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Thursday, May 31, 2012

Financings of the Fortnight Doesn't See Much To "Like"

 

Without further ado, we bring you a few IPO notes from the Facebook Fiasco Fortnight. While most market watchers trained their eyes on Zuck, his biotech-veteran CFO, his bankers, and (eventually) his lawyers, a few biotechs made moves of their own. Only one took a step forward: Kythera Biopharmaceuticals filed an S-1 after raising about $100 million through four venture rounds and seven years. The company’s lead product, a Phase III injectable meant to reduce the fat that causes double chins, is fully licensed to a division of Bayer.

Two others took steps back. TVAX Biomedical withdrew its modest $20 million offering, citing poor market conditions. The firm has an autologous immunotherapy platform that has produced a Phase III brain cancer treatment and a Phase II treatment for renal cell carcinoma. And Cancer Genetics, which first filed in late December, postponed a planned $48 million offering, according to Renaissance Capital. No official word yet on a second attempt.

For any small company -- let alone a biotech -- hoping to tap the public markets, the Facebook bungle couldn’t have come at a worse time. The Euro crisis drags on, and the ripple effects of a potential Greek Euro exit loom ever larger in macroeconomic calculations. Then comes Facebook, only the most watched, most anticipated U.S. financial event of the so-called recovery, and instead of a shot of much-needed confidence, it delivered yet another ringing example of American institutional ineptitude at best, criminal venality at worst. Years to prepare, to hire the best and the brightest, and this is the best they could do?

This headline made us chuckle: "IPO activity remains slow despite Facebook offering." Despite? We venture that in sectors like ours, it was more like an extra twist of the knife. Next time an underwriter comes knocking with a fabulous biotech, potentially game-changing science, visionary leadership, blah blah blah, what will happen? Hardcore biotech investors will surely do their own diligence, but what about the “swing voters,” the more general investors who might crack open a window to make a biotech bet or two? Are they going to stick their necks out? Would you?

You don't have to buy our shares, and you don't have to "like" us. Just enjoy another edition of... 


TVM Capital: The international venture firm has raised its seventh life-science fund with a northern twist. Announced May 28, the fund will be based in Montreal and focus mainly on single-product companies in Quebec, part of an asset financing trend that VCs such as CMEA Capital, Atlas Venture, and Index Ventures, as well as non-traditional investors, have tested recently. The new fund also marks the fourth time since November that a Big Pharma has poured cash into a Canadian biotech investment vehicle, including the Merck Lumira Biosciences Fund, which we noted in this column earlier this year. A major chunk of TVM Life Sciences VII, which has C$150 million ($146 million) committed, comes from Quebecois fund-of-funds manager Teralys Capital, with ties to several regional investors. The goal is to fund about 15 projects, mainly but not exclusively in Quebec. Another major limited partner is Eli Lilly & Co., which alongside its investment will open a branch of its Chorus drug development network in Montreal. It’s unclear, however, what ties Chorus Canada has to the Lilly/TVM arrangement. A Teralys managing partner told “The Pink Sheet” that Chorus will not have rights to help develop the assets that receive TVM investments. Other VC investors in TVM Life Sciences VII included BDC Venture Capital, Fondaction and Advantus Capital Management, a subsidiary of the Minnesota Life Insurance Company. Only the size of the investment by Teralys (C$65 million) and that made by BDC Capital (C$20 million) were disclosed. – John Davis

Royalty Pharma: The buyer of biopharmaceutical royalty streams said May 24 that it raised $600 million in debt to fund future acquisitions. That a royalty fund has raised cash is no surprise; RP rival Cowen Healthcare Royalty Partners announced a $1 billion fund, its second, to start 2012. OrbiMed Advisors also got into the game with a $600 million royalty fund in 2011. The funds have recently marketed themselves as alternatives to life-science venture capital for limited partners uneasy with venture’s sallow returns and long fund cycles. But Royalty Pharma prefers bond holders to equity holders, which makes sense given that royalty deals are more like debt than equity investments, with lower risk and return profiles. The $600 million tranche, with a borrowing spread of Libor + 3% and a maturity date of November 9, 2018, brings RP’s total debt load to $3.4 billion. Two other tranches of $850 million and $1.9 billion mature on November 9, 2016 and May 9, 2018, respectively. RP said that strong demand for the debt issue boosted the size from $500 million to $600 million. The firm has bought royalty streams to more than two dozen products including Humira (adalimumab), Remicade (infliximab) and Cimzia (certolizumab). - A.L.

Prosonix: The Oxford, UK firm extended its Series B round with £5.7 million ($9 million) to push forward development of its generic asthma treatment fluticasone propionate (PSX-1001). The firm is banking on its ultrasound drug-engineering technology to convince European regulators to approve its inhaled version of GlaxoSmithKline’s Flixotide/Flixonase. Ultrasound induces the crystallization of drugs from solution and can be precisely controlled, leading to the formation of particles with little variation in size and shape. The particles are stable and do not require formulating with excipients for use in inhalers. In contrast, conventional jet-milling makes inhaled powders that are more unstable and with more variable physicochemical properties, Prosonix CEO David Hipkiss told our "Pink Sheet" colleagues. Pharmaceutical companies that currently dominate the respiratory products sector, such as GSK, AstraZeneca and Novartis have not faced significant generic competition because of the complexity of developing inhaler drug delivery technology, and the difficulty of showing bioequivalence to inhaled powders. Also, in the U.S. there is no regulatory pathway for generic inhaled respiratory products. Belgian investment firm Gimv joined existing investors in the second tranche of the Series B. In the June 2011 first close, Prosonix raised £11.4 million from a European syndicate that included Ventech of Paris; Gilde Healthcare Partners of Utrecht, the Netherlands; Entrepreneurs Fund BV and Solon Ventures, both of London; and Quest For Growth of Leuven, Belgium. Prosonix hopes to start a Phase IIa trial later this year for its second product candidate, a twice-daily inhaled therapy for chronic obstructive pulmonary disease. - J.D.

Sangart: The San Diego firm added $50 million from a previous investor to bring its Series G round to $100 million and its total cash raised to $280 million. Sangart said the cash will help it complete its current Phase IIb trial for its lead product, an oxygenated form of recycled blood meant to treat tissues deprived of oxygen after traumatic injury. It will also aim to complete a Phase Ib for another product that uses carbon monoxide instead of oxygen with the recycled blood to treat sickle cell anemia. When the two trials are done, the company wants to look for a licensing partner for one or both products, or perhaps even a buyer for the company, CEO Brian O’Callaghan told “The Pink Sheet.” The cash comes from Leucadia National Corp., which also contributed most of the first $50 million Series G tranche. Leucadia is a conglomerate with diverse holdings in mining, beef packing, wine, and timber. – Lisa LaMotta

Photo courtesy of flickrer striatic, who gets two thumbs up.

No Quick Fix for Comparative Effectiveness

This month’s Science Matters column in START-UP looks at a recent assessment of characteristics of the clinical trials recorded in the US-based registry ClinicalTrials.gov, and suggests that the questions raised in that paper for interventional trials also hold for other strands of clinical research, notably those focused on comparative effectiveness.

The authors of the assessment, which was reported in the May 2 issue of the Journal of the American Medical Association, noted that ClinicalTrials.gov suffers from defects in methodology and standardization. The problems are even more acute with comparative effectiveness research (CER), and one reason FDA places scant value on observational studies, at least as currently conducted.

Addressing those issues -- in both realms -- is critical. “In our traditional evidence development framework, we were trialists or observational scientists but rarely both,” Richard Gliklich, president of the Outcome unit of QuintilesTransnational, told attendees at the annual Post-Approval Summit held earlier this month at Harvard Medical School. “In the emerging framework, this false dilemma is no longer affordable. There are too many questions to answer, too many settings, too many populations.”

It’s easy to find examples of CER methodologies causing confusion rather than creating clarity. A recent CER-skeptical story in The Wall Street Journal led with two studies using the same UK patient database drawing very different conclusions about whether osteoporosis drugs increased the risk of esophageal cancer. It’s also easy to try to draw a dividing line between efficacy and effectiveness research. But the discussion is more nuanced. As Gliklich said, both approaches are needed. In each realm, data need to be gathered using methodologies that allow for apples-to-apples comparisons.

