Friday, September 28, 2012

Deals Of The Week Looks For A Replacement

Few deals are as relieving as the National Football League’s labor settlement with its “real” refs this week. Though it’s little consolation to fans of the Green Bay Packers, who were robbed of a victory as Monday night's game crew displayed a unique combination of blindness and temporary insanity, the need to replace the replacements with the genuine article couldn’t have been more plain.

But for Cardiome Pharma, the dismantling of its partnership with Merck & Co. on Sept. 26 won’t provide much relief at all – and might leave Cardiome scurrying to find a replacement as well. Merck returned rights to Cardiome’s atrial fibrillation drug, vernakalant, ending a three-year-old agreement, during the lifetime of which the drug was approved in September 2010 and marketed in Europe as Brinavess. Vernakalant is approved in the EU specifically for rapid conversion of recent onset atrial fibrillation to sinus rhythm in adults.

Merck once saw such promise in the therapy that it expanded its original deal. The pharma initially paid Cardiome $60 million upfront in April 2009 to obtain global rights to the oral version of vernakalant, as well as rights to the intravenous version outside North America. Then, in July 2011, it bought out Astellas’ partnership with Cardiome, which covered the intravenous drug in North America. Cardiome received two additional milestone payments totaling $45 million from Merck for the submission and eventual approval of the intravenous drug in Europe, as well as $26 million total to date from the Astellas deal.

But worries mounted for the drug, as its safety was called into question when one patient receiving the intravenous version died. Its regulatory path was complicated by requests for more data and a narrower patient population, and safety concerns surrounding Sanofi’s rival drug Multaq (dronedarone) shadowed Cardiome’s compound. Meanwhile, sales of the drug appear to have slowed; neither company breaks out sales of the drug, but Cardiome’s partnership revenue from Merck totaled barely $1 million in 2011, according to its annual report (pdf, see note 15).

Merck finally said in March that it would discontinue trials on the oral version; Cardiome since has laid off most of its staff, and CEO Doug Janzen left the company in July. While it seemed to be holding onto hope that it could find a new partner for the drug, analysts weren’t optimistic. “It’s likely that any partner the company could find for the drug would have the same issues as Merck,” Morningstar’s David Krempa told "The Pink Sheet" DAILY in March.

Cardiome interim CEO Bill Hunter tried to provide clarity in a Sept. 26 conference call discussing Merck’s decision to end the deal, saying that Cardiome would attempt to move the drug forward on its own. But he said Cardiome’s remaining management had not yet hashed out the details of the drug’s transition back from Merck, and never mentioned trying to forge a partnership with someone new.

Hunter did, however, hint that the company could be sold. “[A]s a company with a small market capitalization, one that has a pharmaceutical product in a major market in a major disease indication for sale, that is a pretty unique position,” he said. Now unencumbered by partnerships, Cardiome could represent a clean, fire-sale takeout, but only for a buyer willing to bear its risks. That’s a mildly ironic fate for a company that partnered with Merck expressly “to de-risk our business,” as Janzen put it three years ago, then deemed its own pipeline too dangerous to develop.
There are plenty of other companies waiting to be picked off this week, whether they get the call or not. See which deals we’ve flagged in this week’s installment of…

Roche/Galaxy: About four months after Takeda returned rights for an anti-hepatocyte growth factor (HGF) antibody program for cancer, Galaxy has found a new pharma partner, licensing exclusive worldwide development and commercialization rights to antibodies targeting fibroblast growth factor 2 (FGF2) to Roche. Under the deal announced Sept. 24, Roche will pay privately held Galaxy $8 million upfront, with the potential for preclinical, clinical and regulatory development milestones, as well as royalties on product sales. Roche said FGF2 is over-expressed in many types of cancer and is known to stimulate both angiogenesis and lymphangiogenesis, which can play an in important role in metastasis. For some tumors, a high level of FGF2 has been found to correlate with poor clinical outcomes, the Swiss pharma said in a release. While the deal covers an entire program, key to the transaction is a novel humanized monoclonal antibody discovered by Galaxy that has demonstrated inhibition of certain tumors in animal models. In 2006, California-based Galaxy licensed an HGF antibody to Takeda for $2 million upfront plus milestones and royalties. This past June, Takeda ended the collaboration and returned all related intellectual property to Galaxy. — Joseph Haas

Covidien’s Mallinckrodt/CNS Therapeutics: Mallinckrodt, the soon-to-be spun-out pharmaceutical arm of Covidien, announced Sept. 24 that it has agreed to purchase privately held CNS Therapeutics for $100 million. The acquisition is expected to close in the fourth quarter. St. Paul, Minn.-based CNS currently has one marketed product, Gablofen (baclofen injection) – the generic version of Novartis AG’s Lioresal. The drug is approved for the treatment of severe spasticity. CNS also offers Mallinckrodt a pipeline of pain and spasticity products, including other concentrations of Gablofen. Representatives at the company would not discuss the pipeline. Covidien announced in December its plans to spin out Mallinckrodt as a public company by mid-2013. Covidien will retain its medical products and devices businesses, which posted sales of about $9.6 billion in 2011; Mallinckrodt brought in about $2 billion during the same time period. “Our medical devices and pharmaceuticals both hold industry-leading positions. They have quite different business models, sales channels, customers, capital requirements and talent basis. They also have innovation pipelines that differ substantially in length, regulatory approval requirements, possible risks and potential returns,” said Covidien President and CEO Jose Almeida during a December conference call. – Lisa LaMotta

