Deals Of The Week: What Will Soriot's Genentech/Roche Experience Mean For AstraZeneca?

Like Bristol-Myers Squibb, AstraZeneca has maintained a “pure-play” pharma approach to business in recent years as well as a preference for smaller, targeted “bolt-on” acquisitions, rather than the large-scale M&A pursued in recent years by Pfizer, Merck and Roche.

Some Wall Street analysts suggest that may be about to change, as the U.K. multinational announced Aug. 28 that Pascal Soriot, a chief architect of Roche’s successful absorption of Genentech, will take over as its new CEO on Oct. 1, replacing acting CEO Simon Lowth and succeeding David Brennan, who stepped down in April.

With AstraZeneca struggling through a severe patent cliff – Seroquel (quetiapine) lost U.S. patent protection earlier this year, with Nexium (esomeprazole) slated to follow in 2014 and Crestor (rosuvastatin) in 2016 – full-year worldwide pharmaceutical sales are projected to decline by 16% this year. Bernstein Research analyst Tim Anderson wrote following the Soriot announcement that AstraZeneca’s five-year financial outlook is “uninspiring,” due to a thin late-stage pipeline and a mixed track record of R&D success.

“Doing small bolt-ons, like AstraZeneca has previously described, probably won’t be enough for the company to change its trajectory quick[ly] enough,” Anderson opined in an Aug. 29 note. “Doing a larger acquisition (>$20B in size) would more immediately accomplish this goal, in our view, and AstraZeneca would likely be able to borrow an amount of this size such that its dividend would remain secure and its share buybacks might even continue.”

Bolt-on transactions have been the order of the day recently at AstraZeneca. The firm has been active in acquiring companies with late-stage or marketed products to bolster its flagging R&D pipeline, the most recent being the joint acquisition with Bristol of Amylin Pharmaceuticals. With the purchase, AstraZeneca, which will incur a cost of around $3.5 billion, and Bristol obtained two marketed anti-diabetic GLP-1 agonists, Byetta (exenatide) and Bydureon (exenatide extended-release).

AstraZeneca also announced the $1.27 billion acquisition of Ardea Biosciences to gain access to the Phase III gout drug lesinurad, on June 23. Along with bolt-ons, the company’s business strategy has focused heavily on returning cash to shareholders through share buybacks. Brennan, who announced he was stepping down on April 26, after the company reported an 11% decline in revenues year-on-year in the first quarter of 2012, was an advocate of the buybacks strategy.

But Anderson believes Soriot will be emboldened by his experience in merging Roche with Genentech, a process in which insiders say the exec successfully managed both the process and the people. “He knows both the science and the commercial side of the pharmaceutical business, and he proved himself to be a leader when folding in Genentech,” Anderson wrote. “The Roche/Genentech tie-up continues to function well, all things considered. With this experience in hand, could he be tempted to do a bigger deal at his new company?”

Another analyst, Eric Le Berrigaud of Bryan Garnier & Co., does not see major philosophical changes in the near term, however. “Soriot comes from a company that drives a pure-play strategy in the pharmaceutical industry, which suggests a change in strategy from this perspective at AstraZeneca is unlikely, i.e., no diversification on the horizon.” Just the same, Le Berrigaud also predicts that smaller-scale business development activity will continue at AstraZeneca at its recent hectic pace.

So there you have it – either Pascal Soriot will be a change agent at AstraZeneca in favor of big M&A to turn around the pharma’s prospects … or he won’t.

Yet another perspective, from our sister publication PharmaAsia News, posits that Soriot will try to replicate at his new address the strong emerging markets performance enjoyed by Roche. Particularly in China, Roche has soared in emerging market sales growth, while AstraZeneca has underperformed the industry, and in a business segment it identifies as a priority, no less,

Roche has shunned branded generics in its emerging market strategy – a business pathway pursued vigorously by AstraZeneca – and instead focused on selling innovative specialty products such as high-priced biologics, despite the potential reimbursement hurdles. The strategy has paid off – Roche reported 37% year-over-year sales growth in China during the second quarter, while AstraZeneca sales grew by 12% in that country and only 1% worldwide on the quarter.

As always, your crack deal-watching team has labored to bring you the latest edition of:

Sunovion/Elevation – Sunovion Pharmaceuticals will pay $100 million upfront and up to $430 million total to buy out privately held Elevation Pharmaceuticals in a deal announced Aug. 30. Central to the deal is Elevation’s Phase IIb candidate for chronic obstructive pulmonary disease (COPD), EP-101, which combines an aerosolized formulation of glycopyrrolate with a proprietary inhaler device, the eFlow Nebulizer System. In addition to the upfront, Sunovion (the CNS/respiratory disease-focused company created by the merger of U.S. specialty pharma Sepracor and Japan’s Dainippon Sumitomo) will pay Elevation up to $90 million in development milestones, up to $210 million in commercial milestones and potentially another $30 million if other Elevation programs are developed successfully. Elevation claims that EP-101 is the only nebulized, long-acting muscarinic antagonist (LAMA) bronchodilator in development – the intended indication is for moderate to severe cases of COPD. Phase III trials are slated to begin in the second half of 2013. The buyout provides an exit for Elevation’s venture capital backers, including Canaan Partners, Novo Ventures, TPG Biotech, Care Capital and Mesa Verde Venture Partners. Founded in 2008, Elevation raised roughly $44 million over two financing rounds. Most recently, the biotech announced a $30 million Series B in early January, but had only drawn down a $12.4 million first tranche of that round at the time of the sale’s announcement. – Joseph Haas

Janssen/Genmab – Janssen Biotech has turned again to Genmab to boost its R&D pipeline, this time licensing worldwide development and commercialization rights to the Danish biotech's clinical-stage, CD38-targeted monoclonal antibody daratumumab, in a deal valued at a hefty $1.1 billion. For that sort of money, one would expect a lot of competition for rights to the molecule, and indeed that was the case – Genmab's CEO Jan van de Winkel claimed to be still receiving approaches from other companies the day before he sealed the deal with Janssen on Aug. 30. More than a dozen companies apparently expressed an interest in the asset. The agreement includes an upfront license fee of $55 million, an equity investment of $80 million and up to $1 billion in development, regulatory, and sales milestones, in addition to tiered double-digit royalties. Just weeks before, the two companies had concluded a much smaller deal, valued at $175 million, under which Janssen Biotech will evaluate Genmab's newer bispecific antibodies against a range of therapeutically relevant targets. Daratumumab targets CD38, found widely on the surface of multiple myeloma cells, and it has the potential to be a first-in-class drug for the treatment of multiple myeloma and other hematologic cancers. Initial data have shown it offers a potent and broad spectrum of anti-cancer activity. Janssen looks to be the ideal partner, as it already markets a multiple myeloma therapy, Velcade (bortezomib), in some countries. Genmab has executed a noted turnaround in fortune, after needing to slim down and restructure in 2009-2010. Now, all three of its active clinical-stage products have big pharma partners, and its cash runway extends out four years, at which point royalty and licensing revenues just might be large enough to sustain the company. – John Davis

Alnylam/Monsanto – Alnylam Pharmaceuticals has inked an agreement with big agriculture firm Monsanto that puts Alnylam’s intellectual property in the service of developing next-wave pesticides and other agricultural products. The deal announced Aug. 28 brings Alnylam a $29.2 million upfront payment with the potential for downstream milestone payments and royalties, along with research funding. In exchange, the companies have an exclusive 10-year arrangement in which Monsanto will apply Alnylam’s RNA interference technologies to its BioDirect platform, which aims to bring innovative biological solutions to farmers. Alnylam in turn sent $1.4 million of the upfront to Isis Pharmaceuticals, under a 2004 arrangement in which Alnylam licensed IP for double-stranded oligonucleotide therapeutics that mediate RNAi. Isis also is in line to receive a portion of any milestones or royalties that Alnylam earns under its partnership with Monsanto. According to Alnylam Chief Business Officer Laurence Reid, the agreement with Monsanto is ideal because it gives his company a new source of non-dilutive funding from which it can finance its internal RNAi therapeutic development program, dubbed “5x15.” Alnylam staff will be involved somewhat in technology transfer efforts with Monsanto, but the agriculture firm will do most of the work and will provide research funding for whatever assistance it needs from Alnylam. Neither company would provide much in the way of specifics about how RNAi would be used to create next-wave agricultural products, with a Monsanto spokesperson saying it was still “early days” for determining what kinds of products might evolve from the partnership. “Our collaboration with Alnylam relates to work we have in discovery,” she said. Such products might be used to control devastating agricultural pests and diseases. Monsanto has calculated the annual worldwide market for agricultural biologics at about $1.7 billion. – JAH