Gliklich made his remarks introducing Summit keynote speaker Michael Rosenblatt, CMO at Merck, who went on to highlight many of the key challenges around CER. For example, if a data set is biased, “you can get the wrong answer, but with great precision,” he said: in many cases it may possible to detect very small changes in risk estimates, but not understand whether they are clinically significant or not. Plus, “something you would think would be clear-cut like a diagnosis of a myocardial infarction, where you have cardiograms and a blood test, still has about a 15% miscoding rate,” he said. In such a case, comparing one drug’s side effect to another’s where one drug might have a meaningful but small percent difference in efficacy, would be impossible.

Making a CER framework valuable is a formidable challenge. Health care provider systems all do things differently: can they rely on outside studies, even the best from places, or does the analysis still have to be done institution by institution? And if so, do they have the resources? We put that question to Kevin Tabb, CEO of Beth Israel Deaconess Medical Center in Boston, a panel participant at a May 18 symposium held at the MIT Sloan School of Management on health care costs, following the meeting. “It still has to be done institution by institution,” he said. “It’s incredibly expensive and we don’t have the tools to do it.”

In his opening remarks to the MIT Sloan gathering, Massachusetts Governor Duval Patrick referred to the 2006 Massachusetts health care reform legislation. That a solution is not perfect is not a reason to not do anything, he said: “It’s [not a matter of] a perfect solution versus no solution.”

We hope that observation holds for the newly formed, high-profile Patient-Centered Outcomes Institute, the entity charged with enabling much of the US’s future CER efforts.

PCORI has spent much of its first year debating and drafting methodological guidelines and standards, which will be posted in draft form next week. (For more on PCORI’s preparations for the release of its methodology report, look here.) But industry groups have criticized PCORI (as reported here and here, for example) for its timing and the lack of specificity of its proposed research agenda, which will be a considerable departure from the more familiar investigator-led study design format. Its start-up was at first deliberate, as befits a public-private partnership trying to obtain a popular buy-in to CER without stirring up fears of drug rationing. Now, however, PCORI seems to be in a more frantic hurry-up mode as it seeks to dole out an initial $120 million in research funding by the end of 2012 -- only issuing guidelines for its initial funding announcements after a Board of Governors meeting May 21.

PCORI's invocations of the value of patient-centeredness have sounded simplistic at times, like Dorothy following the yellow brick road to the wonderful land of Oz.  We know that's not the case, and that it's easy to take shots, like the WSJ did, at CER in any form.  But we also know the road ahead is unpaved and will be bumpy, requiring serious and careful navigation. Duke's Rob Califf, first author of the JAMA paper on ClinicalTrials.gov, made the case more succinctly and pointedly perhaps than PCORI itself has managed. Establishing that a drug has some efficacy in a clinical setting does not answer the real-world questions of how to use it, when to use it, how long to give it and how to compare it with others, he told us. “That’s what comparative effectiveness is all about and where you need the spectrum of different kinds of observational studies and randomized trials."

Friday, May 25, 2012

Deals Of The Week Jump Starts The Summer Reading List

High on the New York Times List of Bestsellers (in the hardcover advice & miscellaneous category) this spring has been the book “Reverse Innovation: Create Far From Home, Win Everywhere.”

It’s by two well-known Dartmouth business school professors, Vijay Govindarajan and Chris Trimble, and tracks how innovation originating in emerging markets is finding its way into the broader global business world. Since the topic’s increasingly relevant to pharma – although the book isn’t specific to healthcare -- and since the book arrived on my desk this morning, I’m giving it priority status for my Memorial Day weekend reading. Besides, it ties in nicely with one of the themes on my mind since attending the US-India Chamber Of Commerce Healthcare Summit on May 11 in Cambridge, MA.

That meeting was focused on biopharma, and started with a talk by Elias Zerhouni, president of Sanofi's Global R&D, on innovation and India. Billed as the keynote, he had to cancel plans to attend at the last minute and instead participated from Paris, via a near-lifelike videocast.  “I was struck several years ago by the extraordinary ability of the healthcare system in India to adopt new technologies to provide high quality care at low cost…so I know there is the fundamental power and energy to create in India,” he started off.

Sanofi, of course, bought India’s Shantha Biotechnics vaccines business, where it is working to produce vaccines at low cost for the global market.  The company also has a partnership with Glenmark on developing a monoclonal antibody for inflammatory diseases. “It is possible to see that India has capability of addressing very fundamental obstacles that exist in R&D,” Zerhouni said. "…No one, no country, no organization, has all the needs to master the complexity of biology and to have access patient population and patient samples that would give us profound insights into disease. The role of India is to innovate, not just the delivery of health care, which it has been excellent at doing, not just be less costly, what makes the difference is creativity.”

Zerhouni wasn’t specific but others at the one-day conference gave examples. The Boston Consulting Group has studied India’s capacity for innovation in healthcare, which BCG partner Bart Janssens, who is based in Mumbai, called India’s “magic beans.” According to BCG, these are information technology and computational research, which could help direct pharma’s growing appetite for big datasets (biology is becoming an information science, one speaker noted). Also on the list: nanotechnology and, to no one’s surprise, process efficiencies, a hot topic, particularly in the area of translational research .
And much of the discussion centered around innovative approaches to clinical trials, where India and U.S. academic institutions and MNCs are working aggressively on projects that are sure to change the nature of the way clinical trials are done globally -- but may not be moving fast enough, as colleague Josh Berlin points out in his excellent take on the summit. 

In health care, much of the reverse innovation activity has been on the device side, which Govindarajan and Trimble, along with GE CEO Jeff Immelt, wrote about in the Harvard Business Review in October 2009. That article received a lot of attention and gave some circles in pharma food for thought, although pharma seems to be a step behind.

Nevertheless, as I grab the book and run out the door, with more say on this post-holiday, it seems worth pointing out a mainstay of pharma's efforts to capture innovation, namely through deal making. And this week's activities boil down to....
 
 
IMI/GSK/AZ/Sanofi/Basilea/Janssen Pharmaceuticals: In an effort to address concerns about the increasing resistance of bacteria to the currently available antibiotics, a European initiative launched in November announced May 24 that it is forming a public-private collaboration coined NewDrugs4BadBugs to fund the development of new antibiotics. The Innovative Medicines Initiative, part of the EuropeanCommission’s Action Plan against the Rising Threat From Antimicrobial Resistance, is providing €119 million ($149.6 million) in funding. Private companies – GlaxoSmithKline, Sanofi, AstraZeneca, Janssen, and Basilea – will contribute a combined €114.7 million ($144.1 million). Perhaps more important, however, is the companies’ commitment to share data.  The group is forming a committee, which will build a website that can facilitate the sharing of this information, including specifics on failed targets and clinical trial data. The focus of the overall program will be to develop better networks of researchers, create more fluid trial designs, and provide incentives for companies to participate. The collaboration in the EU happens to parallel proposed legislation in the U.S. that is meant to increase the exclusivity period for antibiotics developed to combat certain types of multi-drug resistant bacteria. Both the U.S. and EU are trying to increase the number of antibiotics under development as more and more people continue to die from infections that were not previously fatal. --Lisa LaMotta

Labcorp/XDx:  With Labcorp., molecular diagnostics developer XDx has found a partner to enable it to resume development of a diagnostic to predict when lupus flares may occur. Lupus has always been in XDx’s sights.  But its early discovery efforts were not sufficient to winnow down potential candidate markers to a set ripe for clinical validation. It also had tabled a clinical study in 2010, SAGE, 600 patients short of its original goal of 1000, because it had to direct resources toward its lead product, the heart transplant diagnostic, AlloMap. 

