Friday, February 24, 2012

Financings of the Fortnight Thinks You're Hot.... Or Not

A mother-in-law who's also a day trader sounds like the start of a "walks into a bar" joke. But trust us, such people exist. And they sometimes ask their sons-in-law for biotech trading advice, at which point their sons-in-law laugh out loud and say, "Here's the best biotech trading advice: Don't." 

Obviously a lot of people do, and (we assume) most of them understand just how risky the sector is. There are all kinds of bets to place on all kinds of companies and assets and perhaps, just perhaps, those with appetite for risk are starting to peek out from under the tarp (and we're assuming they don't duck again for cover in fear of the Gilead Sciences Hepatitis C results spreading end-of-bubble contagion over the sector). We say so because this past fortnight brought a fascinating group of financings in areas that, we can say charitably, are about as hot as a first date with Rick Santorum. 

For example, Alnylam Pharmaceuticals, once flying high on the therapeutic promise of RNA interference -- a discovery that won the Nobel Prize six years ago -- has seen much of the interest in the platform dry up and legal headaches crop up. But the firm, while cutting a third of its staff, is pressing on with its own clinical program for transthyretin-mediated amyloidosis, one of only a few RNAi-based drugs in the clinic, and last week it raised $87 million through a public offering of 8.6 million shares at $10.75 a piece. 

Another notable and counter-intuitive bet was the $100 million private placement issued by Vernalis, bought in large part by a major shareholder. Vernalis is a long-in-the-tooth UK biotech that slowly, steadily has built itself back up from a near-bankruptcy late last decade. Resilient, yes. En vogue? Mais non. As we explain below, most of the cash is being plowed into the firm's new guise as a cold-and-cough-drug marketer, a sharp and, to be frank, rather weird right turn for the long-time discovery firm. 

Staying across the pond, we note the French diabetes firm Adocia raised €25 million ($33 million) in the first European biopharma IPO of the year -- and the first one in nine months. In other words, paying newly public companies for their equity is something European public investors simply don't do these days, so when it happens, please take note. (It's also worth a mention that French orthopedic imaging firm EOS imaging went public on the NYSE Euronext February 15 and raised €38 million.)
But the most interesting deal for us this past fortnight is in Alzheimer's disease, where a lot of smart people are wondering how to treat a malady that, by the time symptoms start to appear, might be too late to treat. With huge clinical programs burning hundreds of millions of dollars to little effect, it's not a great time for start-ups to convince investors to back their early-stage work, especially when they've already had significant delays in getting to the clinic.

But Satori Pharmaceuticals said this week that three existing investors would put up $15 million in convertible debt as a bridge to the clinic -- and ideally to an exit. It could be the start-up's last chance to make a big impression in a field that, to some extent, is in retrenchment mode, with a growing realization of how vast the problem is, and even the federal government pondering how to step in. In the grand scheme of things, $15 million is chicken feed weighed against the chance of Satori bucking current conventional wisdom and having a disease-modifying effect with a drug that keeps nasty plaques from forming in the brain.

See our roundup below for a more detailed account, and let's all give a hip-hip-hooray for those with an appetite for risk, as long as they don't give our mothers-in-law any bad advice. Meanwhile, you can never go wrong hanging on every word of...

Satori Pharmaceuticals: The preclinical Alzheimer's startup said February 23 that its current venture backers have extended the firm $15 million in convertible debt to help push its lead compound into the clinic, with Phase I now slated to start in early 2013. When the firm sewed up its previous financing, a $22 million Series B round in 2008, officials were optimistic they could reach clinical studies by 2011, but the horizon retreated with the need to rework the unnamed compound, a gamma secretase modulator, into a once-a-day dosing formulation, executives say. The new cash is not equity, although officials said they contemplated raising a Series C. Instead, as the company races to file an IND, the debt option allowed faster turnaround because there was no need to negotiate a new company valuation or bring in new investors. The debt will convert to Series C shares if the company raises a new round, but Satori prefers that the $15 million bridge loan would attract Big Pharma partners -- and ultimately an acquirer -- by proving its lead drug's hypothesis in two Phase I trials. The first trial aims to show safety, without the side effects that have dogged gamma secretase inhibitors. Satori says its drug is more "selective," in that it allows the enzyme gamma secretase to do its beneficial work in some molecular pathways, while preventing it from creating the toxic amyloid beta-42 fragment that aggregates into the tell-tale plaques that foul the brains of Alzheimer's patients. In the second Phase I trial,  Satori aims to show by measuring cerebrospinal fluid (via spinal taps) that the drug indeed suppresses production of Aβ-42 without suppressing production of other amyloid beta fragments that don't appear to be harmful. Existing investors InterWest Partners, New Enterprise Associates, and Prospect Venture Partners bought the debt financing. Other Satori investors including PureTech Ventures could buy an additional $4.2 million of the debt as part of their pro-rata rights, but have not yet done so, according to Satori officials. -- Alex Lash

Ceptaris Therapeutics: Wait a second. Is venture debt hot? After changing its name from Yaupon Therapeutics to Ceptaris Therapeutics in January, Ceptaris has raised $15 million in a venture debt financing to help fund its transition from a clinical-stage company to one that anticipates commercializing its first product later this year. The product, formerly known as Clearazide, a topical gel formulation of the generic cytotoxin mechlorethamine, has a PDUFA date of May 27 for an indication of early-stage cutaneous T-cell lymphoma (CTCL). The company received $7.5 million at closing of the debt financing February 21, and is eligible to draw down the other $7.5 million upon FDA approval of the drug. The debt financing was backed by Silicon Valley Bank and Oxford Finance. Ceptaris, founded in 2002, had raised more than $33 million over four rounds of financing, most recently bringing in a $14.4 million Series D last August. Chairman and CEO Stephen Tullman explained that the non-convertible debt financing offered Ceptaris several advantages over another VC round, not the least of which was preventing further dilution of the company’s stock. "At this time venture debt offers us the lowest cost of capital,” he said. -- Joseph Haas

