Deals of the Week Ponders Eleventh-Hour Risk

Pharma dealmaking is usually fraught with all kinds of risks, whether technical, clinical, regulatory, financial, or otherwise. But Allergan’s buyout of migraine drug developer MAP Pharmaceuticals this week represented a unique roll of the dice: the $958 million deal’s ultimate value to the buyer hinges largely on the approval of a late-stage drug currently under re-examination due to a “Complete Response” letter from FDA, casting its approval this spring into doubt.

It’s not unprecedented for a buyout to occur while a drug nearing approval hangs in the balance – more on that in a moment – but the Allergan/MAP deal is perhaps even more unique in that it shifts the risk around Levadex (dihydroergotamine), once shared by the two companies, entirely to the buyer, just a few months before an approval decision is due from FDA. Allergan had already paid MAP $60 million up-front for rights in U.S. and Canada to the inhalable Levadex in January 2011, when two Phase III trials of the drug had already been completed. But FDA demanded additional work in a March 2012 CRL, and MAP filed an amended NDA seven months later. The drug has a PDUFA date of April 15.

Even with precedent, it’s a rare case that a deal’s valuation is driven entirely by a single drug this close to approval, but under the shadow of a CRL. We at Deals of the Week! looked for other examples of acquisitions of companies with an outstanding CRL since 2010, and discovered a range of outcomes.

Cephalon’s 2011 buyout of Chemgenex, for example, featured uncertainty in the pipeline as Chemgenex prepared chronic myeloid leukemia drug Omapro (omacetaxine) for resubmission; the drug was eventually approved in a narrower third-line indication than originally requested, and is marketed as Synribo today. And Kyowa Hakko Kirin’s $475 million acquisition of Prostrakan in April 2011 occurred between the April 2010 CRL for Rectiv (nitroglycerin ointment) for anal fissures and its eventual June 2011 approval. But both those companies had other key assets ahead of those covered by their CRLs.

Sometimes the outcome isn’t as encouraging. When Pfizer bought Encysive in 2008 for $195 million, it hoped that Thelin (sitaxentan) would complement its existing drug Revatio (sildenafil) for pulmonary arterial hypertension, even though the compound had already received three CRLs. But two years later, Pfizer gave up the ghost, withdrawing Thelin from Europe and all the territories in which it had already been approved, and ceasing U.S. clinical trials. (In late 2010, Pfizer also acquired King Pharmaceuticals, whose pain drug Remoxy (long-acting oxycodone) remains under CRL status.)

In any case, MAP has long expressed confidence that Levadex’s approval is likely, and that FDA’s concerns about chemistry, manufacturing and controls won’t affect either the drug’s safety or efficacy. That was enough to convince Allergan (which, as the Levadex partner is in a position to know what's what) to acquire full rights to the drug instead of just share them.

Roll the dice with us, and see which pharmas and biotechs are trying to conquer new terrain. You don’t even have to attack Irkutsk when you’ve got…

Watson (Actavis)/Uteron – Watson, which will soon go by the name Actavis Group, has been adding to its portfolio of women’s health products in hopes of building its branded business – with a goal of $1 billion in revenues for the division. The latest acquisition for the group was Belgium’s Uteron Pharma, which Watson purchased on Jan. 23 for $150 million upfront and the promise of another $155 million in milestone payments. Uteron brings a branded oral contraceptive, a test used in the infertility process and an intrauterine device (IUD) to the table. Uteron’s Levosert is an IUD that delivers 20 mcg of levonorgestrel per day. It is currently pending approval in the EU and in Phase III in the U.S. with the potential to reach the U.S. market by 2014. The product will go head-to-head with Bayer’s Mirena and its latest offering Skyla. The other late-stage opportunity in Uteron’s pipeline is Diafert, a non-invasive immunoassay kit for the assessment of egg quality during in-vitro fertilization (IVF), allowing physicians to select the best eggs for the process and increase success rates. The test is expected to gain approval in the EU this year and in the U.S. in 2014. Uteron also has a Phase II oral contraceptive that could stand out in a heavily genericized market. Estelle, expected to reach the U.S. market in 2018, uses a natural form of estrogen, while most oral contraceptives on the market use synthetic estrogen. Watson expects to combine the product with various types of progestins to create a family of products. –Lisa LaMotta

Baxter/Inspiration/Ipsen -- Ipsen of France hopes it can soon free itself of U.S. partner Inspiration Biopharmaceuticals Inc. now that Baxter International Inc. has agreed to buy the troubled biotech’s flagship hemophilia drug OBI-1 and related Boston, MA manufacturing facility. Inspiration entered Chapter 11 protection at the end of October 2012 to restructure and find a buyer for its two main hemophilia products. These are OBI-1, a recombinant porcine factor VIII (rpFVIII) for treating hemophilia A with inhibitors, and IB1001, a recombinant factor IX (rFIX) for the treatment of hemophilia B. Ipsen, Inspiration’s sole senior secured creditor, has been bleeding funds developing these two experimental drugs since 2010 and has been trying to distance itself from Inspiration since then. Ipsen has also been providing Inspiration with Debtor-in-Possession financing (DIP) for an amount of up to $18.3 million to permit the sale process to proceed and support business continuity. The duo on Jan. 24 said U.S.-based Baxter had now agreed to buy worldwide rights to OBI-1 along with Ipsen’s industrial facility in Milford, outside Boston, which makes bulk OBI-1, a biologic product, thus making the plant of strategic interest to Baxter. Subject to court and regulatory approval, Baxter will pay $50 million upfront, up to $135 million in potential additional development and commercial milestones as well as tiered net sales payments ranging from 12.5% to 17.5% of OBI-1 annual net sales. The share of upfront payment to be received by Ipsen should mainly cover the total amount of DIP financing it has provided to Inspiration. The remaining portion of proceeds is contingent on OBI-1’s regulatory approval. As a consequence, Ipsen may incur an impairment charge to its hemophilia related assets, composed mainly of the convertible bonds and the Milford manufacturing site, totaling some €100 million after tax. The sale process for IB1001 has meanwhile entered the final bidding stage. Evercore Partners, which acted as sole financial advisor to Inspiration and Ipsen on the OBI-1 transaction, are leading the IB1001 sale negotiations too. This sale will be the more difficult, though, given IB1001’s cloudy regulatory prospects after safety issues led FDA in July 2012 to slap a clinical hold on the candidate, impacting two ongoing phase III trials. Ipsen declined to say how many groups have voiced interest in acquiring IB1001. - Sten Stovall