However, through SAGE, XDx obtained an exotic lupus-oriented set of samples: blood and information on clinical parameters collected monthly from patients. “We knew a certain percentage of these patients would have a significant flare event,” says COO Mitchell Nelles. By drawing blood monthly, the company would have samples before and after flare events, allowing XDx to look for biomarker signatures which could then be used to predict those flares. Now, Labcorp has shown interest in this diagnostics discovery approach. In a deal announced May 23, the companies are collaborating to develop a test to predict lupus flares, to which Labcorp will have full US commercial rights.

A flare predictor test could potentially tell a physician when to intervene with a drug.  Even more important, if it were to have a high negative predictive value, the test could tell a physician when to reduce the use of steroids and minimize side effects or generally adjust downward the level of medication.  The aim would be “not just preventing the flare, it’s not having to give more medicine than a patient needs,” Nelles says.  “We’ve seen that in the transplant field and also autoimmunity. The opportunities to reduce medication to the lowest level possible can have a profound clinical impact.” The test would likely contain a combination of gene expression and protein biomarkers. XDx retains the right to work with other potential pharma/biotech partners to develop a companion diagnostic to predict drug response and otherwise manage therapy.  It had previously worked with Bristol-Myers as part of BMS’s clinical plan to develop its arthritis drug Orencia in lupus, an effort which ultimately failed due to the drug's lack of efficacy in Phase III. – Mark Ratner

GSK/Auxilium: GlaxoSmithKline and Auxilium Pharmaceuticals announced May 21 that they have teamed up on the marketing of the Malvern, Pa-based biotech’s testosterone gel, Testim. The co-promotion agreement is set to begin early in the third quarter and is slated to last until September 2015. That's when generics start to infiltrate the $1.4 billion testosterone gel market, which is currently all branded. In the meantime, this promotion will help Auxilium maximize its product before competition arrives. The British pharma will be responsible for increasing awareness of U.S. physicians, while Auxilium will still manufacture the product. GSK will receive revenues on the drug if it exceeds an undisclosed baseline sales figure. Testim, which is meant to treat conditions related to low testosterone levels, generated sales of $208 million in 2011 and accounted for about 80% of Auxilium’s revenues. Just a day after announcing the deal, Auxilium filed suit against Watson Pharmaceuticals in the U.S. District Court of N.J. claiming the generic drug maker’s plan to launch a generic of Testim is in violation of several patents. Other testosterone gel manufacturers like Par Pharmaceuticals and Abbott have reached agreements with Watson to keep a low-cost generic off the market until at least August 2015 – it appears Auxilium is trying to get the most out of its branded product before the competition arrives. --LL

DaVita Inc./HealthCare Partners:  DaVita, which manages more than 1,800 dialysis centers across the U.S serving 145,000 patients, is buying one of California’s largest independent physician associations, HealthCare Partners, for $4.4 billion. HCP generated $2.4 billion in revenues in 2011 from services its 700 physicians provide to 667,000 people in Southern California, Central Florida and Nevada. The deal is valued at about 8.4x HCP’s 2011 EBITDA. That’s big news in the provider services and dialysis worlds, but what does it mean for pharma?

Once integrated into DaVita, HCP will operate as a separate subsidiary and its current management will continue to run daily operations. DaVita isn’t likely to get much of a bump in its presence in the dialysis market. Rather, it sees the addition of HCP as a way to build on an integrated care approach, based on HCP’s ongoing efforts to work closely with payers and consumers. While the companies were not specific about how HCP interacts with the groups it services, they noted in the analysts’ call that in certain disease categories — chronic obstructive pulmonary disease, for example — more integrated care with physicians and patients working closely together resulted in shorter hospital stays and no increase in hospital readmissions. In addition, HCP collects claims and administrative data, which, combined with clinical data, allows it to develop clinical programs geared to specific patient populations. 

This strategy, while not directly impacting pharma in the near-term, reflects a move on the part of providers and payers to seek what is increasingly known as “a continuum of care” for patients.  Pharmaceutical companies have generally taken a wait-and-see approach to such efforts, before responding with new product portfolios and commercial models that address the shifting needs of their constituents. But the trend is on their minds and some, particularly those involved in diabetes, such as Sanofi, are forging ahead with continuum of care strategies; Endo Health Solutions, which recently changed its name from Endo Pharmaceuticals to better reflect the diversity and focus of its pipeline, is taking a continuum of care approach to the urology and oncology sub-segments.—LL
 
Takeda/Multilab Industria: Japanese firm Takeda Pharmaceutical claims a leading position in Brazil’s pharmaceutical space with the May 25 purchase of Multilab Industria e Comercio de Produtos Farmaceuticos, which manufactures branded generics and OTCs. The transaction, worth an upfront payment of BRL 500 million ($245.5 million), plus up to BRL 40 million, makes Osaka-based Takeda one of Brazil’s top 10 pharma players and brings it the country’s top-selling OTC cold and flu remedy, Multigrip. Takeda expects to close the deal by September.

Through its 2011 acquisition of Swiss firm Nycomed, Takeda has an OTC presence in Brazil, including the analgesic brand Neosaldina, and Rio Grande do Sul-based Multilab is expected to complement that business via its established distribution network, especially in emerging parts of Brazil. Takeda recently projected sales in Latin America, including Brazil, will reach JPY 52 billion  ($651.9 million) in 2012, and the firm does not plan to revise this year’s earnings guidance following the deal. Multilab generated revenue of about $68.8 million in 2011.--Dan Schiff

Valeant/Swiss Herbal Remedies Ltd.: Aggressive pharma acquirer Valeant Pharmaceuticals purchases assets from Canadian natural health product firm Swiss Herbal Remedies, the latest consumer health pickup for Montreal-based Valeant. In a May 24 release, Valeant said Swiss Herbal is well-known in Canada and will complement the Cold-FX NHP brand Valeant acquired along with Afexa Life Sciences in 2011. Valeant paid less than 1x sales for the assets from Richmond Hill, Ontario-based Swiss Herbal; the assets generated 2011 net revenue of CA $28 million (U.S. $27.4 million).—DS

Suneva/Spear:  Fallout from Valeant's hectic deal-making pace continued May 24 as the anti-wrinkle product Refissa (tretinoin 0.5%) moved to a new home for the second time in less than a year. In December 2011, following Valeant’s buyouts of Sanofi’s Dermik Laboratories and Janssen’s Ortho Dermatologics, the Federal Trade Commission required the specialty pharma todivest three dermatology products from its portfolio – Refissa, acne medication BenzaClin and topical flurorouracil cream 5FU. Valeant sold Refissa, indicated for fine facial lines, hyperpigmentation and tactile roughness, to Spear Pharmaceuticals, and the other two products to Mylan Pharmaceuticals. For undisclosed financial terms, Spear has sold worldwide rights to Refissa and a generic version developed and launched by Spear to privately held Suneva. Suneva CEO Nick Teti said his firm is entering the prescription topical aesthetic space, which he called a potential $100 million market opportunity. The addition will enable its marketing force to offer aesthetic physicians “a comprehensive anti-aging solution,” also include Suneva’s proprietary ReGenica skincare products and its injectable filler Artefill. Suneva called the deal transformational and said Refissa will be a key driver of sales growth over the next five years.—Joseph Haas

image from flickr user mySAPL used under creative commons

Friday, May 18, 2012

Deals of the Week Ponders The Complications


Sometimes, a pharma partnership is a prelude to a buyout deal. Other times, as some lovelorn users of one newsworthy social network like to say, it’s complicated. For GlaxoSmithKline, its relationships with three different companies show how one kind of deal can lead to another – or not.

This week, GSK acquired one longtime partner, wrestled with another after it rejected a hostile bid, and raised its stake in a third. First, it paid GBP 61 million ($99 million) to acquire the portion of proteomics drug discovery company and longtime partner Cellzome that it does not already own. GSK will pay cash for just over 80% of Cellzome shares; it previously owned a shade less than 20% of the company, thanks to a 2001 deal in which GSK sold its Cell Map division to the privately-held German start-up, then just a year old. The deal, expected to close Monday, gives GSK access to additional tools to assess interactions between drugs and proteins, potentially leading to better visibility into drug successes and failures during the discovery process. The two are already familiar with one another: They’ve been collaborators in an inflammatory disease partnership since 2008.