Vernalis: British biotech Vernalis joined the follow-on fiesta of the fortnight with a $104 million private placement of its stock to fuel its transformation into a marketer of prescription cold and cough medicines. The cash helps pay for a new development deal struck with privately held Tris Pharma, which has spent more than seven years developing 12-hour extended release liquid formulations. Vernalis will pay development milestones on up to six new cold drugs that Tris funds, develops and submits for approval to the FDA. The active ingredients are already marketed in the US, so the products could be ready for filing in 12 to 24 months, Vernalis CEO Ian Garland said in a February 10 conference call. Vernalis has exclusive marketing rights to the products, and their core patents on extended-release liquids expires in 2029, Garland said. It's a remarkable pivot and the latest incarnation for Vernalis, with roots going back two decades, although not a complete surprise that it would aim for a nearer-term product to in-license. In 2010 Garland said Vernalis was on the hunt for something in neurology or oncology. Also, Garland has experience marketing cough and cold medicine when he ran the US business of Celltech (now UCB Pharma) in the 1990s. That Vernalis could raise $100 million is also remarkable, considering it was nearly bankrupted by the US rejection of its migraine drug Frova (frovatriptan) in the expanded indication of menstrual migraine. It sold US rights and restructured in 2008, and soon after Garland took over with the plan to rebuild through licensing deals backed by its discovery platform, such as this 2009 tie-up with GlaxoSmithKline. The recent placement totals 342 million shares at £0.20 a piece, a 7% premium. It was sold to existing backers, including Invesco Asset Management, and new buyers. Invesco already owns 42.9% of Vernalis; its purchase would have triggered an obligation to buy Vernalis outright, but Vernalis is waiving the condition to let the sale go through. Shareholders must approve the sale February 28. -- John Davis

Exelixis: As Exelixis continues to push top candidate cabozantinib through a Phase III trial for medullary thyroid cancer, the oncology drug developer has again turned to the public markets for financing. Exelixis netted $65 million in its latest follow-on offering, selling 11 million shares to the public at $5.50 apiece, plus an additional 1.65 million to its underwriters. Goldman Sachs was the sole book-running manager in the offering, while Cowen & Co. was co-manager. Exelixis said earlier this month that it aimed to sell 10 million shares, but it raised its target upon pricing the offering Feb. 10. In a Feb. 22 regulatory filing, the company said it had $284 million in cash, cash equivalents, marketable securities and long-term investments as of Dec. 31. With anticipated payments from partners and the newly-raised cash, Exelixis said it has enough capital to cover its next 12 months’ worth of expenses. The company expects to pursue a more lucrative prostate cancer indication for cabozantinib if the drug is approved for MTC. Exelixis last raised money in March 2011, when it netted $180 million by selling shares at $11 apiece. The company raised about $285 million in four other secondary offerings between 2003 and 2007. -- Paul Bonanos

Photo courtesy of XcBiker via a Creative Commons license. Soooooo hot.

Friday, February 17, 2012

Deals of the Week Takes Out The Last One Standing

Fifteen months ago, three well-funded startups were racing alongside a couple of more established companies to develop the first approved drug for idiopathic pulmonary fibrosis. Two, Arresto Biosciences and Amira Pharmaceuticals, were taken out in rich deals. That left Stromedix as the last one standing.

Biogen Idec knocked down the final pin in a Feb. 14 deal to acquire Stromedix, bringing the last of the three promising drugs into the hands of a publicly traded behemoth. Gilead acquired the Arresto asset for $225 million plus unspecified milestone payments in a December 2010 deal; Bristol-Myers Squibb paid $325 million for Amira in a relatively complex transaction last summer.

While the deal’s upfront payment of $75 million was modest compared to the others, the contingency payments actually exceed the Amira deal’s. If Stromedix’s drugs meet all the milestones built into the arrangement, its shareholders would receive a total of $562.5 million; the Amira deal was worth $475 million including milestones. Both Amira and Stromedix were planning to begin Phase II trials on their IPF drugs at the time of their acquisitions, while Arresto’s was in Phase I.

For Biogen, the acquisition brings back a compound the company licensed to Stromedix in 2007. Stromedix's primary asset was the antibody STX-100, a selective inhibitor of the TGF-beta pathway which Biogen originated but eventually de-prioritized. Former Biogen executive vice president of research Michael Gilman left the company in 2005 to join Atlas Venture, started Stromedix and acquired STX-100 with Atlas’ backing. Now, Biogen has them both back.

Effectively, Biogen offloaded the risk in developing STX-100 through Phase I to a VC syndicate that included Atlas, Bessemer Venture Partners, Red Abbey Venture Partners, New Leaf Venture Partners and Frazier Healthcare Ventures. Those firms stand to receive a healthy return after pouring $29.4 million into the company; the up-front payment alone represents a step-up valuation of more than 2.5 times their initial investment.

What's more, this is a validation of what one might call an 'if you love it, set it free' strategy that large pharmaceutical companies are increasingly pursuing with shelved assets. Biogen had no claw-back on the Stromedix crown jewel, a more palatable opportunity for any biotech's venture investors, and was still able to keep tabs on the compound via a 5-6% stake in Stromedix and a board-observer position.

Gilman describes the acquisition as "bittersweet,' noting that "getting acquired was always the end game," and of all places Biogen is a great place to land. He and the rest of the Stromedix team will function independently as a fibrosis project team within the bigger biotech, helping to build a broader pipeline of fibrosis drugs there.

As we settle into President’s Day weekend in the U.S., we at Deals of the Week hope you all get to enjoy a bit of leisure. Maybe you’ll even hit the lanes like Nixon did. Enjoy your beer frame with…

Valeant/Eyetech: Rebuffed last fall in its effort to buy ISTA Pharmaceuticals, acquisition-hungry Valeant Pharmaceuticals International beefed up its ophthalmics holdings Feb. 13 by taking out privately held Eyetech for an undisclosed amount up-front plus milestone payments. The deal gives Valeant U.S. rights to Eyetech’s Macugen (pegaptanib), which in 2004 became the first inhibitor of vascular endothelial growth factor to treat the “wet” form of age-related macular degeneration by slowing angiogenesis around the retina. The injectable drug has since lost ground to Genentech’s Lucentis (ranibizumab), as well as off-label prescriptions of Genentech’s Avastin (bevacizumab). Pfizer markets Macugen outside the U.S. Palm Beach Gardens, Fla.-based Eyetech has been privately owned since a 2008 management buyout; it was publicly traded until OSI Pharmaceuticals acquired it in 2005. Valeant acquired ophthalmics products Lacrisert (hydroxyproyl cellulose) for dry eye and the Ocudose formulation of glaucoma treatment Timoptic (timolol maleate) when it bought Aton Pharma for $318 million in 2010. Even if all the milestones in the Eyetech acquisition are reached, the deal’s value will be less than twice Eyetech’s 2011 sales; Valeant  vice president of investor relations Laurie Little said the deal is “small in the scheme of things” for the Canadian specialty pharma. – P.B.