Valeant/QLT: The ravenously acquisitive Canadian pharma Valeant struck again on Sept. 24, taking global rights to an ophthalmologic drug from QLT. Valeant paid $112.5 million total for rights to Visudyne (verteporfin for injection), approved to treat certain forms of wet age-related macular degeneration. The purchase price included $62.5 million for US rights and $50 million for the right to receive royalties from sales in the rest of the world, where QLT has partnered the drug with Novartis. Sales of the drug were $21 million and $14 million in and out of the US, respectively. Valeant also agreed to make contingent payments of $5 million covering development of QLT's laser program in the US, $15 million related to the Novartis royalties, and unspecified royalties if Visudyne is approved for new indications. Currently, the drug is sold in 80 countries to treat two forms of subfoveal choroidal neovascularization, the formation of leaky blood vessels that occurs in patients with wet AMD. QLT, which is weathering a turbulent year that included the takeover of its board by activist investors, said it will return cash to shareholders and continue developing its synthetic oral retinoid program. - P.B.

Clinipace/Paragon: Contract research organization Clinipace expanded its global presence by acquiring Paragon Biomedical, a CRO with offices in Irvine, Calif.; High Wycombe, U.K.; and Trivandrum, India. The Sept. 25 deal, for which terms were not disclosed, doubles Clinipace's size, giving it 430 employees worldwide. Clinipace now has 12 offices in eight countries. The Morrisville, N.C.-based company already had strengths in oncology and digital platform technology; the addition of Paragon gives it further expertise in the cardiovascular, immunology, infectious diseases, CNS, respiratory, dermatology and medical-device areas. The companies will join forces without laying off any staff, and key members of Paragon management will assume positions at Clinipace. Privately held Clinipace raised $13.3 million in debt earlier this month, according to an SEC filing, and was backed by Morgan Stanley Expansion Capital, Hatteras Venture Partners and Brook Private Equity Advisors in a $15 million Series C round last year. - P.B.

Official thanks to Flickr user yourdon, who kept us from being penalized by sharing his photo via Creative Commons.

Friday, September 21, 2012

Deals Of The Week: A Top Analyst Sees R&D Productivity Improving, Now Where’s The Value

Recently there’s been a more positive outlook on the industry from some sectors of Wall Street built on conviction that pharma has really improved its pipelines and, by implication, its R&D decision making capabilities, helped in part by its persistence in evolving new and more flexible business models. Opinions are still mixed on this score, but the sea-change in sentiment was underscored in a talk earlier this week by Citibank’s managing director of global healthcare, Andrew Baum.

Speaking at Elsevier’s Pharmaceutical Strategic Alliances conference on Sept. 19, Baum, who is not shy about criticizing the industry, said he is encouraged that it has successfully evolved to deliver value through each period of change and “this time will not be an exception.” Efforts in the past two to three years to down size and revamp its R&D organizations -- led by AstraZeneca and including rate-changing shut-downs such as Pfizer's Sandwich labs -- have in reality resulted in less spent on fixed-cost research and fewer research sites, in absolute terms. And that shrinkage is continuing. "Three-quarters of the global pharma industry is existing research and re-allocating capital to externalization," he added.

More than that, Baum argues that “the presence of research labs is a material driver of bad decision making and shareholder value destruction, as research labs kept drugs alive that should have been killed."

But improving R&D is straightforward compared to what Baum sees as the biggest challenge facing pharma in the next 10 years: the demonstration of value to payers. “That is where there are enumerable problems and that should be the major preoccupation of any CEO in pharma for next 10 years or so,” he said. Delivering affordable value will require a very different paradigm. “The impact of taking a 20% price reduction or anything that reduces profit by 20% kills the economic value of a molecule."

Ongoing changes in the U.S. and European healthcare landscape forcing value to the forefront include provider consolidation in the increasingly complex U.S. healthcare infrastructure, European pricing pressures, and the advent of more sophisticated IT systems, including electronic health records, that allow better methodologies for tracking value. In the U.S., where these changes coincide with the introduction of accountable care organizations -- admittedly still a small part of the overall infrastructure -- accurate identification of areas of under treatment or over treatment is possible and that has broad implications for pharma. That said, “it’s not entirely clear that this will be net positive or negative for the [pharma] industry,” he observed. “There is mixed evidence whether ACOs and capitated care will result in reduced costs, but there is the beginnings of evidence.” The opportunity to leverage data and capture patient information "has to be weighed against more rational implementation of existing care through use of pathways."

While R&D improvement is underway, other key factors influencing his optimism are improving regulatory climate, government incentives to support the industry -- notably around tax breaks -- and a modest improvement in relations between the industry and health technology assessment agencies, albeit from a very low base.

FDA’s appetite for risk is increasing, highlighted by its recent willingness to accept neoadjuvant data for the approval of a breast cancer drug that previously would have required a progression free survival endpoint. In taxes, a number of governments are compensating for rigid HTA views and very heavy price reductions by implementing ‘patent boxes’ which reduce the rate of corporation tax levied on profits derived from patents. European countries that have such programs include the U.K., Belgium, The Netherlands, and Spain, according to a report Baum’s group published in late 2011.