The first-comes-love-then-comes-marriage arrangement doesn’t seem to be happening for GSK and Human Genome Sciences, though. As we noted last week, that deal turned hostile as HGS rejected a $13-per-share bid that valued it at $2.6 billion. Now, HGS is trying to remain independent by adopting a poison-pill strategy, a shareholder rights plan that would kick in if a third party acquires 15% of HGS stock. While HGS is still retaining banks to explore strategic options, the new provision would allow its stakeholders to thwart a takeover attempt; it reiterated that it believes GSK’s offer is inadequate this week as well. GSK and HGS are already partners on the lupus drug Benlysta (belimumab), as well as a pair of pipeline drugs including Phase III cardiovascular drug darapladib.

Is there a middle ground between outright acquisition of a partner and a hostile takeover of one that doesn’t want to be bought? How about what GSK did with its collaborator Theravance this week? The British pharma took that relationship to the next level when it acquired 10 million additional shares of publicly traded Theravance for $213 million, based on terms announced in April. That boosts its ownership stake from 18.3% to 26.8%. The two have been allies since 2002, and have expanded their partnerships around bifunctional muscarinic antagonistic beta-2 agonist (MABA) and long-acting beta-2 agonist (LABA) programs under development for chronic obstructive pulmonary disease, including Relovair (fluticasone furoate/vilanterol).

Sound complicated? Some deals are easier to complete than others, but we've got more news than that to report this week. Now stop hitting 'refresh' and read...


Agilent/Dako: The words “biggest tech IPO in history,” were frequently spoken of Facebook’s offering this week, but it’s worth remembering that the spinout of Agilent Technologies from Hewlett-Packard in a 1999 offering was once ranked among the biggest ever. Agilent made a move in the life sciences May 18, when it acquired Danish cancer diagnostics company Dako for $2.2 billion in cash. Agilent, a Santa Clara, Calif.-based maker of electronics measurement equipment, already markets a variety of life sciences and chemical analysis products. Its microscopes, imaging equipment, software and other laboratory gear allow study of biological samples at the molecular level; they are sold into the commercial pharma, biotech and research market as well as the academic and government markets.  Dako sells antibodies, software and instruments for cancer diagnostics, including diagnostic kits, probes, and reagents used in flow cytometry. It posted revenues of about $340 million in 2010. Swedish private equitiy firm EQT Partners AB acquired Dako from its founding family for about $1.3 billion in February 2007; Novo Nordisk held a minority stake at the time. – Paul Bonanos

Piramal/DRG: Flush with cash from the May 2010 sale of its branded generics business to Abbott Laboratories Inc., Piramal Healthcare Ltd. announced on May 16th that it will acquire life science analytics and consulting firm Decision Resources Group for $635 million. The acquisition is Piramal’s second this quarter; in April it moved to acquire Bayer AG’s molecular imaging business, including florbetaben, a Phase III molecular imaging agent for diagnosing Alzheimer’s disease. Last August, the company made a significant investment in Vodafone’s Indian operations. The DRG acquisition price represents a 4x multiple of DRG’s projected 2012 top line sales of $160 million. The beneficiary of the sale is Provident Equity Partners, which focuses on the media, communications, education and information sectors, and has over $23 billion under management. Provident took a majority stake in DRG for $193 million in May 2010, investing out of its $4.25 billion Fund V. The sale to Piramal, expected to close in the second quarter, will bring Provident a 2.1x return on investment. Piramal chairman Ajay Piramal cited rising demand in the pharma sector for “specialist information” during a time of rising research costs and increasing complexity in accessing global markets. In particular, he emphasized Piramal Healthcare’s reputation and relationships with global life science companies and its knowledge of emerging markets. DRG CEO Peter Hoenigsberg echoed the demand for information about emerging markets, which he called “the primary avenues for growth in the pharma industry” – and mentioned Piramal’s experience in emerging markets as a factor in the deal. - Michael Goodman

Bristol-Myers Squibb/Tsinghua University: Bristol-Myers Squibb has teamed up with China’s Tsinghua University to develop novel targets for oncology and immunoscience on May 14. The partnership will focus on 3D protein structure mapping of biological targets, as well as structural biology research. "This is Bristol-Myers Squibb's first discovery collaboration in China and is an example of the company's deepening commitment to the country," said Francis Cuss, senior vice president of research at BMS. "We are delighted to be working with Tsinghua University, a world-renowned and highly esteemed research-based academic institution with expertise in target identification and structural biology that will support the discovery of new medicines to fight serious diseases in China and around the world," he said. The multi-year partnership is one of many that have popped up in recent years between innovation-hungry Big Pharma and the academic community. - Lisa LaMotta

Newron/Zambon: Two Italian companies struck a licensing deal around safinamide, a novel Parkinson's treatment that showed safety and efficacy in a recent Phase III trial. Chemical and pharmaceutical company Zambon paid a total of €20 million ($25.4 million) to Newron Pharmaceuticals of Milan to option and license the drug worldwide, not including Japan and other Asian territories already covered by a deal with Meiji Seika Pharma. (One-time rights holder to safinamide, Merck-Serono, returned the drug to Newron in October 2011, throwing a wrench in Newron's previous corporate development plans.) Newron will also receive milestone payments of unspecified size, as well as double-digit royalties if the drug is commercialized. Zambon will shoulder further development costs of the drug. Newron had been lining up safinamide for approval in 2013. The compound is expected to be marketed as an add-on treatment administered alongside dopamine agonists in patients with various stages of Parkinson's disease; Newron says it has both dopaminergic and non-dopaminergic properties. Separately, Newron said new chief executive Stefan Weber will replace founding CEO Luca Benatti, who stepped down from the position after 13 years. - P.B.


Financings of the Fortnight Ponders Neurodegenerative Death And Taxes


The big funding news this fortnight doesn’t come from public or private investors, it comes from taxpayers. As "The Pink Sheet" DAILY reported May 15, the Obama administration formally rolled out its national Alzheimer’s plan, which has been in the works for more than a year.

Alzheimer’s and other dementia-related diseases were already slated to get $450 million in National Institutes of Health funding in 2012, with the same amount proposed by the White House for 2013, but the new plan adds extra money: $50 million right away this year and $80 million proposed for next year, with another $20 million for caregiver support, education, data collection and other services.

Intriguing, then, that in a field where clinical trial costs are often cited as a major barrier to an already-skittish industry getting more deeply involved, nearly half of the extra $50 million for 2012 is earmarked for clinical trials. It won't help struggling biotechs push promising treatments, mind you; $16 million is going toward a prevention trial using the Roche/Genentech-sponsored antibody crenezumab to test still-healthy members of extended families in and around Medellin, Colombia, who share a rare genetic mutation that almost assures them of early-onset Alzheimer’s. The study, which the sponsors consider to be a Phase II adaptive trial, will cost an estimated $100 million. A private research group, the Banner Alzheimer’s Institute of Phoenix, is in charge, and chose crenezumab as the agent last December because it has demonstrated a better safety profile so far in early Alzheimer’s trials conducted by Genentech.

In addition to the NIH’s $16 million, Banner is putting up $15 million. Genentech will pay the remaining costs, but it’s unclear who will pay if the cost runs beyond $100 million. (Genentech spokeswoman Robin Snyder declined to speculate on additional costs but said the company doesn’t expect funding to be an issue.)

However it plays out, the fact of mighty Roche getting subsidies for as much as one-third of a major trial is, at the least, a sign of the importance of making progress – any progress at all – in Alzheimer’s R&D. We’re not complaining; if $16 million of our national treasure brings about an Alzheimer’s breakthrough, or simply speeds the progress toward one, it’s money well spent and a pittance compared to the costly burden of the disease now and a generation from now.

But to be clear: Neither Banner nor NIH accrue any rights to crenezumab, which Genentech licensed from Swiss biotech AC Immune in 2006, so if the trial points toward crenezumab as a viable treatment, Genentech/Roche could be sitting on a gold mine. The trial is expected to run five years, with an interim analysis after two. At that point the investigators would evaluate continuation of the trial to support an application for approval, said Snyder. “We are hopeful that the trial will support an indication, the specifics of which are yet to be discussed with regulatory authorities,” she wrote in an email. “If it works we would like crenezumab to be as broadly available to patients who may be eligible.”

