Deals of the Week Listens to The Rumor

“Now when the rumor comes to your town, it grows and grows. Where it started, no one knows. Some of your neighbors will invite it right in. Or maybe it’s a lie; even if it’s a sin, they’ll repeat the rumor again.”

Who’s Bayer going to buy? If you believe the Reuters story that crossed the wire Wednesday, three unnamed sources seem confident that the German company is about to spend billions of euros on a healthcare company, possibly within the next few days. And while Reuters’ sources didn’t name any names, some investors seem to think they’ve divined the answer -- or answers.

First, shares in Onyx Pharmaceuticals gained value abruptly after Reuters’ story was published, indicating that many believe the longtime Bayer partner and sometime legal adversary would be a fine fit. It’s certainly in the right price range: At the close of Thursday’s trading, Onyx’s market cap sat just above $3 billion, up about 8 percent since the story appeared. Judging by other recent premiums, Bayer would likely have to bid closer to $5 billion to buy Onyx outright.

And then on Friday, The Times (UK) reported that it was Warner Chilcott that would be on the receiving end of a Bayer bid. With a market cap juiced to $4.7 billion on the rumor, the derm and women’s health specialist also fits within the reported deal size range. Most of the company’s heft comes from its $3.1 billion 2009 buyout of Procter & Gamble’s pharmaceuticals business, which tripled its size and added to the portfolio some nearly off-patent assets, like Actonel and Asacol. The success of that transformative deal is debatable, particularly since Actonel successor Atelvia has had difficulty capturing significant share of the genericized osteoporosis market. As Warner Chilcott's price spiked following publication of the Times story, Onyx shares lagged, losing about 2% of their value in early Friday trading.

Bayer and Onyx already have a deep history together. The companies forged a discovery partnership in 1994 that led to the development of renal and liver cancer treatment Nexavar (sorafenib), now a $1 billion drug. As mutually satisfying as the arrangement might have been, Bayer raised Onyx’s ire by developing a slightly modified version, regorafenib, that’s currently in Phase III. Onyx filed a lawsuit in 2009, accusing Bayer of developing the molecule in secret and violating an agreement to share research related to Nexavar. The companies settled last fall as Onyx dropped the suit, instead taking 20% of regorafenib sales and signing away rights to the drug in Japan for $160 million up-front in a revised co-promote agreement with Bayer.

Much of Onyx’s future value is tied to carfilzomib, a Phase III proteasome inhibitor being studied in relapsed and refractory multiple myeloma. The drug is under standard review from the FDA; Onyx said Thursday that the agency’s Oncology Drugs Advisory Committee will review the drug on June 20, prior to its PDUFA date of July 27.

Multiple bidders could also be lining up for Onyx. The company was said to be exploring a sale last fall, according to a Bloomberg report. (Again, the sources were unnamed. “Could there be someone, someone here among this crowd…?”) Bayer waived change-of-control provisions connected with Nexavar as part of the companies’ settlement, making Onyx a more valuable target. Now, it’s in the driver’s seat: If Bayer wants to regain full control of the sorafenib/regorafenib franchise as well as carfilzomib’s future potential, it will have to pay top dollar for its longtime partner.

For whether this rumor proves true or false, Deals of the Week will be celebrating the life of The Band’s late drummer, singer, mandolinist and spiritual anchor, Levon Helm. Take a load off, Levon, we’ll miss you. We hope that we’re writing about cancer treatments that could save people like you. And so, with that in mind, here’s…

AstraZeneca/Ardea and AstraZeneca/The Medicines Co.: It was an eventful week for AstraZeneca, whose two deals were overshadowed by the abrupt departure of chief executive David Brennan on April 26. As the company reported an 11% year-over-year decline in revenues in the first quarter of 2011, Brennan retired -- or, perhaps, was forced to resign. And although AZ has been cutting costs, it's still willing to spend: the company will pay $1.26 billion, or $1 billion net of cash, for gout treatment developer Ardea Biosciences. The British pharma said April 23 it would pay $32 per share for Ardea, representing a 54% premium over the previous session's closing price. The deal gives it Phase III candidate lesurinad, which is thought to harbor potential to improve on both Takeda's Uloric (febuxostat) and the generic drug allopurinol. Even on its tumultuous Thursday, AZ revealed yet another partnership: The company has a new four-year agreement with The Medicines Co. to co-promote coronary drug Brilinta (ticagrelor) in the U.S. TMC will market the drug to interventional coronary specialists, while AZ will continue selling it to hospitals. The arrangement will net $15 million annually for TMC. – Joe Haas and Paul Bonanos

Watson/Actavis - Watson Pharmaceuticals Inc. will become one of the world’s largest generics companies with its roughly $5.6 billion acquisition of Actavis Inc. The deal, announced late on April 25, gives Watson a broad international presence in a fragmented sector of the pharma industry that is gradually consolidating as market share and global operations become critical to success. Once it closes in the fourth quarter, 40% of the combined company’s revenues will come from outside of the U.S. – up from 16% currently. The companies have minimal geographic overlap, with both present only in six markets, including the U.S., UK, Australia, France, the Nordic countries, and China. As a result of this diversification, Watson will be one of the leading generics suppliers in the UK, where Actavis already is second in the market, with 13% share of the generics market. It also strengthens Watson’s foothold in the Middle East, Northern Africa and the Asia/Pacific, which generate 5% of Actavis current sales of $2.5 billion. Watson will be financing most of the transaction with a combination of different kinds of debt, in the process raising its debt load to $6.8 billion, up from the current $1.1 billion. Wall Street greeted the deal, which has been rumored for weeks, enthusiastically. Not least in their calculations has been the obviously heavy involvement of Watson’s EVP, global generics, Siggi Olafsson, who was previously CEO at Actavis. His insight into the privately held Actavis, which is backed by Deutsche Bank AG after the billionaire owner Bjorgolfur Thor Bjorgolfsson lost money in the financial crisis, likely helped with due diligence. – Lisa LaMotta

Pfizer/Nestlé: Pfizer’s price of $11.85 billion for selling its pediatric nutritionals business to Nestlé came in at the upper end of what most analysts expected, reflecting the fierce competition among global infant formula players for opportunities in emerging markets. Nestlé managed to keep Pfizer Nutrition out of the hands of its competitors with a deal announced April 23. Morningstar analysts projected a price tag in the $9 billion to $10 billion range and suggested Nestlé went high with its offer to fend off rival bidders Danone and Mead Johnson Nutrition. The sale is the second major divestiture for Pfizer since Ian Read assumed leadership of the New York-based drug company in December 2010 and, responding to investor discontent, vowed to remake the company. After a strategic review, Pfizer in July 2011 announced plans to shed its nutrition and animal health units, to devote more resources to biopharmaceuticals. The company also raised its dividend and vowed to be more proactive in buying back shares. These moves leave Pfizer more vulnerable to the high-risk high-reward nature of biopharma drug development. Still, in an era where Big Pharma divestitures and spinouts are greeted warmly on Wall Street, investors have met them with largely positive reactions, in some cases calling for a complete break up of the company to unlock its stagnant value. Even now, Pfizer could go further, argues Goldman Sachs analyst Jami Rubin, who wrote that Read said in a recent meeting that he would be open to more divestitures under the right circumstances. Presumably he would think about Pfizer’s relatively small generics business as one potential candidate. Pfizer likely will use the proceeds from Nestle to buy back stock – potentially 373 million shares, UBS analysts estimate. The repurchase could increase Pfizer’s 2013 earnings-per-share growth by three percentage points, the Morningstar analysts added. – Dan Schiff and Wendy Diller

