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Tuesday, December 24, 2013

Three Polls, One Page: Vote for IVBs Deals of the Year

We've set up a single page where you can vote on M&A, Financing, and Alliance of the Year. Polls open til January 7. Good luck to the nominees! VOTE HERE.


Monday, December 23, 2013

And the Nominees for IVB's 2013 M&A of the Year Are ...

We've nominated five 2013 Deals for M&A of the Year. It's time for you, esteemed readers of The In Vivo Blog, to decide the winner. It's an eclectic bunch this year -- we can't wait to see what you'll choose. Our polls will stay open through the New Year, until Noon ET on Tuesday, January 7. Good luck to the nominees! VOTE BELOW! IF YOU ARE VIEWING VIA EMAIL AND CAN'T SEE THE POLL, CLICK HERE.


Valeant/B&L: The May 2013 deal was a big win for private equity owners Warburg Pincus. It put some extra shine on the reputation of then-B&L CEO Brent Saunders, who has moved on to Forest to work his Hassanian brand of turnaround-magic in the world of primary care. And it again highlighted ophthalmology -- and B&L's diversified pharma/device/consumer approach to the field -- as an industry hotspot. But the main reason we've nominated Valeant/B&L for the M&A Roger this year is that it underscores the increased activity on the big deal front of specialty pharma over its supposedly deeper pocketed Big Pharma rivals. Read the full nomination here.

McKesson/Celesio: McKesson’s purchase of German drug wholesaler Celesio for $8.3 billion is one of the largest deals of 2013, but that is not what puts it on the In Vivo Blog Deal of the Year map. More to the point, and the reason it should be on the radar of everyone in the biopharma industry, is its likely impact on pharma and the drivers that led it to consolidate in the first place. Although the deal focuses on distribution and supply chain management, some of the duller aspects of an industry prone to flaunt its contribution to saving lives, it is every bit just as important to pharma’s health as the next big deal in cancer immunotherapy. Read the full nomination here.

Biogen/Elan's Half of Tysabri: Elan’s move to sell its share of Tysabri (natalizumab) to long-time partner Biogen Idec was the ball that set the Rube Goldberg device in motion, precipitating its endgame and eventual sale to Perrigo, and landing it on the 2013 shortlist for M&A deal of the year. Ultimately, this sale gave Elan the thing it needed to become appealing to virtually any acquirer – lots of cash. Tysabri fits right into Biogen’s sweet spot; alongside Avonex (interferon beta-1a) and Tecfidera (dimethyl fumerate) Biogen's locked down about 40% of the total MS market. Read the full nomination here.

Amgen/Onyx: Onyx serves as a leg up for Amgen as it looks to establish itself as a major oncology innovator and bring forward a pipeline of oncology drugs it has cobbled together partly through acquisitions. Despite the possibility of drama, the deal wound up as a straightforward acquisition that hedges risk for the buyer and still rewards the seller, one where the purchase price, at $125 per share, meets a middle ground. Read the full nomination here.

The Ibrutinib Royalty: Royalty deals have long been the provenance of more conservative private-equity vehicles. And so it was odd not just to see two venture firms join the royalty deal but also to hear how much each was putting up. Aisling Capital and Clarus Ventures said in August they had paid $48.5 million to acquire a tiny slice of sales royalties from ibrutinib, a cancer drug that hadn't been approved yet. Read the full nomination here.


And The Nominees for IVB's 2013 Financing of the Year Are ...

We've nominated six 2013 deals for Financing of the Year. It's time for you, esteemed readers of The In Vivo Blog, to decide the winner. From Series A to IPO, from twinkle-in-the-eye science to Phase III drug candidate, we've got it all. Our polls will stay open through the New Year, until Noon ET on Tuesday, January 7. Good luck to the nominees! VOTE BELOW! IF YOU ARE VIEWING VIA EMAIL AND CAN'T SEE THE POLL, CLICK HERE.


Ophthotech's IPO: In a year filled with impressive public market debuts when public market debuts of biotechs were one of *the* top stories, Ophthotech's IPO hauled in $192 million and rightfully sits atop a heap of newly public biotech offerings. And Ophthotech might need every bit of that cash, and maybe more, for an ambitious Phase III program. Read the full nomination here.

