Friday, July 27, 2012

While Awaiting New CEO, AstraZeneca Already Busy On The Business Development Front

Every player in big pharma is facing a patent cliff to some extent, but while some are dealing with their losses through diversification or a targeted approach to deal-making activity, it is unclear what direction AstraZeneca, the pure-play pharma among the giants, will take now that Seroquel IR (quetiapine) is off-patent, to be followed soon enough by Crestor (rosuvastatin).

A good portion of this uncertainty stems from the vacancy in the chief executive’s office. CFO Simon Lowth has been serving as acting CEO since predecessor David Brennan stepped down June 1 under a plan announced during the Anglo/Swedish pharma’s first quarter earnings call in April. The second quarter review occurred July 26, but while the impacts of patent expiries to top-selling AstraZeneca products are becoming clear, with a new permanent CEO not selected yet, the company’s strategy going forward remains a source of much speculation.

AstraZeneca focused largely on recent launches and late-stage pipeline prospects during the call, while Brennan’s successor was not discussed and current executives did not offer much new in the way of corporate strategy for the near term. In talking up its pipeline, AstraZeneca said it has 90 candidates in clinical development, although it counts seven drugs in the approval and launch stage among that number – an instance of trying to have its cake and eat it too?

Still, an 83-candidate pipeline is nothing to sneeze at, although Wall Street generally does not enthuse about AstraZeneca’s internal R&D. Instead, citing Leerink Swann analyst Seamus Fernandez as an example, the call is for significant M&A to yield a new future for AstraZeneca. In his July 26 note reiterating a “market perform” rating for AstraZeneca’s shares despite an 18% year-over-year decline in revenues, Fernandez re-issued an earlier call for “aggressive” M&A activity.

“We continue to believe the most realistic path forward for AstraZeneca is a more aggressive M&A strategy … but if current trends continue, additional and likely substantial restructuring may be necessary to sustain profitability necessary to deliver on the company’s “balanced” capital allocation strategy,” he wrote.

On May 31, on the cusp of Brennan’s departure, Fernandez opined that an “increased reliance on international sales growth from Japan and the emerging markets” would not be sufficient to overcome a precipitous revenue decline in the U.S. Indeed, AstraZeneca reported emerging markets revenue growth of just 1% during the second quarter, the same growth as during the first quarter, but attributed the lackluster pace to supply-chain issues stemming from new IT snags at a manufacturing site in Sweden. But for those weak links, the chain would have produced 8% growth in emerging market sales during the quarter, AstraZeneca execs claimed.

Still, there has been a clamor for growth-by-acquisition. And in a year that has seen plenty of biopharma M&A already, AstraZeneca has contributed its share of deals.

It teamed up with Bristol-Myers Squibb earlier this month to buy Amylin Pharmaceuticals for a whopping $7 billion. While Bristol is the actual buyer, AstraZeneca will send Bristol $3.4 billion after the deal goes through, almost half the purchase price, and then the two pharmas will use Amylin’s Byetta (exenatide) and Bydureon (exenatide extended-release) to bolster their combined diabetes portfolio.

In fact, it seems only accurate to describe AstraZeneca’s business development approach as aggressive already, even if it let Bristol take the lead in the Amylin buyout. Just since April, AstraZeneca has participated in eight deals, highlighted by a $1.27 billion purchase of Ardea Biosciences centered around gout candidate lesinurad. During that period, the pharma also has signed partnerships and licensing agreements with Cellworks Group, Link Medicine, Axerion Therapeutics, Amgen and The Medicines Co.

During the July 26 call, Lowth and President, R&D, Martin Mackay indicated that those deals should be seen as part of an ongoing business development strategy the AstraZeneca will continue to pursue. While Mackay focused on open innovation and numerous R&D tie-ups with partners of all sizes, Lowth said the company is pleased with the three significant deals it has completed (Ardea, Amgen, Amylin) this year, adding “there’s a whole host business developments and collaborations going on across research and development.”

Whether a new, permanent CEO – be it Lowth, Mackay or someone from outside the organization – will bring a new direction is unknown, but it is fair to say that AstraZeneca already is pursuing an active and hectic business development course. – Joseph Haas

Now, here is our weekly look at other developments in the world of biopharma deal-making …

Merck/Chimerix and Merck/Yamasa: The marketer of billion-dollar HIV drug Isentress (raltegravir), Merck & Co., struck two July 24 deals to bolster its pipeline of compounds that fight the same virus. Merck paid $17.5 million upfront to privately held Chimerix for worldwide rights to the Phase I drug CMX157, a lipid-antiviral conjugate designed to deliver the antiviral compound tenofovir to cells in high concentrations with reduced systemic effects. Milestones could add $151 million to the deal’s value, and Merck would pay Chimerix royalties if the drug is approved. CMX157 also is thought to hold promise in treating hepatitis B virus. Research Triangle Park, N.C.-based Chimerix, which has raised $101 million from venture investors, expects to put the funds toward trials on CMX101, a broad-spectrum antiviral soon to enter a Phase III study for cytomegalovirus. Separately, Merck partnered with Japan’s Yamasa Corp. in a deal of undisclosed size that gives it global rights to EFdA (4-ethynyl-2-fluoro-2-deoxyadenosine), a nucleoside reverse transcriptase inhibitor that has shown efficacy against highly resistant strains of HIV. Merck also said it would begin a Phase IIb trial on one of its own HIV pipeline drugs, MK-1439. – Paul Bonanos