Celgene/Epizyme: In a deal announced April 26 (pdf), Celgene has taken a three-year option for Epizyme's unpartnered pipeline of histone methyltransferase targets, granting Epizyme U.S. rights to any programs it selects while splitting development costs post-IND. Celgene can extend the option to a fourth year for an additional fee. The deal includes a $90 million upfront payment, of which part is a minority equity investment, plus more than $160 million in ex-U.S. milestones on any program Celgene selects, as well as double-digit tiered royalties on ex-U.S. sales. Celgene also purchased rights to Epizyme's lead program focused on DOT1L, an oncogenic HMT whose aberrant recruitment drives mixed lineage leukemia, a particularly lethal subtype of acute leukemias affecting as many as 5,000 patients annually in major markets. Celgene also has the right to appoint a voting member to Epizyme's board. It's the latest close collaboration between Celgene and a high science company, and caps a hectic 15 months of dealmaking for Cambridge, Mass.-based Epizyme that has included deals with GlaxoSmithKline and Eisai as well. It's also a sign of maturity in the epigenetics sector, as money and interest move away from the problematic histone deacetylase inhibitor drug class and toward HMTs, which are more biologically selective. HMTs also have applications in immune-inflammatory conditions, a primary therapeutic focus for Celgene. – Michael Goodman

Amgen/Mustafa Nevzat: On April 25, Amgen continued its push into emerging markets by spending $700 million for Turkish pharma and generics supplier Mustafa Nevzat Pharmaceuticals. Amgen acquired 95.6% of Mustafa Nevzat shares in the all-cash deal, giving it control of a company that had about $200 million in 2011 revenues. The California biotech already had established a Turkish affiliate in 2010. It currently markets two products there, and had stated a goal of selling more drugs from its pipeline in Turkey. Mustafa Nevzat was said to be entertaining proposals from multiple suitors over the past few months, although prior reports suggested that it was mulling the sale of a minority stake rather than a complete takeover. Though the deal is a rich one for Mustafa Nevzat, the price will have a relatively small impact on Amgen's balance sheet; the company had $19.4 million in cash and equivalents as of March 31. Amgen's sales in emerging markets were $250 million in 2010, and the company said it wants to reach $1 billion by 2015. – P.B.

Merck Says Goodbye to Independent Biosimilars Unit

Merck BioVentures, the biosimilars endeavor set up by Merck & Co. in late 2008, is being subsumed into the biologics and vaccines division of Merck Research Laboratories. Mike Kamarck, who has led BioVentures since 2010, has left the company.

Merck tells In Vivo blog it has "established internal capabilities and external collaborations that create a strong foundation for future progress in the evolving biosimilars sector. As our pipeline of biosimilars and novel biologics continues to progress, we decided to combine development and align under one leader to facilitate decision making and prioritization of resources across the portfolio." That leader is Rich Murray, who is Merck's SVP biologics and vaccines research.

Kamarck's departure is either a blow for the company's biosimilar ambitions or a reflection of reduced expectations and investment for the business. Kamarck has been for the past few years probably the most visible Big Pharma executive on the biosimilars front, and Merck has been -- at least among large, brand-focused pharma companies -- the most bullish on biosimilars' regulatory and commercial prospects.

There have been several bumps in the road. The company's first big biosimilar hopeful was a version of Amgen's Aranesp. That project was discontinued in early 2010. The company also had big plans for its biosimilar version of Enbrel, which it licensed in Phase III from Korea's Hanwha in June 2011. Only a few months later Amgen laid waste to those plans, announcing a 'stealth patent' that could keep Enbrel biosimilars off the market for another 15 years.

Biosimilars may indeed be a new kind of innovation, one that brand-focused biologics companies would be foolish to discount and one they seem to be tripping over themselves to embrace (see Amgen/Watson, Baxter/Momenta, Biogen/Samsung).

Merck's move to reduce its BioVentures group at least in stature seems a step in the other direction and at odds with the bullish attitude of the newly converted and groups like Novartis' Sandoz unit, which just this week predicted incredible growth for its own biosimilars business. That said, it’s hard to say whether this retrenchment will be part of the long-term learning process or bigger strategic shift, as the whole field is in the midst of an evolution and successful business models have yet to fully materialize.

Deals of the Week Looks At Illumina’s Roche Rebuff: There Will Be Time To Revisit This Deal

With the news this week that shareholders of Illumina had rebuffed Roche’s efforts to expand and stack its board of directors, the latter withdrew its hostile tender offer for the company.

No surprises there. Illumina’s management has been stalwart in its belief in the company’s positioning and prospects for rebounding from the dent in its earnings resulting from the global economic slowdown and cutbacks in government spending for its genome sequencing equipment.  That view is obviously shared by the institutions that own its stock, who were unmoved by Roche’s most-recent $51 per share ($6.8 billion) offer.  Roche, for its part, tried to use Illumina’s market-weakened position to highlight the risks of the business. As we wrote in IN VIVO in February, its interest in Illumina is strategic, but also opportunistic.

At one point during the parties’ back-and-forth letter writing to shareholders, Illumina alluded to its being called “the Apple of the genomics business.”  But while Apple’s products appeal to a “seemingly endless consumer base,” Roche replied, Illumina’s sequencing tools serve a much smaller and highly regulated market.  “Not even Illumina has projected any surge in revenues from its products in any specific foreseeable time period,” it said.  “As a standalone company, Illumina’s future is far from certain… Roche has the infrastructure, expertise, sales force, and market share required to successfully bring Illumina’s products to the broader Life Science and Diagnostics market and the combined capabilities of our two companies will accelerate the transition of Sequencing into clinical and routine diagnostics.”  Fair points.

As we’ve written, the how and when of applying sequencing to clinical diagnostics is debatable, especially when trying to show that complex patterns of genetic differences – the kind that rapid and inexpensive whole genome sequencing can uncover – can help guide therapy decisions (see here and here). But there’s no debating the research interest, nor that Illumina is the market leader and a continuing innovator in the field.  And while competitors are selling and developing small, fast next-generation sequencing instrumentation for smaller sequence read lengths, including Roche through its own 454 Life Sciences unit, it’s fair to think that large research and clinical labs will continue to invest in the workhorse machines Illumina has placed so successfully, especially as the costs of whole genome sequencing continue to fall.

Roche has called its $51 per share offer a starting point for negotiations, suggesting it would go higher once it has access to Illumina’s internal documents.  Illumina has resisted, presumably because it does not think Roche would pay what it would want as fair value – and that it will be in a much stronger negotiating position down the road.

