Alliance Deal of the Year Nominee: AZ/Amgen

It's time for the IN VIVO Blog's Fifth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

2012 featured an uptick in pharma-pharma peer dealmaking, a trend we expect to continue. And though much of that comprised pre-competitive teaming up (see Transcelerate, for example), we continue to see peer alliances designed to avoid duplication of R&D infrastructure and reduce development risk. These are important deals – industry’s largest companies’ tacit admissions that they can’t, and shouldn’t, do everything on their own.

And so when AstraZeneca said it was partnering with Amgen to co-develop and commercialize five of Amgen’s clinical-stage monoclonal antibodies, notably including brodalumab, which is entering Phase III in psoriasis and in Phase II in asthma and psoriatic arthritis, we thought: there’s a deal worthy of a Roger.

The April 2 deal, under which AstraZeneca paid $50 million upfront, bolsters pipeline of its biologics unit MedImmune, particularly in inflammation and respiratory indications. This is no small consideration, as AstraZeneca’s $15.6 billion buyout of MedImmune in 2007 has produced disappointing results so far.

Meanwhile, Amgen gains some needed financial flexibility under the arrangement, as it needed to reduce an R&D budget that exceeded 20% of sales in 2011. AstraZeneca will cover 65% of development costs for the five antibodies – the other four are in Phase I for indications such as Crohn’s disease, ulcerative colitis, systemic lupus erythematosus and asthma – during the years 2012-2014, with the two companies splitting development costs thereafter.

“We have what I consider an exceptionally rich pipeline with a lot of potential medicines we would like to bring forward and find their true benefit. And that costs a lot of money,” Amgen Senior VP of R&D Joe Miletich told “The Pink Sheet” DAILY at the time of the deal. “We have some candidates that are in the clinic already and some that are preclinical that we’d still like to bring forward. And having some financial relief from [the cost of] advancing these five by ourselves will enable us to apply some of those resources, both personnel and expense, to other parts of the pipeline that I think are also very attractive.”

The deal is expected to increase MedImmune’s R&D budget by about $250 million annually in 2013 and 2014, but gives the unit a near-term candidate for regulatory approval and launch, which it lacked before the transaction. MedImmune, which derives 40%-50% of its pipeline from external deal-making, anticipates 32% growth over the next decade in the use of biologic therapeutics in psoriasis.

In addition to brodalumab, MedImmune and Amgen will co-develop:

• AMG 139, a MAB that neutralizes IL-23 interaction with its receptor while not affecting IL-12. It is in Phase I in Crohn’s disease and is thought to offer potential in psoriasis too.
• AMG 181, an antibody to alpha4/beta7 that blocks binding to MAdCAM-1, in Phase Ib trials in Crohn’s and ulcerative colitis.
• AMG 557, which binds to B7 related protein (B7RP-1) and is in Phase Ib in SLE.
• AMG 157, which blocks the interaction of thymic stromal lymphopoietin (TSLP) with its receptor and is being investigated in Phase Ib in asthma.

Amgen will book sales of each antibody if/when it reaches market and will earn a low single-digit royalty on sales of brodalumab and mid-single-digit royalty on each of the other candidates. Following the payout of royalties, the two companies will split profits from each product equally.

MedImmune will lead the development and commercialization of ‘139, ‘157 and ‘181, while Amgen will remain in charge of brodalumab and ‘557. For brodalumab, Amgen will handle marketing for dermatology indications in the U.S. and Canada and for rheumatology indications in the U.S., Canada and Europe.

Kyowa Hakko Kirin holds Asian rights to the antibody under a prior deal. AstraZeneca will promote brodalumab in respiratory indications globally and in dermatology indications in markets not controlled by Amgen or its partners. The commercial rights for the other four antibodies will be determined later – Takeda holds Japanese rights to ‘557.

--Joseph Haas