Hospira/Orchid – For the second time, injectable generics seller Hospira struck a deal with India’s Orchid Chemicals & Pharmaceuticals to boost its antibiotic-manufacturing abilities. Hospira said Aug. 29 that it would pay about $200 million to acquire Orchid’s 12-year-old, 50,000-square-meter active pharmaceutical ingredient manufacturing facility in Aurangabad, India, which houses 640 chemists, engineers and technologists. The deal also includes a research and development facility in Chennai, home to 160 scientific professionals. Hospira says the acquisition will support manufacturing of key antibiotic products, including wide-spectrum beta-lactam antibiotics such as imipenem-cilastatin and injectable meropenem. The new deal is expected to close in the fourth quarter, and be break-even to slightly accretive to earnings in the first year following its close. In a deal that closed in March 2010, Hospira paid $381 million for another of Orchid’s antibiotic-manufacturing complexes and associated R&D facilities, where it manufactures finished-dosage-form injectable generics. Orchid plans to keep its cephalosporin manufacturing business, which supplies Hospira with that drug. – Paul Bonanos

Merz/Shionogi – Merz Inc., the U.S. affiliate of Merz Pharmaceuticals GMBH, announced Aug. 27 the acquisition of Cuvposa (glycopyrrolate, coincidentally the same active ingredient in Elevation’s COPD drug, EP-101, noted above) from Shionogi & Co. Financial terms were not disclosed. Cuvposa is an oral solution for sialorrhea, over-excretion of saliva, specifically for pediatric chronic severe drooling associated with neurological conditions such as cerebral palsy. Cuvposa indirectly reduces the rate of salivation by preventing stimulation of acetylcholine receptors located on peripheral tissues, including salivary glands. FDA approved Cuvposa as an orphan drug in 2010, and it has been available in the U.S. through specialty pharmacy since April 2011. It is the only FDA-approved treatment for this condition. Merz, Inc. CEO Bill Humphries said the acquisition of Cuvposa “is a promising addition to our neurology business and reflects our commitment to becoming a recognized leader in the treatment of movement disorders and related conditions.” Merz, Inc. develops and commercializes products in the U.S. for its German parent, and its portfolio comprises neurology, aesthetics and dermatology products. – Michael Goodman
Photo credit: Roche

Deals of the Week Points to a Solution to Your Phase III Woes

Early this morning the US/German biotech Agennix announced a significant restructuring whereby it would attempt to spare capital by dismissing 55% of its workforce, or 37 people. The restructuring isn't a surprise; two weeks ago Agennix said its lead program in non-small cell lung cancer failed a Phase III trial in the third-line setting. The company's market value has deteriorated accordingly; it now trades at or below the Eur22.7 million in cash it had as of the end of June. It'll certainly need a financial infusion if it plans to continue any operations beyond the first quarter of 2013. What are the odds investors buck up?

Though clearly a disappointment for patients, Agennix management, and its unusually concentrated investor base (the company is publicly traded but controlled by shareholder Dietmar Hopp, whose funds hold about 65% of Agennix's stock), the biotech's plight provides a timely illustration of some fairly common biotech problems. And it allows us to point toward a theoretical solution.

Agennix, the product of a merger of two biotechs in 2009, is a somewhat diversified company, but investors obviously based its entire value on that Phase III program. Besides developing talactoferrin alfa -- the above-mentioned immunotherapy that failed in early August -- in two NSCLC settings, other cancer indications, severe sepsis, and (as a topical formula) in diabetic foot ulcers, Agennix also has rights to a handful of unrelated oncology programs (remember satraplatin?). The biotech is far from alone in this kind of pipeline-in-a-product diversification, even if it is unusually stretched -- from lung to foot -- to the physiological maximum. It's also about average when it comes to the way investors viewed its later-stage programs (as in, if it ain't first, it don't matter). In fact, more or less, this is the default biotech valuation model.

Check out the twin pie charts at the top of this post, created with data provided by TechAtlas. At least 48 different biopharmaceutical companies are pursuing clinical-stage treatments for Type II diabetes. In NSCLC, 41 different companies have drugs that are in Phase II or beyond. Only a handful of competitors – typically the largest companies – are pursuing multiple agents against the same disease. Most NSCLC developers are like Agennix -- small, diversified, and reliant upon a single asset because it's first in the firing line. It's the larger companies, those with multiple drug candidates in development for the same indication, that therefore are able not only to identify the best single agent of the group but also to experiment with combinations pre-commercialization.

But imagine a parallel universe version of a company like Agennix, one that was diversified around a single indication instead, say NSCLC, before it reached pivotal studies. A company that instead of chasing three or four disparate indications, was wholly focused on one well-defined problem. And instead of relying heavily on a single asset and a series of clinical trials that pits that asset against placebo or standard of care, it had a handful of candidates against that single indication in the same stage of development, and tested them against one another in a proof-of-concept trial.

Wouldn't investors have more faith that the winner of that trial not just in terms of its ability to succeed in Phase III, but the likelihood that it passes muster with regulators and payors as well? Wouldn't an ecosystem populated by these solution-focused companies reduce duplicative clinical infrastructure, find it easier to recruit patients to participate in clinical trials, and attract likeminded and driven backers?

Such are the arguments that RA Capital's Peter Kolchinsky puts forth in the September issue of IN VIVO (subscribers should check out the full feature here; we'll also be discussing this model on a panel at our upcoming Pharmaceutical Strategic Alliances meeting -- Sept 17-19 in NYC).

Pulling together the foundations of a so-called Solution Development company is a tall though by no means impossible order. Beyond the central arguments about how to build biotechs and design meaningful trials, Kolchinsky suggests a role for disease foundations in identifying promising assets and even incentivizing developers to pool their candidates, as well as the opportunity for large pharmaceutical players to strike pre-negotiated deals to license the winners of these contests.

For the whole feature, get over to IN VIVO. Meanwhile we've got the solution to your late-summer Friday blues, it's time for the latest installment of ...

Allergan/Molecular Partners: Allergan must like what it sees in Molecular Partners' obscurely named DARPins, returning Aug. 21 to license another potential therapy for wet age-related macular degeneration (AMD), MP0260, and entering into a discovery collaboration to find more DARPin compounds with activity against serious eye conditions. The U.S. ophthalmics-to-dermatology specialty company already has licensed the Swiss biotech's lead compound, MP0112 (AGN-150998), which is being compared with Genentech/Novartis' Lucentis (ranibizumab) in a Phase IIb clinical study. DARPins are based on repeated peptide sequences that mediate natural protein-protein interactions and have some interesting characteristics, including a possibly longer duration of action in the eye than current AMD therapies like Lucentis and Regeneron/Bayer's Eylea (aflibercept), and maybe improved efficacy. In return for access to the cutting-edge research, Allergan is making an upfront payment of $62.5 million for the two new agreements, which include licensing options on three compounds. In total, Molecular Partners could receive up to an eye-watering $1.4 billion in development and regulatory milestones and tiered royalties on future product sales. The company signed up Janssen Biotech in December 2011 to evaluate DARPins for immunological applications, and also is developing its own pipeline of proprietary products.—John Davis

Riemser Arzneimittel AG/AXA Private Equity: The Greifswald, Germany-based specialty pharmaceutical company Riemser Arzneimittel has been sold by the founding Braun family and various minority shareholders, including TVM Capital, to the European diversified private equity firm, AXA Private Equity, for an undisclosed amount, the companies announced Aug. 21. Over the past 30 years, Riemser has made a remarkable journey, from a veterinary vaccines company based in East Germany to an international marketer of niche pharmaceuticals in the oncology, anti-infectives and dermatological fields. This has been achieved by organic growth and by the acquisition of smaller German companies and portfolios of unwanted products from other companies, supported by investments from TVM Capital and GE Capital. Riemser divested its veterinary business in 2010. AXA Private Equity intends to use its global network to support Riemser's internationalization strategy and its continued focus on niche therapeutics. A new round of company consolidation also might be in the cards in this less-risky corner of the pharmaceutical industry.—J.D.