NYGC/Illumina/Feinstein Institute: The recently opened New York Genome Center announced Feb. 16 that it has entered into a large-scale whole genome sequencing project with the Feinstein Institute for Medical Research, part of the North Shore-LIJ Health System, which is one of the founding members of the NYGC. The project, which is set to begin in March and estimated to last about four years, will sequence the genomes of 1,000 Alzheimer’s disease patients in hopes of finding a clear genetic link to the disease. NYGC will begin with samples from 130 patients this year. The project will leverage the collaboration already established between Illumina and the NYGC, with Illumina supplying the sequencing equipment. The data that results from the project will be made available to the public a year after the sequencing is completed. The NYGC, led by attorney Nancy Kelley, is an effort that comprises 11 of the city’s academic medical centers, as well as two industry partners – Roche and Illumina. Backed by more than $125 million in fees from sponsors, the NYGC is one of New York’s efforts to compete with the strong biopharma initiatives going on elsewhere in the country, particularly San Francisco and Boston. – Lisa LaMotta
Merck/Supera Farma: As it develops into one of the most fertile emerging markets for biopharmaceutical products, Merck is establishing a joint venture in Brazil with two local companies – Cristalia Labs and Eurofarma Laboratorios – to market roughly 30 drugs in that country, both innovative products and branded generics across a range of therapeutic areas. Merck announced Feb. 15 that it will team up in Brazil with Supera Farma Laboratorios, jointly owned by Cristalia, which specializes in psychiatry, anesthesia and pain relief, and Eurofarma, which boasts a broader therapeutic focus and the largest medical sales force in Brazil. Merck will own 51% of the joint venture, with the two Brazilian firms controlling the other 49%. The new entity will have its own dedicated sales force, while the parent firms’ infrastructures will be leveraged for tasks such as training. Merck’s investment in Brazil is just the latest in a string of such plays by other biopharmaceutical companies. Last April, Amgen bought out Brazil’s Bergamo for $215 million, while Sanofi paid about $662 million in 2009 to acquire Medley Pharmaceuticals and Pfizer spent $240 million upfront in 2010 to obtain 40% of Laboratorio Teuto Brasileiro.—Joseph Haas

Merck/Zhifei: Merck struck a second deal in an emerging market when it expanded an existing partnership with Chinese vaccine developer Chongqing Zhifei Biological Products. The two companies will jointly seek approval of vaccines for rotavirus and respiratory syncytial virus in China, building on an April 2011 agreement under which Zhifei markets Merck’s measles-mumps-rubella combo vaccine and a 23-valent pneumococcal prophylaxis in China. Merck’s RotaTeq for rotavirus is currently approved and available in 87 countries, and has been sold in the U.S. since 2006, but approval in China will require the completion of a Phase III trial. Only one other vaccine has been approved for rotavirus in the country, a single-valent therapy marketed by Sinopharm subsidiary Lanzhou Institute of Biological Products; there is no approved vaccine for RSV in China. Zhifei is now the sole distributor of Merck vaccines in China; the two companies are said to be aiming to further expand their partnership. – P.B.

Invaluable reporting on the Biogen/Stromedix deal was provided by Joe Haas. Image from Flickr user Andrew Ressa, reproduced under Creative Commons license.

Thursday, February 16, 2012

First-in-human Implantable Drug Delivery Data Airing at AAAS

As this post goes live, a 2pm press briefing is starting at the AAAS Annual Meeting in Vancouver to discuss data from Waltham, MA-based microCHIPS’ inaugural human clinical study of its implantable drug delivery chip, to be published in Science Translational Medicine. The briefing is expected to include company president & COO Robert Farra live on site, as well as founding inventors Michael Cima and Robert Langer of MIT dialing in. Given the venue and the potentially disruptive nature of the technology, we would not be surprised if it receives wide popular coverage.

The thumbnail-sized chip can be implanted and removed in a doctor’s office using local anesthetic. In the trial, it delivered the parathyroid hormone (PTH) drug Forteo daily for 19 days (20 doses), starting at day 57 post-implant. (The lag was to determine that the formation of fibrous tissue around the implant did not interfere with pharmacokintetics – apparently, it did not.)

The device functioned in seven of the eight patients, delivering a total of 132 doses. Although there were some mechanical glitches, the study validated several critical design features including hermetic sealing of each drug reservoir at or near room temperature, to prevent drug degradation, and on-command delivery. Importantly, according to Farra, the patients “found it acceptable:” they could not feel the device and were willing to repeat the procedure for another round of dosing.

An accompanying editorial to the paper, titled "Re-Engineering Device Translational Timelines," dishearteningly calls the road to commercialization of a novel therapeutic implant “a long, meandering pathway to clinical introduction,” fraught with warning signs of “many hairpin curves ahead.” In an interview, Farra sidestepped any discussion of that analogy: “There have been challenges,” he says, but “this technology is paradigm shifting…I think microCHIPS actually did this relatively quickly given the capability of this microchip,” and the need for safety and reliability for use in humans.

Farra may balk at the characterization of expectation versus reality with respect to his company’s timelines. But microCHIPS was founded in 1999 and has been on the popular science radar screen for the past 4-5 years. Literally; in 2008, co-founder and then CEO John Santini was named one of Popular Science’s “Annual Brilliant 10.” Santini later departed, as has successor Ajit Gill. Farra, who joined as head of R&D in 2007, became president in September 2011. Turnover in top management is not unusual for a start-up, but the editorialist’s general point about expectations is valid, irrespective of whether those expectations are being ginned up internally (which we are not saying is the case here) or by the media.

Successful adoption of this implant will probably also require medical infrastructure changes to take effect, such as real-time monitoring capability. The microCHIPS device has built-in diagnostics that can tell whether a dose has been delivered correctly, but it’s done retrospectively, after that information has been uploaded by a physician or caregiver. Farra envisions that in the future, the device will be linked to a cellular network so the information would be flowing to a trending database system that would automatically flag a problem in minutes or less. How quickly such an infrastructure is put in place remains to be seen.

That said, the trial results are heartening. “We needed this milestone to ensure we are spending our money wisely in developing this product,” says Farra. Having validated the 20-dose chip, the next step is to test a same-sized, higher density chip containing 365 wells, which could handle delivery for 1-2 years depending on the drug. The company has developed continuous glucose sensors and could combine sensing and drug delivery within the same microchip -- for delivering glucagon, for example, if a patient was to start going hypoglycemic (insulin delivery is not on the table as dosing is just too high to accommodate in a microchip).

The size of the microchip and its unique mechanism for releasing drug from a preprogrammed set of wells may distinguish it from other diabetes-related drug delivery technologies, such as Intarcia Therapeutics' mini-pump for delivering a years' worth of GLP-1 therapy, soon to enter Phase III testing.

Generally, the drugs best suited for use in the microchip are potent injectibles – proteins, peptides, or nucleic acids that can’t be taken orally and are delivered at low doses.

image via microCHIPS

Wednesday, February 15, 2012

Pfizer's Dolsten Sees a Bright Future for Xalkori and Pfizer Oncology

During a fireside chat at the BIOCEO meeting in New York this week, Pfizer’s president of worldwide R&D Mikael Dolsten ranged over the company’s R&D spend (down!), FDA filings (up!), and externalization initiatives (off the scale). He also offered his view on the more transformative products in Pfizer’s late-stage lineup: bullish on tofacitinib and Prevnar 13, inscrutable on bapineuzumab.

