Deals Of The Week: Isis Rethinks Its Partnering Strategy

 

In its last few earnings calls Isis Pharmaceuticals Inc. has touched on a significant change in its partnering strategy. We spoke with CEO Stan Crooke recently to better understand the implications of these changes for Isis’s top line and operating expenses, and also how they might allow the antisense specialist to enter into more strategic relationships with a few well-chosen partners. 

Isis has been on a deal tear. It out-licensed 5 candidates in 2012, striking three of those deals with Biogen Idec Inc., according to Elsevier’s Strategic Transactions Database. Since 2008, it has collected over half a billion dollars in upfront cash, and hundreds of millions more in milestone payments, not to mention $175 million on the sale of its satellite subsidiary Ibis Biosciences Inc. to Abbott Laboratories Inc.

The new approach was enabled by the size and renewability of Isis’s pipeline – some 28 antisense compounds in clinical development, and about seven in preclinical – and also by recent improvements in antisense technology that have raised the value and attractiveness of Isis’s assets and allowed it to pursue targets in a broad array of diseases including larger population diseases.

Isis puts its candidates into three buckets. The first bucket includes drugs in indications where there’s high target risk and costly and inconclusive Phase II studies.  Its goal is to partner these assets early, sometimes during preclinical development, in option deals where Isis controls development through Phase I or II. Recent agreements in neurology with Biogen (spinal muscular atrophy) and Roche (Huntington’s disease), and in cancer with AstraZeneca PLC (various tumors), conform to this model.

The second bucket is for drugs in indications where Phase II studies are dispositive and predictive of Phase III success, but where Phase III programs are very expensive and complex – for instance, due to a requirement for cardio outcome studies. These indications, typically metabolic disorders or certain cardiovascular diseases, have large patient populations and require a significant commercial effort. Isis’s unpartnered candidates against targets involved in insulin resistance, lipid control, fat metabolism, clotting disorders and coronary artery disease fall in this bucket. “Because we’ve kept them longer, through Phase II proof-of-concept, the terms are more lucrative,” said Crooke.

The third bucket signals the greatest change in Isis’s partnering strategy. From the firm’s founding in 1989, it has focused primarily on partnerships in which it had limited financial flexibility and where its partner controlled development. Beginning around 2010, Isis began to strike deals where it retained developmental control through early and mid stages, and generally took a bigger payment, both upfront and in milestones and royalties.

This third group comprises drugs in indications with clear Phase II and Phase III clinical paths, low-to-moderate total development costs, and the potential for initial rare disease opportunities, with larger-population indications downstream. Crooke said Isis is looking for “a Phase III program that we think we can manage without growing the organization enormously.” In fact, Crooke said Isis may hold onto candidates in the third bucket partway or all the way through Phase III.

The company might even control some drugs through filing, though he conceded that the timing would get tricky. The art is to partner early enough so that the licensee can prepare for launch, but late enough to maximize the value of the asset. Deals over Phase III assets might include a one-year option, though Crooke said he and his team are still evaluating different deal structures.

The first experiment in Phase III out-licensing will be ISIS-APOCIIIRx for patients with high triglycerides; its Phase III trial is slated to begin next year. The Kynamro (mipomersen) deal with Genzyme Corp., in which Isis took $325 million in upfront cash and equity for an asset it had funded through Phase II, may have woken it to the commercial opportunity of holding drugs longer, particularly ones that play out in multiple indications. But where mipomersen’s Phase II trial had to be funded via a private placement and an innovative financing with Symphony Capital, Isis is no longer cash-constrained and will have no trouble managing the late-stage development program for APOCIIIRx and other appropriate candidates. Similar deal terms and a big pharma partner are likely if Isis is successful in licensing APOCIIIRx.

The new deal strategy calls for Isis to crank out three to five drugs per year. At that rate, said Crooke, it will need to grow the organization a bit. And R&D spending, which has until now been relatively stable, will begin to rise as it moves drugs forward faster and retains some into Phase III.

But the river of cash that will be generated by Isis’s numerous existing deals – upfronts, milestones, licensing fees, royalties – should easily cover the costs. Its cash hoard, announced at its August 6 second quarter earnings call, is $590 million. The money will also make possible the next iteration of Isis’s partnering strategy. “What we look forward to in the future,” said Crooke, “is a few strategic partners where we’ll have a partner in a specific space who really knows us and the technology. And we know the partner and what we’re getting.”

Clear sailing, then, as long as the deals keep coming in. However, 2013 has seen a pause in the torrid pace of Isis’s deals. So far into the year, it has struck only the Roche agreement in April.

Still, all that cash set to pour in, and all those changes in the way it does business development, could nudge Isis to rethink its platform business model.  We’ll be examining that possibility in an upcoming issue of IN VIVO. - Mike Goodman

Until then, here’s what the rest of the biopharma world has been up to, deal wise . . . 