The Banner Institute plans at some point to test the same antibody in people at higher risk for the more common form of Alzheimer’s.

A side note: Steering millions of federal dollars toward potentially groundbreaking Alzheimer’s trials hasn’t yet provoked the same skepticism as the millions being steered toward other drug discovery and development efforts under the new translational center known as NCATS.

Funding crucial Alzheimer’s trials is of course a different proposition than, say, repurposing drugs that have sat on industry shelves or fallen out of use, one of the mandates of NCATS, which had a $575 million budget this year. But both efforts are dollars spent that, in a parallel universe, perhaps, might have gone toward basic biomedical research, a common refrain from critics. (Our START-UP colleagues, who profile a different source of funding for biotech innovation every month in the “Capital Matters” column, wrote about one of the NCATS programs, the Therapeutics for Rare and Neglected Diseases, or TRND, a few months ago. You can read it here.)
Our friends at Pink Sheet are all over the NCATS story, and we suggest you follow along. It will require a subscription, but to paraphrase the late Donna Summer, they work hard for the money. So hard for it, honey. Rest in peace, disco queen, and same to you, go-go king. No one loves to love you, baby, more than…



Arena Pharmaceuticals: Wasting little time, Arena announced May 16 it priced a secondary stock offering and grossed $60.5 million just six days after an FDA advisory committee voted 18-4 in favor of Arena’s weight-loss drug lorcaserin. Arena sold 11 million shares at $5.50 per share, although shares reached as high as $7.02 on May 11, the day of the committee vote. Shares closed May 16 at $5.67. The vote doesn’t guarantee approval of lorcaserin, but it’s a notable reversal. The panel voted down the drug in September 2010, largely due to data that showed an increase in tumors in rat studies. A reassessment of that data, plus new information on the tumors’ causes, reassured the panel this time around that the cancer risk is negligible. Obesity drugs need to meet only one of two criteria set out in FDA’s draft guidance on weight management products: they either must provide a 5% weight loss in 35% of patients on-treatment and twice as many patients on-treatment as on-placebo; or there must be at least a 5% difference between weight loss in the active-product and placebo groups. Lorcaserin met the former standard, but not the latter. (More details about the panel’s decision is here, courtesy of our Pink Sheet colleagues.) Lorcaserin’s PDUFA date is June 27, so Arena’s new cash reserves give it a boost for commercialization, although in a deal expanded just before the committee vote, Eisai owns commercial rights to the drug in the US, Mexico, Canada and Brazil. Underwriters Jeffries & Co. and Piper Jaffray & Co., with help from BMO Capital Markets, have the option to sell up to 1.65 million additional shares. Two other sponsors of obesity are vying for FDA approval. Qnexa from Vivus has a PDUFA date of July 17, and Orexigen Therapeutics, which agreed to conduct a cardiovascular outcomes trial, hopes to re-file Contrave for approval in 2014. -- Cathy Dombrowski and Alex Lash

OncoMed Pharmceuticals: One of the first cancer stem cell companies, OncoMed is now hoping to cash in on the cancer stem cell hype (which just happens to be the subject of a forthcoming feature in Start-Up magazine). After all, OncoMed, founded in 2004, is a relative graybeard of the field, with a couple of alliances under its belt and three programs in the clinic. Tiny Verastem notched a $63 million IPO in late January without anything yet in the clinic, and another company, Stemline Therapeutics, filed its IPO papers in April. OncoMed hasn’t set terms yet, but it won’t be a surprise if it aims sky-high. Venture backers have put at least $170 million into the company since its founding, most of it coming in a massive Series B in 2008. There are seven venture funds and one strategic investor with stakes of 5% or more in OncoMed, led by U.S. Venture Partners (17%), Latterell Venture Partners (12%), and GlaxoSmithKline (12%), which also owns options for worldwide rights to two OncoMed antibodies. GSK can exercise the options at either the end of Phase I or Phase II proof of concept trials. OncoMed owns exclusive rights to its lead compound, the antibody demcizumab, and is currently testing it in two Phase Ib trials, both in combination with chemotherapy agents.  -- A.L.

Egalet: In its second incarnation, Danish pain management firm Egalet Ltd. has raised $14.3 million in Series B financing. The firm restructured and recapitalized in 2010, shedding its cardiovascular program to focus on its abuse-resistant Egalet technology for the development of opioid and non-opioid pain medications.  The company is preparing to advance lead candidate EGP066, an extended-release form of morphine, into Phase III studies. The Egalet platform creates tablets that erode at a controlled rate to produce prolonged- or delayed-release delivery. It also prevents the drug ingredient from being easily extracted, which deters drug abusers from chewing, snorting, or injecting it. First-time investor CLS Capital joined returning shareholders Atlas Venture, Omega Funds, Sunstone Capital, and Index Ventures, which committed to a two-tranched €2 million ($2.6 million) Series A round in August 2010.  Prior to the recap, Egalet A/S had raised at least $60mm in venture financing. In December 2009, it out-licensed its CV compound, the beta blocker EGP042, to RedHill Biopharma. The firm has a second formulation technology, Parvulet, that creates a soft pudding-like substance that can be eaten with a spoon. Farther down its pipeline are extended-release versions of oxycodone, hydrocodone, and hydromorphone. -- Amanda Micklus

Dynavax Technologies: Like Arena, Dynavax is a veteran biotech hoping to soon celebrate its first product launch, with the hepatitis B vaccine Heplisav now before the FDA for review. Dynavax tapped the public markets, raising $74.4 million on May 9 before deductions and expenses. It sold 17.5 million shares at $4.25 apiece, adding more than 10% of its share count to the outstanding base. If that’s not enough dilution, underwriters have the option to sell another 2.6 million shares. What’s more, Dynavax also announced just before the share sale that longtime CEO Dino Dina will step aside for a more commercially experienced successor. He’ll remain CEO until the search is complete, and he’ll also keep his board seat, Dynavax said. Investors didn’t take kindly to the CEO news or the offering, which was priced 17% below the previous day’s close of $5.09. Shares have continued to decline, closing May 17 at $3.76. But Dynavax needs the cash, as it owns full rights to Heplisav, for now at least, and says it intends to launch it independently in the US. Historically, biotechs that keep worldwide or at least US rights to their first commercial products fare better in the long term, but a successful launch is no guarantee. Dendreon’s prostate cancer treatment Provenge (sipuleucel-T) and Human Genome Sciences’ breakthrough lupus drug Benlysta (belimumab), both hailed as welcome additions in under-served indications, have faltered badly out of the gate. That's led to new management for Dendreon and, for HGS, a hostile takeover bid from marketing partner GSK. -- A.L.

Image courtesy of flickr user brain_blogger. How appropriate.

Friday, May 11, 2012

Deals of the Week: GSK Goes Hostile

How easy it is to push friendship aside when money gets in the way. GlaxoSmithKline PLC has pushed its two-decades long friendly partnership with Human Genome Sciences Inc. aside and is taking its acquisition bid hostile. The company commenced a tender offer for HGS May 10, taking its $13 per share offer directly to shareholders after the company’s board of directors rejected it in April.

The offer represents an 81% premium over HGS’ closing share price of $7.17 April 18, the last trading day before the offer was publicly disclosed, but shareholders aren’t likely to see the value the same as GSK. Just a year ago, HGS closed trading at $27.82 on May 10, 2011. But the company’s stock has been under pressure as sales of the company’s first marketed drug, the lupus treatment Benlysta, have failed to take off the way some investors hoped.

The fiasco makes the timing right for GSK. The two companies are partnered on Benlysta, as well as on two late-stage pipeline drugs. The tie-ups leave HGS particularly vulnerable to a takeover by GSK since it is unlikely another suitor will step up for a company that is already so deeply engaged with a another big pharma.

Still, HGS is trying to pull what levers it can. The company retained Goldman Sachs and Credit Suisse to explore strategic alternatives. And shareholders have already pushed the stock over $14, suggesting they see a chance GSK will push its bid higher. But GSK is putting the pressure on HGS now, and says it has no interest in being part of the strategic review process.