But his comments on Pfizer’s budding oncology franchise caught this blogger’s ear. Dolsten rightly highlighted Pfizer oncology’s strengths in tyrosine kinase biology, mentioning the recent launches of Xalkori for advanced NSCLC and Inlyta for advanced renal cell carcinoma, and also bragged about Pfizer’s emergence as a “significant player” in antibody conjugates.

When I pointed out that Xalkori, although a stunning development story, was in all likelihood a modest commercial story, the R&D head took exception. He noted its remaining commercial potential in inhibiting the ALK translocation, with several additional indications currently in Phase I, and Pfizer’s ongoing exploration of Xalkori’s other targets, including c-MET and the recently disclosed ROS1. But after years of false starts and frenetic deal-making, would all this and more be enough to help Pfizer turn the corner with its oncology business?

Xalkori -- approved in just under five months from submission, and only four years from target identification -- represented the first time that a targeted cancer therapeutic was approved by FDA based on Phase I data. The crizotinib team in La Jolla had spent about 6 years investigating the molecule’s activity against gastric tumors by inhibiting its c-MET target. A chance publication in Nature describing the role of the ALK fusion gene in NSCLC made them rethink the target and the population, put the compound on a new clinical path, and the rest is history.

If Xalkori is a window into drug development innovation (read our In Vivo feature on that subject, published in the next issue of the magazine), it remains to be seen whether the process can be templated and repeated in project after project. Pfizer’s restructuring into fiscally responsible, therapeutically aligned business units 4 years ago played an important role in the Xalkori development story. Restructurings are disruptive, but controllable. Likewise the size of Pfizer’s therapeutic footprint and the right-sizing of its portfolio for optimum risk and return. But the chance publication in Nature at around the time the c-MET theory was running out of gas – uncontrollable. And the tight, totally idiosyncratic interaction between La Jolla’s translational group and the clinical research group – basically, the chemistry between scientists – very hard to control.

Dolsten said in an exclusive interview following the BIOCEO chat that the move into BUs incentivized scientists “by pulling them into the business dimension of R&D” -- e.g., resource tradeoffs, financial responsibility, speed-to-market pressures – “in addition to the science.” He also warmed to idea of the human element in drug R&D: “These factors are often ignored. For instance, having the right talent. Passion in scientists -- this is not a 9-5 job, they're here because they feel part of a mission to understand oncogene science as it emerges. And part of is, yes, you need to be adaptive to change. We try to build that into our culture, an ownership culture, in which, as new science breaks, we embrace the opportunity to rapidly adapt to new knowledge.”

Dolsten’s implication was that the human element – the passion, adaptability, and close interaction – can be controlled. Maybe. Note that he didn’t go near the chance element – a fortuitous publication, a serendipitous lab finding. But let’s see if Pfizer oncology can repeat the speed and sure-footedness of Xalkori’s approval. Not just getting the next round of candidates approved and launched, but assuring their performance in the market, their reception by payers, and their expansion into other indications and settings. That’ll make a believer out of me. -- Michael Goodman

Friday, February 10, 2012

DOTW Hears Pharma Leaders On Post-Patent Cliff Deal-Making

It’s been a lean week in the deal space, but that doesn’t mean Big Pharma isn’t talking deal strategy. As 2011 earnings report cards come in and 2012 gets off the ground,  pharma CEOs – Andrew Witty of GlaxoSmithKline Inc. and Christopher Viehbacher of Sanofi come to mind – are both expounding on the same issue: they’ve right-sized their business for a post-patent cliff world.

Both Viehbacher and Witty have sung the tune about right-sizing their businesses before – but now the plans these men have been making for the last three years are finally coming to fruition. As Viehbacher aptly put it during Sanofi’s fourth quarter call on Feb. 8: “2012, I’ve said on numerous occasions, is a year that I’ve had circled in red in my diary for three years.”

And a large part of that right sizing has been due not only to cost-cutting but to M&A and aggressive adoption of externalization as a core part of R&D, with results beginning to bear out in terms of pipelines and revenues, at least.  Having embarked on the biggest biopharma M&A transaction of 2011 – its $20+ billion acquisition of Genzyme -- along with several lesser, but still substantial purchases, Sanofi is now looking for focus – and what it calls “new models of externalization.”

For the French pharma this is the big year of revenues lost to patent expirations. “Last year we tackled the ‘R,’ and we’ve embarked upon an ambitious program, not only of restructuring, but when you look at things like the Warp Drive deal that we did in January, although a small deal in itself, is very much emblematic of where we see research and development going,” Viehbacher told analysts.

That deal, in which Sanofi received a non-exclusive option to acquire the biotech is emblematic of the pharma’s current thinking and Viehbacher and president of global R&D Elias Zerhouni highlighted it in their talks with analysts. It involves a start up that uses computational biology, synthetic biology and intelligent screening to read genomes of existing micro-organisms with the ultimate goal of producing new drugs, all while capitalizing on Sanofi’s internal expertise in building libraries. It’s structured like a call/put option, in that in addition to Sanofi's option, Warp Drive Bio’s shareholders can force a sale under pre-determined terms if certain milestones are reached. In short, said Zerhouni, it fits with Sanofi’s goal of “providing value” to an external innovator, to get a better, more precise understanding of the molecule.

But of course one of the most infamous deals of the decade came to a quiet conclusion, when court papers filed on Feb. 8 showed that Canadian generics company Apotex paid a $445 million settlement fee to Sanofi and Bristol-Myers Squibb over the former’s 2006 at-risk launch of the Big Pharma's anti thrombolytic Plavix.

Witty was quieter on the company’s business development plans going forward. But he issued a note of caution: In response to an analyst’s question, he pointed out that yes, more of the company’s R&D programs are partnered, which means they run the risk of lower margins. “There’s no doubt that the partnered programs obviously reduce the margin going forwards. It’s obviously how we’re going to pay for that R&D that was done on our behalf, or the risk that was taken on our behalf,” he said. “There’s a clear cost of goods sold hit that is going to come in as the portfolio mix changes.” The question, he asked, is whether manufacturing can keep driving enough savings to neutralize the impact.

But the European pharmas aren’t the only ones that issued 2012 marching orders on deal-making strategies. Last month, Pfizer’s top executives also talked about more strategic, focused deals going forward. Pfizer’s head of business development, Kristin Peck, talked with “The Pink Sheet” DAILY in January about Pfizer’s interest in risk-sharing deals with partners, be they biotechs or emerging markets acquisitions, and getting the proper balance between upfront payments and the staggered payouts. “If your asset is strategically important to you and you can be creative around a deal structure, it can be a win-win,” she said.