Boehringer Ingelheim/Funxional: Boehringer Ingelheim is expanding its respiratory drug pipeline with the acquisition of a novel oral small molecule anti-inflammatory drug developed by Funxional Therapeutics. The companies announced a deal July 23 in which BI will acquire Funxional’s lead candidate, FX125L, a potential first-in-class somatotaxin and back up compounds for an undisclosed amount. Respiratory disease is one of BI’s core therapeutic areas; the company markets the inhaled blockbuster Spiriva (tiotropium bromide) for chronic obstructive pulmonary disease and has several respiratory drugs in late-stage development, including tiotropium for asthma and nintedanib for idiopathic pulmonary fibrosis. The addition of FX125L will give BI a first-in-class asset in a novel pathway that acts through the type-2 somatotaxin receptor (sstr2). As an oral drug, the market opportunity for FX125L could be significant given that inhaled drugs dominate the respiratory landscape. But few details are known about the drug’s clinical safety and efficacy so far. Funxional’s CEO Geoff Race said that in addition to offering the best terms, BI also had the pedigree and track record in respiratory disease that Funxional’s investors were looking for. “It is not just the initial payment that is important. It is the probability of getting the product to market that is also important,” he said. “We were pleased to have a partner like BI who we felt had the financial resources as well as the technical resources to take this product to the market.” Since its somatotaxin portfolio was essentially Funxional’s only program, the deal provides an exit for the biotech’s backers Index Ventures, Novo AS and Ventech. But Funxional may not vanish; it’s already evaluating its other earlier-stage technologies. “We are thinking about which one goes into the pipe,” Race said.” “We will take a little bit of time to think about that and start research programs later in the year.” – Jessica Merrill

Roche/AREVA: Roche and AREVA Med, a French biopharma specializing in the development of radioactive isotopes for therapeutic use, announced on July 27 that they will collaborate on a novel alpha radio-immunotherapeutic platform to focus on high-unmet need cancers. No terms were disclosed. Together, they will assess the efficacy of combining Roche’s engineered antibodies with AREVA Med’s radionuclide, Lead-212, a compound that shows promise in treating some types of cancer. Alpha radiation consists of fast-moving, high-energy helium atoms which, because of their large size, are easily stopped by a light, relatively insubstantial barrier such as a few inches of air or a piece of paper. Therefore, alpha radiation travels only short distances in human tissue. This mean that its energy is absorbed in a smaller area for improved cell death with little damage to healthy tissue. By targeting cancer cells with highly specific antibodies combined with Lead-212, there is an opportunity to more precisely irradiate and kill cancerous cells. In 2011, AREVA Med acquired Macrocyclics, a leader in metal chelators, which also will  participate in the collaboration with Roche. AREVA Med is associated with the National Cancer Institute (NCI), the University of Alabama at Birmingham (UAB) and the French National Institute of Health and Medical Research (Inserm). – Michael Goodman

Photo credit: (AZN's R&D location, Molndal, Sweden) Wikimedia Commons

Thursday, July 26, 2012

Financings of the Fortnight Has Its Eyes On the A's

Our sister publication START-UP starts up every new year with The A-List, a review of the previous year’s Series A life-science financings, which we feel are an excellent proxy for gauging investor enthusiasm for new biomedical ventures and measuring the shifts in what’s getting funded, and who’s doing the funding. 

But we can’t wait for the end of the year to peek, so we’ve tallied year-to-date Series A financings using Elsevier’s Strategic Transactions. (Two weeks ago, we did the same with follow-on public financing.) The top-line result: In dollar terms, we’re on pace to equal 2010, a particularly glum year with $876 million total raised in Series A money. To match last year’s modest rebound of $1.1 billion raised, Series A funding must pick up with alacrity, a trend that’s hard to imagine as the Euro crisis continues to bubble and the U.S. loses its economic momentum from the spring. 

Here are the numbers: In the first half of 2012, 33 Series As across the biopharma, device, and diagnostic industries totaled $423 million. The majority of the first half’s total comes from the biopharma sector, mainly US and European companies. (24 financings, $345 million.) That’s just $30 million fewer raised than in the first six months of 2011 from the exact same number of transactions. So it’s fair to say biopharma isn’t lagging as much as the device sector. Still, biopharma numbers to date are not on track to reach the full-year 2011 biopharma figure of $887 million from 63 deals.

The average fundraise in the first half is $15.1 million, slightly higher than 2011’s full year tally of $14.1 million. But wait: the higher total is, ahem, warped by Warp Drive Bio’s $125 million investment from Third Rock Ventures, Sanofi, and Greylock Partners in January. Warp Drive is researching the medicinal properties of naturally occurring microbes with R&D support from Sanofi through a separate collaboration. It’s one of the most intriguing deals of the year so far, not just for the cash considerations, but for the unusual structure that gives Sanofi a nonexclusive option to acquire Warp Drive if certain milestones are achieved. At the same time, Warp Drive has the right to force a sale of the company if other milestones are met. It’s a brave new world when Series A-funded companies and their investors are locking in future acquirers. 

We’re also seeing a lot of solo Series As, a sign that the VC shakeout has left fewer viable syndicate partners for early-stage deals. Ten Series As were solo-backed, and the largest was Third Rock’s $41 million infusion into Global Blood Therapeutics, a firm developing candidates that alter key blood proteins, with an initial target in sickle cell disease. Third Rock is no stranger to solo A-rounds, notching SAGE Therapeutics, Blueprint Medicines, and Lotus Tissue Repair in 2011.

But the Boston and San Francisco firm also knows that good syndicates are hard to find: it joined Bessemer Venture Partners and Frazier Healthcare in a $10 million financing for Alcresta, which is working on a nutritional supplement that contains more digestible and absorbable forms of long-chain polyunsaturated fatty acids. Alcresta was the syndicate’s third go-round together, all with the same management team. The same phenomenon cropped up this year with the investment trio of Astellas Venture Management, InterWest Partners and Sutter Hill Ventures, who are now on their fourth venture together. It’s not rocket science for people who’ve made money together to revisit the formula, but the reduced pool of investors makes it all the more likely.

While oncology and peripheral vascular disease start-ups dominated the 2011 biopharma Series As, Series As the past six months were focused mainly on neurology, gastrointestinal, musculoskeletal, and metabolic disorder companies, which together made up 40% of the financing. Neurology led with seven financings bringing in $64 million, or 17% of the first-half dollar total and nearly a third of the deals. Four GI-related financings followed, while metabolic and musculoskeletal players had three deals apiece.

Biopharma Series A's By Therapeutic Category, January-June 2012
Note: The total number of deals is greater than 24 as several financings involve companies in multiple therapeutic areas.
SOURCE: Elsevier’s Strategic Transactions

Even though CNS start-up Cerecor’s $22.5 million round was shy of the $30 million raise the company had forecasted a year ago, the transaction topped the list as highest raise in CNS and third-largest Series A in the first half of 2012. Counting the second half of 2011, we’ve now seen 16 A-round neurology deals the past year, which perhaps holds counterbalance to Big Pharma’s well-documented exit from the CNS space.