The industry's embrace of externalization is certainly evident in the plethora of deals announced this week, so without much ado, let's jump to ...

United Therapeutics/Ascendis Pharma: United Therapeutics has licensed exclusive rights to apply Ascendis Pharma’s TransCon technology platform to treprostinil, the active ingredient in its flagship product Remodulin. Treprostinil is a synthetic analog of prostacyclin. These rights will additionally extend to the development of prostacyclin, prostacyclin analog, and prostacyclin-related products for pulmonary arterial hypertension, and UT will hold worldwide commercial rights to products resulting from the collaboration. Financial terms were not disclosed. Ascendis’ TransCon technology is designed to release a drug in a precise, time-controlled way, enabling a longer-lasting therapeutic effect. A subcutaneous infusion formulation of Remodulin has been approved in the U.S. and EU. UT’s COO Roger Jeffs said  that a formulation of treprostinil using the TransCon technology may also eliminate injection site pain and reactions that frequently occur with continuously infused subcutaneous Remodulin.” This collaboration is Ascendis’ first since its 2010 deal struck with Sanofi. --Michael Goodman 

Baxter/Onconova: Privately held Onconova sold European rights to its promising Phase III cancer drug Estybon (rigosertib) to Baxter in a Sept. 19 deal. The drug is in late-stage trials for myelodysplastic syndromes, a group of disorders that often lead to acute myelogenous leukemia, as well as Phase II/III studies in pancreatic cancer. The alliance nets Onconova $50 million in upfront funding, plus $515 million in milestones that could pay out before the drug is even commercialized. Subsequent sales milestones and royalties could add more value to the deal. Baxter receives full rights to all indications of rigosertib in 32 countries, including the full European and adjoining territories such as Norway, Switzerland and Turkey. Deerfield, Ill.-based Baxter took a $50 million equity position in Onconova in a separate deal last month. Rigosertib targets both the PI3-K and PLK pathways, each of which is implicated in solid tumor and blood cancers. Baxter already has a hematological sales force, as well as modest holdings in cancer that include both marketed products and pipeline drugs. Onconova previously partnered rigosertib with Japan’s SymBio Pharmaceuticals in Japan and Korea. The Newtown, Penn.-based company expects to use some of the proceeds to support ongoing trials for lymphoma drug ON-013105 and Ex-RAD, a radioprotectant. –Paul Bonanos

Bionomics/Eclipse: Australian biotech firm Bionomics has acquired San Diego-based private biotechnology company Eclipse Therapeutics in a $10 million deal, from which Eclipse shareholders – including Biogen Idec – will emerge holding about 6.5% of Bionomics' issued capital. A spin-off of the Biogen Idec oncology franchise, Eclipse is developing drug candidates that target cancer stem cells (CSCs), thought by some to be the “seeds” at the root of cancer. Eclipse’s lead compound, ET101 – aimed at an undisclosed CSC target that is over-expressed on most solid tumors – is expected to move into human trials in 2014. "This acquisition elevates and expands Bionomics’ oncology pipeline beyond BNC105, our primary cancer drug candidate, which is now at advanced clinical stages,” said Bionomics CEO Deborah Rathjen. “It also establishes Bionomics as a global leader at the forefront of cancer stem cell therapeutics … and provides Bionomics with an important strategic base in the U.S.” Eclipse co-founders Jonathan Lim, Peter Chu and Chris Reyes all will take up roles with Bionomics, with Lim becoming a non-executive director, Chu the company’s VP of U.S. operations and cancer biology, and Reyes, VP, R&D biologics.James Dunn

Dyax/Kadmon: Dyax and Kadmon signed a strategic licensing agreement Sept. 20 under which Kadmon has been granted an exclusive worldwide license for the development and commercialization of DX-2400, a fully human monoclonal antibody that inhibits matrix metalloproteinase 14. Specific deal terms were not disclosed, but Dyax will receive an upfront payment and can earn development and commercial milestones, as well as up to double-digit, tiered royalties on commercial sales. The deal follows a July 2011 agreement in which Kadmon obtained a non-exclusive license to Dyax’s antibody phage display libraries for drug-discovery work. Now, Kadmon is responsible for further development and commercialization of ‘2400, currently in IND-enabling studies. “This agreement expands on our longstanding relationship with Dyax and [its] antibody technology platform," Kadmon Chairman and CEO Samuel Waksal said. “We believe MMP-14 is an important piece of the puzzle for overcoming cancer’s growth, proliferation and resistance mechanisms. In particular, its role in tumors and ocular disease neovascularization represents a unique target opportunity that may be complementary to other anti-angiogenic therapies on the market and in development.” Joseph Haas

MacroGenics/Servier: Expanding upon their December 2011 licensing deal around Phase I anti-cancer antibody MGA 271, MacroGenics and Servier have signed a territorial option agreement for the development and commercialization of three DART (Dual-Affinity Re-Targeting) antibody therapeutics aimed at undisclosed targets. MacroGenics will receive a $20 million upfront payment, and could earn option fees and preclinical milestones reaching up to $80 million under the deal. The deal also calls for clinical, regulatory and commercial milestones that could reach $1 billion, as well as tiered, double-digit royalties on product sales. The Rockville, Md.-based biotech retains full development and commercialization rights to the three programs in North America, Japan, Korea and India, while Servier, of Suresnes, France, acquires an option for an exclusive license covering the rest of the world for each program. The two firms will co-fund and conduct R&D activities leading up to Servier’s go/no-go decision points. Servier can exercise one of the options prior to IND submission, and the other two after initial Phase I trials are conducted for each. For each program Servier elects to option, the two companies will split clinical development costs.J.A.H