Silence Therapeutics/MiReven: Silence Therapeutics has been tapped again for its RNA-delivery techniques that allow RNA-based drugs to reach tissues deep within the body. Australian-based microRNA company MiReven has signed a deal with Silence to use its delivery system with its cancer drug miR-7. Silence will formulate a miR-7 mimetic molecule with its proprietary lipid-delivery systems in order to evaluate miR-7 in various cancer models. It will also undertake in vitro and in vivo studies of the formulated miR-7. Silence is being paid an undisclosed fee for the collaboration. In July, Silence raised $8.8 million from new and existing investors to help extend its cash runway to 2014. The company uses its revenue from delivery partnerships, as well as funds raised to forward its own internal pipeline, which includes RNA-interference compounds. Silence Chief Scientific Officer Klaus Giese noted that this is the company’s fourth microRNA delivery technology partnership. “Whilst we remain internally focused on the delivery of our siRNA therapies, we continue to broaden the potential value of our proprietary delivery systems by collaborating with partners,” he added.—Lisa LaMotta

Pfizer/Mylan: In one corner, Pfizer wanted to expand its Established Products footprint in Japan, the world’s second-largest pharma market but only the sixth-largest generics market with room to grow. In the other, Mylan has more than 380 products in its portfolio in Japan, but has been stalled in gaining significant market share due to lacking distribution and marketing capabilities. The two firms say it was a perfect fit for an “exclusive, long-term strategic collaboration” for generics in Japan. Pfizer will slap its label on Mylan’s existing portfolio and an additional 125 compounds in Mylan’s pipeline and handle the commercial side, while Mylan is tasked with development and manufacturing of compounds in the agreement. A key to success in gaining market share in Japan’s generic market is securing preference from nationwide wholesalers. Pfizer’s status as an innovative company likely will go a long way in bumping Mylan-sourced products near the top of wholesalers’ recommendation lists for hospital sales. The companies will split revenue, but otherwise the deal does not include any capital alliance. In terms of sales, Pfizer Established Products Business Unit President Albert Bourla said the firms have “very high ambitions” to be a market leader in terms of sales by 2015.—Daniel Poppy

Bristol-Myers Squibb/Synergy: Gastrointestinal disorder-focused Synergy Pharmaceuticals signed an asset purchase agreement Aug. 23 with Bristol-Myers Squibb to acquire all assets related to FV-100, an orally available nucleoside analogue in mid-stage testing for shingles. Financial terms were not disclosed. Bristol previously had completed a Phase IIa trial of the candidate in which it was found to be well tolerated dosed at 200 mg and 400 mg in 230 patients. The trial also demonstrated clinically meaningful reductions in time to resolution of clinically significant pain and in incidence of post-herpetic neuralgia, Synergy stated in a release. "We believe that with our expanding clinical experience in utilizing patient-reported outcome tools from our GI program, a feature that will be necessary for supporting pain-related indications for FV-100, we are in a unique position to further develop FV-100 for patients not adequately treated with present-day therapy,” said Synergy CEO Gary Jacob. In July, Synergy merged with cancer-focused Callisto Pharmaceuticals, its largest shareholder, in a tax-free stock swap.—Joseph Haas

Financings of The Fortnight Sneaks A Peek At The VC Survey

Pennant races are on. Kids are back to school. (Wait, whatever happened to summer lasting until Labor Day?) And 90% of the venture capital world is on vacation. Whew. Good thing we caught more than 100 of the top life science VCs earlier this summer to participate in START-UP Magazine’s second annual Life Science VC Survey.

We’re putting the finishing touches on our package of feature stories and survey results, including a series of questions for corporate VCs, an ever-more important subset of investors whose role in funding biotech innovation has changed dramatically in the past few years. We’ve asked our participants a battery of questions, and here's a sneak preview: The overall mood hasn’t improved from last year’s survey, and unlike last year, a handful of VCs planning to hit the pavement and raise new funds now tell us that they’re willing to take lower terms and fees (virtually zero said so in 2011). Some are also moving forward with plans for smaller funds and smaller staffs.

(You can find the 2011 survey here and here. Subscription required.)

One partial counterweight to the sour mood and fundraising difficulties is the Food and Drug Administration. In 2011, not a single optimist said the FDA was a reason to feel positive, while 80% of the pessimists said the FDA was one of the largest obstacles the life science industry faced. In 2012, it’s not all horseshoes and hosannas, but 23% of the people who call themselves optimists said the FDA was a reason to feel positive -- a big jump from zero -- while 73% of the pessimists named the FDA as an obstacle. Given the consistency in recent years of the nearly comical vitriol life science VCs have aimed at FDA, any improvement is notable.

Another focus of our survey is therapeutic area. VCs are eternally curious what their peers find the most interesting areas for investment, whether to avoid the herd mentality or to avoid being left behind. Topping the list of most compelling indications or technologies on the biopharma side for the second straight year are oncology and rare disease. The latter we find particularly interesting, seeing how some observers of the field think we could be in a rare-disease bubble at the moment, typified by the Enobia Pharma sale to Alexion at the end of 2011.

One disease area that received a surprising boost of investor confidence in our survey was metabolics/diabetes, which went from solidly unattractive in 2011 to just a bit more hot than not. On the flip side, one of this year’s biggest losers was next-generation biologics platforms, perhaps an acknowledgment that the gold rush of a few years ago has played itself out.

We also asked about politics and policy, geography and stage preference, and we’re slicing and dicing the results in various ways to find out how these subgroups of respondents intersect. We’ll feed you more tidbits in our next column and on Twitter (@invivoblogalex), but if we give away more this time around we’ll have to sing for our supper. Let’s get on with our round-up. Survey says it's…

Novira Therapeutics: Anti-viral drug developer Novira said Aug. 23 it had closed a $23 million Series A round led by first-time investors 5AM Ventures and Canaan Partners. Contract research organization WuXi PharmaTech, based in Shanghai and listed in the U.S., also participated in the round. Three-year-old Novira had been backed previously by seed-stage backer BioAdvance, as well as regional angel groups Mid-Atlantic Angel Group, Robin Hood Ventures and Delaware Crossing Investment Group, which had collectively supplied about $3.5 million to date; all contributed to the new round as well. The Philadelphia-area company plans to develop novel therapies that disrupt viral replication and proliferation by inhibiting the life cycle of the capsid, the protein shell that encloses genetic material inside of viruses. It currently plans to investigate drugs for hepatitis B and HIV, although candidates have not yet been identified for either indication. The company intends to retain rights to a lead program in HBV as it progresses into mid-stage trials, while it may partner an HIV program at an earlier stage, according to CEO Osvaldo Flores. Although HIV research has spurred excitement with renewed hope for a cure, deal-making in the space remains a rare occurrence. An SEC filing indicates that Novira has collected the first $11 million of a $26.5 million round, which Flores said includes the seed money as well. – Paul Bonanos

MediciNova: MediciNova, a specialty firm that licenses approved small-molecule compounds from Japanese companies for development and approval in the U.S., has signed a two-year, $20 million common stock purchase agreement with Aspire Capital Fund. The funds will lengthen MediciNova’s runway as it tries to move a pair of lead programs into pivotal clinical trials. Aspire has bought 606,000 MediciNova shares at $1.65 per share, the firm’s closing price on Aug. 2, for a total of $1 million. Headquartered in both San Diego and Tokyo, with shares traded on both countries’ stock exchanges, MediciNova was one of the more successful biotech IPOs in 2005, raising $113 million.  The income bought additional time for MediciNova’s business model in 2009, allowing it to outlast Biotechnology Value Fund in a battle to acquire Avigen, which brought MediciNova additional cash and the compound ibudilast (MN-166/AV411), in development for progressive multiple sclerosis, neuropathic pain and drug addiction. Ibudilast is currently in grant-funded mid-stage trials for drug addiction. MediciNova’s other lead program is bedoradrine sulfate (MN-221) for acute asthma and chronic obstructive pulmonary disorder. The Aspire deal will help MediciNova advance '221 into a Phase III trial in either acute asthma or COPD by early 2013, but it's unclear how much beyond that trial the cash will last. Based on Aspire’s previous dealings with biopharmaceutical companies, which include similar equity line arrangements with Bionovo and NuPathe, MediciNova expects Aspire to be a long-term investor, with an ownership interest that should reach and then remain in the 5% to 10% range. -- Joseph Haas