On the device side, six Series A rounds raised $49 million. The dollars and number of deals lag the full-year 2011 total of $151 million raised in 24 transactions. In vitro diagnostics have tallied $27 million in three deals, slightly better than the 2011 pace, which finished with $48 million from 10 transactions. It’s worth noting that corporate venture played a role in three of the  biggest device and diagnostic Series As. Merck Serono Ventures along with KPCB and TPG took part in the first tranche of the Series A raise for Auxogyn, a company focused on infertility assessment using noninvasive devices that determine embryo viability. Novartis Ventures Fund led a $12.5 million first round for ImaginAb, with participation from Merieux Developpement (bioMerieux’s venture arm) and other investors. ImaginAb is developing engineered antibody fragments for diagnostic imaging, initially in cardiovascular diseases. And the molecular diagnostics company Xagenic pulled in $10 million in a  January round that included Dutch diagnostic giant Qiagen.

Now if you'll excuse us, we're shifting our attention away from data dives and toward springboard and platform dives. But first, many thanks to the Olympian effort of Amanda Micklus and Maureen Riordan for this week's column. It's time to raise the torch for another edition of...

California Institute for Regenerative Medicine: California's state agency that funds stem-cell and other regenerative medicine R&D announced July 26 $150 million in grants for translational projects that are expected to file an IND or complete an early-stage clinical trial within four years. Only one of the awards goes to a for-profit entity, the San Francisco Bay Area firm StemCells Inc., which wants to use stem cells to treat spinal cord injuries in the neck both in patients with new injuries and in patients who have been paralyzed for months or years. The other six awards are going to academic or institutional researchers and range from $14 million to $20 million per project. The lack of private sector recipients underscores the challenges of turning stem-cell-related research into product candidates. Three years ago, CIRM handed out $225 million in grants to move 14 preclinical projects toward the clinic; only one of the 14 was based at a for-profit company. -- Alex Lash

Bluebird Bio: Once an area that drew great skepticism, gene therapy is now drawing big money. Cambridge, Mass.-based start-up Bluebird Bio raised its third big round of funding since the beginning of 2010, tapping a diverse syndicate of investors for $60 million in Series D money that will support ongoing trials of gene therapies for rare diseases. It comes just as European regulators have approved the first gene therapy product in Europe, another strong sign of the advances the field has made the past decade. The Bluebird deal includes contributions from public and private growth investors Deerfield Partners and RA Capital, hedge fund operator Ramius Capital Group, and two unnamed public investment funds, as well as strategic backer Shire. They join returning venture firms ARCH Venture Partners, Third Rock Ventures, TVM Capital, and Forbion Capital Partners. Bluebird Bio raised $35 million in a Series B round in early 2010, then was slated to take $30 million in two tranches of Series C capital in an April 2011 agreement. The startup, however, held a call option which it never exercised on the second tranche; its VCs instead put that $15 million into the Series D round at a higher price, according to Bluebird CEO Nick Leschly. The firm plans to conduct a Phase II/III study of a treatment for childhood cerebral adrenoleukodystrophy and a Phase I/II study of a beta-thalassemia and sickle-cell disease therapy. Both are built on Bluebird’s lentiviral technology, in which a patient’s own bone marrow stem cells are genetically modified and returned to the patient, potentially obviating the need for a transplant. – Paul Bonanos

Alimera Sciences: The publicly-traded ophthalmic company said July 18 it has grossed $40 million in a sale of preferred shares to Palo Alto Investors, Sofinnova Ventures, and New Enterprise Associates. The trio gets 1 million preferred shares and warrants to buy 300,000 more, with each preferred share convertible into 13.75 common shares. Investors can trigger a conversion at will, outside of a lockup period and other constraints. The preferred shares entitle their holders to dividends and other distributions pro rata with the common stock, as well as unspecified downside protection. The shares can also convert to common if Alimera’s lead product gains regulatory approval or if Alimera raises additional equity at predefined share prices, Sofinnova partner Garheng Kong told the IN VIVO Blog. Kong was among Alimera’s original investors at Intersouth Partners and is now one of the partners investing Sofinnova’s new $440 million life-sciences-only fund, up to 25% of which could go toward positions in public biotech companies, Kong said. (Alimera is the fourth investment from the fund.) Alimera’s lead product is Iluvien, an eye implant that delivers drug up to 36 months to treat vision loss associated with diabetic retinopathy. It is approved in France, Austria, Portugal, the U.K., and of this week, Germany. The US FDA asked for more clinical data last November, the second time it has issued a complete response letter for Iluvien. No new PDUFA date has been disclosed. The private stock sale must be approved by a majority of common stockholders; as of July 17, holders with 56% of the common stock had agreed to vote in favor, according to Alimera. – A.L.

Durata Therapeutics: With a handful of biotechs knocking on the IPO window this fortnight, only one as of this writing has gotten through. Antibiotic developer Durata on July 18 raised $68 million by selling 7.5 million shares at $9 each. The firm missed its original goal of $75 million by pricing below the intended $11 to $13 per share range, but it sold more shares to bridge part of the gap. Existing investors Domain Associates, New Leaf Ventures, Aisling Capital, Sofinnova Ventures and Canaan Partners agreed to buy 3.8 million shares, more than 50% of the offering, to get the deal done. That’s par for the course these days. It’s rare for a biotech to go public without insider participation, as we detailed in February. Nothing’s changed since then. If biotech backers want to reach liquidity, they’ll more than likely need to help get the glass half-full. Investors are adding not subtracting Durata shares, but their holding times to date have been relatively short. Durata was founded less than three years ago from the ashes of Pfizer’s nearly $2 billion acquisition of Vicuron Pharmaceuticals. In Pfizer’s hands, one of Vicuron’s main products, the antibiotic dalbavancin for skin and soft-tissue infections, received three rejections from the FDA. But with the agency rolling out new regulatory guidelines for certain antibiotics, Durata feels it can do it right this time and recoup the rewards of bringing a once-weekly intravenous gram-positive antibiotic to market. It is currently conducting two Phase III trials. BofA Merrill Lynch and Credit Suisse led the underwriting team, which has the option to buy 1.1 million additional shares for 30 days following the IPO. – A.L.