Plenty of companies are making the tough choices about how to share risks with partners while getting access to technologies that could be fruitful down the line - the new reality is that companies are making bolt-on acquisitions to add diversification, while making deals in technology platforms that share the risk through downstream milestone payments, options and earn outs. -- Lisa Lamotta 

Siemens/Viiv and Tocagen: Siemens Healthcare has joined the ranks of companies offering its services to pharma to develop companion diagnostics, with the announcement this week of deals with Viiv Healthcare (a Pfizer-GSK joint venture pooling their HIV franchises) and gene therapy specialist Tocagen.  The Viiv relationship began a year ago when it approached Siemens to develop a sequence-based assay to predict patient response to the approved HIV drug Selzentry: although there’s already an assay for this (a phenotypic measurement of the drug target, CCR5 co-receptor tropism), Viiv was seeking a more lab friendly test, aiming to increase use of the drug.  Siemens devised a sequence-based (genotypic) tropism test and Viiv has started a Phase III trial which, among other things, randomizes patients for screening with the phenotypic or genotypic test.  With this week’s announcement, the partners have decided to commercialize a genotypic test and seek FDA clearance for it.  Siemens emphasizes the breadth of the technologies it has to offer pharma including nucleic acid-based, immunoassay, and in vivo imaging.  The latter may come into play in the partnership with Tocagen, which is developing a glioma treatment based on delivering a viral gene selectively to cancer cells in the brain.  The gene, diffused throughout the tumor, can convert the antibiotic flucytosine (the prodrug) into the anti-cancer drug 5-FU.  Developing IT and workflow solutions around molecular assays is critical to the knowledge base Siemens is offering pharma.  It will be key to moving genotyping onto next-generation sequencing platforms and also, as with Tocagen, a core capability for introducing the convergent use of in vivo and in vitro techniques – a long-standing goal of in vivo capital equipment manufacturers like Siemens, GE Healthcare, and Philips. --Mark Ratner

BioLineRx/GenoScience/RFS Pharma: In its second deal in about two weeks, both with France’s GenoScience Pharma, BioLineRx has acquired another preclinical candidate for hepatitis C, this time a Phase I-ready protease inhibitor, which GenoScience co-developed with Georgia biotech RFS Pharma LLC. Announced Feb. 6, the deal will require Israel’s BioLineRx to pay both GenoScience and RFS upfront cash, as well as potential downstream milestones and sales royalties. As with the Jan. 24 deal in which BioLineRx licensed Phase I-ready HCV candidate BL8020, designed to inhibit virally induced autophagy, the specific terms were not disclosed. BioLineRx says its latest acquisition, BL8030, is a potent and selective second-generation protease inhibitor which has shown activity in preclinical study against various genotypes of HCV as well as a strong resistance profile. This should lower the probability that the virus will develop resistance to treatment with ‘8030, the company says. The protease inhibitor also demonstrated a good toxicity profile in preclinical testing, including a clean profile versus human liver enzymes, which reduces the chance of drug/drug interactions. RFS, which co-developed ‘8030 after its discovery at GenoScience, was founded by Emory University professor Raymond Schinazi, also a founder of HCV-focused biotechs Pharmasset and Idenix. Pharmasset was recently bought out for nearly $11 billion by Gilead Sciences on the strength of its lead HCV candidate, GS-7977, while Idenix is thought to be a top M&A target for other companies involved in the HCV space.—Joseph Haas

Cytomedix/Aldagen: Cytomedix, a developer of regenerative therapies for wound care, has closed its acquisition of privately-held Aldagen. The all-stock transaction is valued at $16 million, with the opportunity for Aldagen investors to gain additional stock upon the successful completion. As part of the transaction, certain Aldagen investors purchased $5.0 million of Cytomedix common stock in a private placement concurrent with the closing of this acquisition. Cytomedix issued 135,398 newly designated Cytomedix Series E preferred shares to Aldagen shareholders, giving Aldagen shareholders a 17.3% stake in Cytomedix. Milestone payments totaling up to 20,309,723 shares will be issued to Aldagen shareholders upon the achievement of predetermined clinical milestones associated with an ongoing Aldagen Phase II trial in post-acute ischemic stroke. The costs of the trial will be funded by the $5 million investment made by Aldagen shareholders and $3 million in proceeds from completed warrant exercises by existing Cytomedix shareholders. The acquisition helps Cytomedix fulfill its intentions of becoming a broader regenerative medicine company. – LL 

Prismic/Scarista: Privately held start-up Prismic Pharmaceuticals revealed that it had acquired Scarista Ltd., specifically to obtain the license to a patent portfolio covering the use of omega-3 fatty acids in treating central nervous system disorders. Scarista had previously licensed the patents from Amarin Neuroscience, a division of publicly traded Amarin Corp. of Dublin, Ireland, in a 2010 deal. Founded in 2011, Prismic intends to commercialize drugs for psychiatric and neurodegenerative disorders, although it has yet to advance a drug to the clinic. It’s also looking to forge partnerships with one or more other pharmas to develop CNS drugs, as well as develop dietary products covered by the same patents that conform to the Orphan Drug Act’s medical food classification. To that end, Prismic says it already has technology partnerships in place intended to support non-conventional initiatives that would help market its drugs to certain physicians and other members of the healthcare community. Amarin is currently seeking approval of a late-stage omega-3 drug candidate, AMR101, which would treat high triglycerides in the bloodstream. – Paul Bonanos

Vernalis/Tris Pharma: U.K. biotech Vernalis PLC announced Feb. 10 it was to collaborate with private US drug delivery firm Tris Pharma on developing new long-acting prescription cough/cold preparations for the US market, supported by a just-closed share placing and open offer that raised£65.9 million ($104 million). Vernalis's CEO Ian Garland believes the moves will accelerate the company's evolution into a diversified self-sustaining pharmaceutical company, rather than continuing as a cash-burning biotech. Vernalis will pay a single upfront fee of $5 million and development milestones on up to six new long-acting prescription cough/cold drugs that Tris funds, develops and submits for approval to the FDA. On average Vernalis expects to pay Tris around $13 million for each NDA. On approval, Vernalis will acquire and then commercialize the products in the US, using a sales team that will be set up with the help of the fundraising. Garland has experience in the US marketplace, having run Celltech's (now UCB Pharma SA) US business in the 1990s, when it marketed one of the few long-acting prescription cough/cold preparations, Tussionex. Around 80% of the funds raised by the share placing will be used by Vernalis for the Tris products, including the building of a commercial infrastructure in the US. The remaining 20% will be used for other late-stage in-licensing opportunities, Garland said. The placing has been taken up by both existing investors and a number of new institutional investors.—John Davis