Bristol-Myers Squibb/Vanderbilt University: Already partnered with Johnson & Johnson, Seaside Therapeutics and Karuna Pharmaceuticals on the development of allosteric modulators for neurological indications, the tech-transfer folks at Vanderbilt University are at it again. The school’s Center for Neuroscience Drug Discovery (VCNDD), headed by former Merck researcher Jeffrey Conn, signed an agreement Sept. 21 with Bristol-Myers Squibb to collaborate on the discovery, development and commercialization of positive allosteric modulators (PAMs) to treat Parkinson’s disease. VCNDD will receive an undisclosed upfront payment along with multi-year research funding for continuing discovery efforts. The collaboration will focus mainly on VCNDD identifying potential drug candidates that act on the metabotropic glutamate receptor 4 (mGluR4), and then turning them over to Bristol for development and potential commercialization. VCNDD will be eligible to earn development milestones and royalties on product sales under the collaboration. Previously VCNDD’s discovery efforts in Parkinson’s received funding support from the Michael J. Fox Foundation. The partnerships with J&J and Karuna focus on schizophrenia, while the Seaside tie-up works toward therapies for Fragile X syndrome, autism and other brain development disorders.—J.A.H

Novartis/Selexys: Selexys Pharmaceuticals of Oklahoma City announced a $23 million Series A round led by MPM Capital on Sept. 19 but also signed a side deal granting Novartis an option to acquire the biotech if Selexys’ lead compound, an anti P-selectin antibody called SelG1, succeeds in a Phase II trial against sickle-cell disease. With the cash infusion, the trial is slated to start next year and finish possibly in 2015. Several Selexys top managers, including President and CEO Scott Rollins, are veterans of the rare-disease firm Alexion. Novartis’ purchase option calls for up to $665 million in upfront payments and potential earn-outs. Founded in 2002 with technology exclusively licensed from the University of Oklahoma, Selexys is developing antibodies for acute and chronic inflammatory and thrombotic diseases. Specifically, the company is focusing on the adhesion of white blood cells – the first step in the inflammatory process – which involves the interaction of the P-selectin and PSGL-1 proteins. SelG1, a P-selectin antagonist, is a humanized monoclonal antibody which completed Phase I late last year for vaso-occlusive crisis, a painful complication in sickle-cell disease. The antibody was granted orphan drug status by the FDA in 2008. Selexys believes SelG1 will fill the void left by the one and only approved medication for sickle-cell disease, hydroxyurea, which only benefits half of the patients, and even they don’t respond completely to the drug.—Alex Lash and J.A.H

Covance/GNS: Cambridge, Ma.-based data analytics company GNS Healthcare has teamed up with contract research organization Covance to help pharmaceutical companies create more efficient drug development methods using GNS’s super computer-driven Reverse Engineering And Forward Simulation (REFS) data analytics platform. The collaboration will use data provided by Covance to create models that can better predict the success of a drug given certain patient characteristics. “Our collaboration with Covance combines our unique collective resources and capabilities to tackle what has previously been an intractable challenge—improving dismal clinical drug development success rates,” said Colin Hill, president and CEO of GNS. The companies are going to start with models for type II diabetes. Covance is hoping that the technology will help it offer its clients a forecasting option. Financial terms of the deal were not disclosed. The work is similar to that done by GNS for other clients including Huntington’s disease models for the CHDI Foundation and modeling work on inflammatory work for Bristol-Myers Squibb.--Lisa Lamotta

TransCelerate BioPharma: Unveiled Sept. 18, TransCelerate BioPharma Inc. will strive to identify and solve common drug-development challenges, improve clinical trial quality and ultimately bring new products to market more quickly. The non-profit organization is being staffed and funded by ten pharmaceutical companies (the charter members of TransCelerate are Abbott Laboratories Inc., AstraZeneca, Boehringer Ingelheim, Bristol-Myers Squibb, Eli Lilly, GlaxoSmithKline, J&J, Pfizer, Sanofi, and Roche/Genentech Inc.). During the PSA conference on Sept 19, J&J CSO and pharma chairman Paul Stoffels said he expected the effort could cut development time – and development costs – by up to 5% for an average program. The outfit is led by acting CEO Garry Neil, former corporate VP, science & technology, at J&J, who said the primary issues TransCelerate can solve come down to a lack of standardization in drug development that results in needless repetition of effort, and with it, the draining of resources. Intended to be a virtual initiative, the firm will be headquartered in Philadelphia but have no staff at the start other than Neil. Instead, full-time equivalents from the 10 charter companies will work together on the goals. Each participating company is contributing an undisclosed amount of money to the effort, along with the FTEs, Neil said. Though not every big pharma is involved the door remains open, said Neil, for large, medium or small firms to join in. Also expected to play a role, Neil added, are academia, regulatory agencies, contract research organizations and patient advocacy groups. – J.A.H.