CoDa Therapeutics: The San Diego wound-healing firm is the first to benefit from venture firm Domain Associates’ new strategic alliance with the Russian sovereign fund Rusnano. On July 24, Domain said CoDa has completed a $40 million Series B financing, with contributions split equally between Rusnano and a Domain-led syndicate of CoDa’s current investors. These include the Australian VC firm GBS Ventures and the New Zealand firm BioPacific Ventures. Domain and Rusnano said in March they were each committing up to $330 million over the next three to five years to fund Domain portfolio companies. CoDa came first because it needed financing, according to Domain partner Brian Dovey. It is in Phase IIb trials for a wound-healing compound aimed at venous leg ulcers and in Phase II trials for the same compound for treatment of diabetic foot ulcers. Domain companies that receive Rusnano funds are obligated to license exclusive rights to sell their products in Russia and the CIS regions to NovaMedica, a new Russian company that Rusnano and Domain are spending up to $190 million to create. The partners claim it will be Russia’s first fully integrated, innovative domestic drug firm, and will be structured as a joint venture between Rusnano and Domain. As a condition of its Series B financing, CoDa has licensed exclusive rights to its lead product and related technologies in Russia and the CIS to the new company, in exchange for undisclosed royalties on sales. Domain is one of several U.S. life sciences venture capital firms that are working with Rusnano, a five-year-old $10 billion sovereign fund charged with helping Russia jumpstart domestic high-tech industries, and as profiled this spring in START-UP's Capital Matters column, it has been aggressive making investments in Western biotech, both directly and through other funds such as Domain and Burrill & Co.  – Wendy Diller

Photo courtesy of the International Olympic Committee.

Friday, July 20, 2012

Deals Of The Week Brings It All Back Home

As a great man once said, there’s no success like failure, and failure’s no success at all. For Infinity Pharmaceuticals, the failure of one drug means it will have to seek success with another lead candidate – and it’s planning to do that alone, rather than with a longtime partner.

Infinity announced July 18 that it had taken back global rights to a key cancer drug by restructuring an existing alliance with Purdue Pharma LP and its European affiliate Mundipharma International Ltd., which had previously obtained rights to all of Infinity’s early-stage oncology programs in a 2008 arrangement. The renewed focus on that drug comes a month after Infinity said it would suspend a Phase II trial on saridegib, a cancer drug that was apparently performing no better than placebo, according to interim data. Saridegib was also covered under the same partnership.

Infinity now takes full control of a phosphoinositide-3-kinase (PI3K) inhibitor known as IPI-145, which has been through a Phase I study and is slated to enter an expansion cohort, as well as mid-stage trials for asthma and rheumatoid arthritis. Also transferred were rights to a fatty acid amide hydrolase program and other early discovery projects. Initially, Purdue and Mundipharma had sought greater control over the oncology compounds, according to Infinity CEO Adelene Perkins. But Infinity was unwilling to part with additional rights, and instead took back worldwide rights to the programs.

Perkins said the company will attempt to build value on its own, using cash from the restructured deal, before it considers partnering the programs again. But now that it’s less encumbered by alliances, Infinity could become a takeout target too. (As we’ve noted before, a clean target can be especially ripe for picking. Speculation arose last fall that Amylin would soon be bought, shortly after it recovered full rights to exenatide from Lilly. Within months, Bristol-Myers Squibb and AstraZeneca paid $7 billion to acquire Amylin, valuing it far higher than its trading price before the partnership dissolved.)

Under the newly rearranged agreement, Purdue and Mundipharma will take a larger equity stake in Infinity. Purdue will buy 1.8 million shares of its common stock for $14.50 a share, or $27.5 million. Infinity also will issue another 3.5 million shares at the same per share price to Purdue to pay off the remainder of a $50 million line of credit that Purdue issued in 2009. The investment will give Purdue a 28% stake in the company, up from its previous 22.5% share. The original contract stipulates that Purdue cannot own more than 33.3% of the company. Infinity also will pay Mundipharma a royalty on sales of any future products that were once part of the agreement ranging from 1% to 4%.

Who's in the basement, mixing up the medicine? Why, it's...

Express Scripts/ Walgreens: Walgreens will rejoin Express Script's pharmacy networks beginning Sept. 15 under the terms of a “multi-year” contract announced July 19. Although the companies did not disclose contract specifics, the announcement states that Walgreens’ 7,900 stores will participate in the “broadest” Express Scripts retail pharmacy network available to new and existing clients. With Walgreens, that network includes more than 64,000 pharmacies nationwide. The resolution must be reassuring to drug companies concerned about broad access to their drugs, even though it is unlikely that they lost much in sales because of the dispute, since competitors were ready to fill Walgreen’s shoes.

Walgreens withdrew from Express Scripts’ retail pharmacy network in January. In financial presentations preceding Walgreens’ exit, Express Scripts and rival PBM CVS Caremark both predicted the development would lead to a greater acceptance of narrower pharmacy networks among payers. Payers have typically opted for broad pharmacy networks as a convenience to members even though they are more expensive. It remains to be seen whether payers will actively choose a more restrictive network in the interest of controlling costs once Walgreens has rejoined the Express Scripts mix. Addressing the question in an email, an Express Scripts spokesman said, “we wouldn’t speculate on any future transitions, but we have had strong interest from clients” in narrower networks.