Novartis/Ensemble Therapeutics: Building on its research into the inflammatory cytokine interleukin-17, Novartis AG has partnered with Ensemble Therapeutics Corp. to develop an oral small molecule targeting the pathway. The big pharma is one of the leaders in this field of research and has a biologic drug that blocks IL-17, secukinumab, poised for a near-term regulatory filing for the treatment of psoriasis. Several competitors are also looking to bring similar drugs to market, and an oral alternative would represent a compelling commercial opportunity. The terms of the discovery-stage deal, announced Aug. 5, were not disclosed, though it will include an upfront payment, milestones and research funding payable to Ensemble.  For the private drug discovery company, the deal involves its latest-stage asset.  Much of the value of its macrocycle discovery platform, from which it has built a library of more than five million synthetic macrocylic compounds called Ensemblins, is at an early stage. The orally available compounds permeate cells like small molecules do, but like biologics, also bind to protein targets. The company has partnered with several other pharmas including Pfizer Inc., Bristol-Myers Squibb Co., Genentech Inc., Boehringer Ingelheim GMBH and, most recently, Alexion Pharmaceuticals Inc.- Jess Merrill

Bayer/Compugen: Israeli drug developer Compugen Ltd.  landed a drug development deal with Germany’s Bayer AG for two potential cancer treatments whereby the Tel Aviv-based biotech will get an upfront payment of $10 million and could get more than $500 million in milestone payments, not including milestone payments of up to $30 million for preclinical activities, plus royalties on resulting drug sales. Compugen, which has a pipeline of preclinical protein therapeutics and monoclonal antibodies, uses predictive discovery technologies to discover antibody therapies that use the body's natural immune defenses to fight tumors. The NASDAQ-listed biotech’s computational platform uses algorithms to predict which surface membrane proteins could be used as antibody drug targets; these are later validated in the laboratory. The collaboration, announced Aug 7, will focus on two novel immune checkpoint regulators that may play a role in immunosuppression.  Its scientists are developing specific therapeutic antibodies geared to block the immunosuppressive function of these targets and to reactivate the patient's anti-tumor immune response. It’s an area that is drawing increasing attention from drug makers. Compugen depends to a large degree on partnerships to progress its R&D program. Under its latest arrangement, Bayer will get control over further development and global commercialization rights to any new antibody-based cancer immunotherapies the collaboration generates. - Sten Stovall

Oncobiologics/InVentiv Health: N.J.-based Oncobiologics Inc. has entered into a risk-sharing agreement with contract research organization inVentiv Health Inc. in an effort to move its biosimilars pipeline forward. Oncobiologics is a small privately-held company, founded in 2011, that has relied on government grants, partnering opportunities, and angel investors for funds. It currently has no drugs in the clinic, but has several preclinical biosimilars and three innovative molecules still in discovery. The two companies will collaborate to develop five biosimilars, beginning with a generic version of AbbVie Inc.’s blockbuster rheumatoid arthritis drug Humira (adalimumab). The collaboration will involve biosimilar versions of four oncology drugs, including Roche/Genentech Inc.’s Rituxan (rituximab), Bristol-Myers Squibb Co./Eli Lilly & Co.’s Erbitux (cetuximab), Roche/Genentech’s Herceptin (trastuzumab), and Roche/Genentech’s Avastin (bevacizumab). inVentiv will share the cost of Phase III development. Oncobiologics was founded by individuals with business, R&D, and process engineering experience in the biologics divisions of major pharma companies. The firm intends to find commercialization partners in the U.S., Europe, and emerging markets, and has struck several deals to that end, but will work with inVentiv to commercialize the products in any territories without partnership agreements. inVentiv’s share of the profits will be dependent on its involvement in those unpartnered territories. Financial details of the transaction were not disclosed.- Lisa Lamotta

Amgen/Array: In this week’s “No Deal,” Amgen Inc. will return glucokinase activator AMG 151 to original owner Array BioPharma Inc., ending a December 2009 collaboration in which the companies jointly studied type 2 diabetes drugs. The tie-up officially unravels October 5, when rights to AMG 151 will revert to Array. Boulder, Colo.-based Array revealed the deal’s termination along with second-quarter earnings on August 7. The Phase II candidate, originally and henceforth known as ARRY-403, was the centerpiece of a deal that netted Array $60 million up-front. Array also received an $8.5 million milestone payment during the life of the deal, which included an additional $658 million in unrealized payments. The collaboration included a two-year research agreement that ended in 2011. The deal was forged when ARRY-403 was still in Phase I. Since then, some doubts have arisen that glucokinase activators can produce sustained glycemic improvement, while further risks of hypoglycemia and increased blood pressure have cast doubt on the drug class’s future in diabetes. Moreover, both companies have replaced their CEOs in the intervening years, and Amgen research and development head Roger Perlmutter has moved on to Merck & Co. Inc. The companies recently completed a Phase IIa study of the drug, and plan to share its results with the scientific community, according to an Array statement. - Paul Bonanos