Deals Of the Week, Once Again, Ponders Biosimilars

Teva Pharmaceutical Industries Ltd.’s and Lonza Group’s announcement on July 25 that they were formally ending their four-year-old biosimilars joint venture was hardly a surprise, given that late last year both companies said they were reviewing their relationship. Their decision certainly reflects the complexities of developing biosimilars, but it also is the consequence of each company’s new leadership, which has different priorities than those who forged the original deal.

Signed at a time when biosimilars seemed like an incredibly promising, albeit vague, long-term opportunity for an assortment of generics and pharma companies, the original deal was ambitious in scope. Each company committed to spend $300 million over six years on the alliance, estimating the cost of developing one biosimilar would be roughly $100 million – considered a lot at the time. Teva saw biosimilars “as a major growth driver” and positioned itself as “a leader in this market,” then President and CEO Shlomo Yanai said at the time. Lonza would bring large-scale biologics manufacturing and development expertise to the table, while Teva offered experience in clinical development and marketing of generic and branded drugs.

Four years later, even as the EU and U.S. regulatory pathways for biosimilars gain some clarity, the overall landscape for the field is as complex as ever. Like their competitors, Teva and Lonza held much of their work close to their vests, but they had counted on developing a franchise around a biosimilar version of Roche’s $7 billion Rituxan (rituximab) franchise, only to halt clinical development last October due to “changes in the regulatory and competitive environment.” They weren’t the only ones to face setbacks on rituximab programs: Celltrion Inc. and its partner Hospira Inc., and the Samsung Biologics/Quintiles Transnational Holdings Inc. alliances also are also in the midst of re-evaluating their biosimilar rituximab programs.

More telling, perhaps, new CEOs at each company are set on revamping priorities across the board. Lonza’s new CEO, Richard Ridinger, who joined the company in April 2012, is in the midst of re-organizing the company into two core areas, pharma and biotech and specialty ingredients. On an earnings call also on July 25, he said the company, which accounts for about a third of all mammalian cell culture manufacturing worldwide, would reduce its manufacturing footprint, including closing two plants. Lonza indicated that it holds CHF100 million ($107.6 million) in assets on its balance sheet in relationship to the joint venture and has expensed CHF38 million since its formation. The company estimates it will save CHF150 million by ending the deal.

Teva releases its second-quarter numbers on August 1, so the company isn’t providing accounting details or elaborating on the announcement. But CEO Jeremy Levin, who assumed his position in May 2012, is emphasizing greater selectivity and focus across the board, rationalizing overlapping projects, and improving the efficiency of an organization that had become unwieldy and unfocused, even as it has grown rapidly in the past decade. A lot of that rationalization is taking place in Europe, where markets are relentlessly unforgiving and where Teva’s –and its competitors’ – first attempts at biosimilars launches are occurring.

Biosimilars work continues at Teva internally. In comments earlier this year, both Levin and Chief Scientific Officer Michael Hayden said they would pursue biosimilars as part of a broader biologics program. Teva currently has several generic versions of marketed biologics on the market, although it went through traditional regulatory routes to get approvals: TevaGrastim, a generic version of Amgen Inc.’s Neulasta (pegfilgrastim) has been available in Europe for several years, for example. “I would say that in the biosimilars space, we still remain enthusiastic, but we’re going to be smart about it,” said Hayden in an investor call late last year, noting. “We're going to be in biosimilars in a very focused way.”

And since Teva is mum on the subject, it’s worth noting an observation by Frederick Wilkinson, president of Teva competitor Actavis Inc.’s specialty brands unit, on the latter’s own earnings call the same day as the Lonza-Teva announcement. Actavis has a joint venture in biosimilars with Amgen and Wilkinson said it expects a news update from that endeavor in August.  “I wouldn't actually read too much into it,” Wilkinson said of the ‘no deal.’ “If you looked at the Teva biosimilar program, they at some point had bought enough different companies that they had multiple projects going on the same product. And so, I think what they've done is probably very efficiently pruned their product line down to the leading entities within their biosimilar portfolio. Lonza for the last year has been out selling or trying to solicit use of space, so it has been obvious that the Lonza Teva relationship was not going to be as deep as it originally was [planned to be].” 

If you're looking for deals that may be smaller scale, but have a fresh start, here are some of the newest developments in what was generally a quiet deal-making week:--Wendy Diller

Adimab/Biogen &Adimab/GSK: Adimab’s tech transfer deals with GlaxoSmithKline  and Biogen Idec represent the small biotech’s greatest business development and financial successes to date.

The deals, each announced July 26, see Adimab setting up its technology platform inside its partners’ R&D shops. By licensing non-exclusive rights and transferring this antibody discovery and protein engineering platform to GSK and Biogen, Adimab enables its partners to expand their use of a technology that the biotech has until now tightly controlled. Both Biogen and GSK had previously allied with Adimab (GSK through the acquisition of Adimab partner Human Genome Sciences Inc.), but like the biotech’s 19 other partners, they were limited to one- or two-target “trials.”