For Walgreens, the financial impact of its dispute with Express Scripts has been significant. Express Scripts processed approximately 88 million prescriptions filled by Walgreens in fiscal 2011, representing approximately $5.3 billion of the drug chain’s net sales. In a financial report filed July 12, Walgreens estimated that since it left the Express Scripts network, it has retained, on an annualized basis, only 15% of the 2011 prescriptions processed by the PBM.Adding even more pressure on Walgreens to reach an agreement was the prospect of losing its network relationship with Medco Health Solutions, which Express Scripts acquired in April. A Walgreens spokesman said in an email “there are no changes in pharmacy access for Medco clients and members” under the new agreement with Express Scripts, and that “Medco retail networks that included Walgreens will continue to do so.” Walgreens pharmacies filled approximately 125 million Medco prescriptions in 2011, representing approximately $7.1 billion of the drug chain’s net sales.--Cathy Kelly

Par Pharmaceuticals/ TPG Capital: Generic drug maker Par Pharmaceuticals agreed to be acquired by private equity firm TPG Capital in a deal that is worth as much as $1.9 billion. Par, which had sales of roughly $900 million, announced July 16 that TPG will pay $50 per share to acquire the company. Based on the July 13 closing price of $36.58, the last trading day before the deal was announced, the offer represents a 37% premium. The generic pharmaceutical company’s stock jumped more than 36% to trade at $50 the day the deal was announced. Par has until Aug. 24 to seek a better offer, the company said, noting it will “actively solicit acquisition proposals.” Should no other offers materialize, the deal is expected to close this year. Consolidation activity in the generics market has been high over the last few years, but much of it involves U.S. companies looking for ex-U.S. properties and/ or differentiated subsectors such as injectables, and hard-to-manufacture formulations, so few suitors may be interested in Par’s largely U.S.-focused business. The deal with TPG comes shortly after Relational Investors LLC, which owns 9.9% of Par, urged the company to put itself up for sale citing the continued low valuation for the stock despite Par’s effort to make operational improvements. Par added Indian generics manufacturer Edict Pharmaceuticals for $20.5 million in cash, as well as repayment of $4.4 million in debt and up to $12 million in cash earn-outs. It also bought Anchen Pharmaceuticals, for $410 million in May 2011 and a portfolio of ANDA filings, from Teva, in the wake of the Israeli company’s acquisition of Cephalon. The purchase price is below what other generic pharmaceutical companies have been bought out for recently. -- Lisa LaMotta

Amicus Therapeutics/GlaxoSmithKline: GSK increased its equity stake in Amicus Therapeutics Inc. when the two companies expanded their collaboration regarding jointly developed migalastat HCl for Fabry disease. The July 19 collaboration gives Amicus all U.S. rights to Fabry programs developed under the agreement and GSK the commercialization rights to the rest of the world. The British pharma is increasing its stake in the Cranbury, N.J.-based company to 19.9%, with a $18.6 million investment of stock priced at $6.30 per share. Migalastat HCl is being developed as a monotherapy and currently is in Phase III; data are expected in the third quarter of 2012. The drug also is in Phase II as a combination with enzyme replacement therapy. Amicus and GSK, in collaboration with Japan-based JCR Pharmaceuticals Co. Ltd., are developing migalastat HCl as a co-formulation with a proprietary recombinant human alpha-Gal A enzyme (JR-051). The formulation is expected to enter the clinic in 2013. Amicus and GSK will continue to share research and development costs for all formulations of migalastat HCl, with Amicus funding 25% and GSK funding 75% of these costs for monotherapy and co-administration during the remainder of 2012. The companies have agreed to split costs 40%/60%, respectively, for the co-formulation and for all formulations in 2013 and beyond. -- L.L.

Accera/ Nestle Health Sciences: Accera has struck a deal with Nestle Health Science SA to gain clinical development and commercialization for its medical food Axona, which is meant to help manage metabolic processes associated with moderate Alzheimer’s disease. Terms of the July 18 deal were not disclosed. People with Alzheimer's and other neurodegenerative conditions typically suffer from a condition called neuronal hypometabolism, meaning neurons are unable to process glucose. Axona, formerly called Ketasyn (AC-1202), is an orally available form of caprilyc triglyceride that is metabolized by the liver into betahydroxybuterate, a ketone body, which then crosses the blood-brain barrier for use by neurons as fuel. Accera has completed clinical trials elderly volunteers and in patients with memory impairment or mild-to-moderate AD. Results showed that Axona helped improve cognition when compared with placebo.

Established in January 2011, Nestle Health Sciences was formed to gain a stronger foothold in diagnosis and treatment of gastrointestinal diseases, an area Nestlé knows well from its medical nutrition business. The new subsidiary has bigger ambitions, however, and is hoping to create a continuum of offerings for metabolic ailments and neurodegenerative diseases like Alzheimer’s; Axona would be a strong addition to that. The medical nutrition industry is small, dominated by three companies – Abbott Laboratories, Mead Johnson Nutrition, and Nestlé. Nestlé launched the Health Science subsidiary in January, building it out of the technology from Nestlé’s existing health care nutrition business, which posted sales of $1.9 billion in 2010. The subsidiary since has purchased three companies – Vitaflo Scandinavia, CM&D Pharma, and Prometheus Laboratories– in an effort to make it more substantive than its previous medical nutrition business. - L.L.

Novavax/PATH: Novavax, a Rockville, MD-based vaccine specialist announced a collaboration on July 18th with the international non-profit health organization PATH to develop its recombinant RSV fusion protein vaccine to protect infants in developing countries through maternal immunization. There is currently no approved RSV prophylactic vaccine available for the disease. RSV is the most common childhood respiratory infection, and has a global prevalence of 64 million cases, with 160,000 deaths annually. PATH will provide approximately $2 million toward Novavax’s Phase II dose-ranging trial planned for later this year. The partners may then progress the further development of Novavax’s vaccine with the goal of immunizing pregnant women such that high levels of maternal RSV antibodies will be transmitted to their offspring before birth. Thereafter, they can elect to continue the collaboration, with PATH potentially funding 50% of Novavax’s external clinical costs. Novavax would retain global rights to the product in the event it is approved, and has made a commitment to make the product affordable and available in low-resource countries. The RSV virus is also increasingly recognized as a significant pathogen in elderly populations. Novavax has stated that their goal is to collaborate with both private and public-sector partners “in all markets throughout the world,” says CEO Stanley Erck. Novavax puts the global commercial opportunity for a prophylactic RSV vaccine in excess of $5 billion. The biotech has partnerships with Cadila Pharmaceuticals (India), GE Healthcare, and LG Life Sciences (Korea), and was the recipient of a Department of Human Health BARDA grant  in March 2011. -- Michael Goodman

Life Technologies/ Navigenics: In what appears to be a straightforward buy-over-build decision, life sciences tools conglomerate Life Technologies is acquiring personal genomics firm Navigenics.  LifeTech calls the deal its “first step in executing a strategy to build out its molecular diagnostics business.”  It will employ Navigenics’ CLIA-certified lab to design and validate new assays, including both laboratory-developed tests and FDA approved diagnostics.  Navigenics’ CLIA lab will also support LifeTech’s partnering efforts with pharma for companion diagnostics.