Financings of the Fortnight Takes The Snap and Runs The Option

Financings of the Fortnight is definitely more baseball fan than football fan. (Also: Dogs, not cats; salsa, not ketchup; and baths, not showers.) But we couldn’t help notice the odd coincidence of the past two weeks. Just as (American) football season starts, we see a spate of biotech option plays, er, deals. Three, by our count.

Like the option in the National Football League, options-to-acquire in biotech are rare, indeed, because investors shun attempts to limit their upside the way a running back stiff-arms a charging linebacker. Rare, but not completely lacking.

(For readers flummoxed by our nation’s savage pastime, in an option play the quarterback takes the ball and runs along the line of scrimmage with a running back shadowing him. With one eye on the defense, the quarterback has the option of keeping the ball and running downfield or pitching the ball to his teammate.)

For readers flummoxed by a biotech’s willingness to give a partner an option to acquire the company down the road, it’s a sign of the times: in the right situation, investors will accept a ceiling on their potential returns if they also come with a potential floor. Here are a few from the past twelve months: Constellation Pharmaceuticals signed a research partnership with Genentech in January that gives Genentech a right to acquire the start-up that was initially funded by Third Rock Ventures, Venrock Associates and The Column Group.

Third Rock also incubated Warp Drive Bio, built around a genomics “search engine” keyed to screen naturally occurring microbes for medicinal properties, then announced in January a massive Series A round that not only gives co-investor Sanofi certain rights to buy the company if certain milestones are reached, but also allows shareholders to force a sale to Sanofi if different milestones are triggered.

In November 2011, Celgene took an exclusive three-and-a-half year license to genomic analysis technology from Quanticel Pharmaceuticals, and also bought equity and an option to buy Quanticel outright if it likes what it sees from Quanticel’s platform and internal drug-discovery efforts.

Mind you, the options we’re talking about are not the same as earnout-driven deals, a much more common deal structure for private biotech acquisitions. Both feature downstream, often significant payments, but there’s a subtle but key difference: Options to buy leave the target company independent until the option is triggered; earnouts are paid out after the target company has been acquired and subsumed.

Ah, you say, but this is Financings of the Fortnight, not Deals of the Week. We’re talking options because in the past couple weeks, we’ve seen three more deals in which the option-to-acquire is part of a Series A financing. In other words, there’s not much waiting around to build the aforementioned floor and ceiling into a start-up’s future; no one’s going to spend years and tens of millions of dollars on a company and then limit the upside with an option. But if you can build it quickly and cheaply, knowing from the start there's a potential and contractually obligated buyer waiting at the other end of the development path, then capped upside could be better than no upside at all.

Case in point: Selexys Pharmaceuticals of Oklahoma City raised a $23 million Series A round led by MPM Capital but also signed a side deal granting Novartis an option to acquire if Selexys’s lead compound, an anti P-selectin antibody, succeeds in a Phase II trial against sickle cell disease. With the cash infusion the trial is slated to start next year and finish perhaps in 2015. Several top managers, including president and CEO Scott Rollins, are veterans of the rare-disease firm Alexion.

Vascular Pharmaceuticals announced a $16 million Series A led by Intersouth Partners and, whaddya know, MPM Capital again, to advance its preclinical compound against diabetic nephropathy. At the same time, it announced an agreement with J&J’s Janssen Biotech to grant an option to acquire after Phase II testing of the compound, which has gone through a certain amount of preclinical work at the University of North Carolina’s Chapel Hill School of Medicine. Janssen is paying undisclosed upfront fees and potential milestones for its option rights.

The third example is profiled below in our roundup: the asset financing group carved out of Atlas Venture’s most recent fund has announced its second entity, Annovation Pharma, a virtual company built around a next-generation anaesthetic. One difference between Annovation and the two described above is that the holder of the option-to-acquire is also a Series A investor: The Medicines Company bought into Annovation’s $8 million round and receives a right to buy the whole shebang if the drug reaches proof of concept.

You could argue that each of these start-ups is basically an asset wrapped in a bit of legalese; the buyers are keying on the progress of one asset only. In our second VC survey, now available through a subscription-only Web site near you, respondents with biopharma investment experience were fairly cool to asset financing: 


The 32% "not interested" was notably higher than the 20% who answered the same way in our 2011 survey. But it's clear from the past fortnight's activity that in certain circumstances, the model appeals to investors. Especially if they don't mind having -- or selling -- options.

You've read this far, brave soul, and the goal line is in sight. Your only option is to keep reading the latest edition of...

MyoKardia: Third Rock Ventures rolls on with a solo Series A funding of MyoKardia, launched to treat genetic heart diseases, with patients to be identified using a companion diagnostic. Third Rock has committed $38 million, and partner Charles Homcy will be MyoKardia’s interim CEO. Homcy told our "Pink Sheet" colleagues that the goal is to develop small-molecule allosteric modulators to treat a percentage of genetic cardiomyopathy patients whose disease is caused by a specific genetic mutation. No novel therapies for two of the main cardiomyopathies have come to market in more than a decade, Homcy said. The firm’s platform derives from the research of several academics who focus on muscle biology and cardiovascular genetics, including James Spudich of Stanford University, Leslie Leinwand of the University of Colorado, Christine Seidman of Harvard Medical School and Jonathan Seidman, also of Harvard Medical School. The Series A money for MyoKardia comes out of the $426 million second fund Third Rock closed in 2010. Its previous fund of $378 million closed in 2007. Third Rock has announced investments in seven other companies in 2012, most recently joining a syndicate that produced a $60 million Series C for bluebird bio. In June, it put up all $40.7 million of an A round for Global Blood Therapeutics. -- Joseph Haas

