenty of risk. The company has twice paid Reata Pharmaceuticals top dollar for its compounds, buying ex-U.S. rights to chronic kidney disease treatment bardoxolone for $450 million in 2010 and nabbing a group of pre-clinical antioxidant inflammation modulators for $400 million late last year. If it’s going to be an independent company, Abbott’s pharma division would do well to be better-balanced, with a diverse group of revenue-generating products. Without the diversified medical products business to balance things out, its weaker quarters on the pharma side may be all the more obvious – and damaging.

That’s one reason why Galapagos’s drug seemed like a natural selection for Abbott and why we hope you’ll join us on another pun-filled voyage of…

GlaxoSmithKline/Angiochem: In the latest of a series of rare disease deals, GlaxoSmithKline has forged a collaboration with Montreal, Canada-based Angiochem to develop drugs that cross the blood-brain barrier (BBB) to treat patients with lysosomal storage diseases like Tay-Sachs disease and Fabry disease. Currently marketed enzyme replacement therapies for lysosomal storage diseases do not cross the BBB, and so do not ameliorate neurological symptoms. Angiochem is able to engineer enzymes so that they bind to the LRP (lipoprotein-receptor-related protein-1) receptor in brain tissue and are transported into the CNS. Angiochem is eligible to receive up to $31.5 million in upfront cash, research funding and other fees for one undisclosed enzyme product, although it could receive more than $300 million if GSK exercises certain rights to other compounds and pays sales-related royalties. GSK set up a rare diseases business unit in 2010, and has since then forged deals with the likes of U.S. biotech Amicus Therapeutics for its Phase III Fabry disease therapy, Amigal (migalastat), and with Dutch company Prosensa for PRO-051, its Phase III potential Duchenne muscular dystrophy therapy. – John Davis 

Dainippon Sumitomo/Boston Biomedical: Japanese pharma Dainippon Sumitomo is bolstering its U.S. presence, with a focus on oncology through the acquisition of private U.S. biotech Boston Biomedical, announced Feb. 29. In a back-end loaded deal, Dainippon will buy Boston Biomedical for $200 million upfront and an additional $540 million in development milestones and $1.89 billion in sales milestones if net sales reach $4 billion. In exchange, Dainippon will gain two potential first-in-class drugs targeting cancer stem cells and a drug discovery platform. BBI608 is expected to begin Phase III clinical testing later this year for colorectal cancer and BBI503 is in Phase I/II testing in multiple solid tumors. But Dainippon also gains a new oncology research center; the company said it plans to maintain the BBI headquarters in Norwood, Mass. as an oncology R&D base in the U.S. Its North American business, which operates under the subsidiary Sunovion Pharmaceuticals Inc., sells Latuda (lurasidone) for schizophrenia and drugs it gained through the 2009 acquisition of Sepracor: the sleep aid Lunesta (eszlopiclone), Xopenex (levalbuterol) for asthma, Brovana (arformoterol) for chronic obstructive pulmonary disease and Omnaris for allergies.The company’s primary focus in North America has been on the atypical antipsychotic Latuda, which launched in the U.S. about a year ago. Dainippon formed a global oncology business development office in June 2011 to spearhead efforts to enter the oncology drug development space. The company was already familiar with BBI, however; the two have been partners since March 2011 when Dainippon acquired Japanese rights to BBI608 for $15 million upfront. – Jessica Merrill

Avanir/Concert: Avanir, which brought a light-selling dextromethorphan formulation to market in 2010, is making a deeper plunge into developing drugs based on that active ingredient, as the Aliso Viejo, Calif.-based biotech in-licensed multiple deuterium-modified dextromethorphan (d-DM) compounds from Concert Pharmaceuticals on Feb. 29. The deal included an undisclosed up-front payment to Concert, which also can earn research, development and commercialization milestones of up to $200 million and sales royalties starting in the single digits and potentially increasing to the low double-digits if one or more of the compounds reaches market. Concert uses its DCE Platform (Deuterated Chemical Entity Platform) to alter existing therapeutic compounds to improve their plasma exposure, among other benefits. Avanir plans to develop the d-DM molecules in undisclosed neurological and psychiatric indications – it will assume all development responsibilities, while Concert will provide manufacturing support for IND-enabling studies. Previously, Concert brought in an $18.3 million upfront payment and a $16.7 million equity investment from GlaxoSmithKline in a 2009 deal giving GSK options to several DCE-modified compounds. In 2011, the companies chose CTP298, a deuterium-modified version of HIV drug atanazir, for further development. To date, Concert has earned at least $16 million in milestones under the GSK collaboration. Avanir obtained FDA approval of Neudexta (dextromethorphan hydrobromide 20 mg/quinidine sulfate 10 mg) for pseudobulbar effect in 2010 – the company thinks d-DM compounds could be therapeutically effective without the addition of an enzyme inhibitor like quinidine.—Joseph Haas

Nektar/Royalty Pharma: Risk-free cash now, or potential for risk-bearing cash later? Nektar Therapeutics opted to take the lump sum this week when it sold two royalty streams for previously out-licensed drugs to Royalty Pharma, a firm designed for such transactions. The deals netted Nektar $124 million in cash, which it will use primarily to pay down the $215 million in convertible debt it has accumulated. Nektar gives up its share of future sales of UCB Pharma's rheumatoid arthritis and Crohn's disease drug Cimzia (certulizumab pegol) and renal anemia treatment Mircera (methoxy polyethelene glycol-epoetin beta), which it had partnered away in 2000. If the drugs don't meet certain undisclosed sales thresholds during the next two years, Nektar would have to pay a Royalty Pharma affiliate $3 million next year and $7 million during 2014. Nektar's top unpartnered assets include NKTR-102, a Phase III metastatic breast cancer candidate also studied in several other cancers, and NKTR-181, a mu-opioid analgesic drug soon to enter Phase II that's designed to cross the blood brain barrier slowly and thus thwart abuse. It also has NKTR-118 for opioid-induced constipation and NKTR-119 for pain, both being developed under a partnership with AstraZeneca. - P.B. 

GlaxoSmithKline/ Daiichi Sankyo: Just two days after Takeda Pharmaceutical Co. Ltd. unveiled more details about the global expansion of its new vaccine business – which it expects to become the top vaccine supplier in Japan - Daiichi Sankyo announced March 2 a vaccines joint venture with GSK that would create the number one vaccines business in Japan. The 50-50 joint venture Japan Vaccine Co., Ltd. will be led by co-CEO representatives from each company. The JV’s stated goal is to join GSK's extensive vaccine pipeline with Daiichi Sankyo's domestic manufacturing, sales and development presence. Keeping all things equal, the companies will sell their prophylactic vaccines into the JV, and will earn for 50-50 profits. Daiichi Sankyo and GSK will also split the ¥100 million start-up capital for the venture, and each will send three executives to sit on the six-member board. Each company will be responsible for their own research, preclinical and pre-proof-of-concept and ultimately manufacturing of their own products. Japan Vaccine will step in for development after proof-of-concept. GSK has been vocal about growth opportunities in Japan. The firm's Japan business grew 30% from 2010 to 2011, largely on the back of the human papillomavirus vaccine Cervarix (human papillomavirus types 16,18), which was added to a government reimbursement program for vaccines in 2010. Since then, Japan has leapfrogged to become Cervarix' largest market. The joint venture will begin operations July 2.—Dan Poppy

Image of Conrad Martens' painting of the HMS Beagle reproduced courtesy of the Wikimedia Commons.