Two years ago, LifeTech’s genomics’ efforts – it manufactures gene sequencers through its Applied Biosystems and Ion Torrent Systems divisions – were focused on the research and translational medicine markets, initiating programs like its collaboration with the Translational Genomics Research Institute, to find gene signatures that could better guide treatments and outcomes for triple negative breast cancer.  Since then, cancer genomics research has led to an increasing number of targeted gene tests – many that can be performed on next-generation sequencing platforms.  With diagnostics a much greater potential market opportunity for genomics than life sciences research, LifeTech, along with its major sequencing rival Illumina, has started to move downstream.  And its translational work appears to have sold the firm on the need for its own CLIA lab and on the opportunities that open up in cancer genomics by owning the clinical workflow, including data analysis and bioinformatics (which we wrote about recently here). The companies did not disclose the price of the acquisition, but it’s fair to assume that it was not much more than the bricks-and-mortar value of the lab, plus a dime or two for bioinformatics and the opportunity to hold onto some good people.

Navigenics’ founding model was challenged, as were those of other personal genomics start-ups, after the cautionary letters it and others received in June 2010 on the need for a premarket review of their products.  Nor did it appear to rejigger its model to create much know-how or IP since. That said, in announcing the deal, LifeTech also noted that it will be able to leverage Navigenics’ clinician and patient education and support capabilities as it builds a diagnostics business – particularly with community-based physicians.  One benefit of the personal genomics adventure has been recognition that when to comes to complex tests there’s a greater need for direct involvement with physicians, as opposed to a focus on marketing tests to labs.--Mark Ratner

Human Genome Sciences/GlaxoSmithKline: In a deal that was years in the making, GSK finally acquired its partner Human Genome Sciences for $3.6 billion, in a deal made up of cash and debt announced July 16. Now, GSK gets full ownership of darapladib, an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2) being investigated in acute coronary syndrome, and albiglutide, a once-weekly, injectable GLP-1 agonist for type 2 diabetes, as well as the already-marketed lupus drug Benlysta (belimumab) that the companies have been partnered on for more than a decade. The $14.25 per-share price represents a 99% premium over HGS’ closing price on April 18, the last trading day before GSK’s initial offer was disclosed publicly. That original bid was valued at about $2.6 billion, so HGS’ three months of delaying what many observers viewed as the inevitable brought its investors roughly another $400 million. Both companies’ boards have approved the transaction, in the form of a tender that will expire July 27. -- L.L.

Sanofi/Brigham & Women’s: For the next step on its continuing quest to establish itself as an end-to-end diabetes treatment provider, Sanofi has partnered with Brigham & Women’s Hospital to search for an immunological therapy for type 1 diabetes. Researchers from both organizations will unite to conduct “proof-of-concept, safety and functional studies” with a goal of finding an immunomodulatory drug target for the disorder, according to a July 18 statement. The parties did not release financial details of the arrangement, but said that Sanofi will receive an option to acquire an exclusive license to intellectual property generated by the partnership. Sanofi has marketed Lantus (insulin glargine) for more than a decade, and sells a variety of oral and injectable medications for both type 1 and type 2 diabetes; the company is currently waiting on regulatory approval for Lyxumia (lixisenatide), a glucagon-like peptide-1 antagonist. BWH researcher and Harvard professor Dr. Vijay Kuchroo specializes in immunology, and has studied the genetic basis of type 1 diabetes. – P.B.

Lisa LaMotta reported on the Infinity/Purdue deal. And thanks to flickr user mtarvainen for sharing under Creative Commons.

Friday, July 13, 2012

Deals of the Week Doubles Down on Neuroscience

Hit me! While many Big Pharmas have shied away from central nervous system drugs lately, at least one is placing bets on early-stage scientific advancements in neuroscience. AstraZeneca's new neuroscience innovative medicines unit (iMED) is still a virtual company division, but it is showing some real concrete progress in its deal-making, making a pair of deals that redouble its commitment to neurodegenerative diseases.

On July 12 (a warm summer's evening, on a train bound for nowhere?), it announced its second and third agreements since the division was set up earlier this year, acquiring a portfolio of small molecule assets from the U.S. company Link Medicine and, separately, entering into a research alliance, dubbed the A5 alliance, with four academic laboratories to evaluate the role of apolipoprotein E4 (ApoE) in Alzheimer's disease.

In the Link Medicine deal, AZ's neuroscience iMED has acquired a number of molecules in the clinical and preclinical stage that target the enzyme farnesyltransferase and modulate autophagy – the process whereby cells degrade and recycle their own misfolded or damaged proteins. Neurodegenerative diseases such as Parkinson's and Alzheimer's diseases are characterized by a build-up of such incorrectly folded, aggregated or neurotoxic proteins.

Established in 2005 by two philanthropists and Harvard Medical School neuroscience researcher Peter Lansbury, Link Medicine will receive unspecified upfront and milestone payments, while AZ will assume all R&D activities with the programs. Link Medicine has courted little publicity since it was established, although it did raise $40 million from a couple of VCs, Clarus Ventures and SV Life Sciences, in 2008, in a series C funding round.

With the A5 alliance, AZ will join with Dr. Steven Paul of Weill Cornell Medical College, Dr. David Holtzman of Washington University, St. Louis, Dr. Peter Davies of the Feinstein Institute for Medical Research, and Dr. Cheryl Wellington of the University of British Columbia, to try to identify, validate and risk reduce ApoE-related drug targets in Alzheimer's. Although ApoE is well-known to be a risk factor in Alzheimer's, second only in importance to age, no drugs have been developed which target ApoE-related mechanisms. AZ will fund the research. Since being set up in February 2012, AZ's neuroscience iMED, through the pharma's biologics arm MedImmune, has also forged an agreement with the U.S. company Axerion Therapeutics involving preclinical antibodies for Alzheimer's disease.