Dezima/Mitsubishi Tanabe -- Intriguing European start-up Dezima acquired a Phase I compound to treat dyslipidemia from Mitsubishi Tanabe Jan. 22, giving the young company a new lead program, and observers of recent clinical disappointment in the space something to scratch their heads about. Dezima paid an undisclosed amount for rights to TA-8995, an inhibitor of cholesteryl ester transfer protein (CETP), which it will rename DEZ-001. The company says it plans to fund studies on the drug, which has already been through single and multiple-ascending dose studies that revealed effects on both high-density and low-density lipoprotein, all the way into Phase III. Dezima was co-founded in 2012 by University of Amsterdam professor John Kastelein, along with investors Forbion Capital Partners and BioGeneration Ventures. Kastelein and Forbion’s Sander van Deventer, the latter of whom serves as Dezima’s CEO, also helped establish uniQure, whose gene therapy Glybera (alipogene tiparvovec) became the first treatment of its kind approved anywhere in the world last fall. The company also said it had added two dyslipidemia experts to its scientific advisory board: University of New South Wales professor and International Atherosclerosis Society president Philip Barter, and Washington Cardiovascular Associates director and Medstar Research Institution consultant Bryan Brewer. – P.B.

PatientsLikeMe/UCB/VA Epilepsy Centers of Excellence -- On Jan. 22, the U.S. Department of Veterans Affairs’ Epilepsy Centers of Excellence (ECoE), UCB SA and PatientsLikeMe (PLM) announced a study to better understand what factors improve health outcomes for veterans with epilepsy. No financial terms or timelines were disclosed. The ECoE is interested in compiling the kind of real-world, patient-reported data that PLM specializes in to improve the overall quality of life of epilepsy patients. It would build on a recently completed ECoE study of various metrics including seizure frequency and severity, treatment adherence, and patient-physician dialogue. Both ECoE and PLM had separately been working with the Brussels-based biopharm UCB which markets several products including Keppra XR (levetiracetam) for epilepsy. Both valued UCB’s expertise in epilepsy, and its KOL networks and advisory boards. Moreover, PLM and UCB have partnered since 2010 on epilepsy projects. ECoE staff physician John Hixson and UCB approached PLM with a request to help them develop a way of integrating the patient-reported experiences which PLM harvests through surveys of epilepsy communities with clinicians’ experience to improve disease management at the point of clinical encounter. According to Hixson, 66,000 veterans with epilepsy visit the VA Medical Centers each year. The parties said the collaboration will harness PLM insights, for instance into how patients can best describe their seizures to clinicians, and what was the optimal physician type to care for epilepsy patients. Jamie Heywood, co-founder and chairman of PLM, said “This is a great opportunity to validate our earlier findings which revealed that patients using our website reduced side effects, increased compliance, and reduced ER visits.” In August 2012, PLM and Merck & Co. Inc. partnered to analyze and interpret psoriasis patient-reported data. - Michael Goodman

AstraZeneca/Orexo -- Once again, one company's trash is another company's treasure. Or, at least, its very low-risk preclinical and preliminary respiratory bet. This morning Swedish biotech Orexo said that it had granted AZ rights to evaluate compounds in its OX-CLI preclinical respiratory R&D program. Terms of the deal were not disclosed, though Orexo said that if the Big Pharma decided to option any compounds that it would receive potential development milestones and royalties. The CLI program had been idle since Orexo and J&J's Janssen unit killed a deal around those assets and other Orexo programs back in January 2012.-- Chris Morrison

Celsion/Zhejiang Hisun Pharmaceutical Company -- We've covered a ton of option deals here at DOTW, but this might be our first "option for an option" deal. NJ-based biotech Celsion said on Jan. 22 that it received a $5 million fee when it entered a technology development agreement with Zhejiang Hisun Pharma Co., and laid out a roadmap for a future option-deal with the Chinese pharmaceutical company for China rights to Thermodox (a heat-activated liposomal encapsulation of the chemotherapeutic doxorubicin). Phase III data on Thermodox in hepatocellular carcinoma (the HEAT study) are expected this month, according to the company, and the product is being developed for a variety of other oncology indications. If Hisun wants those rights, it must pay Celsion another $5 million within 60 days of this first deal, which would trigger an option on a deal that includes an additional $15 million up-front fee, milestones, and royalties on sales in the Greater China market, which Celsion notes is home to the largest HCC patient population in the world. Per a 2008 deal, Yakult holds rights in Japan, the only other territory where Celsion has licensed the asset. -- CM

Risk image via flickr user avyfain under creative commons