Editas' Series A: Polaris, Third Rock, and Flagship more often than not will work in stealth on new potential breakthrough technologies on their own. Not the case with Editas, where the trio have teamed up to turn one of the hottest research tools around into a new wave of therapeutics. One might call it gene therapy, version 2.0: the technology known as CRISPR/Cas9 allows researchers working with cells or model organisms to delete genes or replace them with new ones, but in ways considered more precise than other gene-editing systems currently in use. Read the full nomination here.

Google backs Calico: Just Google, Art Levinson, and a small handful of drug discovery and development luminaries getting together to combat diseases of aging. Anyone else out there planning to 'solve death'? Read the full nomination here.

CHOP backs Spark Therapeutics: Spark sprung nearly fully formed (with a Phase III asset) from CHOP this year, with $50 million in funding. That's enough to carry its lead program to market, a gene therapy for an inherited form of blindness. In doing so it is riding a wave of recent high-profile investment in gene therapy. Read the full nomination here.

Juno Therapeutics' Series A: Juno unites researchers from three different institutions: Fred Hutchinson Cancer Center and the Seattle Children’s Research Institute in Seattle, and Memorial Sloan-Kettering Cancer Center in New York to pursue multiple avenues of cancer immunotherapy, and its $120 million Series A instantly sets the Seattle-based company up to become a major player in the rapidly evolving sector. Read the full nomination here.

GSK/Avalon Ventures: Pharma needs innovative pipeline candidates. VCs need faster, cheaper and easier exits. The partnership between Avalon Ventures and GlaxoSmithKline aims to accomplish both. The model sees up to $30 million from Avalon and up to $465 million from GSK come together to fund up to 10 new companies, each built around a single drug candidate. Read the full nomination here.


And the Nominees for IVB's 2013 Alliance of the Year Are ...

We've nominated five 2013 deals for Alliance of the Year. It's time for you, esteemed readers of The In Vivo Blog, to decide the winner. From medication adherence to geographic diversity to hot new technologies, there's something for everyone. Our polls will stay open through the New Year, until Noon ET on Tuesday, January 7. Good luck to the nominees! VOTE BELOW! IF YOU ARE VIEWING VIA EMAIL AND CAN'T SEE THE POLL, CLICK HERE.


GSK/Community Care of North Carolina: The deal may seem like a small marketing alliance between a big pharma company and a local provider of health care services in the medication adherence arena. But in reality it is much, much more. The alliance tackles critical challenges that are clearly on top of executives’ minds, in pharma and elsewhere in the health care system. Given the difficulties of closing deals between a pharma company and non-traditional commercial partners, notably like providers or payers, GSK certainly has pulled off a coup.Read the full nomination here.

Celgene/Oncomed: The deal once again put Celgene at the forefront of early-stage oncology dealmaking and added to the already impressive smorgasbord of drug candidates and technologies to which it holds rights or options. This is not to say the complicated deal with OncoMed was business as usual, for it was one of the most complicated agreements of the year in biopharmaceuticals, necessitating a term sheet that might have resembled a Rube Goldberg machine, and quite lucrative for OncoMed -- potentially very lucrative. Read the full nomination here.

Amgen/Astellas: In announcing a strategic alliance with Astellas Pharma in May, Amgen has placed an economic bet on Japan. It is also, indirectly, a bet on economic recovery in the U.S. and Europe, Japan’s two biggest export markets. The partners will co-develop and co-commercialize five Amgen drugs for the Japanese market, as well as establish a joint venture that is 51% owned by Amgen, opened in Tokyo in October. Operating as Amgen Astellas BioPharma KK, the JV is structured to allow Amgen to turn the operation into a wholly-owned Japanese affiliate as early as 2020, and a direct channel into Japan for any molecule in its portfolio including its six biosimilars in development.Read the full nomination here.

Roche/Polyphor: Roche has given notice that it’s back in the antimicrobials space. For the first time in 30 years. Roche and Polyphor believe the timing of their alliance is good. Others have cut back, including onetime leader Pfizer, which closed its antibiotic R&D center in Connecticut in 2011, as well as Bristol-Myers Squibb Co. and Eli Lilly & Co., leaving only a few players, such as AstraZeneca, GlaxoSmithKline and Merck & Co. Read the full nomination here.