As AZ places its bets, some other companies have doubled down with pairs of deals. We hope you'll take a chance on us with the latest installment of...

Verastem/Pfizer and Verastem/Eisai: Verastem had a busy week, striking two separate deals that will help build its cancer stem cell-focused pipeline. On July 11, Verastem in-licensed Pfizer Inc.’s focal adhesion kinase (FAK) inhibitor formerly known as PF-04554878, which Pfizer decided to stop developing after a strategic review of its portfolio. Pfizer is not currently developing any FAK inhibitors, but GlaxoSmithKline Inc. and Boehringer Ingelheim GMBH are both developing compounds against this target that are currently in Phase I. VS-6063, as the compound will now be known, has completed a Phase I safety study in 36 patients with advanced solid tumors that was presented at the American Society of Clinical Oncology meeting last year. The study showed that the compound was well-tolerated and showed signs of clinical activity. Verastem will receive all intellectual property surrounding ’6063, including a composition of matter patent that will last until 2029, and in exchange Pfizer will reportedly receive an upfront payment of $1.5 million in cash, about $2 million in stock and the potential to earn $125 million in milestones. Verastem will be solely responsible for the development of the compound. Hours later, the company announced that it inked a deal with Eisai Inc. to collaborate on its Wnt inhibitor program, based on its compound VS-507. The 12-month collaboration will focus on analogs of VS-507 and Verastem will have full ownership of any compounds that result. Verastem will use its Wnt signaling and cancer stem cell assays to test the resulting analog compounds for selectivity. Eisai will be eligible for royalities and will have the right of first negotiation on any compounds that result. Having concluded the agreement with Eisai, Verastem announced that it will deprioritize the development of ‘507 as it pushes the FAK inhibitor program into the clinic. – Lisa LaMotta
Alnylam/Ascletis:  Looking for a partner for its Phase II-ready RNAi candidate for hepatocellular carcinoma (HCC) for more than a year now, Alnylam found one – at least for China and three other small Asian markets – in a licensing deal with U.S./China hybrid Ascletis. Announced July 12, the deal provides Ascletis, headquartered in both Hangzhou, China, and Research Triangle Park, N.C., with rights to develop and commercialize ALN-VSP in China, Hong Kong, Macau and Taiwan. Although Alnylam is eligible for milestones and sales royalties, it receives no upfront payment in the deal. Alnylam Chief Business Officer Laurence Reid told our sister publication PharmAsia News that gaining the rights to use Ascletis’ trial data for registrational efforts in other countries matters more to his company than an upfront payment. “From our perspective, the largest HCC population is in the Asian region, particularly China, where it’s driven by the dreadful prevalence of hepatitis virus infections, so having them finance the advance of the drug in that population and us getting rights to the data, that’s the basic value-swap of the deal,” Reid said. About 55% of new diagnoses of HCC each year occur in China. Ascletis CEO Jinzi Wu said his firm would negotiate a Phase II protocol with China’s State FDA, with a plan to test ALN-VSP in about 100 patients with a primary endpoint of progression-free survival.— Joseph Haas

Janssen/Evotec/Harvard: Regenerating ailing pancreatic islet beta-cells inside a patient's body is the aim of a new three-way collaboration announced July 11 between the J&J unit, Janssen Pharmaceuticals Inc., the German drug discovery services company Evotec AG, and Harvard University. The deal comes only a year after Evotec forged links with the Harvard laboratories of Prof. Doug Melton, to help advance research on small-molecule and biological substances that appear to regenerate beta-cells, and move closer to a potentially curative approach to diabetes; the project's name, CureBeta, highlights the ambitious nature of the enterprise. Janssen has paid a relatively modest $8 million upfront to take potential products arising from the research through clinical trials and on to the market, with Evotec and Harvard sharing in milestones worth a $200-300 million per product, and royalties on sales. The size of the split was not revealed. The research should add to Janssen's efforts in diabetes which notably include a new type of antidiabetic, canagliflozin, which ws recently submitted for marketing approval in the U.S and Europe. The German company's role in providing a bridge between academia and the pharmaceutical company is a new one  – making academic research more attractive to the industry through "industrial-standard" experimentation in industrial-grade infrastructure, rather than its usual role of providing discovery development services for biotech and pharma companies. Perhaps buoyed by CureBeta's success, Evotec has set up similar projects in other areas, including CureNephron, another collaboration with Harvard set up in February 2012; CureNeuron and CureHeart. – J.D.

Janssen/Genmab: Separately, Janssen's U.S.-based immunology, oncology and nephrology unit Janssen Biotech will collaborate with Danish biotech Genmab to identify and develop bi-specific antibodies for multiple disease targets, under the terms of a deal announced July 12. Janssen agreed to pay DKK 21 million ($3.5 million) up-front in the deal, which also includes potential milestone and licensing payments valued at DKK 1.06 billion ($175 million) for each drug. Janssen will fund research on panels of antibodies supplied by Genmab, for disease targets Janssen has identified. Although the companies didn’t specify the disease areas on which they will focus, Genmab typically uses its “DuoBody” platform to discover and develop drugs for cancer, autoimmune and infectious diseases, and central nervous system disorders. Publicly traded in Denmark, Genmab previously introduced the antibody Arzerra (ofatumumab), approved by FDA for chronic lymphocytic leukemia in 2009. – Paul Bonanos

John Davis reported on both AstraZeneca deals. Thanks to Flickr user twobobswerver for taking a chance with a five and a six, and sharing via Creative Commons.

Financings of the Fortnight Follows the Follow-Ons

The half-year data are in. Public biopharma firms raised $3.14 billion in secondary offerings through the end of June. According to Elsevier’s Strategic Transactions database, that surpasses the full year totals from 2011 ($3.09 billion) and 2010 ($2.94 billion), and might have surpassed 2009 if Human Genome Sciences and Vertex hadn’t gone toe to toe, mano-a-mano, FOPO-a-FOPO, each raising more than $800 million, with Dendreon close on their heels pocketing more than $600 million.

And since the half-year mark, we’ve had a couple more big issues, with Synageva BioPharma (details below) and ImmunoGen each hitting the $100 million mark. So, as the kids like to text these days, WTF? One explanation is that biotech in general has fared well. The Nasdaq biotech index is up 25% for the calendar year, beating the pants off the major indices.