Elcelyx Therapeutics: San Diego-based Elcelyx announced a $7 million extension of its Series B financing on Aug. 13, as well as a pair of executive hires, including former Biogen Idec and Mpex Pharmaceuticals business development leader Mark Wiggins as its senior VP of business development. Built upon a platform that produces first-in-class Gut Sensory Modulators (GSMs), Elcelyx plans to develop two products: Lovidia, an over-the-counter weight-loss supplement, and NewMet, a delayed-release formulation of diabetes drug metformin, which the company says will offer a much better safety profile than existing formulations. It’s the latest example of a biotech, or a management team, using a single platform to pursue a dual prescription/over-the-counter strategy. Elcelyx’s two products could offer a life cycle management opportunity for a future pharma partner. Elcelyx launched in 2010 and has raised about $20 million in venture capital over its lifespan, including $17 million under the B round. The $7 million extension was funded by existing backers Morgenthaler Venture Partners, Kleiner Perkins Caufield & Byers and Technology Partners. At present, Elcelyx is taking down $4 million of the extension, which CEO Alain Baron said will take the firm “well into efficacy trials” for Lovidia and NewMet. – J.H.

Relypsa: Still trying to get its phosphate binding agent into Phase III, Relypsa has raised nearly $50 million as part of an $80 million Series C round, according to a regulatory filing. Its lead compound, RLY-5016, is designed to linger in the GI tract and absorb excess potassium, a toxic side effect of certain drugs such as blood pressure medicine. An acute buildup of potassium is called hyperkalemia and can lead to arrhythmia or cardiac arrest. RLY-5016 has been tested in five clinical trials since entering the clinic in 2008 and currently is in a 300-patient, year-long Phase IIb trial for the treatment of diabetic nephropathy. Data from the ongoing trial are expected to be presented later this year. Two Phase III trials are expected to start in early 2013. The company plans to file for an NDA by the end of 2013 and will commercialize the drug on its own, president Gerrit Klaerner told “The Pink Sheet” DAILY. Relypsa is the reincarnation of Ilypsa, a company bought by Amgen in 2007. After paying $420 million, Amgen spun out the remaining four preclinical compounds; Ilypsa’s previous management team has overseen the business. Amgen took an equity stake in the company, less than 20%, when it was spun out. RLY-5016 appears to be tracking behind original expectations. In 2007, at the time the company was formed, management was aiming to advance RLY-5016 into Phase III trials within 18 to 24 months. Later, upon the Series B raise in 2010, the company said those funds would be used to take the compound through Phase III. – Lisa LaMotta
 

A Sneak Peek at Science Matters: Way Cool Wyss

On July 24, Harvard’s Wyss Institute for Biologically Inspired Engineering announced a Cooperative Agreement worth up to $37 million from DARPA for development of an automated instrument integrating ten human organs-on-chips. The news triggered a bout of media coverage including stories on National Public Radio and the Discovery Channel as well as the print trades.

But two weeks earlier, we had been speaking to Wyss founding director Don Ingber about another program at the institute: the development of a nanoparticle technology that uses physical shear force to target occluded blood vessels and deploy the clot-busting drug tPA, which is then effective at one-hundredth of the current therapeutic dose, preventing unwanted bleeding elsewhere. (The image above shows a blood clot within a mouse artery beginning to disappear following the injection of the nanotherapeutic.)  The drug delivery technology could conceivably be used to deliver an array of drugs to diseases characterized by vessel constriction, including heart attack and stroke. It was reported in the July 5 issue of Science Express and is the subject of next month’s Science Matters column in START-UP (a sneak peek of the story is available to readers now here).

When we spoke, Ingber also gave us a heads-up on the organs-on-chips development, which he called “a huge effort” at the Wyss. “We use microfluidics to model the physical as well as the chemical microenvironment and we can get functionality nobody’s ever seen before, in vitro,” he said. “We’ve really found that modeling the 3D physical environment is incredibly powerful for drug screening, disease models, toxicology and so forth.”

The nanoparticle technology was similarly inspired. The modeling of vascular occlusion on which it is based is an offshoot of an idea Ingber had in the 1990s, when DARPA was seeking ways to induce blood clotting in soldiers without knowing where the internal bleeding injury was, and Ingber thought to devise platelet mimetics that would use the higher shear force inside a cut blood vessel as a targeting mechanism. The nanoparticle idea takes a 180 degree turn – using the understanding of the mechanics of how platelets travel in the vasculature and settle at sites of injury to stop rather than induce clotting.

Both programs exemplify the Wyss’ mechano-biological world view. The organs-on-chips effort could greatly advance drug safety and efficacy testing. But we sense Ingber has a special soft spot for the nanoparticles. “This is one I am personally committed to giving our best shot to take it to the clinic,” he says.

Image courtesy of the Wyss Institute.

Deals of the Week Ponders PatientsLikeMe and Empowerment

Next-wave patient-based research pioneer PatientsLikeMe (PLM) struck an alliance with Merck on August 13^th to “evaluate the impact of psoriasis on patients and to inform a novel approach to improving outcomes.”

Dr. Sachin H. Jain, chief medical information and innovation officer at Merck looks to the collaboration to help it “establish and apply innovative solutions that improve disease management and enhance the patient experience.” In other words the Big Pharma is tapping into PLM’s network to gather patient-reported data it can use to tweak and tailor its psoriasis clinical strategy – one hopes to the eventual benefit of patients – but the announcement fell short on concrete terms and goals.

PLM’s model consists of organizing patients into online disease communities where they can share information about how their disease affects them, how they are treating it, the outcome of treatment, etc. The company, founded in 2004, is based on a sophisticated IT platform that, according to one of its founders, Jamie Heywood, aims to convert patients’ stories into structured information that is “computable, to change the way medicine is done and delivered.”

According to PLM’s website, it is backed by an interesting syndicate consisting of a “mission-based” investment group, technology-focused seed capital investors, and traditional private equity.  PLM’s main source of revenue is the sale of aggregate and annonymized patient information to industry, primarily drug firms. PLM lists many partners on its website, including Novartis, Abbott, Biogen Idec, Sanofi, and numerous disease associations.

PLM is totally plugged into the reigning zeitgeist of openness, sharing, connectivity, and community. Think Facebook, social networks, precompetitive consortia and collectives, open source programming – these are all cousins to PLM, although their business or operational models may differ. In a commercial context, the flipside of this zeitgeist, particularly in the world of consumer data, is crowdsourcing off the harvested information and selling it to end users. As for PLM, the company is refreshingly candid about its business model: “We take the information patients like you share about your experience with the disease and sell it to our partners (i.e., companies that are developing or selling products to patients).”

Is the information gathered and sold better – in terms of granularity, nuance, accuracy, actionability – than what can be provided through traditional means, including field and panel market research, patient diarization, etc? Do the patient communities offer more in the way of education and solace than patient groups organized by disease associations or that spontaneously assemble online?

In a video on PLM’s website, Jamie Heywood outlines the grand goal of PLM: “Everyone learns from the experience of everyone else on every meaningful variable that can affect the [health] outcome in real time across the whole medical system.” We applaud the sentiment, but wonder if it can be achieved.

And where does this leave the patient?  PLM offers no way to measure its own outcomes on patient health and happiness, or on R&D innovation, or disease management or the delivery of care. How can we know that PLM is moving the needle with respect to these lofty ends?

The patient empowerment promised by PLM and others is truly a worthy goal. But only getting downstream of the results of collaborations like this will tell us if we are really getting there. For now, we can take you, dear reader, through this week's installment of...