That’s called being a true believer.  We think Roche is, too – in both the technology and in Illumina itself.  However the next year or so shakes out, Illumina should remain a good fit for Roche, to round out its genomics offerings and provide a channel for them to the clinical community.  The question is only at what price. (The discussion could also revert to some form of equity investment plus collaboration, which is what Illumina thought Roche’s intention was when it first came calling last November.)  The tender offer is set to go away at 6 pm tonight, but the two are still negotiating. – Mark Ratner

As one hostile saga wraps, another unfolds. Read all about it in this week's edition of ...

Adimab/Gilead and Adimab/unnamed partner: Antibody specialist Adimab has built a business on drug discovery partnerships over the past three years, while avoiding drug development of its own. Numerous pharmas have struck discovery deals in which Adimab uses its yeast engineering platform to identify antibodies against specific targets, allowing Adimab to build a cash-flow-positive business without taking on any development risk. This week, the venture-backed company struck two new deals, although it released fairly few details about either. First, Adimab will discover antibodies against two targets selected by Gilead Sciences in exchange for an undisclosed up-front fee plus preclinical and development milestones and royalties, if either is commercialized. The companies did not identify a therapeutic area, nor did they release any further financial details. For its other deal, Adimab didn’t even name the partner, only saying that it will discover bi-specific antibodies against two distinct targets selected by the partner, which can commercialize one or more in exchange for technical milestone payments, licensing fees, clinical development payments and royalties. The arrangements with Gilead and the other stealthy partner join a long list of Adimab deals, including agreements with Merck, Roche, Novo Nordisk, Biogen Idec, Lilly, Genentech and Pfizer. Adimab’s backers include SV Life Sciences, Polaris Venture Partners, Google Ventures, OrbiMed Advisors and Borealis Ventures. – Paul Bonanos

GlaxoSmithKline/Human Genome Sciences: It's not quite a deal yet, but it looks like there might be a silver lining for GlaxoSmithKline from the weak sales of Benlysta (belimumab) for lupus. The big pharma now has the chance to buy its Benlysta commercial partner, Human Genome Sciences, and gain full ownership over Benlysta and two other drugs the two have in development. GSK disclosed an unsolicited bid for HGS April 19, offering $13-per-share, or roughly $2.6 billion. HGS’ board of directors promptly rejected the unsolicited bid, saying it does not reflect the inherent value of the company, and hired the investment banks Goldman Sachs & Co. and Credit Suisse Securities to explore strategic alternatives for the firm. The $13-per-share cash offer represents an 81% premium over the company’s closing share price of $7.17 April 18. It also represents a 66% premium over the 30-day trading average closing price of $7.83 and a 58% premium over the ninety-day trading average, according to GSK. Nonetheless, while HGS investors may be relieved to see an offer on the table that represents immediate and certain value, $13-per share is a far cry from where the stock was trading a year ago. Last April, the stock was trading close to $29, riding high on the FDA approval of Benlysta for systemic lupus erythematosus March 2011. But it’s not likely a white knight is going to step forward. GSK splits rights to Benlysta with HGS, and owns rights to two other pipeline assets: albiglutide, a once-weekly injectable GLP-1 agonist for type 2 diabetes, and daraplatib, an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2) in development for cardiovascular disease. That’s likely to deter a competing bidder and limit HGS’ negotiating power. The history between HGS and GSK is long, dating back to the SmithKline Beecham days. SmithKline Beecham partnered on with HGS in 1993 on rights to a gene sequencing technology. The companies expanded on that original alliance several times over. In 2006, GSK paid HGS $24 million for rights to belimumab. --Jessica Merrill

Cell Therapeutics/S*BIO: With an EU regulatory approval potentially on the horizon for Pixuvri (pixantrone) and Phase III trials ongoing for that drug as well as tosedostat, Cell Therapeutics might appear to have more than enough activity at the moment. But on April 19, it paid $30 million upfront to S*BIO Pte. Ltd. for global rights to JAK2 inhibitor pacritinib, giving the Seattle-based biotech three Phase III candidates in blood cancer. CTI will pay S*BIO $15 million in cash and issue $15 million in unregistered preferred stock convertible to common stock – giving the Singapore firm nearly a 5% interest in its partner – and could pay milestones up to $132 million and single-digit sales royalties in exchange for the Phase III-ready myelofibrosis (MF) candidate. S*BIO could realize approval milestones based on regulatory outcomes in the U.S., Europe and Asia, along with sales milestones pegged to reaching amounts such as $200 million, $400 million and $500 million in a calendar year. CTI is not the first company to partner with S*BIO on pacritinib. In 2009, Onyx Pharmaceuticals paid $25 million upfront to acquire an option to the compound, then known as SB1518, as well as another preclinical JAK2 inhibitor, SB1578. With the potential for up to $525 million in milestones, it was among the most lucrative biotech deals seen in Asia to that point. However, in 2011, Onyx declined its option on both compounds, returning all rights to S*BIO. CTI believes pacritinib, as a selective JAK inhibitor, should have a better safety profile than the only FDA-approved drug for myelofibrosis, Incyte Corp.’s Jakafi (ruxolitinib), a JAK1/JAK2 inhibitor launched in late 2011.—Joseph Haas

Eli Lilly/Vanda: In its first in-licensing transaction since 2004, Vanda Pharmaceuticals has acquired development and commercialization rights to a Phase I-ready neurokinin 1 receptor (NK-1R) antagonist from Eli Lilly & Co. for an upfront payment of $1 million and up to $99 million in milestones. The 2004 deal with Novartis gave Vanda worldwide rights to iloperidone, which FDA approved for schizophrenia in 2009; it is now on the market as Fanapt, though sales have been weak. Vanda, focused on central nervous system therapies, has only one other clinical candidate in its pipeline, tasimelteon (VEC-162), in Phase III study for circadian rhythm sleep disorders. In its deal with Lilly, announced April 16, Vanda acquires VLY-686, an NK-1R antagonist that demonstrated proof-of-concept for controlling alcohol dependence in an NIH study. The company said it will complete technology transfer related to ‘686 this year and examine the oral compound’s clinical profile, to determine potential indications for an early-development clinical program. In addition to the upfront fee, Lilly could earn up to low double-digit royalties on sales, up to $4 million in pre-NDA milestones and up to $95 million in regulatory and sales milestones under the deal.—JH

GSK/Aspen: GSK wraps up its final bulk OTC portfolio divestiture, selling 19 international brands to Aspen Pharmacare Holdings Ltd., leaving only the troubled weight-loss drug alli as GSK’s last non-core brand. For £164 million in cash ($263 million under the April 20 exchange rate), Durban, South Africa-based Aspen gets the rights to Dequadin sore throat lozenges, Phillips Milk of Magnesia, Solpadeine analgesics and Zantac antacids, among others, outside the U.S., Canada and Europe. Glaxo said April 20 the non-core OTCs divested to Aspen generated about $95 million in 2011 sales, or a little over 1% of GlaxoSmithKline Consumer Healthcare’s total business of $8.20 billion. GSK declined to provide a full list of the brands included in the Aspen deal. Aspen, Africa’s largest drug maker with a $145 million consumer products business, split the GSK transaction in two: its South African subsidiary acquired the products sold in Africa for about $32 million, while Aspen Global Inc. acquired the rest-of-the-world brands for about $231 million. Aspen CEO Stephen Saad praised the OTCs’ established brand equity and said they “will also provide impetus in territories where Aspen is seeking to grow critical mass, such as Latin America and Southeast Asia.”Full coverage of the deal is in "The Tan Sheet". -- Dan Schiff