But dig a little deeper and you’ll find that public investors like their biotech companies like they like their porterhouses: Rare. Counting the latest Synageva fund-raise, public companies with a rare-disease focus have rolled up a cool $1 billion this year, nearly a third of all post-IPO money raised (debt not included), led by Alexion Pharmaceuticals and BioMarin Pharmaceutical. No wonder our friends at the RPM Report are calling this the orphan drug bubble.

On the private side of the rare-disease story, stay tuned for the next issue of START-UP, which delves into the sale of Enobia Pharma to Alexion last December -- $610 million upfront with $400 million more in potential earn-outs – as an excuse to ask investors, entrepreneurs and the potential buyers of rare-disease assets the same question: How long can this last?

The recent renewal of the FDA’s user-fee program under FDASIA has tasty carrots that rare-disease advocates say will help spur even more development of treatments for tiny patient populations. So the momentum might not let up. That’s a good thing for people who otherwise would have no medical recourse, and of course it’s something that we’ll continue to cover biweekly in the latest edition of… 

Genkyotex: The Swiss biotech with the funny name (it pays homage to Geneva, Kyoto, and Texas, the home turfs of its founding scientists) padded its coffers in a July 9th tranche that supplements a CHF 18 million May 2011 Series C round, for total proceeds of CHF 25 million ($26 million). Participants in the extension included previous backers Eclosion, Edmond de Rothschild Investment Partners (which just announced a new fund, see below), Vesalius Biocapital, and MP Healthcare. The company says the funding will advance its first-in-class orally available NOX inhibitor GTX137831, now in Phase Ia for diabetic neuropathy, through a Phase II trial due to start by the end of 2012. It will also fund programs in neurodegenerative diseases such as Alzheimer’s, Parkinson’s, and ALS. Born out of the Geneva incubator Eclosion, six-year-old Genkyotex has raised about CHF 30 million to date. It’s developing small-molecule inhibitors of the NOX (nicotinamide-adenine dinucleotide phosphate oxidase) family of enzymes. NOX enzymes are involved in intracellular electron transfer and produce reactive oxygen species (ROS). NOX-4 over-expression has been linked to diabetic nephropathy and lung fibrosis, and there is evidence that NOX-1 and NOX-2 isoforms are involved in neurodegenerative processes. Blocking the action of NOX may help reduce the formation of ROS, which is thought to be involved in metabolic, cardiovascular, pulmonary, neurological, and other diseases. With the new cash, Genkyotex also named Eric Meldrum, formerly of 3-V Biosciences, as CSO and Alexandre Grassin, previously with Alexion Pharmaceuticals, as finance director. For more on Genkyotex, be on the lookout for the July/August issue of START-UP, which will feature a company profile. – John Davis and Maureen Riordan

Synageva BioPharma: Ah, the joys of going public. In its second fundraising since it undertook a reverse merger to gain a public listing, Synageva raked in $100 million by selling 2.42 million shares at $41.20 a share. Underwriters have an option to buy 364,000 more shares, as well. Lexington, Mass.-based Synageva was privately held until June 2011, when it merged with publicly traded Trimeris, whose HIV treatment Fuzeon never gained traction despite a longtime partnership with Roche, which has worldwide rights. The merged company now considers itself a rare-disease specialist as it pushes forward its lead candidate, an enzyme replacement therapy for lysosomal acid lipase (LAL) deficiency, also known as Wolman disease. Synageva raised $74 million in January at a stock price of $25.18, which means between dilutive events the shares went up 60%.  Like other orphan disease companies, its stock price has ridden what many see as a bubble into lofty heights. As our colleagues at the RPM Report explain here, the market cap of public rare-disease firm Alexion Pharmaceuticals now exceeds the combined market cap of Human Genome Sciences and Amylin, both hotly pursued for their commercial holdings. Alexion cashed in a couple months ago with a stunning $462 million follow-on, the largest of the year so far, and right behind Alexion in dollars was another rare-disease player, BioMarin Pharmaceutical, with a $236 million fundraise, also in May.  – Alex Lash

Nektar Therapeutics: Nektar said July 10 it has sold $125 million in debt in a private placement at an interest rate of 12%. The company said in a release that the debt financing, plus a royalty sale from earlier this year, should put its cash reserves at the end of the year around $300 million. The firm had nearly $500 million in cash and equivalents at the end of the first quarter, and the new debt issue will help pay down $215 million in previous debt, with an interest rate of 3.25%, due in late September. The new debt comes due in 2017. The debt sale comes more than four months after it raised $124 million by selling future royalty streams from two products, UCB Pharma’s Cimzia (certolizumab) and Roche’s Mircera (methoxy polyethylene glycol-epoetin beta), which date back to a technology deal Nektar struck in 2000. The firm often associated with Pfizer’s Exubera inhaled insulin “bong” – it provided the inhalation technology and received a $135 million payment when Pfizer ended the partnership – has to some extent reinvented itself under new leadership . Its pipeline includes a Phase III reformulation of the chemotherapy irinotecan for breast cancer, which Nektar has decided for now to keep unpartnered. Cowen and Co. and CRT Capital Group are handling the transaction. - A.L.
Edmond de Rothschild Investment Partners
: Fill ‘er up. Just in time for START-UP’s upcoming annual life-science VC “gas tank” update, the Paris-based venture firm announced the first close of its fourth BioDiscovery fund, which is focused mainly on Europe. The firm said it has €125 million committed and is on target to hit a final close of €200 million by the end of 2012, which would push its life-science assets under management past €500 million. It will hew to its previous strategy of leading 15 to 20 investments in biopharma, device and diagnostic companies. With BioDiscovery IV, Rothschild joins The Wellcome Trust, Index Ventures, Vivo Ventures, and H.I.G. Bioventures in closing at least part of a healthcare-focused fund this calendar year, which has proven extremely difficult for venture firms to raise fresh capital. Current portfolio companies include the German Alzheimer’s developer Probiodrug, French eye specialists Novagali Pharma, and cardiovascular developer Regado Biosciences. – A.L.

Thanks to Maureen Riordan for help with the data.

Photo courtesy of Floris Oosterveld via a Creative Commons license.