Biogen Idec: The big biotech said September 10 it has sold its royalty rights associated with the lupus drug Benlysta (belimumab) to Canadian private equity firm DRI Capital. Benlysta, brought to market by Human Genome Sciences in 2011, netted only $50 million in sales that year, a huge disappointment. GlaxoSmithKline bought the company in July 2012 and hopes to improve the drug’s momentum. Biogen Idec’s royalty stream stems from a European patent claiming a method of treating autoimmune diseases using an antibody to B-lymphocyte stimulator, which Benlysta targets. Biogen Idec licensed HGS and then-partner Glaxo exclusive rights in 2008. The deal numbers are paltry compared to Biogen Idec’s annual revenues, but it’s part of a slow outflow of holdings since CEO George Scangos took over in mid-2010 and said he would reorganize around Biogen's neurology franchise and shelve oncology. In late 2010 Biogen Idec said it would sell its San Diego campus – originally the “Idec” half of the company – and in April 2011 the firm announced it would out-license two preclinical kinase inhibitors to Takeda Pharmaceutical Co. Coming on board in late 2010, head of business development Steven Holtzman told IN VIVO  that divestment was a high priority: “We’re taking a two-track approach. One is out-licensing; the other is a spin-out,” he said. With the Benlysta royalties, DRI is paying Biogen Idec $18.3 million upfront, then undisclosed portions of the royalty stream until September 2014. After that, DRI keeps all royalties but could pay a contingency fee if cumulative royalties to DRI exceed an undisclosed amount. -- Alex Lash

Annovation Biopharma: The Series A financing for Annovation, established to develop a safer, next-generation anaesthetic, is all about speed – developing an anaesthetic agent from which surgical patients can be revived in minutes and creating a corporate structure that will allow a quick, profitable exit for Annovation’s investors. The $8 million A round, which can be extended to $11 million if needed, was led by Atlas Venture Development Corp., a standalone entity established by venture capital firm Atlas Venture in 2010 to create and operate single-asset companies that can be sold off quickly to generate returns for the parent company. Joining AVDC in funding the round were Partners Innovation Fund (PIF) and The Medicines Co. (TMC). The participation of TMC, a specialty pharma focused on hospital-based products, is crucial to the deal because TMC also gets an option to buy out Annovation at pre-negotiated terms once the lead drug reaches proof-of-concept. Seed funding for Annovation was provided by AVDC, PIF and Mass Medical Angels. The product is an anesthetic with a pharmacokinetic profile that would allow patients to be brought to consciousness minutes after their procedures conclude. The lead drug, which should enter clinical development in the first half of 2013, is based on research by Annovation founder Douglas Raines, a doctor at Massachusetts General Hospital in Boston. At the time seed funding was provided, Annovation was working on a pair of next-generation, small molecule drugs for anesthesia, sedation and sleep, called Rapidate and Ventidate. -- J.H.

Wellington Partners: A spot of new fund news cracks this fortnight’s lineup: European venture firm Wellington Partners announced September 19 the first closing of its new life sciences fund, Wellington Partners IV. The early total is €70 million. It aims to raise €120 million in total, which will be significantly larger than Wellington's third fund, which raised €78 million, the company said. Family-owned investment offices were among investors from Europe, the U.S. and the Middle East who contributed to the new venture capital fund. Major investors in the fourth fund included the European Investment Fund (EIF), LfA Foerderbank Bayern and Austria Wirtschaftsservice GmbH. The EIF is also a major partner in another Eurocentric fund announced this year, the $80 million CRT Pioneer Fund it launched in conjunction with Cancer Research Technology Ltd., the commercial arm of the sprawling charity group Cancer Research UK. Other European life-science funds to close this year include Edmond de Rothschild Investment Partners’ fourth BioDiscovery Fund and Index Ventures’ asset-centric €150 million fund backed by Johnson & Johnson and GlaxoSmithKline. Wellington’s life science team -- general partners Rainer Strohmenger, Erich Schlick, Regina Hodits, Harald Keller, Ernst Mannheimer and Rolf Dienst -- will invest in companies in the medical devices, diagnostics and biotechnology sectors across Europe. – John Davis

Are you ready for some FOTF? Photo courtesy of flickr user beatboxbadhabit.

Friday, September 14, 2012

Deals Of The Week Goes To PSA

Here’s some facts you ought to know about emerging markets – and why they are driving deals these days. Emerging markets dominated deal news this past week, notably inked by Merck, Pfizer & AstraZeneca in China, as the companies seek to  expand their broader, established product portfolio further to tap that vast country' s inland cities and rural areas, and by Sinclair IS and Quintiles in Mexico:

Sales in emerging markets will grow by $150 billion or more between 2011 and 2016, according to IMS Health.

China is in the midst of a 12th five-year plan (2011-2015), which lists biotechnology as one of seven strategic areas for investment.
A host of Chinese biotechs are starting to jump start their R&D pipelines by in-licensing compounds from Western developers: Asceltis Inc., Aslan Pharmaceuticals Pte. Ltd., and Hua Medicine, to name a few. Some Western firms, such as Merck and AstraZeneca, have invested in Chinese biotechs that are aiming to bring innovative new drugs to market. 