AstraZeneca/Moderna: Shortly after unveiling a revised R&D strategy and organizational restructuring, AstraZeneca made a massive bet on an early-stage platform that suggested the big pharma has taken to heart new CEO Pascal Soriot’s directive to be more willing to embrace risk. The deal boasts $240 million upfront from AstraZeneca to privately held Moderna Therapeutics and is unusually broad-based, carrying options for up to 40 programs in different therapeutic areas using the biotech's messenger RNA (mRNA) technology. Read the full nomination here.


2013 M&A of the Year Nominee: Valeant/B&L

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


Valeant Pharmaceuticals -- the seemingly insatiable embodiment of growth-by-acquisition in modern pharmaceutical times -- has been party to more than a dozen significant M&A deals since acquiring Biovail in 2011. Its biggest move in 2013, earning an M&A-of-the-year nod from us, is the $8.7 billion takeover of ophthalmology specialist Bausch & Lomb.

The May 2013 deal was a big win for private equity owners Warburg Pincus. It put some extra shine on the reputation of then-B&L CEO Brent Saunders, who has moved on to Forest to work his Hassanian brand of turnaround-magic in the world of primary care. And it again highlighted ophthalmology -- and B&L's diversified pharma/device/consumer approach to the field -- as an industry hotspot.

But the main reason we've nominated Valeant/B&L for the M&A Roger this year is that it underscores the increased activity on the big deal front of specialty pharma over its supposedly deeper pocketed Big Pharma rivals.  In fact a look at the top biopharma deals by dollar value this year suggests none of the 'big' deals -- the recent exception of BMS selling its stake in its diabetes JV to AZ notwithstanding -- were Big Pharma deals.

Warner Chilcott went to Actavis for $8.1 billion. Shire bought ViroPharma for $3.3 billion. Onyx went to Amgen (OK we're splitting hairs there, but we'll call Amgen a 'big biotech'). The remains of Elan went to Perrigo. Big Pharma --  its stated penchant for bolt-ons be damned -- bolted on very little of substance this year. On the other hand, Spec Pharma has the firepower, as our friends at Ernst & Young reminded us this year. And it is using it.



Valeant in particular has been using it to diversify. At the time of the deal, CEO Michael Pearson said Valeant has made no secret of its interest in durable specialty sectors with low R&D risk such as eye care and dermatology (last year's big buy was derm specialist Medicis, for $2.8 billion). Acquiring B&L will enable Valeant to balance its revenue mix from both a geographic and therapeutic perspective, he added. Post-B&L, about 50% of Valeant revenue stems from the U.S., with Eastern and Central Europe comprising 15%, Western Europe and Japan 13%, and Latin America, Canada, Australia, Southeast Asia and South Africa rounding out sales.

In terms of therapeutic areas, dermatology and aesthetics contributes about 34%, eye health about 32%, neurology and “other” about 12%, and consumer and oral health about 11%, the CEO said. (Consumer businesses are absolutely on Valeant's radar since adding B&L's consumer brands, the company has said more recently.)

So vote Valeant for its personification of specialty pharma's growth ambitions, particularly in comparison to Big Pharma's 'hey everybody let's get small' religion. For the way it represents the shifting firepower available for the big deals (buybacks and dividend hikes aren't free -- and that's where a lot Big Pharma's money has gone over the past few years). And for its kid-in-a-candy-store, shopping-spree approach to building a large, specialist pharma player: think of it as a vote not just for Valeant/B&L, but for Valeant/Solta, Valeant/Obagi, Valeant/Medicis, and all the rest and what's to come.

Artillery photo via flickr/Paul Campy // cc

2013 M&A Of The Year Nominee: McKesson/ Celesio

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


McKesson’s purchase of German drug wholesaler Celesio for $8.3 billion is one of the largest deals of 2013, but that is not what puts it on the In Vivo Blog Deal of the Year map. More to the point, and the reason it should be on the radar of everyone in the biopharma industry, is its likely impact on pharma and the drivers that led it to consolidate in the first place.