Sanofi/Michael J. Fox Foundation: Sanofi has tapped the Michael J. Fox Foundation to run a Phase Ib clinical trial of a potential treatment for cognitive deficits in Parkinson’s disease. MJFF VP if Research Programs, Mark Frasier, said the situation was a unique one. “Sanofi approached us about this molecule that, for internal business reasons, they were not pursuing, but that they thought may have promise for Parkinson’s disease patients,” he added. MJFF will be responsible for costs associated with the trial, but Sanofi will provide the drug at no cost to the foundation, clinicians, or patients. The trial is expected to launch in the latter half of 2012 and data will likely be available in early 2013. MJFF will have all rights to the data and will be able to disseminate that information as they see fit. Sanofi will retain the intellectual property surrounding the molecule and will have the first right of refusal in further development of the compound, based on results of the study. Cognitive deficits like a shortened attention span, trouble multi-tasking, and problems with planning affect 60% to 80% of Parkinson’s disease patients. There are currently no treatments available to help patients with these symptoms. - Lisa LaMotta

Crucell/Royal DSM: Vaccine-maker Crucell N.V. and Netherlands-based Royal DSM have chosen to abandon biosimilar development through their joint venture, Percivia LLC. A spokesman for DSM tells us that "the Shareholders and Board of Managers decided on the restructuring following the lack of agreement on further joint investment in the Company." Crucell is part of Johnson & Johnson, and others have speculated that J&J was simply not interested in financing the JV, which was launched in 2006 and headquartered in Cambridge, Mass. The initial focus of Percivia was to combine DSM’s manufacturing technology with Crucell's PER.C6 cell line for the production of proteins and antibodies within the protein therapeutic and diagnostic field, but the company changed direction in early 2011 to pursue a PER.C6 technology-based biosimilars product development strategy for emerging markets. According to Crucell, all biosimilar work will be terminated. According to a report in BioSpace, thirty employees of Percivia have already been let go and another 10 will remain for the next 30 to 90 days while operations are wound down. Percivia will remain a legal entity for the purposes of continuing the existing PER.C6 technology licensing business, says DSM. –LL

Financings of the Fortnight Examines The Peter Thiel Principle

Iconoclastic investor Peter Thiel has famously offered smart young people money not to go to college. (See video above.) Now his personal foundation, through a venture called Breakout Labs, wants to play a role usually left to the Federal government: providing seed money to life science companies too young to attract venture capital.

Foundations, charities, and angel investors have also picked up some of the slack to boost what some VCs refer to as “science projects,” but these days, if it doesn’t quack like a product, the duck isn’t likely to come down and give you $50 (or $500,000).

So into the breach, again, steps Thiel, the billionaire founder of online payments company PayPal and one of the first backers of Facebook. He later co-founded Founders Fund, a venture firm dedicated to backing only entrepreneurs with audacious goals. In February's START-UP we profiled the firm as it moves more aggressively into the life sciences and health care. Beyond social networking and digital media, Founders Fund is now aiming to cure diseases, use data to change the way medical care is understood, and take advantage of mobile and analytical technologies to solve what its partners see as enormous human problems, rather than just improve drugs or treatments incrementally.

Some of those audacious goals are also part of the Breakout Labs modus operandi, or so they say. Unveiled in the fall of 2011, Breakout is a revolving fund, not unlike an evergreen venture fund. Operated by the Thiel Foundation and seeded initially with $5 million, the philanthropic program accepts royalties and warrants for equity in the start-ups it supports, typically taking an option for a 1% stake in each start-up. Breakout will then funnel those returns back into itself to seed more companies, with grants between $50,000 and $350,000 apiece issued on a rolling basis.

Its first six grants are ticketed for six companies which have what the Labs calls “radical ideas” in the life sciences. (Some of Thiel’s stated personal aspirations are a bit radical, too – living forever, say, or colonizing the ocean on stateless floating platforms.) Although Breakout says it prefers ideas developed outside of traditional academic settings, science director Hemai Parthasarathy notes that some have connections to academia: 3Scan, which aims to map the connections within the brain in a three-dimensional digital reconstruction, is based on technology developed at Texas A&M, and Longevity Biotech, a developer of artificial proteins that it hopes to use in orally available versions of biotech drugs, uses technology spun out of the University of Wisconsin.

The other programs funded, which Parthasarathy says include a few garage-level projects recently incorporated as LLCs, have auspicious implications, if not necessarily truly radical science. Arigos Biomedical would preserve organs in a cooled storage bank over a long period of time for future transplants, using cryonics techniques Parthasarathy acknowledges do not have a “high academic consensus” of approval behind them. Immusoft is developing a novel way to turn immune cells into therapeutic compounds within the body, applying technology discovered in Nobel laureate and CalTech professor David Baltimore’s lab to re-engineer B-cells and infuse them back into a patient’s body. Inspirotec is creating hand-held devices that capture airborne toxins, potentially affecting both epidemiology and bioterrorism, while Positron Dynamics is conducting particle science with implications that include medical imaging. All are in the early stages of research and development, so it'll be many years before anyone knows how dramatic an impact their projects might have. 

Founders Fund has been able to shake up the status quo on the tech side, but life sciences and health care -- areas with bedeviling development timelines, complex regulations, and hugely entrenched status-quo interests -- will be an interesting test of the firm's, and of Breakout Labs', outsized ambitions. Until then, look to Thiel, both through his foundation and through Founders Fund, to be an important source of capital in this corner of the world.

Whether radical, incremental, or somewhere in between, any new source of early-stage biomedical funding these days is newsworthy. You bet your life you’ll read about it in…

Alcresta: The founders of Alnara Pharmaceuticals, Alexey Margolin and Robert Gallotto, have teamed up with their former investors to launch two new companies based on their enzyme stability expertise. Alcresta is the latest, with a $10 million Series A round unveiled April 17. Third Rock Ventures, Frazier Healthcare Ventures, and Bessemer Venture Partners are the same investment group that backed Alcresta’s sister company, Allena Pharmaceuticals, with a $15 million Series A announced in November. “Sister company” isn’t quite the right phrase. Alcresta and Allena are more like Siamese twins: The two companies will be run by the same staff of eight people while producing completely different products. Alcresta is developing a nutritional supplement with omega-3 and omega-6 fatty acids that are more easily digested and absorbable. The fatty acids are an important part of cardiovascular and brain health, and most nutritional drinks and infant formula include the triglyceride form of the two acids, but certain patients – including premature infants, some elderly, and cancer patients – lack the proper enzymes to digest the nutrients in the triglyceride form. That’s where the Alcresta supplement would come in. The product would be used at point of care, including hospitals and in the home, and will join one of the fastest growing segments of the nutrional supplement market. The company expects to launch a product sometime next year and is already in talks with potential acquirers, Frazier partner Jamie Topper told our “Pink Sheet” colleagues. Meanwhile, Allena, which raised $15 million in Series A financing in November from the same investment group, will develop drug therapies with oral protein therapeutics aimed at treating nephrologic and urologic conditions. The founders expect the two companies to diverge at some point, but see the dynamic business model as a means of keeping costs down while products are in early development and can capitalize on the shared resources. -- Lisa LaMotta