The Russian government's Pharma 2020 program aims for 50% of pharmaceuticals (and 90% of essential drugs) to be manufactured domestically by 2020. In addition, it wants 60% of local drugs (by value) to be innovative products and to grow pharma exports by eight times compared to 2008. President Vladimir Putin has pledged nearly $4 billion to make it happen, according to Elsevier's PharmAsiaNews.

India has strong capabilities in nanotechnology, aggregation and analysis of genomic databases, and translational research, according to a report released last spring by The Boston Consulting Group.

Closer to home, deal-making also continued apace, as companies tap academic institutes, biotechs, and venture philanthropy for innovation and financing.

See you at PSA 2012 in New York beginning Monday.... and/ or at PharmAsia Shanghai Summit on Sept.--Wendy Diller

Meanwhile onward with dealmaking...

Merck/ Simcere and Pfizer/ Hisun: After watching several rounds of price cuts on branded generics, which account for roughly 80% of multinational companies’ business in China, Merck  and Pfizer hope to boost volume of off-patent products via partnerships with local companies. First, Merck and Simcere Pharmaceutical Group officially launched a joint venture in Shanghai Sept. 12, and the following day, Pfizer announced the launch of its JV with Zhejiang Hisun Pharmaceutical Co. Ltd.

Both moves should be seen in the greater context of China healthcare reforms, including the expansion of basic health insurance to virtually all of China’s 1.3 billion people. The reforms, in particular, have fueled rapid growth in lower-tier cities and rural markets, areas that have been the commercial domain of domestic pharma companies, whereas multinationals historically focus on larger cities. Merck signed its agreement with Simcere last August, and the JV, called SMSD (Simcere-MSD), was granted a business license in July 2012. SMSD has recruited a team of 400 employees to cover all provinces in China, and headcount is expected to double to 700-800 by year end. Merck’s affiliate in China Merck Sharp & Dohme Ltd. owns a 51% stake in the JV and Simcere holds the remaining 49% of SMSD.

In contrast to Merck and Simcere, Pfizer signed a memorandum of understanding to form its JV with Hisun – Hisun-Pfizer Pharmaceuticals Co. Ltd. – to develop, manufacture and commercialize off-patent pharmaceutical products in China and global markets in June 2011. Earlier this year, Pfizer and Hisun signed an additional framework agreement, and have since been waiting for government approval to launch the JV.

In a reverse of the Merck/ Simcere structure, Hisun will control a 51% stake in the JV and Pfizer will hold 49%. Aggregate investment in the JV is $295 million and registered capital is $250 million.--Tamra Sami, Brian Yang.

MedImmune/ WuXi AppTec: The joint venture between MedImmune and WuXi announced on Sept. 10 supports key ambitions of both partners – MedImmune’s aspiration to commercialize innovative biologics in important markets such as China and WuXi’s aim to build out its manufacturing services as a source of revenue growth ([A#28120910015]). WuXi’s biggest business is in contract research, but it has been expanding a manufacturing pipeline.

The agreement revolves around MedImmune’s monoclonal antibody MED15117 for rheumatoid arthritis. The JV will develop and commercialize the compound, with WuXi providing local regulatory, manufacturing, pre-clinical and clinical development support, while MedImmune offers technical and development expertise. But the JV is more than an opportunity for WuXi to expand manufacturing capabilities – it also offers the Chinese company an opportunity to learn through exposure to a global biologics company. For MedImmune, it is a chance to take advantage of China’s fast-track regulatory pathway, which is open only to domestic companies and to obtain access to local biologics manufacturing, which China also requires for development of a compound that is not already approved elsewhere.

It is the first JV between a foreign and Chinese company focused on developing an innovative biologic for China, according to analysts. MedImmune will have the option to acquire full rights to commercialize MEDI5117, and if it does not exercise that option, the joint venture will have the right to commercialize the product. WuXi will earn revenue based on services provided to the JV, and MedImmune will receive milestone payments as the program progresses.--T. Sami, B. Yang.

Pfizer/ Visterra: Pfizer took a flyer on early-stage infectious disease research this week, when it struck a deal with Cambridge, Mass.-based start-up Visterra. In an agreement revealed Sept. 11, Pfizer paid an undisclosed amount up-front to collaborate on drug discovery with the biotech, an antibody developer hoping to bring its first drug candidate into the clinic by 2014. Financial details weren’t released, but the companies said the deal includes research funding, milestones and royalties as well. The parties also haven’t said which specific disorders their collaborative research will aim to treat, or what rights Pfizer will receive to drugs discovered. Visterra’s own lead program, VIS410, is a preclinical influenza therapy. 