image by tarotastic via flickr under creative commons license

Financings of the Fortnight Looks For the IPO Insiders

We've got windows on the brain this fortnight after seeing Verastem, a wee cancer stem cell company that says its first drug might be ready for clinical trials later this year, convince the public markets to buy its stock. The Cambridge, Mass. firm, which is targeting cancer stem cells that drive aggressive disease such as triple negative breast cancer, raised $63 million starting January 26 by selling 6.3 million shares at the midpoint of its targeted range of $9 to $11 per share. One caveat: Verastem insiders, including Advanced Technology Ventures, Bessemer Venture Partners, CHP, Longwood Fund, and MPM Bioventures, bought nearly $15 million of the offering, leaving the underwriters a little less work to do. (Interesting to note that the bankers received the same commission -- 70 cents a share -- on all shares sold. In some cases, as we'll see soon, underwriters get a smaller commission for the shares insiders purchase.)

But that's all wonky deal stuff. The larger point is that biotech IPOs can get done, especially when the folks who've been pumping cash into the company promise to keep doing so. Insider participation in IPOs can be tough to measure -- lack of mention in regulatory filings doesn't mean it's not happening -- but if it is happening, and the company thinks the purchases are material, they let us know. At FOTF HQ, we've been debating whether insider participation is a sign of desperation to get a deal done or a sign of long-time owners who simply love their portfolio companies and want to smother them with more hugs. Most people we talk to, be they entrepreneurs, lawyers, or VCs, say it's desperation. But all agree that there can be exceptions. (People at Ironwood Pharmaceuticals, whose follow-on fundraising we detail in this week's round-up, have long insisted that insider purchases in their 2010 IPO came from their long-term bullishness, an attitude the company is careful to cultivate in documents such as the prospectus for its latest offering.)

Deals also get done when those involved have a long track record of bringing companies to Wall Street. Verastem and its technology might be young in years -- it was founded in 2010 around research published in 2008 and 2009 -- but the co-founder and CEO is Christoph Westphal, whose previous companies include IPOs (Alnylam Pharmaceuticals, Momenta Pharmaceuticals) and acquisitions (Sirtris Pharmaceuticals, Alnara Pharmaceuticals). "Later stage is better, sure," says investor relations specialist Lilian Stern, who connects venture-backed biotechs with public buyers, "but people are happy to bet on the jockey."

Let's shift the metaphor to a different sport: As soon as Verastem cleared the lane, antibiotic developer Cempra and cancer specialist ChemoCentryx took the ball to the hoop. Mind you, the former was no slam dunk. Half of Cempra's $50 million IPO came from insider purchases. You hear the mantra all the time -- "the IPO is just another round of funding" -- but Cempra is a particularly acute example. There's been a lot of insider participation in IPOs since late 2009, and among those with publicly available details, Cempra's insider crutch is among the largest. (More on Cempra below.)

ChemoCentryx sold 4.5 million shares for $45 million, below the terms of 4 million shares at $14 to $16 per share it first expected. In a side deal, its two largest shareholders, GlaxoSmithKline and Techne Corp., bought $7 million and $5 million respectively at the IPO price of $10 a share in separate private placements.

One firm that had no mention of insider participation in its regulatory filings was Merrimack Pharmaceuticals. (Perhaps because investors have pumped nearly $270 million into the company over nearly two decades, most recently with a $77 million Series G round, at an average share price of $3.92.) Guess who had to postpone their IPO? We should have seen it coming. There were hints as early as last October, if you knew where to look. But seriously, the only reason Merrimack gave for the delay was unfavorable market conditions, which is odd, because the conditions are as favorable as they've been for months. In its last terms before withdrawing its IPO, the firm set a goal of raising $150 million through the sale of 16.7 million shares. It's possible that some Merrimack investors were poised to buy at IPO. As noted above, no mention of it could simply mean the firm didn't feel the information was material. But in such a large IPO, even a small percentage of insider purchase would add up to big dollars, and lawyers who work on IPOs told FOTF it's unlikely that kind of activity would go unmentioned. (Look for more on IPO insiders in the next issue of START-UP.)

Who's next? As of this writing, TVAX Biomedical is scheduled to debut any day now, shooting for a miniscule offering of $20 million. Radius Health is the latest to file (see below). It's an odd case, however, as the firm has technically been public for several months after maneuvering onto the bulletin boards via a reverse merger. Otherwise there's not much raring to go. Last year from March through August an average of 29 U.S. firms per month filed paperwork, according to IPO research firm Renaissance Capital. Since then, the monthly count hasn't topped 20, and biotech companies have been few and far between.

IPOs might be rare; we don't care. Every two weeks, you'll always have...

Radius Health: Osteoporosis and women’s health-focused Radius filed an S-1 with the Securities and Exchange Commission Feb. 7 to seek an initial public offering. Pricing and amount of shares have not been determined. Based in Cambridge, Mass., the company’s lead candidate is BA058, an analogue human parathyroid hormone-related protein (hPTHrP) for postmenopausal osteoporosis being developed in both injectable (Phase III) and transdermal (Phase II) formulations. To lead the late-stage clinical charge, the firm hired former Genzyme CFO Michael Wyzga as its president and CEO in December 2011. A month earlier, the biotech drew down the second portion - $27.65 million – of a three-tranche $91 million venture round to fund the Phase III study of the injectable formulation and launch a Phase II trial of the transdermal version. The company hopes to position ‘058 as a direct competitor to Lilly’s Forteo (teriparitide), the only current osteoporosis therapy that builds bone, rather than slow the rate of bone resorption. Radius laid the groundwork for its listing on the NASDAQ through a reverse-merger in May 2011 with shell company MPM Acquisition Corp, which created a recapitalized entity currently traded on an over-the-counter basis. MPM Capital emerged as the largest shareholder with 39% of Radius, followed by the Wellcome Trust (13.4%), HealthCare Ventures (10.7%) and BB Biotech Ventures (8.9%). -- Joseph Haas