Alder Biopharmaceuticals: Already richly funded by private investors and a lucrative partnership, antibody developer Alder has tapped into a new $38 million Series D round of funding, led by Novo Ventures. Since its previous venture round, a $40 million Series C in 2007, the eight-year-old start-up has received an additional $100 million in non-dilutive capital from a partnership with Bristol-Myers Squibb. BMS licensed Alder’s ALD518, a Phase II antibody that binds to interleukin-6, in autoimmune indications for $85 million up-front in 2009, then issued a $15 million milestone payment at the beginning of a Phase IIb study in rheumatoid arthritis in June 2011. While the licensing deal enriched Alder’s coffers, the company will need more cash to support several initiatives. For one, Alder still retains rights to ALD518 in cancer and is conducting a pair of Phase II trials in oral mucositis and acute graft-versus-host disease. The company had previously investigated the drug’s efficacy in combating cancer-related fatigue, cachexia and anemia, but Alder CEO Randall Schatzman said the regulatory path for those indications would be long and costly, and Alder has halted those programs for now. The D round brings Alder’s total private funding to $105 million. Prior investors Delphi Ventures, TPG Biotech, H.I.G. BioVentures, Sevin Rosen, Ventures West, and WRF Capital all followed on in the new round, but Novo’s participation was a factor in raising more private money instead of attempting an IPO. Novo is an evergreen fund backed solely by the Novo Nordisk Foundation, which often affords it more patience with its portfolio companies. Besides, said, Schatzman, “The public market is still a rocky place to play, with lots of down rounds in the public sphere. Early stage companies haven’t been trading well, so liquidity to investors has not been that great.” -- Paul Bonanos

H.I.G. Capital: One of Alder’s early backers, the investment firm H.I.G. Capital, announced the closing of its second life-sciences fund, H.I.G. BioVentures II, with $268 million committed. The firm says the fund, originally targeting $250 million target, was oversubscribed, and more than half the limited partners were not investors in the first BioVentures fund. Managing director Aaron Davidson told “The Pink Sheet” that the new fund will seek out companies with lead products that can be developed with $40 to $60 million. That ceiling likely precludes very early-stage technology or capital-intensive indications such as Alzheimer’s disease, although Davidson noted that breakthroughs can change the calculus within a specific field rather quickly. He cited the recent FDA approval of Eli Lilly’s Amyvid (florbetapir) imaging agent, which helps doctors and researchers map amyloid beta deposits in the brain and could help re-shape the risk of Alzheimer’s R&D. Notable investments from the first fund include Salmedix and Gemin X Pharmaceuticals, both of which were acquired by Cephalon, now part of Teva Pharmaceutical Industries; OncoGenex Pharmaceuticals, which went public in reverse merger with Sonus Pharmaceuticals; Novadaq Technologies, a Canadian device company that went public in 2005, and Tranzyme, a drug firm that went public in 2011. -- Michael Goodman


Supernus Pharmaceuticals: More than a year after first filing to go public, Supernus has dusted off its S-1 and decided to have another go at the public markets. A revised prospectus filed April 11 aims the company for an IPO of about $75 million, not including extra shares allotted to underwriters. It wants to sell 5.77 million shares in the range of $12 to $14 per share. The firm is based on formulation technology spun out of Shire in late 2005 and into the hands of a venture syndicate led by New Enterprise Associates (NEA). Its lead compounds are extended-release anti-epileptic drugs, reformulated with the Shire technology. SPN-538 (extended-release topiramate) is under review at FDA and has a PDUFA date in July. Epliga (extended-release oxcarbazepine) is also under review with a PDUFA date in October. Not only has Supernus built a pipeline from the Shire formulation technology, it has stretched its venture dollars by turning royalties attached to the technology into bulk cash payments. The technology has been used in several marketed products. The royalties for Sanctura XR (trospium chloride) and Oracea (doxycycline) were used to secure $75 million in debt raised in 2008. For Intuniv (guanfacine), an important product in Shire's portfolio, Supernus accepted in 2009 a one-time payment of $37 million to waive future royalty rights, as our START-UP colleagues explained when Supernus first filed to go public more than a  year ago. Heading into the IPO, NEA holds 45% of Supernus, followed by OrbiMed Advisors (18%), Abingworth (18%), and Shire (7%). CEO and founder Jack Khattar, a former Shire executive who founded Supernus, owns 11% of the company. The latest filing notes that certain large shareholders could buy shares at the IPO, but it did not indicate which ones or how much they might buy. -- Alex Lash

- Paul Bonanos wrote this week's introduction on Breakout Labs.

Provigil Generics Saga Is Certainly Stimulating

And we thought the launch of Lipitor generics involved some complicated issues…

When Teva Pharmaceutical Co. Ltd. announced on March 30 the launch of an authorized generic of its Cephalon subsidiary’s wakefulness drug Provigil (modafinil), we were surprised.

We, like most of the free world, believed that modafinil generics would not be primed to enter the U.S. market until April 6 – the entry date that several companies (including Teva USA, Mylan Pharmaceuticals, and Ranbaxy Laboratories) had agreed to under years-ago patent settlements with Cephalon. Plus, we knew Par Pharmaceutical would be a player as well, thanks to the Federal Trade Commission’s requirement that Teva supply Par with generic modafinil tablets for at least one year, with market entry no later than April 6.

Teva Ltd.’s authorized generic announcement seemed to be an attempt to capitalize on its new ownership of Cephalon, giving it a one-week jump on other modafinil generics. We figured that the other ANDA filers, who were expected to share in 180-day marketing exclusivity, were probably none too pleased with Teva’s move. Probably neither was the FTC, which already had concerns about Teva/Cephalon having too much control over the modafinil marketplace.

But our surprise then was nothing compared to the reaction when we heard that Teva USA alone had been awarded 180-day marketing exclusivity on modafinil.

Huh?

FDA’s determination that Teva, as the first ANDA filer to certify against each of two Cephalon patents, was the sole holder of 180-day rights left us befuddled. Others, apparently, were just mad.

Case in point: Mylan – which promptly sued FDA challenging the exclusivity decision.

Also hopping mad was FTC. In an amicus brief filed in Mylan’s lawsuit, FTC said that had it known at the time Teva Ltd. bought Cephalon last year that Teva USA would have sole exclusivity rights for modafinil, it would have sought stronger remedies beyond merely requiring the generic manufacturer to enter into a supply agreement with Par.

FTC was quick to say that it takes no position on FDA’s interpretation and application of the Hatch-Waxman Amendments and governing regulations. Nevertheless, FTC’s assertion that FDA’s exclusivity decision “eviscerates the competitive incentives” in Hatch-Waxman is a pretty clear indication of what the commission thinks about its sister agency’s decision.