AstraZeneca/Regulus, Biogen Idec/Regulus: Regulus Therapeutics snagged another Big Pharma partner on Aug. 14 when it announced its agreement with AstraZeneca PLC to discover, develop, and commercialize microRNA therapeutics based on three targets for oncology, cardiovascular, and metabolic disorders. Under the deal with AstraZeneca, the Carlsbad, Calif.-based biotech will identify and prepare the pre-clinical compounds for human trials and AstraZeneca will handle clinical development and commercialization. AstraZeneca is paying $28 million up-front and is also making an undisclosed equity investment. Regulus also has the potential to receive undisclosed pre-clinical, clinical and commercialization milestones. The program will begin with Regulus’ microRNA-33, which is in pre-clinical development for treatment of atherosclerosis, a hardening of the arteries due to buildup of fat and cholesterol. The drug reduced arterial plaque size by more than 35% in pre-clinical animal models. The other two targets were not identified by the companies. Regulus added to the news flow with another announcement that it would team up with Biogen Idec to develop microRNA-based biomarkers for multiple sclerosis. Biogen will make an undisclosed upfront cash payment and equity investment in the company, as well as potential milestone payments. Biogen is hoping that Regulus will be able to help it identify the optimal patients in clinical trials, as well as in use with companion diagnostics, and to monitor disease progression and relapse. – Lisa LaMotta

Elan Corporation/Neotope: In a move that polishes Elan up for a sale after the Phase III failure of bapineuzumab, the Irish drug maker announced plans Aug. 13 to spin-out its Neotope Biosciences drug discovery business into an independent company. The news came just days after Elan’s development partners, Pfizer Inc. and Johnson & Johnson, discontinued almost all of the bapineuzumab research programs after two Phase III failures in Alzheimer’s disease. Elan developed bapineuzumab and the disappointing news leaves the company solely dependent on the multiple sclerosis drug Tysabri (natalizumab), partnered with Biogen Idec Inc., to generate revenue. One of the more appealing exits for Elan shareholders now could be the sale of the company, with the most obvious acquirer being Biogen Idec. By spinning out Neotope, Elan reduces operating expenses and positions the company as a more attractive takeout target for an acquirer interested in the Tysabri revenue stream. After, Elan will be a “focused business” that will generate immediate profits, with its primary being Tysabri, but the business will also own ELND005, a Phase II/Phase IIb ready asset in development for neuropsychiatry indications targeting non-amyloid pathologies, and the continued interest in the J&J partnership, which includes bapineuzumab. The spinout of discovery research would reduce Elan’s operating expenses by $103 million to $300 million post the transaction. Net income would be in excess of $250 million, and the company is targeting earnings per share of $1 by 2015, the firm said. Neotope Biosciences PLC will focus on discovery-stage research with a focus on transforming science into clinical stage assets. The unit mainly develops antibodies to tackle disease related to misfolded proteins, including chronic degenerative diseases. Chief Scientific Officer Dale Schenk will be the CEO. Elan plans to finance the start-up with $120 million to $130 million in capital and will retain a 14% to 18% minority equity position in the company. - Jessica Merrill

Merck/Arrowhead: Nanomedicine company Arrowhead Research Corp. has found a research partner for one of the programs it obtained in April when it acquired Alvos Therapeutics. A Merck & Co. subsidiary will evaluate a monoclonal antibody discovered using the human-derived peptide targeting program now owned by Arrowhead, according to an Aug. 14 announcement. Financial terms weren't disclosed, although the company said Merck will pay for the evaluation. It was not immediately clear what rights, if any, Merck obtained to the compound, nor what compensation Arrowhead would receive if the compound is developed further and commercialized. Spun out of the University of Texas' MD Anderson cancer research center, Alvos developed technology that generated peptides that target tumor cells or other tissues specifically. Arrowhead paid $2.13 million in stock up-front to acquire Alvos in April, although milestone payments could add $23.5 million to that deal. Arrowhead said it is currently evaluating additional programs derived from the platform in oncology and other therapeutic areas, and will assess them for partnering or internal development. - Paul Bonanos

Pfizer/AstraZeneca: Pfizer shows once again in the consumer health care products space that it will put its money where its mouth is, acquiring from AstraZeneca global OTC rights for Nexium and gaining right of first refusal on OTC rights for Rhinocort Aqua. The firms Aug. 13 said Pfizer will make an upfront payment of $250 million to AstraZeneca for to market a potential 20mg version of the proton pump inhibitor Nexium (esomeprazole), currently available only by prescription and indicated to treat the symptoms of gastroesophageal reflux disease. AstraZeneca, which is eligible to receive milestone and royalty payments from Pfizer based on product launches and sales, in June filed a marketing authorization application for an OTC Nexium tablet with the European Medicines Agency and expects in the first half of 2013 to file a new drug application with FDA for an OTC Nexium in delayed release capsules. If approved, Pfizer anticipates commercializing the product in the U.S. beginning in 2014 with launches in other markets to follow. While an OTC Nexium would enter a crowded nonprescription PPI market, an OTC Rhinocort Aqua could be a first-in-class U.S. switch as all pharmaceutical therapies for non-infectious rhinitis currently remain Rx only. The product is a pump spray containing the glucocorticosteroid budesonide, with a local anti-inflammatory effect. Both agreements underscore Pfizer’s commitment to keeping and growing its consumer health care products business, largely acquired in its takeover of Wyeth in 2009, rather than divesting the business. The firm this year launched an online health and wellness self-assessment tool, nutritionpossible.com, to help drive sales for its vitamins and dietary supplements business, led by the Centrum line added in the Wyeth deal, and acquired Alacer Corp., maker of Emergen-C vitamin C powdered drink mixes.--Malcolm Spicer

Epic Sciences/Undisclosed Partners: Epic Sciences, a cancer diagnostic company located in San Diego, announced Aug. 15 that it has signed collaborations with six major pharmaceutical companies, including two of the top four multi-national pharmas. The company works to develop circulating tumor cell (CTC) technology for companion diagnostics to help predict later-stage cancer outcomes. Epic said its collaborations include 12 clinical trials in over 40 distinct projects. "By using Epic to molecularly characterize CTCs, our pharmaceutical partners are looking to improve the success rate, decrease the cost, and expedite commercial launch of their targeted therapies,” said Epic president and CEO David Nelson in a statement.
Epic was spun out of Scripps Research Institute in 2008 and completed a Series A in March 2011, but did not reveal the amount that was brought in or its investors. -LL

Michael Goodman wrote about PatientsLikeMe this week.Close up of 'Empowerment' in Lincoln, UK from flickr user Lincolnian under creative commons.

DOTW Takes A Look At Stock Movements

In the hum-drum days of August, deals have been sparse, but a spate of bad clinical trial results in recent weeks shows how risky pharma R&D is.

The news -- around J&J/Pfizer/Elan's Alzheimer's disease monoclonal antibody bapineuzumab, Merck's 0524b cardiovascular drug, Amgen's pancreatic cancer drug AMG 479, and Bristol's nucleoside polymerase inhibitor for HCV -- led DOTW to wonder about the correlation between clinical trial data releases and biopharma stock prices, and whether negative or positive data has a bigger relative impact. Of course, one can hypothesize, but few rigorous studies of the topic seem to exist, and a host of variables make generalizing difficult. 

The most recent news didn't seem to have much effect on stock prices of the sponsors, likely because investors anticipated the bad news, given the nature of the compounds and previous work done in the class of drugs involved. Nevertheless, thanks to a nudge from pharma analyst Mark Schoenebaum of ISI Group, we came across an article that appeared in Oct. 2011 in the Journal of the National Cancer Institute. Co-authored by Allan Detsky, former physician in chief at Mount Sinai Hospital in Toronto, and colleagues, it studied the stock movements of companies sponsoring Phase III oncology drug trials between Jan. 2000 and Jan. 2009.

The stock prices of companies that owned the drugs were analyzed for 120 trading days before and after the first public announcement of clinical trial results and regulatory decisions. The study found, as follows: "The mean stock price for the 120 trading days before a Phase III trial announcement increased by 13.7% (95% confidence interval) for companies that reported positive trials and decreased by 0.7% (95% confidence interval) for companies that reported negative results...Changes in company stock prices before FDA regulatory decisions did not differ statistically between companies with positive and negative decisions." The implication was that at this "later stage of drug development there is less speculative interest, given that the supporting data are already available."

I'm not entirely sure what this tells investors, given the limitations of the retrospective study and the vagaries of the stock market. But looking for the most accurate drivers of biopharma stock prices, be they clinical trial data results, deal announcements, or M&A, is a key responsibility of biopharma investors and an obsession in the biopharma industry at large. For those who track markets and are scientifically inclined, it offers an analysis in a familiar format and makes for a new ingredient to throw into the mix. Whether it is more than beach reading is in the eye of the beholder.