Cempra: Apparently the antibiotic maker didn't manage to get all the bugs out of its February 2 initial public offering, which required heavy participation from pre-IPO shareholders. Cempra, whose lead program CEM-101 (solithromycin) just completed Phase II in an oral dose to treat community-acquired bacterial pneumonia, raised $50 million by selling 8.4 million shares at $6 a piece, a sharp drop from its goal of selling 6 million shares between $11 and $13 each. Cempra says it will use about half the proceeds to start a Phase III pivotal trial of CEM-101 this year, but it cautions that it will need to raise more cash to pay for materials and testing to support its marketing application for CEM-101. Existing shareholders bought 4.2 million shares, which couldn't have pleased Cempra's bankers. Their commission on the shares sold to insiders was 21 cents per share, half the commission they earned on sales of shares to new investors. Which insiders bought IPO shares wasn't immediately available; the top owner pre-IPO with 19.3% was Wistar Morris, an angel investor and scion of a famous Philadelphia family quite familiar with biomedical research, followed by Intersouth Partners (18.7%), Aisling Capital (18.6%), and Quaker BioVentures (18.5%). The firm underwent a 1-for-9.5 reverse stock split on January 29. Stifel, Nicolaus and Leerink Swann led the underwriters, which also included Cowen & Co. and Needham & Co. They have an option to buy up to 1.26 million shares in the over-allotment period. -- Alex Lash

Ironwood Pharmaceuticals: The Cambridge, Mass. developer of the late-stage gastrointestinal treatment linaclotide has begun selling 5.25 million shares of common stock with an eye toward raising at least $73 million at the Feb. 6 closing price of $14.85 a share. Underwriters J.P. Morgan and BofA Merrill Lynch have 30 days to buy an additional 787,500 shares at the public offering price. The firm also said that the FDA won't schedule an advisory committee meeting for linaclotide, which Ironwood has partnered in the US with Forest Laboratories and submitted for FDA review in August 2011. Company shares dropped then regained most of the temporary loss, closing Feb. 9 at $15.09 to approach the six-month high of $15.67. It's the first time Ironwood has tapped the public markets since its 2010 initial public offering, which raised $203 million for the company. Known most of its life as Microbia, Ironwood took in more than $330 million in venture capital over 12 years. Since 2008, the firm has had a dual-class share structure designed to discourage takeovers by placing change-of-control decision-making with long-term shareholders. There's another company creating a bit of IPO buzz lately that also has a dual-class structure in place. Bookface, or something. (Its debut promises to be a wee bit pricier than Ironwood's.) And it's interesting to note that Facebook CFO David Ebersman is also on the Ironwood board. (It's his only public board seat*.) The former Genentech wunderkind, who in his 15 years there rose to become CFO, joined the Ironwood board in July 2009, and he signed on at Facebook two months later. In November of that year, Facebook announced it would adopt a dual-class stock structure. -- A.L.

* A previous version of this post incorrectly stated that Ironwood was David Ebersman's only board membership. He is also on the board of at least one private company. We regret the error.

Acetylon Pharmaceuticals: The Boston biotech, working on an HDAC inhibitor to treat multiple myeloma, announced a $15 million investment from Celgene on February 9. The cash comes with no apparent strings attached: Acetylon says Celgene's chief commercial officer will be a board observer, but the big biotech isn't taking a board seat or receiving rights or options to Acetylon assets. The cash, Celgene's first investment in Acetylon, is untranched and brings Acetylon's total cash raised from equity to $50 million, CEO Walter Ogier told FOTF. The Celgene cash is also independent of the $28 million Series B the firm closed in 2011. Three HDAC (histone deacetylase) inhibitors have been approved in the US, one of which is Celgene's Istodax (romidepsin) for cutaneous T-cell lymphoma and peripheral T-cell lymphoma, both in second-line settings. Celgene bought Istodax's sponsor, Gloucester Pharmaceuticals, as soon as it was approved for CTCL in 2009, and Celgene has since expanded the label to PTCL. Acetylon's lead program ACY-1215 is a second-generation, more selective HDAC inhibitor that it hopes will avoid the harsh side effects of some of the first-generation pan-inhibition drugs, particularly Merck & Co.'s Zolinza (vorinostat), as the field becomes more crowded. Acetylon says ACY-1215 could be tested in combination with Celgene's franchise leader Revlimid (lenalidomide) for progressive multiple myeloma. The firm has not yet published results of preclinical tests of the drugs together. -- A.L.

Photo courtesy of flickr user orijinal via a Creative Commons license. Thanks, orijinal!

Tuesday, February 07, 2012

GSK's DPU Scoreboard: Three Fewer, Four More -- But That Misses The Point

It wasn't a bad pass rate for GSK's biotech-like discovery performance units: 35 out of 38 survived their three-year investment review cycle, completed before Christmas last year. Of those, six got increased funding (20%), and five got less -- they must be on a watch-list.

But overall this process wasn't, apparently, about culling DPUs. Sure, three may have fallen by the wayside, but four new ones were born. And yet all the cost and efficiency goals for R&D are nevertheless being met, claimed CEO Andrew Witty on a webcast annoucing full-year 2011 results. The overall discovery budget is unchanged. The company's cost-per-asset is falling, its R&D rate of return is expected to reach 12%, up from 11% in 2010, and, yes, you guessed it, the pipeline is 'unrivalled'.

Indeed, Witty was keen to draw attention away from the DPU scoreboard ("it's not the story," he told us) and instead onto something far less satisfyingly quantitative: culture. "The story is a new culture created within GSK." All about individual accountability, greater capacity for scientists to communicate with each other, including across disciplines (so increasing the chance of that 'eureka' moment) and more opportunities for researchers to fulfil their potential.

So came the oh-so-human story of Andrew Benowitz, promoted from bench chemist to DPU chief within four months. He was one of those who pitched an idea to the DPU investment board (referred to internally as the Dragon's Den) and not only got it funded, but also got to lead the new DPU that now houses it. (No, we don't know what the idea is, yet: there's a DPU deep-dive for analysts on March 29.)

Good for him. And good for GSK, frankly, which, alongside its major efforts to diversify away from selling branded pharmaceuticals to western payers, reminded us today that R&D is the "core value-creator of the company", one it's aiming to "bring back to life".

The resurrection won't, it seems, benefit Europe. Pricing pressures and access delays mean UK-headquartered GSK won't be designing new drugs specifically for Europe "in the way we used to do," said Witty during Q&A. "We’ll still register drugs for Europe," conceded Witty (who is also president of EFPIA, the European industry association). But GSK's decisions on which comparator to use and where to do trials "will be driven more by those markets that appear to want the product," Witty declared.

Are you listening, European policymakers? Or do you just want another Sandwich?

image courtesy of flickrer's Jinx!

Friday, February 03, 2012

DOTW Spies the Brandification of Generics

With workhorse blockbusters like Lipitor (atorvastatin), Zyprexa (olanzapine) and Plavix (clopidogrel) losing patent protection within six months of one another, generic drugs are at their peak this year – and that puts the generic drug industry teetering at the brink of its own generic drug cliff. Impax Laboratories Inc. hasn’t been as busy diversifying and beefing up its branded portfolio as some of its larger generic competitors, but the company’s brand side did get a boost from a deal with AstraZeneca, announced Feb 1.