We’re looking forward to some interesting oral arguments Wednesday in a D.C. federal court on Mylan’s request for a preliminary injunction. In the interim, however, we’ve been mulling the whole Provigil mess and have come up with more questions than answers (that is, after all, what we do best).

So, lump these into the category of “Things We’d Like To Know”:

1. When did Teva USA realize it was the first to file on both Cephalon patents?

In a filing in its own lawsuit against FDA (subsequently dismissed), Teva USA said it was unaware that it was the first filer against both patents “until recently, after Teva Limited acquired Cephalon and corporate affiliates Teva USA and Cephalon were able to share the relevant regulatory information.” So, then, does that mean this interesting little factoid didn’t come out during the due diligence process before the acquisition was completed? We would have thought it would, given the commercial importance of Provigil, a billion dollar product, to Cephalon.

Or was it, in fact, knowledge that was out there but not seized upon without the help of some clever Hatch-Waxman lawyering? After all, Teva USA already had to have known it filed on the first day possible against both patents. Did that not at least raise the possibility that maybe Mylan and Ranbaxy (who were in on the first day against the first patent) didn’t file immediately on the second patent?

The details about the timing of the Paragraph IV certification filings leads us to our next question…

2. What Did FTC Know And What Did It Think?

In announcing a proposed consent order clearing Teva Ltd.’s acquisition of Cephalon on Oct. 7, 2011, FTC said that Teva USA, Ranbaxy, Mylan and Barr Laboratories (bought by Teva in 2008) all filed ANDAs on the first day possible, “making them all eligible for the 180-day marketing exclusivity period under the Hatch-Waxman Act.”

(FTC’s documents about the consent order did not reference Watson Pharmaceuticals, which some analysts also expected to launch April 6 with a share of 180-day exclusivity because of its certification against Cephalon’s second patent on the day it was listed. The commission and Watson previously had tussled over requiring CEO Paul Bisaro to testify under subpoena about whether Watson’s settlement agreement with Cephalon restricted the former’s ability to relinquish any marketing exclusivity rights it may have with regard to modafinil).

Did FTC receive information about, and review, the specific dates on which Paragraph IV certifications were filed against the second Cephalon patent as part of its clearance process for the Teva/Cephalon acquisition? Did this information not raise a red flag, since it seemed to be common knowledge that a slew of companies would be able to enter the market on April 6?

Clearly, if the commission had any worries about the potential for Teva to win sole exclusivity for modafinil, it could have demanded relinquishment or selective waiver of exclusivity as part of the proposed consent order. (Expect this to be a consideration in any future consent order approving a generic firm’s acquisition of a branded company, or vice versa. Call it the “Provigil clause.”)

When we asked FTC whether it reviewed the timing of the Paragraph IV certifications and whether this information raised any concerns, the agency said it could not comment because the information was non-public.

However, it seems that such information would have been important to the commission’s review of the acquisition. Besides, the Cephalon acquisition was not the first time FTC had examined some of these issues. In 2008, the commission sued Cephalon, alleging that the branded company sought to maintain its monopoly on Provigil by paying four ANDA filers (Teva, Ranbaxy, Mylan and Barr) more than $200 million to keep their modafinil generics off the market. That lawsuit is pending in Pennsylvania federal court.

Given that FTC would already have been on high alert for any concerns related to modafinil generic entry, it seems all the more likely there was a fundamental disconnect between FTC’s assumption of what the market would look like come April 6, and FDA’s final decision. Which leads us to our next question:

3. Would FDA really be all that upset if a court overturned its exclusivity decision?

We suspect not. Reading various documents filed in connection with the court case, one can’t help but feel a sense of reluctance by FDA in reaching its final decision on modafinil exclusivity.

We note with interest the Office of Generic Drugs’ April 4 letter in which it delivered the happy news to Teva that the company received sole generic exclusivity. The letter feels the need to point out that “the parties familiar with modafinil ANDAs appear to have operated under the assumption that there are multiple ANDAs that qualify for the 180-day exclusivity for modafinil.” These “parties” included FTC, the letter said.

In deciding that Teva’s exclusivity was triggered by the March 30 authorized generic launch, OGD writes:

“With control of the marketing of PROVIGIL, and of an authorized generic, Teva has every reason not to pursue final approval of ANDA 076596 and not to market a ‘true’ generic under that application.”

In a footnote, OGD talks about how it considered a harsher penalty for Teva and what effect this novel situation (whereby an ANDA first-filer’s parent company bought, and now controls, the branded product sponsor) might have on FDA policy moving forward:

“We have considered finding that Teva’s marketing of PROVIGIL upon its acquisition of Cephalon triggered its 180-day exclusivity, and believe that there is a strong argument for finding so. We have refrained from adopting that interpretation in this case, however, because that exclusivity, if it were triggered by Teva’s acquisition of Cephalon, would expire on April 11, 2012 and, given the multiple uncertainties in this case, Teva had no notice that FDA considered it to be running. Because of the potential for collusion between NDA holders and captive first generics, and the subversion of the statutory scheme that could result, the agency may in the future provide guidance on the effect of such a relationship between NDA holder and first applicant upon any claim for 180-day exclusivity.”

In a brief opposing Mylan’s request for a preliminary injunction, FDA nevertheless offers sympathy for Mylan’s cause:

“FDA understands Mylan’s concerns. … Granting exclusivity to a generic manufacturer that is owned by the innovator manufacturer appears to thwart the Hatch-Waxman Amendments’ goal of bringing more generic drugs to market faster (i.e., because the generic manufacturer would have no incentive to compete against its related innovator manufacturer, or the generic could sit on its exclusivity indefinitely by not commencing commercial marketing of its product – which would trigger the start of the 180-day exclusivity period – thereby blocking any other generics from coming to market). … Nonetheless, final approval of Mylan’s ANDA hinges only on whether a previous ANDA was submitted containing a paragraph IV certification and the 180-day exclusivity period had run.”

Finally, we pose the question that we (naively?) thought would be the primary focus on the day modafinil generics entered the market:

4. What About Ranbaxy?

Under its recently finalized consent decree with FDA, Ranbaxy faced the loss, or potential loss, of exclusivity on up to eight ANDAs. The company has not publicly identified the ANDAs at issue. However, modafinil appeared to be the first product launch since the decree’s entry in January where Ranbaxy held a claim to 180-day exclusivity. With the generic Provigil story playing out the way it has, we may never know if modafinil was one of the eight.

Perhaps Wednesday’s oral arguments will shine some light on these and other questions we have. We anticipate having no trouble staying awake for that hearing.

-- Sue Sutter (s.sutter@elsevier.com)

image by flickr user oberazzi via creative commons

Deals Of The Week: Will Lightning Strike Twice At Shire?

The old adage is that “lightning doesn’t strike the same place twice,” but as April showers approach, Shire PLC appears to be gambling that the cliché does not ring true. On April 12, it made a move to bolster its burgeoning Regenerative Medicine division, buying out privately held Pervasis Therapeutics in a deal that reportedly could total $200 million if all milestones pay out.