The hostile turn has added fuel to speculation that GSK’s interest in the pipeline drug darapladib is greater than the company is letting on. For a Phase III drug in development for cardiovascular disease, darapladib has been flying under the radar. It is an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2), a first-in-class drug candidate, but its mechanism of action is largely unknown, and investors have thus been skeptical of the program. It’s high-risk, but it could also be high-reward.

GSK’s sudden decision to acquire HGS after such a lengthy partnership has sounded some alarms among HGS shareholders, who are wondering if GSK is looking to get full control of darapladib before Phase III data read out. HGS stands to receive a 10% royalty on worldwide sales, and has an option to co-promote the drug in North America and Europe with a 20% profit share. Management at HGS has been talking up the darapladib opportunity in the meantime, while GSK CEO Andrew Witty has done just the opposite. “It will be two years before anybody can really call a judgment of whether or not this molecule is actually capable of being developed into a drug,” he warned during an April conference call.

The drug is being studied in two large Phase III outcomes studies, but after conducting an interim analysis, an independent data monitoring committee recommended the studies continue. A positive sign in any event.

The other Phase III drug, albiglutide, is a once-weekly injectable GLP-1 agonist for type 2 diabetes that hardly seems worth fighting over given the number of entrenched rivals already on the market.

The question now is if HGS shareholders will be willing to settle for $13 per share and accept the offer with a sigh that includes some relief or hold out for a few dollars more in the hopes GSK is willing to bet higher on darapladib too. The offer is set to expire on June 7.

In other news, it was a ho-hum week on the deal-making front. But don't let that spoil your enjoyment of the next edition of ...

Daiichi Sankyo/Coherus: Daiichi Sankyo Co. Ltd., the latest in a long line of Japanese pharma to make some noise in the increasingly busy biosimilars space, has tapped a California virtual start-up to help it develop etanercept and rituximab biosimilars. Daiichi has partnered with Coherus BioSciences, which will retain rights to the molecules outside of Japan, Taiwan, and South Korea. Further terms weren’t disclosed. Although Coherus itself was only founded in 2010, “its founders are in fact an elite group of biotech pioneers who helped build America’s first-generation biotherapeutics industry, including companies like Amgen, Genentech, Roche and Immunex," Daiichi Sankyo told PharmAsia News. Coherus is lead by CEO Denny Lanfear, a long-time Amgen employee, and co-founder Stuart Builder, formerly of Genentech. Builder was the start-up director for the biotech Alnara Pharmaceuticals, which was sold to Eli Lilly & Co. for $180 million in cash plus up to $200 million in milestones. This isn’t Daiichi’s first foray into biosimilars. The company already has biosimilar capabilities through subsidiary Ranbaxy, which is developing versions of filgrastim and molgramostim, and through the $16.9 million acquisition of biosimilar firm Zenotech Laboratories in Aug. 2010. Coherus says to expect more deals in the not too distant future and that it has five oncology and inflammation focused biosimilars in development. – Dan Poppy

Pozen/Desitin: Pozen, which has built a business strategy around developing fixed-dose, combination drugs comprising low-cost generic compounds, has sold EU rights for MT 400, its Phase III migraine candidate, to Desitin Arzneimittel GMBH of Germany for a nominal upfront payment, modest milestone payments and potential sales royalties. In structure, the deal resembles a previous agreement the North Carolina-based firm reached last year with Johnson & Johnson unit Cilag AG for manufacturing and marketing rights to ‘400 in Brazil, Columbia, Ecuador and Peru. The pact with Desitin, which covers the 27 EU nations as well as Switzerland and Norway, calls for $3 million in pre-commercialization payments, including a $500,000 upfront. The agreement, which also stipulates double-digit royalties on net sales of ‘400 that will increase based on annual sales volume, will expire on a country-by-country basis on the 15th anniversary of the product’s first commercial sale in each market licensed to Desitin. The Cilag deal, which included an undisclosed small upfront payment, provides for expiration at 15 years after the first product sale in each market, with royalties in the high single digits for the first 10 years, then in the lower single digits for the final five. MT 400 is a proprietary combination of sumatriptan and naproxen sodium – Pozen also licenses U.S. rights to a different dose of the combination, known as Treximet, to GlaxoSmithKline.—Joseph Haas

Evotec/4-Antibody: European drug discovery platform companies Evotec AG and 4-Antibody AG have teamed up to provide collaborative antibody discovery services to Evotec’s customers. The deal will allow Hamburg-based Evotec to offer an improved early-stage antibody selection service, along with its existing high-throughput and high-content screening offering. Evotec will use 4-Antibody’s proprietary Retrocyte Display technology, a platform which allows expression and screening of antibody libraries to identify antigen-specific antibodies. The two companies will share profits from services and discoveries made under the agreement. Evotec will also pay Basel, Switzerland-based 4-Antibody a €2 million ($2.56 million) up-front access fee, although the companies said that cost will be fully reimbursable from returns under the partnership. The deal is expected to give 4-Antibody access to a wider field of customers, while improving Evotec’s antibody selection capabilities. Evotec says the agreement will allow it to better differentiate between antagonist and agonist antibodies, while improving attrition rates. – Paul Bonanos

image from flickr user alebonvini

Friday, May 04, 2012

Deals Of The Week: Tolero Introduces Itself In "Double-Jointed" Deal With MannKind



In a deal structure that perhaps could best be described as “double-jointed,” new company Tolero Pharmaceuticals has licensed exclusive worldwide rights to MannKind Corp.’s preclinical Bruton’s tyrosine kinase (BTK) inhibitor program, which Tolero believes could yield novel therapies for hematological cancers and inflammatory diseases.

MannKind, of course, is focused almost exclusively on its perennially troubled effort to develop a recombinant inhaled insulin product, Afrezza. The deal with Tolero puts development of the BTK compounds in the hands of the privately held, Utah-based biotech, but allows MannKind the ability to opt back in after Phase I if it likes what Tolero has uncovered. In the case that MannKind opts back, “bio-bucks” slated to go to MannKind under the deal would flow instead to Tolero.

“It’s a different model that we proposed and one that I think MannKind really liked,” Tolero Chairman and CEO Dallin Anderson said in an interview. “It aligned incentives and made our negotiation progress very smooth. I think us proposing a structure that de-risked the opportunity for MannKind and gave them a chance to still be involved down the road helped us with not only terms but also to get to an agreement that makes sense for both parties.”

Tolero will pay an upfront amount with the potential for development, approval and commercialization milestones going to MannKind, along with tiered royalties on any product sales. The parties did not disclose precise deal terms, but Tolero said the upfront and milestones could total $130 million. However, MannKind also retains the right to re-acquire the BTK assets at pre-specified terms up to 60 days after the conclusion of Tolero’s first Phase I study. If MannKind elects this option, it would assume all development and commercialization responsibilities and costs, with Tolero entitled to the potential earn-outs specified in the April 30 deal.

“BTK currently represents one of the most exciting therapeutic targets in oncology, and we feel that our collaborative approach to targeting BTK may uncover some novel utilities not yet fully realized,” Anderson said. Pressed for details on what those additional “utilities” might be, however, the CEO remained mum.

Much about Tolero remains unknown – founded in 2011 and based in Salt Lake City, the firm is not backed by venture capital or institutional investors. Anderson, who noted his background as having co-founded Montigen Pharmaceuticals in 2003 and then selling to SuperGen in 2006 at a significant multiple, would say only that his company is funded by a number of private investors. Its own programs, including two compounds – TP-0413 for cancer-related anemia and TP-0829 for B-cell malignancies – are slated to enter clinical development in the next year and derive from a discovery approach based upon single genetic alterations that drive cellular signaling pathway abnormalities.

Tolero also is not disclosing the specific source of its technology, although Anderson alluded to some research relationships with the academic community in Utah, specifically the University of Utah and Brigham Young University. The company’s website says it “seeks to target diseases from a pathway-centric approach by identifying and developing pathway-specific inhibitors and then identifying specific diseases (i.e., cancer subtype) and genetic backgrounds where these pathway inhibitors exhibit enhanced efficacy.”