Impax bought U.S. commercial rights to AstraZeneca’s migraine medication Zomig (zolmitriptan), both the tablet and nasal spray formulations, for $130 million plus tiered royalties on sales. Impax has said it wants to “transform into a specialty pharma” with a focus on CNS, but it generates most of its sales from generics. The only brand sales come from a co-promote with Pfizer for Lyrica (pregabalin; a relationship stemming from a 2008 patent infringement settlement between Impax and Wyeth).

The in-licensing deal with AstraZeneca looks to be a smart move for Impax. Zomig will keep the firm’s contract sales force occupied once the Lyrica co-promote expires in June while the company awaits word from FDA on an NDA for IPX066, an extended release formulation of carbidopa-levodopa for Parkinson’s disease. Impax submitted the NDA for IPX066 in December. Zomig offers Impax an opportunity to ramp up its contract sales group ahead of a potential launch. The sales team is made up of 64 reps, but the company plans to add 20 more to support Zomig. Eventually, the company would like to have 120 to 130 reps if IPX066 is approved. Outside the U.S., the drug is partnered with GlaxoSmithKline.

Zomig hasn’t been detailed by AstraZeneca for “several years,” Impax said, so there is an opportunity to jumpstart sales. U.S. sales were $163 million for the 12 months ended Sept. 30. About 40% of scripts come from neurologists, the physicians Impax is looking to target with IPX066. But Impax will have to act fast. The patent expiration for Zomig tablets is in May 2013, though the nasal spray has longer patent protection, out to 2021.--Jessica Merrill

Two other deals this week, both by Germany’s Stada, further highlight how the generic industry is scrambling to diversify. More discussion below in the never generic …

Stada/Grünenthal and Spirig: German generics firm Stada enhanced its presence in Central and Eastern Europe and in the Middle East by acquiring marketed brand products from Grünenthal and a generic business from Switzerland’s Spirig. The acquisitions come as the company is facing unprecedented pricing pressure in its home market. In the larger of the two deals, Stada paid Grünenthal €312 million for rights to a portfolio of more than a dozen branded products in Europe and the Middle East, mainly in pain management. The portfolio includes drugs like Tramal (tramadol), Zaldiar (tramadol plus paracetamol), and Transtec (buprenorphine patch). The deal also includes Grünenthal's newest drug, the dual-action analgesic, Palexia (tapentadol), which is currently being launched in European markets and is licensed to Johnson & Johnson for marketing in the U.S. The smaller deal saw Stada buying Spirig’s generic business in Switzerland for CHF 97 million ($106 million). Stada said the acquisitions will strengthen its presence in the CEE region, where its sales are growing more rapidly than in Western Europe. In the first nine months of 2011, Stada's sales in Western Europe increased 2% to reach €868.4 million, whereas sales in Eastern Europe grew by 23% to €333.3 million. The Grünenthal acquisition will also open up new strategic distribution channels for products from its current portfolio, which in the future can also be marketed as branded products, the company said. —John Davis

Shire/Sangamo: In a move to add to the pipeline for its growing Human Genetic Therapies division, Shire is paying Sangamo BioSciences $13 million upfront in a licensing agreement to develop therapies for hemophilia and other monogenic diseases using the California biotech’s zinc finger DNA-binding protein (ZFP) technology platform. In the deal announced Feb. 1, Shire obtains worldwide rights to ZFP compounds that will target four genes – the blood-clotting Factors VII, VIII, IX and X – in an effort to produce new therapies for hemophilia A and B. Shire also gets the right to designate three additional gene targets – ZFPs, which can be engineered to recognize any specific DNA sequence within a gene, are thought to offer targeting potential in other therapeutic areas of interest to Shire, including hematology and lysosomal storage disorders. Under the alliance, Sangamo will handle all preclinical work up to filing of INDs with the FDA and Clinical Trial Applications with the EMA. Shire will reimburse Sangamo for research-related costs and also pay regulatory, development and commercial milestones, as well as sales royalties. Platform technology licensing deals are nothing new to Sangamo, which most recently licensed its ZFP nuclease technology to Pfizer, to help the pharma genetically alter Chinese hamster ovary cell lines to enhance the efficacy of protein and antibody therapeutics in 2008. We wrote about the latest DNA editing technologies in the January 2012 START-UP.—Joseph Haas

Covance/BioPontis: Contract research organization Covance will be responsible for drug development support for investment firm BioPontis Alliance, a three-year old firm focused on early translational research and science sourced through partnerships with academia. Covance will provide discovery, preclinical, bioanalytical, CMC, clinical, central laboratory and commercial support under the arrangement. BioPontis is tapping universities to evaluate thousands of compounds with plans to whittle them down to dozens and take them from preclinical development to Phase I. Our sister publication START-UP featured BioPontis here.—Jessica Merrill

Merck KGAA/Threshold Pharmaceuticals: Only weeks before a potentially value-boosting Phase II trial in pancreatic cancer patients is expected to read out, Merck KGAA has nabbed worldwide rights to Threshold Pharmaceuticals’ TH-302, a small molecule drug candidate also in Phase III for soft tissue sarcoma. TH-302 is thought to be active in hypoxic, or low-oxygen environments that are typical of tumors. Threshold will receive $25 million up-front, with the potential of a $20 million near-term milestone if the pancreatic trial results are positive. In all the small company could see $280 million in pre-commercial milestone payments and an additional $245 million in milestones and tiered double-digit royalties based on sales of the drug. The companies will jointly develop TH-302 (largely sharing the workload evenly with Merck picking up 70% of the costs, but Threshold will continue to lead the compound’s development in the soft tissue indication in the U.S.) and Threshold retained a U.S. 50/50 co-promotion option. – Chris Morrison

Takeda/Durect: Bad news is snowballing for Durect. On the heels of a failed Phase III study of its post-operative pain drug Posidur, Takeda has backed out of a co-development and commercialization deal for the drug in Europe and other territories. Takeda said Jan. 30 it would return rights to Posidur, which it gained through its acquisition of Nycomed, last year. Posidur is a long-acting depot formulation of bupivacaine made with Durect’s patented SABER technology, designed to provide up to three days of pain relief post-surgery. However, the drug failed to show statistically significant benefits on pain intensity and use of opioid analgesics compared to placebo in the Phase III study BESST. Nycomed paid $14 million upfront for rights to the drug in a 2006 collaboration. Meanwhile, Durect says it will focus on developing the drug in the U.S., where the company is partnered with Hospira. A pre-NDA meeting with FDA to determine a path forward is expected later this year, but it looks like Durect will have a hard case to make—JM

flickr image by Al_HikesAZ used under creative commons