Now, on to deals of the week...

Novartis/University of Pennsylvania - Looking to move further into the emerging field of cancer immunotherapies, Novartis announced a collaboration with the University of Pennsylvania on Aug. 6 in which a joint team of researchers will work to discover and develop anti-cancer immunotherapies that target chimeric antigen receptors (CAR). Novartis gains worldwide rights to CART-19, a Penn-discovered anti-CD19 candidate that is being tested in a pilot clinical trial in chronic lymphocytic leukemia. No deal terms were disclosed; Novartis said it will pay Penn an upfront payment, research funding, milestones pegged to clinical, regulatory and commercial achievements and royalties on any products that reach the market. In addition, Novartis will establish an R&D facility – the Center for Advanced Cellular Therapies, where the work will take place--on the university’s Philadelphia campus. Mark Fishman, president of the Novartis Institutes for BioMedical Research, said the company will commit $20 million to pay for the R&D site. The deal grants Novartis worldwide license to all CAR compounds developed through the partnership, but the primary focus at the start is CART-19. CART-19 has yielded headline-making results in a three-patient pilot trial in CLL. The drug showed potent anti-leukemic effects in CLL patients who previously had undergone multiple courses of chemotherapy and biological therapy. Two of the patients were in remission more than one year after beginning therapy with the candidate, while a third has maintained partial remission for seven months. Novartis plans to begin a Phase II trial with CART-19 during the fourth quarter of 2012.—Joseph Haas

MEI Pharma/S*BIO: In another deal that signals industry’s interest in epigenetics, the San Diego-based oncology company MEI Pharma will acquire exclusive worldwide rights to S*BIO’s oral histone deacetylase (HDAC) inhibitor pracinostat, MEI Pharma announced Aug. 8.  Pracinostat is a selective HDAC inhibitor that has demonstrated clinical evidence of activity in patients with advanced hematologic disorders such as acute myeloid leukemia and myelofibrosis. A drug targeting hematologic disorders will broaden MEI Pharma’s portfolio, which includes two lead drugs targeting solid tumors. MEI Pharma is developing novel isoflavone-based drugs and has two candidates in early clinical development. MEI Pharma will issue $500,000 of common stock to Singapore-based S*BIO in exchange; the deal also includes potential milestones of up to $75.2 million. HDAC inhibitors are one of the main classes of epigenetic drugs, which affect gene expression by inhibiting enzymes that add, remove or recognize chemical modifications on DAN or chromosomal proteins. Dozens of HDAC inhibitors are in development, but much remains unknown about their activity.—Jessica Merrill

Cempra/Curetis: Getting ready to enroll patients in a pivotal Phase III trial of the oral formulation of its antibiotic solithromycin, Cempra will team with Germany’s Curetis in a research and development collaboration through which Curetis will use its Unyvero diagnostic system to examine patient samples for bacteria and antibiotic resistance. No financial terms were disclosed; each party can use the generated data for its own product development and regulatory filings. North Carolina-based Cempra, which went public in February, netting $57.4 million in an IPO that sold for $6 per share, is developing oral and intravenous formulations of solithromycin for community-acquired bacterial pneumonia (CABP). In previous trials, Cempra’s candidate demonstrated efficacy and a favorable safety profile compared to the current standard of care for CABP, Janssen’s Levaquin (levofloxacin). Cempra will test solithromycin in an 800-patient, 100-plus clinical site worldwide trial expected to begin in the fourth quarter and enroll patients into 2014. Curetis said the partnership will enable it to generate further data on the clinical sensitivity and specificity of Unyvero, a versatile hardware platform designed to perform all of its detection in a single run.—J.H.

Intrexon/Synthetic Biologics: Two synthetic biology companies that were already partners are planning to collaborate more closely in infectious diseases. Privately-held discovery platform operator Intrexon has licensed its technologies to Synthetic Biologics in order to develop at least three monoclonal antibodies for as-yet-undisclosed indications. The partnership, which includes use of Intrexon’s proprietary mAbLogix and UltraVector technologies, can be expanded to include up to eight targets. The new deal comes nine months after the companies agreed to develop a pulmonary arterial hypertension therapy, when Synthetic Biologics was known as Adeona Pharmaceuticals. As in the previous transaction, Synthetic Biologics will make its up-front payment in equity rather than cash, granting 3.6 million shares to Intrexon, currently worth about $7.2 million. That brings the latter's stake to about 18%. Synthetic Biologics can pay additional fees in cash or stock if it chooses to expand the partnership, and will owe milestone and royalty payments if and when drugs discovered under the partnership pass through the clinic and are commercialized. Well-funded Intrexon closed a $100 million financing in June 2011, bringing its total funding to $259 since 1998.—Paul Bonanos

Pfizer/Nodality: Pfizer has tapped San Francisco start-up Nodality in a personalized medicine partnership that will initially focus on lupus and other autoimmune diseases. While specifics of the collaboration were not disclosed, Nodality revealed that the partnership is structured like a typical biotech/Big Pharma deal with an initial upfront and potential milestone payments. Nodality will use its Single Cell Network Profiling (SCNP) technology to help Pfizer pick the right clinical trial subjects, characterize mechanisms of action, as well as develop companion diagnostics. Pfizer has been investing in the company since 2008 and co-led a $15 million venture round in Nodality in July along with TPG Biotech, Kleiner Perkins Caulfield & Byers, and Maverick Capital. Nodality also signed a partnership with Belgium’s UCB in February. “This collaboration, which is Nodality's second major strategic pharma partnership this year, provides continuing validation of the value the SCNP platform technology can bring to drug development," said Nodality CEO and Chairman Michael Goldberg.—Lisa Lamotta

Financings Of The Fortnight: Idenix To Forge Ahead On HCV Combo After Novartis' Departure

Idenix Pharmaceuticals has been quite busy of late, on the fundraising front and elsewhere. A clinical-stage biotech with a market cap of nearly $900 million and no marketed products, the virology-focused firm has just exited a long-term collaboration with Novartis, raised $191 million in a registered direct offering, and previewed preclinical data for a hepatitis C candidate that it says appears to offer greater antiviral activity than any other clinical compound in its class.

Also of note, with IDX184, Idenix owns one of four nucleoside polymerase inhibitors still in clinical development for HCV, and that class widely is seen as the backbone for future combinations of all-oral, direct-acting antivirals that could transform a burgeoning market highlighted by millions of warehoused and potentially tens of millions of undiagnosed patients. The peak annual market for HCV drugs has been estimated as high as $20 billion worldwide, and Idenix, while trailing clear leader Gilead Sciences, is positioned as well or better than many more established and deep-pocketed companies racing to grab a significant chunk of that market.

Notably, Idenix might be in an enviable position compared with big pharma rival Bristol-Myers Squibb, which may have flushed $2.5 billion down the drain in January when it bought Inhibitex and its promising mid-stage “nuc,” INX-189. On Aug. 1, Bristol announced it suspended dosing in a Phase II trial of that compound after one patient in the study suffered heart failure – and many Wall Street analysts subsequently have written off that compound (BMS-986094) as a failure.

Idenix CEO Ron Renaud isn’t declaring victory in the frequently changing HCV space, but it’s hard not to view the Cambridge, Mass., firm as being well-positioned, having just reclaimed full rights to ‘184 as the scarcity of such compounds worsens. After nearly a decade of working together on HCV candidates, Novartis and Idenix agreed to end their collaboration on July 31, a decision that Renaud told “Financings of the Fortnight” was a mutual recognition by both companies that a termination would put Idenix on the best footing to advance its HCV program in terms of both clinical and business development.

“Novartis understood that Idenix needed the flexibility to move forward with our pipeline and to have as many possibilities to combine our assets with other assets at various stages of development that the former agreement that we had with Novartis just would not allow,” he said. “There were too many onerous rights – both corporate governance rights and clinical pipeline rights – that prevented us from having fulsome discussions with potential partners about how to move forward together.” Novartis held an option for ‘184, but declined.