TP-0413, which targets signaling involved in the regulation of serum iron levels, a pathway implicated in rheumatoid arthritis as well as cancer, is in advanced preclinical and IND-enabling studies, with a goal of beginning clinical development in the second half of this year. Tolero also hopes TP-0829 will move into the clinic early next year, with potential activity in non-Hodgkin lymphoma, chronic lymphocytic leukemia and multiple myeloma.

Elsewhere, it was a typically busy week on the biopharma deal-making front – let’s get caught up with the latest round-up of:


Sandoz/Fougera: Novartis' generics unit, Sandoz, announced May 2 that it will be acquiring Melville, N.Y.-based Fougera Pharmaceuticals in an all-cash transaction worth $1.53 billion that is expected to close some time in the second half of 2012. Fougera, which produced sales of about $430 million in 2011 and has about 700 employees, will make Sandoz the largest manufacturer of generic dermatology products in the world. For Sandoz, the acquisition was “a strategic bolt-on with synergy potential,” said Jeff George, global group head, in an interview. According to Sandoz, once the acquisition is complete, the generic dermatology unit will take in about $620 million in sales globally, with most of that coming from the U.S. On the worldwide market, the company will compete with the likes of Watson Pharmaceuticals, Mylan, Sanofi and Teva Pharmaceutical Industries. Fougera, previously Nycomed US Inc., was the dermatology business of Swiss-based Nycomed Pharma AS before it was acquired by Takeda Pharmaceutical for $13.6 billion in 2011. Takeda decided to pass on the U.S.-based part of the business because it lacked expertise in dermatology and was uninterested in building out the assets. Since the Takeda takeover, Fougera has remained the asset of private investors – Nordic Capital, DLJ Merchant Banking (a Credit Suisse Group affiliate) and Avista Capital Partners. The acquisition by Sandoz gives those investors a good return with a multiple of about 8.8 times the company’s 2011 earnings before interest, taxes, depreciation and amortization (EBITDA) of $173 million. – Lisa LaMotta

Abbott/Action Pharma/Zealand: Abbott Laboratories boosted the renal pipeline of its soon-to-be-separate pharma division AbbVie by acquiring worldwide rights to Action Pharma’s AP214, a Phase IIb drug designed to treat acute kidney injury that can occur during cardiac surgery. Unlike most licensing deals for pipeline assets, Abbott obtained rights to the drug for a single payment, a $110 million cash transaction that won’t be followed by milestone or royalty payments. (Abbott has made this type of bet at least once before, paying PanGenetics $170 million upfront for a Phase II anti-NGF asset in 2009. Yet there’s one complicating factor: Denmark-based Action had developed the drug using structural peptide technology licensed from Zealand Pharma, another Danish company. In the new arrangement, Action rather than Abbott will pay Zealand DKK 62 million ($11 million), and Zealand is due a royalty in the low single digits if Abbott commercializes the drug. The old agreement between Action and Zealand has been terminated. Abbott will begin a second Phase IIb study on the drug this fall. No treatment has yet been approved for acute kidney injury in patients who have undergone cardiac surgery. Abbott already holds ex-U.S. rights to Phase III chronic kidney disease candidate bardoxolone, licensed in September 2010 from Reata Pharmaceuticals, as well as atrasentan, an internally developed Phase II endothelin-receptor antagonist in diabetic kidney disease. – Paul Bonanos


AstraZeneca/Axerion: AstraZeneca’s new virtual neuroscience drug discovery and development unit reached its first partnership agreement May 1, with a licensing and co-development pact centered on preclinical antibodies for Alzheimer’s disease discovered by Axerion Therapeutics. No financial terms were revealed, but Axerion will receive an upfront payment and research and development funding and be eligible to earn milestones and sales royalties if any compound reaches market. The New Haven, Conn., biotech will work with MedImmune, the biologics subsidiary of AstraZeneca, to optimize and develop antibodies that block the binding of amyloid-beta oligomer to cellular prion protein (PrP-C) in the brain. MedImmune has bought into Axerion’s program, in-licensed from Yale, in the hope that this approach could yield a disease-modifying therapy for one of the most challenging indications currently targeted in drug development. The Axerion partnership is AstraZeneca’s first since it announced plans during a quarterly earnings call Feb. 2 to streamline much of its R&D function, including going to a virtual model in neuroscience. At the time, R&D President Martin Mackay said the pharma’s goal was a “leaner, simpler, more innovative organization with a lower and more flexible cost base.” – Joseph Haas

Merck/Trevena: Pennsylvania-based Trevena announced May 2 that Merck & Co. will be the latest company to utilize its G-protein coupled receptor (GPCR) biased ligand platform. The company hopes to identify ligands that turn on only some biological responses, instead of a whole variety of biological responses, by using what it terms "biased ligands.” The company said that Merck, through a subsidiary, has signed on to use the technology to research biased ligands against an undisclosed receptor. Financial details of the transaction were not disclosed. Trevena, which raised a $35 million Series B round in 2010, has other research under way, including its mid-stage lead compound, a drug meant to treat acute heart failure called TRV120027. GPCRs are protein structures that wind across the cell wall, crossing the cell membrane seven times, and common drug targets. When a ligand binds to a GPCR's extracellular part, it triggers a response inside the cell. – LL

Gilead/AnaptysBio: On the heels of inking a partnership with Celgene in April, AnaptysBio has signed a fifth major pharma partner for its antibody discovery platform. This time, it is Gilead Sciences that wants access to AnaptysBio’s SHM-XEL platform for antibody discovery. The companies announced a partnership to develop novel antibody therapeutics May 1. Gilead will pay an undisclosed upfront fee and pay development milestones and royalties on sales of any drugs that emerge from the partnership. AnaptysBio’s technology platform uses the natural biological process by which antibodies are generated, somatic hypermutation (SHM); the company claims its technology can create antibodies with different antigen-binding regions and better binding affinities. Its other pharma partners include Merck, Roche and Novartis. – Jessica Merrill

Hologic/Gen-Probe: Women’s health-focused Hologic, a developer and supplier of diagnostics, imaging and surgical products, is buying molecular diagnostics provider Gen-Probe for $3.7 billion in cash, to be paid for largely by taking on debt. Adding Gen-Probe’s automated instrument platforms gives Hologic critical mass in the molecular diagnostics market. Hologic already owns a molecular diagnostics platform: the Invader technology it acquired when it bought Third Wave Technologies for $580 million in 2008. That gave Hologic an entrĂ©e into the molecular testing space, including its own HPV test – a broadening of Hologic’s core focus in women’s health, which includes mammography and, via its merger with Cytyc Corp. in 2007, cervical and breast cancer diagnostics. Gen-Probe gives the company the automation and menu to grow the diagnostics market more quickly – by implication, something that the Third Wave acquisition failed to do. A buyout of Gen-Probe has been in the air since April 2011, when the company reportedly retained Morgan Stanley seeking a buyer. What’s unclear is why Hologic made its move now. There’s speculation that the deal foreshadows a weakness in Hologic’s business. “Based on their forward-looking diligence [statements], that does not appear to be the case,” says Piper Jaffray analyst Bill Quirk. Clinical adoption of new Hologic’s tomosynthesis breast-imaging platform appears to be keeping pace with expectations. It brought on the Gen-Probe business as “one of the elements in building diagnostics so that it performs like [the] breast health [business], not so that it makes up for [it],” Hologic CEO Robert Cascella told investors. Post-acquisition, 50% of Hologic’s revenues will be in diagnostics, 38% in women’s imaging and 12% in surgical. – Mark Ratner

Royalty Pharma/Fumapharm – Royalty Pharma announced May 2 that it acquired an interest in the earn-outs payable to former shareholders of Fumapharm, which includes an interest in Biogen Idec’s multiple sclerosis candidate BG-12, for $761 million in cash. Based in New York, Royalty Pharma says it is the industry leader in acquiring royalty interests in approved and late-stage pharmaceuticals, including interests in Abbott’s Humira (adalimumab), Pfizer’s Lyrica (pregabalin) and Genentech’s Rituxan (rituximab). Biogen bought out Fumapharm in 2006 for $215.5 million and with it the German company’s lead product, psoriasis drug Fumaderm (fumaric acid esters) as well as BG-12. In April, Biogen announced positive data from the Phase III CONFIRM trial, its second pivotal study in relapsing-remitting MS. The compound was filed for approval in RRMS at FDA in February and with the European Medicines Agency in March. – JAH

Image courtesy of Wikimedia Commons

Financings of the Fortnight Says If It Floats Like A Duck...