Early data also released at ICAAC on Sept. 10 showed that VIS410 provided both therapeutic and prophylactic protection in 100% of mice infected with multiple strains of influenza A. Visterra’s platform allows it to view proteins in three dimensions and examine their network structure, according to CEO Steven Brugger. Pfizer markets several infectious disease products, including Zyvox (linezolid) for Gram-resistant pathogens and the Prevnar (pneumococcal 13-valent conjugate) vaccine franchise. Visterra was founded in 2007 to develop products based on research conducted by MIT professor Ram Sasisekharan; it has won $19 million in support to date from Flagship Ventures, Lux Capital and Polaris Venture Partners.--Paul Bonanos

Pulmatrix/Cystic Fibrosis Foundation:  Lexington, Mass.-based Pulmatrix will receive $1.4 million in upfront and milestone-driven funding to support its lead drug PUR118 for cystic fibrosis as part of a collaboration with the Cystic Fibrosis Foundation Therapeutics, Inc., the nonprofit drug discovery and development affiliate of the Cystic Fibrosis Foundation. The award will support Pulmatrix’s Phase Ib clinical trials of PUR118 to reduce the risk of acute exacerbations in CF patients, the company said Sept. 14. PUR118 is an inhalable dry powder formulation that is in development for cystic fibrosis and chronic obstructive pulmonary disease. It is currently being studied in a Phase I study in cystic fibrosis and two Phase Ib studies in COPD. The company recently closed a $14 million Series B extension financing including existing investors Polaris Venture Partners, 5AM, Novartis Venture Fund and ARCH Venture Partners.--Jess Merrill
Quintiles Transnational Corp./ Sinclair IS Pharma PLC: What can small pharma companies do to tap buoyant emerging markets when they lack the size and infrastructure to do so on their own? Well, Quintiles, best known as a contract research organization, says it’s got the answer. Based in North Carolina, it signed a deal Sept. 13 with Sinclair IS Pharma, which will give the small U.K.-based specialist pharmaceuticals company its first step into the Latin American market. The 10-year collaboration and licensing agreement is exclusively for the Mexican market, but both parties have their eye on expanding into Brazil.

That’s not surprising given that Quintiles opened operations there only two months ago. Quintiles estimates Brazil's biopharma market at $17.1 billion, and  will set up sales and marketing operations there to help its customers cash in on the burgeoning demand. Quintiles can help biotechs "navigate the complexities these markets present,” said Quintiles Senior Vice President of Commercial Strategy James Featherstone. No financial details of the agreement were given.-- Sten Stovall

Bristol-Myers Squibb Co./ Vical Inc.: Vaccine-focused biotech Vical announced Sept. 13 that it has licensed its platform DNA immunization technology and its Vaxfectin adjuvant to Bristol-Myers Squibb. Under the non-exclusive agreement, BMS will use the platform to produce antibodies. Financial terms of the agreement were not disclosed. Vical’s pipeline is focused on infectious diseases and cancer products. It formed a collaboration with Japan’s Astellas Pharma in July 2011 to develop and commercialize the biotech's cytomegalovirus (CMV) vaccine, TransVax. Vical received $25 million initially from Astellas, plus another $10 million when the Phase III trial design was finalized. The company has the potential to receive $103 million in total potential upfront and milestone payments. Vical will receive double-digit royalties on sales should the product get to market and has the right to co-promote TransVax in the U.S. Astellas will be responsible for all development and commercialization costs; yet, Vical will assist in certain development and regulatory functions. “This agreement represents a meaningful step toward monetizing a common use of our broadly applicable intellectual property asset, and establishes a template for additional agreements with others working in the field,” said Vijay B. Samant, Vical's President and CEO, in a statement.--Lisa Lamotta

AstraZeneca PLC/The Broad Institute: British drug-giant AstraZeneca has tapped the Broad Institute of MIT and Harvard to help it discover new antibiotics to treat infectious diseases. The company is hoping that being able to mine the Broad Institute’s library of 100,000 chemical compounds will help it speed development of antibiotics and other anti-infectives that could help treat antibiotic-resistant superbugs. The chemical library contains customized molecules known as Diversity-Oriented Synthesis compounds that are  designed to contain molecular shapes and structures not found anywhere else and hit challenging biological targets. Under the agreement, screening and hit-to-lead chemistry will take place in the Broad’s Chemical Biology Platform and AstraZeneca will optimize, develop and commercialize any potential compounds found under the two-year agreement. The Broad Institute was founded in 2003 by MIT, Harvard and their affiliate hospitals to help advance science and discovery related to genome-based knowledge.--LL

Bayer HealthCare/ Teva's U.S. Animal Health Business: In its second foray into the U.S. animal healthcare sector this year, the diversified German multinational firm, Bayer AG, is to acquire Teva's U.S. animal health business  for an upfront payment of $60 million and up to $85 million in additional payments tied to manufacturing and sales targets. Bayer will acquire dermatologicals, nutraceuticals, anti-infectives and reproductive hormones used in food animals and pets, the companies announced Sept. 14. In February 2012, Bayer also bought the animal health business of Houston, Texas-based specialty chemicals company, KMG Chemical Inc., for an undisclosed sum. The acquisitions are part of Bayer's strategy to boost its animal health division, which reported sales of €679 million ($893 million) in the first six months of the year, up 9.2% on the previous year, although sales in the U.S. were reported to have "receded" compared with the same period in 2011. Animal health is one of the smaller of Bayer's business units: sales by its crop science division reached €4.8 billion in the first six months of 2012, and its material sciences business clocked up €5.7 billion. Bayer's moves to grow its veterinary business can be contrasted with Pfizer's desire to jettison its animal health division, which it wants to divest via an IPO, with the name Zoetis; the split is expected in  2013.--J.Davis