Novartis remains the largest shareholder in Idenix and it still stands to benefit significantly if Idenix is one of the winners in the HCV race, Renaud added. All Idenix owners had their ownership stakes diluted through a registered public offering that placed 23.5 million new shares at $8 apiece, including an over-allotment for offering managers JP Morgan and Leerink Swann. The RPO netted Idenix about $191 million, giving the firm runway through the first quarter of 2014, CFO Daniella Beckman said.

Idenix had $79.1 million cash on hand as of June 30, thanks in part to a pair of follow-on offerings in 2011 that netted a combined $105.4 million. Its shares had been trading in the $10 range in the weeks just prior to the offering’s pricing on Aug. 2, but closed trading on Aug. 8 down 4% to a palindromic $8.08 a share. Beckman and Renaud conceded that dilution always will be an issue for a clinical-stage biotech, but said their priority had to be gathering enough cash to see Idenix through a crucial Phase II trial testing ‘184 in combination with IDX719, the firm’s Phase II NS5A inhibitor for HCV.

“On the heels of our restructured deal with Novartis, we wanted to make sure we got any balance-sheet concerns behind us as well, and we wanted to be able to execute the business plan,” explained Renaud. That plan includes not just the combo study but also bringing a second-generation nuc, IDX368, into clinical development next year, with other nucs to follow. “This is going to take some considerable financial resources as well as human resources, and this capital raise will enable us to do that now,” he said.

Idenix intends to start both the Phase II combination study – expected to be an all-comers trial of about 200 HCV patients who will receive 100 mg of ‘184 once-daily and likely 100 mg of ‘719 once-daily, in a set of treatment groups some of which also will receive ribavirin – and the first Phase I trial for ‘368 before the end of 2012. The latter compound is the product of a project that has yielded 1,900 new compounds over the past 18 months in search of nucs superior to those in clinical development now (at Idenix, Gilead (GS-7977) and Vertex Pharmaceuticals (ALS-2200)).

“Right now, ‘368 appears to generate more triphosphate, which is what actually kills the HCV virus, than any other nuc that we’ve ever seen in clinical development,” Renaud asserted. “We suspect this a drug that we can start dosing at very low doses once a day and it appears at least preclinically to be very combinable with other classes of DAAs.”

And the HCV race goes on, as do other biopharmaceutical companies’ fundraising plans, which we now review in this installment of …

Mersana Therapeutics: A March collaboration with Endo Health Solutions to create next-generation antibody-drug conjugate therapeutics for cancer was a key turning point for Mersana Therapeutics, a new beginning signified by a $27 million recapitalization announced July 31. Under the financing, which Mersana called a Series A-1, the biotech will receive backing from New Enterprise Associates and Pfizer Venture Investments as well as a group of returning investors. Using its Fleximer conjugation technology to bind a wide variety of novel linkers with anti-tumor payloads, Mersana says it can create ADCs offering a wider variety of payloads, the ability to increase drug loading per antibody significantly while maintaining pharmacokinetic and physiochemical properties, and the capability to use antibody fragments as well as full antibodies. NEA’s participation in the round marks the first biopharma investment under its $2.6 billion NEA 14 fund. With its investment, NEA also will bring General Partner David Mott to Mersana as chairman of the board, while NEA principal Sara Nayeem will take a board seat. “NEA brings enormous financing capability plus tremendous intellectual resources,” said Mersana CEO Nicholas Bacopoulos. “Pfizer also adds to this validation.” Existing investors Fidelity Biosciences, ProQuest Investments, Rho Capital Partners and Harris & Harris Group also backed the round. Mersana raised $21 million through its Series A in 2005, augmenting that most recently with two sales of debt totaling $10 million in 2011 and 2012. – Joseph Haas

Hyperion Therapeutics: In the lone biotech IPO of this fortnight, Hyperion Therapeutics netted $53.5 million on July 31 by selling 5.75 million shares (including the 750,000-share overallotment) at $10, falling short of its $11-13 range. Hyperion, which has raised at least $100 million in venture capital, is awaiting an October PDUFA date on its lead compound Ravicti (glycerol phenylbutyrate) for urea cycle disorders (UCD), a group of rare genetic diseases caused by an enzyme or protein transporter deficiency in the urea cycle that leads to elevated ammonia levels in the blood. In March 2012, Hyperion acquired a global license to the drug from Ucyclyd Pharma, after initially receiving only limited rights in 2007. The only other branded FDA-approved therapeutic for UCD is Ucyclyd’s Buphenyl (sodium phenylbutyrate), and Hyperion holds U.S. co-promotion rights to that drug, plus an option on worldwide rights. Hyperion is the fifth rare disease company to go public in the last five years, according to Elsevier’s Strategic Transactions, and it’s the second-highest netting IPO behind MolMed SPA’s $82 million offering in February 2008. (MolMed’s orphan candidates include Phase III Arenegyr (NGR-hTNF alpha), a vascular targeting agent for malignant pleural mesothelioma.) Only two weeks out from its IPO, Hyperion has been trading in the black, closing at $10.35 on Aug. 8. Other rare disease players that have fared well include Aegerion Pharmaceuticals (which tried to go public twice before succeeding in October 2010): the lomitapide developer closed at $13.54 on Aug. 8, 42% higher than its $9.50 IPO price. That, however, was still lower than the bottom-end of its anticipated $14-16 IPO range. Novagali Pharma, which is developing a vernal keratoconjunctivitis candidate and debuted on the NYSE Euronext Paris Exchange in July 2010, went a different route and last year sold 50.55% of the company to Japanese pharma Santen Pharmaceutical, which paid €6.15 per share, almost double Novagali’s IPO price. – Amanda Micklus

Atterocor: Besides ADC developer Mersana’s $27 million Series A-1 recap round, FOTF recently saw another private biotech in the cancer space raise funds: Atterocor completed a $16 million Series A financing backed by Frazier Healthcare Ventures and 5AM Ventures on Aug. 3. (The last time these two syndicated together was for Marcadia Biotech’s $15 million Series A, along with Twilight Venture Partners; Roche later acquired Marcadia for $292 million upfront). Atterocor is developing candidates for one of the most uncommon types of cancer: adrenal gland cancers, which include adrenocortical carcinoma, neuroblastoma and pheochromocytoma. Atterocor’s founder and CEO Julia Owens says the new funding will help move a lead medicine into clinical trials. Not much has been revealed about the company’s work, however scientific advisor Gary Hammer, the director of the endocrine oncology program at the University of Michigan’s Comprehensive Cancer Center, has been focused on the mechanisms of adrenal-specific growth and differentiation via growth-factor signaling and transcriptional programs. He is specifically addressing dysregulated growth of adrenocortical stem/progenitor cells. Atterocor was established earlier this year and previously raised $500,000 in debt financing from a single investor. There are only a handful of competitors developing treatments for adrenal cancers. One of the most advanced is Astellas Pharma/OSI Pharmaceuticals’s tyrosine kinase inhibitor linsitinib, in Phase II for locally advanced or metastatic adrenocortical carcinoma. The European Commission granted orphan drug status to the candidate this past April. – A.M.

Exelixis: Small-molecule cancer therapeutics biotech Exelixis  has completed concurrent financings, which are expected to result in aggregate net proceeds of $361.9 million. For the $127.5 million common stock offering of 30 million shares (up from the 20 million originally proposed) at $4.25, Goldman Sachs and Cowen & Co. are jointly managing with Piper Jaffray, Stifel Nicolaus Weisel and William Blair & Co. co-managing. After the FOPO, the second-largest of its six follow-ons to date, Exelixis’ valuation is up to about $760 million, a steady decrease from the company’s last two FOPOs, first in March 2011 when the valuation was $1.4 billion and then in February 2012 when the market cap dipped down to $815 million. In the second part of the current fundraise and marking its first public debt financing to date, the biotech is offering $250 million worth of seven-year, 4.25% convertible senior subordinated notes (with an option to purchase additional notes up to an aggregate principal amount of $37.5 million). The notes are redeemable at a price of about $5.31 apiece (with a conversion rate of 188.2353 shares per $1,000 principal), which represents about a 13% discount to Exelixis’ 10-day pre-announcement average, yet a 25% premium to the FOPO share price. The company closed at $4.28 on Aug. 8, a 13% decrease from the Aug. 6 closing price. The debt offering is jointly led by Goldman, Sachs and Cowen; co-managers are Citigroup, Credit Suisse Group and Morgan Stanley. Exelixis will put the proceeds toward its extensive pipeline of oncology candidates, many of which are partnered with big pharma including GlaxoSmithKline, Sanofi, Bristol and Roche. In particular it needs the cash to advance its lead candidate cabozantinib (formerly XL184) – a dual inhibitor of MET and VEGF pathways – in Phase III for medullary thyroid cancer, and also in multiple clinical trials for other cancers including castration-resistant prostate, lung and ovarian. In 2008, BMS licensed exclusive worldwide rights to ‘184, paying a hefty $195 million upfront, but in 2010 returned those rights to Exelixis, which went on to develop the candidate on its own. In 2011, cabozantinib gained orphan status in the medullary and other thyroid cancer indications and FDA just granted a priority review, with a decision expected by late November. If accepted, this would be Exelixis’ first approval. – Maureen Riordan