The biotech IPO trickle continues, with Supernus Pharmaceuticals debuting its shares May 1 and raising $50 million for its drug reformulation programs. It was a third less than the company had hoped for when it freshened up its nearly forgotten S-1 and decided last month to make a lunge for the window. It’s the seventh biopharma to debut this year – five in the US, two in France (France? Mais oui) – and folks are wondering if the opening will expand.

We would never suggest that one deal, especially one as delayed and discounted, should stand for larger trends without putting it in context. Supernus raised $49 million from private investors (with well over $100 million more raised through non-dilutive royalty deals) and a $50 million IPO. Its immediate post-IPO valuation of $120 million translates into a 1.4x step-up, about in line with the typical biopharma IPO in the post-crash era – starting in 2009, that is.

In the same time period, we found pre-IPO terms for 44 US and foreign biopharmas that eventually went public. They wanted on average to sell shares at $14.50 each (we’ve used the midpoint of initial proposed price ranges, and we’ve converted foreign currencies to dollars). Their actual average IPO price: $11.69, or a 20% discount. (Supernus: A 62% discount, from $13 to $5.)

We found the proposed number of shares to sell for 39 companies. On average they wanted to sell 6.7 million. They actually sold an average of 8.2 million, or 22% more shares than first expected. (Supernus: twice as many shares sold than expected, from 5 million to 10 million.)

In other words, with a big haircut and dilution, Supernus is a lot like its post-recession peers, but more so. There’s another resemblance: It had to sell a good chunk of its IPO shares to existing shareholders. Lead VCs New Enterprise Associates, Abingworth, and OrbiMed Advisors ponied up $33 million – a whopping two thirds of the issue. (With insiders like that, who needs outsiders?) We noted it a couple months ago: insider participation isn’t necessarily a bad omen for post-IPO stock performance. And VCs taking companies public these days know the extra outlay is likely, even necessary to get the deal done.  As Clovis Oncology CEO Pat Mahaffy, who has now taken three biotechs public, said at a conference this week of Clovis’s late 2011 successful IPO, “It would have been hard to pull off without insider participation.” It’s now the new normal, says Mahaffy.

As of this writing Supernus is up $1.06 a few days past its debut, a 21% bump. Its backers, new and old, can only hope that over time it continues to resemble its 2012 peers in post-IPO performance. As a class, they’re up 15% post-IPO (as of the April 30 closing bell), and the class of 2011 is slightly better than that at 19%. For a lot more on IPO performance since 2009, look for START-UP Magazine’s next Valuation Watch. For the choicest biotech financing morsels, stick with…


Argos Therapeutics: Once a candidate for an IPO, Argos has turned to insiders for a $25 million Series D round to support Phase III trials on its treatment for metastatic renal cell carcinoma. It’s been an up-and-down year for Argos, which readied its story for retail investors last July but cancelled the offering in March, and instead returned to existing shareholders for cash. Like publicly traded Dendreon, Argos has a personalized cancer treatment in which tumor cells are modified and infused back into the patient to provoke a tumor-specific immune response. But Argos’ timing could hardly have been worse: Days after filing its prospectus, Dendreon shares lost almost two thirds of their value as questions about uptake, reimbursement and demand arose about Provenge (sipuleucel-T). With just $2 million in the bank at year’s end, Argos held hope for a $66 million listing until late winter before scuttling the offering eight weeks ago. “Public investors would like to put companies in boxes,” Argos CEO Jeff Abbey told our Pink Sheet colleagues. “It makes it hard to differentiate ourselves, although our technology is totally different.” Forbion Capital led the new round, and insiders TVM Capital, Lumira Capital, Intersouth Partners, Caisse de depot et placement du Quebec, Morningside Group and Aurora Funds contributed the balance, bringing Argos’ total funding to $114 million since 1997. With $75 million budgeted to spend through 2015, Argos will need more capital from a partnership, private round or IPO during the interim. -- Paul Bonanos

Telstar Pharma: Astellas Pharma has gotten into the asset-financing game with Telstar, a virtual company formed around an ulcerative colitis treatment spun out by Astellas. The compound, ASP3291, was actually outlicensed to Drais Pharmaceuticals, a New Jersey firm whose cofounders, Donna Tempel and Robert Desjardins, were US senior management at one of Astellas’ predecessors. Tempel and Desjardins went on to form AkaRx with backing from Astellas Venture Management, an investment that brought one of the most lucrative returns in recent biotech memory. Drais is paying an undisclosed upfront fee and royalties on future sales to Astellas for ASP3291. Astellas’ venture arm has contributed a minor stake, less than 20%, of Telstar’s $14 million initial financing round, and parent company Astellas has various rights to the compound: the right of first refusal for the Japanese market, the right of first exclusive negotiation for any future partnering for the compound, and non-exclusive negotiations for ex-Japan markets. By depositing ASP3291 in a corporate entity separate from Drais, it should prove a cleaner exit – and faster return – if the compound succeeds in an upcoming Phase IIa trial. Telstar’s lead investors, InterWest Partners and Sutter Hill Ventures, are also investors in Drais. Astellas said it was considering a similar deal with Drais for a compound in a different, undisclosed therapeutic area. -- Daniel Poppy

Castlight Health: In its second large venture funding in two years, health care shopping pioneer Castlight Health has raised a $100 million Series D round that it says it will use to grow its commercial team and add features to its product. Announced May 1, the round was led by T. Rowe Price, Redmile Group and two major unnamed mutual funds, as well as prior investors. Founded in 2008 as Ventana Health Services, Castlight is a Web-based service that enables customers’ employees to compare out-of-pocket costs for procedures such as colonoscopies, X-rays and MRIs. In 2010, the company raised a $60 million Series C, led by non-venture backers the Cleveland Clinic and Wellcome Trust, as well as VCs such as Venrock Associates, Oak Investment Partners and Maverick Capital. The D round more than doubles Castlight’s total cash raised to $181 million. Last year, Castlight announced a 250% increase in revenue over 2010. Chief marketing officer Peter Isaacson would not detail the company’s 2011 performance, but noted that its customer base and revenue are growing “very quickly,” with many new clients being Fortune 100-sized firms. With so many companies still offering employees health care coverage, one of Castlight’s biggest challenges is determining which potential customers to target, he added. -- Joseph Haas

Transcept Pharmaceuticals: Five months after the eye-opening FDA approval of its sleep aid Intermezzo (a reformulated zolpidem, a.k.a. generic Ambien) Transcept has sold 9 million shares at $4.50 a piece in a public offering to raise $37.6 million net of expenses, not including a possible overallotment sale. Many observers had written off Transcept after the FDA gave the company a second thumbs-down in mid-2011, nearly three years after the firm originally submitted its NDA to the feds for Intermezzo, which is designed to help people fall back asleep after waking in the middle of the night. Transcept is relying on sales by US marketing partner Purdue Pharma to bring in revenue, and the marketer launched the drug last month. Transcept has earned a $10 million fee from Purdue and can draw an additional $80 million, plus royalties. The company, which went public in early 2009 through a reverse merger with Novacea, will use the new proceeds to help develop TO-2061, a low-dose version of ondansetron for obsessive-compulsive disorder. The compound has been used for twenty years to combat the nausea and vomiting caused by chemotherapy, radiation and surgery. The 4.5 million shares offered increase the outstanding share pool by 32%, with 675,000 reserved for the underwriter over-allotment. -- Alex Lash

Photo courtesy of flickrer jamiejohndavies.