Pervasis adds a Phase II cell-based therapy Vascugel, for improving hemodialysis access for end-stage renal disease patients, and its endothelial cell technology platform, to Shire’s portfolio.

And Shire executives did not bury the subtext of the transaction – the specialty pharma is hoping that with targeted acquisitions, it can become the “partner of choice” in regenerative medicine, just as its 2005 acquisition of Transkaryotic Therapies enabled Shire to become Genzyme’s main competitor in enzyme replacement therapies.

The $1.5 billion purchase of TKT was leveraged into Shire’s ever-growing Human Genetic Therapies unit. Now, by pairing tiny, two-employee Pervasis with last year’s $750 million takeout of Advanced BioHealing, which brought in the skin-substitute Dermagraft, the company is trying to tell a similar story in regenerative medicine.

“That’s definitely our intent,” Kevin Rakin, president of Regenerative Medicine at Shire, told “The Pink Sheet”. “We want to do the same thing in regenerative medicine and I think there’s a template here: [acquire a] venture capital-backed company, get some technology into man and prove the applicability, and then ideally we can be ideally the partner of choice … for regenerative medicine product development and commercialization.”

ABH took a floundering product, Dermagraft, off the hands of a large medical devices company and built it into a successful franchise. The acquisition has brought Shire development, manufacturing and commercial expertise in regenerative medicines. The acquisition of Pervasis and the renal disease product candidate Vascugel offers a number of synergies, said Jeff Jonas, Shire’s head of R&D for regenerative medicine, in an interview with “The Pink Sheet” during EBI’s Pharmaceutical Strategic Outlook conference in New York on April 12.

“We know the renal space very well from our work with Fosrenol (lanthanum carbonate, Shire’s phosphate binder for a number of chronic kidney disease indications),” he said. “We are familiar with the dialysis suite. We are familiar with cell therapies as well. It is a marriage of a number of synergies that exist in the company.”

This deal should be seen as a harbinger of things to come from Shire, Jonas added, and not as simply an incremental transaction. In regenerative medicine in particular, the specialty pharma is seeking early- to mid-stage assets with upside that it can de-risk early in the development cycle. While HGT now comprises about one third of Shire’s total business, a fraction that is growing, Jonas would not put a number on regenerative medicine’s potential other than to predict that it represents an “area of real potential growth in the next 20 years.”

And now, get out your umbrellas, it's time for the latest roundup of:

Takeda/URL: In a bolt-on acquisition, Takeda’s U.S. division will pay $800 million upfront with the potential for sales-based earn-outs beginning in 2015 to take out privately held URL Pharma. With the buyout, announced April 11, Takeda acquires the gout treatment Colcrys (colchicine).  Takeda hopes that the addition of Colcrys to its existing Uloric (febuxostat) could position the company as the provider of choice for gout therapy in the U.S. Takeda executives were not specific about how URL will be absorbed into Takeda Pharmaceuticals North America, but said the acquisition is expected to be accretive to earnings beginning in 2013. Venture capital-backed URL, headquartered in Philadelphia, markets Colcrys via a 350-person contract sales force. The firm markets three other products in addition: Qualaquin (quinine) for malaria, Fibricor (fenofibrate) for triglyceride management and the antibiotic Bactrim (trimethoprim and sulfamethoxazole). URL’s sales were roughly $600 million in 2011, led by Colcrys, an alkaloid indicated for prophylaxis and treatment of gout flares as well as familial Mediterranean fever in patients four and older, which generated $430 million in revenue. Uloric, which launched in 2009, is hardly on a blockbuster track. The drug posted net sales of $117 million in 2011. But Takeda executives said the two drugs should complement one another well, since Uloric is indicated to treat chronic gout, while Colcrys treats acute cases.--Joseph Haas

Amgen/KAI Pharmaceuticals: Amgen announced April 10 that it plans to acquire KAI Pharmaceuticals. The big biotech paid $315 million in cash for the South San Francisco, Calif., biotech with plans to move its lead compound into late-stage testing as soon as possible. KAI currently is developing KAI-4169, a peptide agonist of the calcium-sensing receptor being developed for treatment of secondary hyperparathyroidism (SHPT) in patients with chronic kidney disease (CKD) who are on dialysis. The company presented positive Phase IIa data last year that showed ‘4169 raised the levels of parathyroid hormone. A Phase IIb trial is currently ongoing and results are expected in “the near term,” Amgen said. Phase III planning is underway already and Amgen will provide the company with a loan in advance of the deal closing to support planning. Amgen will have full worldwide rights except in Japan. KAI licensed the Japanese rights to the drug to Ono Pharmaceutical in September 2011, nabbing a $13 million upfront. The drug is currently being tested in an intravenous formulation, and KAI has looked into a transdermal formulation as well. But, Amgen’s head of nephrology, Reshma Kewalramani said the company is specifically focused on the IV formulation for the moment. “The appeal of this molecule is that it can be administered in concurrence with dialysis,” she said.–-Lisa LaMotta

Celgene/AnaptysBio: Celgene and AnaptysBio announced an antibody-discovery partnership on April 9. No financial terms were disclosed. AnaptysBio will generate antibodies to oncology and inflammation targets using its proprietary SHM-XEL platform. Celgene will receive worldwide rights to develop and commercialize antibodies discovered by AnaptysBio under the terms of partnership. Privately held AnaptysBio is a leader in harnessing somatic hypermutation (SHM), the body’s natural process for generating antibodies, for antibody discovery and optimization. SHM-XEL is an in vitro platform that couples SHM with mammalian cell display to generate antibodies with desired binding and specificity properties. AnaptysBio will receive an upfront payment, potential preclinical and clinical milestone payments, and potential royalties on sales of each product derived from the partnership. The alliance is similar in structure to a pair of deals that the antibody specialist struck in January 2012: one with Novartis and another with an undisclosed company. It was Novartis’ second collaboration with AnaptysBio, the prior one having successfully delivered antibody candidates into the big pharma’s pipeline. AnaptysBio additionally has struck antibody discovery deals with Roche and Merck. This most recent partnership appears to be Celgene’s first foray into antibody therapeutics. The cancer biotech has focused its pipeline primarily on various flavors of small molecules – e.g., epigenetic, multi-mechanism IMiDs and kinases, and cytotoxic chemotherapeutics – and also on cellular therapies. As such, the deal represents a significant broadening of its early-stage portfolio.–-Mike Goodman

Arrowhead/Alvos Therapeutics: RNAi company Arrowhead Research Corp. announced April 11 that it acquired privately held Alvos Therapeutics, a developer of proprietary human-derived homing peptides, in an effort to gain delivery technology for its short interfering RNA (siRNA) compounds. Alvos shareholders will get an upfront payment of 315,467 shares in Arrowhead (about $2.13 million) and will be eligible to receive additional stock valued at up to $23.5 million if certain clinical and regulatory milestones are achieved. Alvos stockholders could receive additional stock if the first three drugs using the Alvos technology reach certain sales milestones. Targeted delivery of RNA interference candidates has been the field's premiere challenge. The Alvos technology platform, which originated at MD Anderson Cancer Center, is designed specifically to generate peptides that bind to and enter tumor cells, potentially solving the delivery problem for Arrowhead, which acquired Roche’s RNAi assets in October. Alvos, previously known as Mercator Therapeutics, will be integrated into the Arrowhead facility in Madison, Wis. Arrowhead CEO Christopher Anzalone said in a statement that the acquisition benefits the company by allowing “for the creation of new peptide-drug conjugates against cancer and other indications, thereby expanding our business and capabilities in a cost effective way." –-L.L.