Photo credit: Wikimedia Commons

DOTW Is Enlightened In The New Way Of Doing Deals

Enlight Biosciences announced on August 2 that KNODE had entered into a “strategic partnership with AstraZeneca PLC and other industry and academic partners.” Now what you first need to understand about this is that KNODE is not a line of furniture from IKEA (that bin you're looking for is KNODD). Nor are Enlight’s other portfolio companies – Entrega  or Endra.

Rather, KNODE is a company incubated by Enlight and recently emerged from stealth mode; and it is also the name of KNODE’s soon-to-launch web-hosted platform for connecting R&D workers with the information sources and expert individuals needed to form teams and to advance their research. According to the KNODE website, it’s a tool for convening experts in collaborations or projects, for identifying tech licensing collaborators, and for accessing up-to-date information to optimize decision making. According to Baruch Harris, Enlight’s chief business officer, KNODE is also a professional network consisting of R&D scientists – a network turbocharged by KNODE’s proprietary semantic and topic extraction algorithms. Its tagline is “It’s not who you know, it’s who you should know.”

Enlight is a company created by PureTech Ventures in 2008 to address the dearth in financing of early stage technology ideas. Enlight’s members, senior R&D managers at big pharma and big biotech, share challenges, expertise and experiences with the goals of (1) identifying unmet needs in R&D and (2) sourcing solutions. Enlight facilitates the process, and when a potential technology is spotted, proposes to its members that they launch a company to commercialize it. As such, unlike an advisory firm that brings investment grade ideas to its clients, Enlight flips the process, so that its pharma members – the ultimate end users – specify their needs and Enlight tailors a solution.

It’s a novel take on pre-competitive collaboration, but with a commercial twist. The companies that Enlight mints are pushed out into the market place to sell their wares to all comers. Enlight members can chose to invest in the portfolio companies and to partake in the potential upside. Take KNODE for example: AstraZeneca, an Enlight member, invested in the idea and is apparently involved enough to partner with other (unnamed) Enlight members and academic institutions to harvest all their expert knowledge and contacts and so develop the IT platform to the point where it can be launched.

Harris says the platform, currently in “private beta,” will be launched late in 2012. He spoke of a “freemium” pricing model. “Our plan is to make the basic functionality broadly available later this year. But there’s also an enterprise price model, for example, for big pharma companies, where they can have some customization built in. Also, they would give KNODE access to their own internal, proprietary information that probably wouldn’t be available to the outside world. And then, for the version that is available to the outside world, there would be value-added tools layered on top that you would have to pay for.” The enterprise value-added version is planned for an early 2013 launch.

We asked Harris if Enlight had plans to crowdsource the information – about what life science researchers are working on and thinking about – that resides in KNODE, and to use it internally or even to sell it.  "We will be crowdsourcing, not private data from our pharmas, but - on an opt-in basis - people claiming their profiles, editing info, and chiming in on the expertise of their peers and colleagues," he said.

He also said that “capturing the information of our strategic partners is not the first priority for us and respecting privacy and private information is paramount.” Harris adds that KNODE is quite useful for “identifying emerging areas of expertise that people are starting to think are relevant” and that “we’re interested in building profiles and following user behavior, but mainly with the goal of improving the product.”

If the deal aspect in all this seems elusive, here’s how it works: investing members in Enlight’s latest company, KNODE, are collaborating with KNODE to develop and launch the newco’s expert network platform (also called KNODE). Basically, the investors are “collaborating” with their investment.

What’s the payoff? KNODE will sell its platform to all comers. Enlight makes money (it has an equity interest in the newco), KNODE and its investors (Enlight members) make money, and surely PureTech dips its beak along the way.

Ka-ching. It’s the new way of doing deals, brought to you by...

Adimab/Mersana: Two leaders in the antibody drug discovery space have teamed up to build and sell an integrated antibody-drug conjugate (ADC) platform. Antibody discovery firm Admiab and ADC developer Mersana Therapeutics announced a partnership Aug. 1 to offer pharmaceutical manufacturers access to Adimab’s antibodies optimized for use in ADCs made with Mersana’s Fleximer polymer and customizable linkers. Adimab is one of the industry’s leading antibody discovery companies, with a fleet of partners including Eli Lilly & Co., Merck & Co., Pfizer and Genentech. Meanwhile, Mersana’s Fleximer is a novel, biodegradable and bio-inert polymer that can be linked to small or large molecules to enhance their pharmacokinetic and safety profiles. Using Fleximer, Mersana says it can develop ADCs that have advantages over existing ADCs like Seattle Genetics Adcetris and Roche’s trastuzumab-DM1. Mersana announced a $27 million recapitalization July 31, led by new investor NEA, joined by new investor Pfizer, and with participation from existing investors Fidelity Biosciences, ProQuest Investments, Rho Ventures and Harris and Harris Group. NEA's David Mott is the company's new chairman. -- Jessica Merrill

Merck Serono/Prexton: Surprise, Prexton's not a thoroughly modern name your neighbor gave to his newborn son. Actually it might be. But it's also the name given to Merck Serono's latest offspring, the Parkinson's disease-focused spin-out announced July 30. (Go on, send them a Pottery Barn Kids monogrammed seat.) Prexton emerges as the first entity from Merck KGAA's ongoing restructuring with a €2.1 million seed investment from Merck Serono’s Entrepreneur Partnership Program (EPP) and a remit to discover and develop drugs that target the metabotropic glutamate receptors mGluR3 and mGluR4. Prexton will work with preclinical compounds discovered at Merck Serono, says founder and CEO Francois Conquet, who estimated the company will start out about 18 months away from entering clinical development. Prexton hasn't had to go far to find shelter; it's currently setting up shop in the Geneva-based incubator Eclosion, which coincidentally shares an address with another mGluR specialist, Addex Pharmaceuticals (which Conquet co-founded a decade ago and which, it seems to us, would have been a logical home for those mGluR assets). Expect a Series A from the new biotech late next year, says Conquet. -- Joseph Haas & Chris Morrison

Idenix/Novartis: Idenix Pharmaceuticals and Novartis, after nearly a ten year relationship, have all but cut ties. Idenix management announced the changes to the agreement with Novartis on July 31, hosting a conference call with investors to clarify the situation. Under the new terms of the partnership, Novartis has given up all rights to license or develop any of the current or future development-stage drugs in the Idenix pipeline, including three hepatitis C (HCV) drugs currently being tested. Previously, Novartis had the first right to refusal to any of the drugs in the Idenix pipeline that had shown clear safety and efficacy in proof-of-concept trials. According to the original agreement, which was established in 2003, Novartis gained a 54% stake in Idenix for $255 million in cash, as well as the rights to the hepatitis B treatment Tyzeka/Sebivo (telbivudine), and two seats on the Idenix board of directors. Under the restructured agreement, Novartis will relinquish its corporate governance rights and reduce its board seats to just one as long as it retains at least a 15% ownership stake. Idenix will no longer receive any more royalty or milestone payments related to Tyzeka/Sebivo. Idenix also will be obligated to pay Novartis a royalty on any HCV drugs that are not used in combination with a Novartis drug. The restructured partnering agreement gives Idenix more flexibility with partnering discussions for its hepatitis C compounds, but may make other potential partners wary that Novartis didn’t jump on the opportunity. After a blow-up of Bristol-Myers nuc development program due to safety issues, Idenix may appear more attractive to potential partners.-- Lisa LaMotta

image from flickr user John K via creative commons