GSK’s agreement is for an indefinite number of years, with unlimited product licenses across all therapeutic areas. Biogen’s deal is more limited – a seven year (renewable) term, limited to certain disease areas where Biogen has a presence, and a limited number of commercial licenses. Both companies can use the technology to pursue any antibody format – including antibody-drug conjugates or bispecific antibodies – and have retained options to access any future improvements or additions to the Adimab platform.
The financial specifics of the two new Adimab deals were not disclosed. In each, Adimab will receive a “significant” upfront cash payment, annual license fees for the lengths of the deal, R&D milestone payments, and royalties and commercial milestones on a defined number of therapeutic products.

The upfront funding from the two deals make Adimab a decidedly profitable discovery engine for the foreseeable future, and the company will make its first dividend payment to its venture investors later this year. It expects to sign one more platform transfer deal this year, and three per year through 2015.--Chris Morrison.

Kolltan/Children’s Hospital Of Philadelphia: Cancer-focused biotech Kolltan Pharmaceuticals announced a license of intellectual property and research agreement with Children’s Hospital of Philadelphia July 18 around discovery efforts for neuroblastoma therapeutics targeting anaplastic lymphoma kinase (ALK). Terms of the deal were not disclosed. Based in New Haven, Conn., Kolltan’s focus is on large-molecule approaches to receptor tyrosine kinase (RTK) inhibition – it has six programs ongoing at the discovery and preclinical stage and plans to file an IND for its first clinical candidate before year’s end. The firm will collaborate with researcher Yael Mosse, who studies the causes and potential therapeutic approaches for treatment of children diagnosed with neuroblastoma. In a statement, Mosse said ALK-targeted immunotherapy or antibody-drug conjugates may offer the best approach for patients whose tumors have an ALK mutation or amplification. “We believe immunotherapy and ADCs may provide a therapeutic option for the majority of patients with high-risk disease given the widespread expression of ALK on the cell surface of most neuroblastoma tumors,” she said.--Joseph Haas

Lilly/Transition: Transition Therapeutics  has obtained a worldwide exclusive license for Eli Lilly’s small molecule transcriptional regulator TT-601 for the treatment of osteoarthritis pain, the biotech announced on July 23. The compound has completed preclinical development, and Transition plans to take it into the clinic during the first half of 2014. TT-601 modulates the activity of a novel nuclear receptor target. Tony Cruz, CEO of Transition, says that molecules in this class “have shown target engagement in the joint space and efficacy in multiple animal models of joint pain.” Twenty-seven million Americans have OA. Under the agreement, Transition gets the rights to develop and possibly commercialize TT-601. Lilly keeps an option to reacquire the agent on review of proof-of-concept data, in which case Transition would be eligible for milestone payments of approximately $130 million and a high single-digit royalty on the sale of potential products containing TT-601.

Should Lilly not take the option, and the product comes to market, Lilly would be eligible for a low single-digit royalty from Transition. There’s a good chance Lilly will pull the trigger on the option. This deal comes on the heels of Lilly’s June 17 decision to exercise its option to reacquire another compound licensed to Transition, TT-401 for diabetes. Transition took a $7 million option fee, and could get up to $240 million in milestones from that deal. That goes back to a March 2010 deal between the partners in which TT-401 was included among a few other preclinical candidates from Lilly. Their partnering history began in 2008 with a non-option deal in which Lilly licensed TT-223 and other gastrin-based therapeutics for both Type I and II diabetes from Transition.--Michael Goodman

PolyTherics And Antitope Merge: Britain’s privately owned PolyTherics  and Antitope have merged their biopharma services businesses to tap growing demand from Big Pharma for services and technologies used in the search for biologics such as antibody-drug conjugates.

The enlarged group has a strong client base in the biotechnology and pharmaceutical industry, including the top ten biggest drug makers. It will offer conjugation technologies to generate more stable and homogeneous antibody drug conjugates, technologies to optimize the pharmacokinetics of biologics, technologies for immunogenicity screening, technologies to re-engineer antibodies, and proteins to reduce their immunogenicity, and cell line development technologies.

Antitope, founded in 2004, tests immune responses caused by antibody therapies and engineers modifications for the drugs. That expertise should complement the conjugation and polymer technologies from PolyTherics, which was created in 2002 as a University College London spin-off.

PolyTherics financed the merger with £13.5 million ($20.1 million) raised from a group of backers that includes Imperial Innovations, Invesco Perpetual, Mercia Fund Management, Advantage Enterprise & Innovation Fund, ProVen Health, Oxford Technology VCTs and high net worth individual's funds managed by Longbow Capital.--Sten Stovall