Photo credit: Wikimedia Commons

Deals Of The Week: The Letter's In The Mail

Pens were flying this week, tied up mainly writing letters, rather than signing dotted lines. Activist investor Carl Icahn put pen to paper (or fingers to keyboard) to scold Amylin Pharmaceuticals' board of directors April 4 for rejecting a reported $22 per share takeover offer from Bristol-Myers Squibb.

There hasn’t been any confirmation of Bristol’s offer or Amylin’s rejection, but Icahn was equally as irked by the lack of transparency. “I find it reprehensible that the board of directors has still not acknowledged or denied the media reports regarding its rejection of a $22 per share takeover offer,” he said in the letter. He made lots of other demands too, which you can read about in "The Pink Sheet" DAILY.

Then, Roche CEO Severin Schwan wrote to the shareholders of Illumina Inc., the next-generation sequencing company, urging them to accept a takeover offer rejected by the company’s board of directors. The offer of $51 per share represents an increase over the $44.50 per-share offer proposed in January. “Your decision will ultimately determine your ability to obtain certain value for your investment amid increasing headwinds for Illumina and the broader sequencing sector,” Schwan said.

Deals of the Week doesn’t know how much correspondence has been going back and forth between Watson Pharmaceuticals and its Swiss generic rival Actavis, but assumes it’s a lot. Media reports say the two are nearing a merger, with Watson offering roughly $7 billion and an announcement could come as early as next week.

We’ll have to wait and see how many jelly beans we eat before these or other takeover rumblings become a reality. In the meantime, here’s a look at some of the deals that did get done....

Spectrum Pharmaceuticals/Allos Therapeutics: Spectrum will buy specialty cancer drug developer Allos Therapeutics, Spectrum announced April 5. Spectrum will pay $1.82 per share, or $206 million, upfront to Allos shareholders, along with a contingent value right (CVR) that gives Allos shareholders another 11 cents per share if the biotech’s lead cancer drug, Folotyn (pralatrexate), is approved in Europe before the end of 2012 and gains reimbursement in three major markets before the close of 2013. Spectrum hopes to create synergies between its current cancer drugs and Folotyn. The news coincided with Spectrum’s announcement that its bladder cancer drug apaziquone failed two Phase III clinical trials. It also comes on the heels of a failed attempt by AMAG Pharmaceuticals last year to acquire Allos. AMAG paid a $2 million termination fee last fall after its shareholders killed the company's three-month long attempt to conduct an all-stock merger. The acquisition by Spectrum comes as no surprise. In a Sept. 15 regulatory filing, Allos revealed that management had turned down a buyout offer from an undisclosed company.--Lisa Lamotta

Amgen/AstraZeneca: AstraZeneca’s MedImmune biologics unit bolstered its pipeline, particularly in the inflammation and respiratory areas, while Amgen  obtained some needed financial flexibility in a partnership the companies announced April 2. Under the deal, MedImmune and Amgen will co-develop and commercialize five monoclonal antibodies originally discovered and advanced into clinical development by Amgen. The lead compound included in the collaboration is brodalumab (AMG 827), an interleukin-17 receptor blocker that has produced impressive Phase II data in moderate to severe plaque psoriasis and also is being investigated in Phase II studies in psoriatic arthritis and asthma. The other four candidates all are in various stages of Phase I development for indications such as Crohn’s disease, ulcerative colitis, systemic lupus erythematosus (SLE) and asthma. Under the deal, MedImmune will pay Amgen $50 million upfront for development and commercial rights to the five antibodies, while the two firms will share development costs. MedImmune has pledged to cover 65% of such costs each year from 2012 to 2014, and costs will be split equally by the two firms starting in 2015. The rationale behind the deal seems fairly clear-cut on both ends. Amgen, which needs to reduce R&D spending that exceeded 20% of sales last year, gets financial flexibility, while MedImmune and its parent, hit hard by recent drug development failures and facing a deep patent cliff, need to boost their pipeline.--Joseph Haas

Forest Laboratories/Janssen: Forest Laboratories has paid $357 million in cash for all U.S. patents and other U.S. and Canadian intellectual property protecting Bystolic (nebivolol), its anti-hypertensive drug, from Janssen Pharmaceutica, a subsidiary of Johnson & Johnson, the companies said on April 2. The deal includes the nebivolol composition-of-matter patent and eliminates the need for Forest to pay royalties on sales of the drug. In addition, Forest and Janssen ended licenses in Canada for both Bystolic and Savella (milnacipran), Forest’s fibromyalgia drug. Forest’s Canadian subsidiary will assume responsibility for registering and commercializing the drugs. Bystolic, while not a blockbuster, has done surprisingly well as a late entrant into a heavily genericized market. As the only branded beta-blocker on the market, it has benefited from Forest’s promotional efforts and from a mild side effect profile, which gradually has won over doctors and patients. And the company points out it has good market access, with 85% of total beta blocker lives covered by managed care in the U.S. with no prior authorization or step edit restrictions. Overall, Bystolic has 4% share of the beta blocker class and continues to grow. Forest’s fiscal year 2012 ended March 31, so it hasn’t reported full-year sales of the drug yet, but says sales are annualizing at more than $400 million. That’s considerable, given the low expectations when Forest launched Bystolic roughly five years ago and the fierce generic competition.--Wendy Diller

Eisai/Valeant Pharmaceuticals: Eisai balanced the disappointment of seeing its new breast cancer therapy, Halaven (eribulin), turned down by the U.K.'s cost watchdog, NICE, April 2, by announcing the same day a tie-up with Valeant to market the product in eight countries in Central and Eastern Europe. Valeant's European division, PharmaSwiss SA, will promote and distribute Halaven in Bulgaria, Estonia, Latvia, Lithuania, Poland, Romania, Hungary and Slovenia, for patients with locally advanced or metastatic breast cancer whose disease has progressed after at least two chemotherapeutic regimens for advanced disease. Financial terms of the agreement were not revealed. PharmaSwiss, acquired by Valeant in 2011 for $480 million, is one of the largest medicines distributors in Central and Eastern Europe, with operations in more than 12 countries. Despite losing an appeal on the negative NICE final draft guidance, eribulin is still being reimbursed in the U.K. through the government's Cancer Drugs Fund (CDF); it also is available and reimbursed in a number of other European countries, Eisai said. Clinical data indicate that eribulin is associated with a statistically significant overall survival benefit in heavily pretreated patients, and Eisai reported it is in the top-12 most prescribed drugs in the CDF.--Jessica Merrill

Image courtesy of Wikimedia Commons