Although the deal focuses on distribution and supply chain management, some of the duller aspects of an industry prone to flaunt its contribution to saving lives, it is every bit just as important to pharma’s health as the next big deal in cancer immunotherapy.

Logistics, scale and geographic reach are increasingly critical competitive advantages as unprecedented pressures put margins under the microscope, and R&D productivity  is too inconsistent to provide protection. In short, the onus is on industry to become more financially efficient. Germany-based Celesio is a leader in pharmaceutical wholesaling, with a presence in key markets in Europe and Brazil and an extensive network of several thousand retail pharmacies in those regions. McKesson is one of the world’s largest wholesalers, with a particularly strong presence in the United States, and $122 billion in annual sales. The combined company will have sales of more than $150 billion, and employ more than 81,500 workers worldwide. How's that for efficient positioning?

Quickly, the deets: McKesson is to acquire 50.01% of Celesio’s stock for €23 per share in cash from the Haneil group and acquire the rest of remaining publicly traded shares and convertible bonds through a parallel tender offer. Among other benefits, the deal will enable McKesson to recognize synergies of $275 million to $325 million by the fourth year. It will be accretive from Year One, which, because of certain German takeover laws, is likely to be fiscal year 2015, which begins April 1, 2014.

Upon completing the deal, McKesson should have the scale to provide its customers with a more efficient global supply chain and, as McKesson’s executives repeatedly have noted, global sourcing, as well as additional business services. The aim is to be a “one-stop shop for people to create global partnerships,” McKesson CEO John Hammergren told analysts on the day of the announcement in October. In pharma, the most obvious impact will therefore be on generic drug sourcing and distribution, since McKesson’s leverage over which generic version of a drug it distributes to customers will increase. Wholesalers do not have nearly as much control over brand pricing.

McKesson says it ranks number one in generic drug distribution in the U.S. The deal is the biggest and broadest of several initiated this year by drug wholesalers looking for more efficient ways of distributing and negotiating with generics suppliers. The trend started late last year, when the U.K’s Alliance Boots GMBH, Walgreen Co., and the U.S. wholesaler AmerisourceBergen Corp. struck a three-way partnership around cooperative purchasing of generic drugs. Walgreen already owns 45% of AllianceBoots and has an option to buy the rest of the company over the next three years; these two companies have an option to purchase up to 23% of AmerisourceBergen.

And the expanded network of retail pharmacies also is important in an era in which the pharmacy, both in the U.S. and abroad, is not just dispensing medicine, but also becoming more of a care provider as a lower-cost alternative to the emergency room or other providers. That may seem peripheral to business development priorities of innovative drug makers right now, but such an impression is misguided. Just ask vaccine producers and makers of diabetes drugs.

thanks to flickr user Jeremy Brooks for McKesson photo // cc

Friday, December 20, 2013

2013 Alliance of the Year Nominee: GSK/ Community Care Of North Carolina

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


GlaxoSmithKline PLC’s tie up with the non-profit Community Care of North Carolina calls for the drug company and the care network to develop health information technologies that help providers identify patients with medication management problems and determine how best to aid them.

Ostensibly the deal, announced Sept. 18, seems like a small marketing alliance between a big pharma company and a local provider of health care services in the medication adherence arena. But it is not that at all and, in reality, it is much, much more. And while no money is changing hands – definitely a deficit on the awards circuit – it tackles critical challenges that are clearly on top of executives’ minds, in pharma and elsewhere in the health care system.  Given the difficulties of closing deals between a pharma company and non-traditional commercial partners, notably like providers or payers, GSK certainly has pulled off a coup.


CCNC coordinates care across roughly 1,000 health care providers, including 110 hospitals and more than 1,700 primary care practices, serving 1.5 million people in North Carolina. The nonprofit has multi-year expertise in optimizing resources for medication management, a goal that is increasingly on the minds of everyone involved in health care, given growing systemic resource constraints and emphasis on pay for performance. GSK has data analytics, IT capabilities, and broad scientific expertise that could be of value in reaching CCNC’s network.

The partners are banking on internally developed predictive analytics and algorithms to create customized approaches that allow doctors or other caregivers to determine, sometimes in advance, what a patient’s specific barriers are to adherence, enabling them have meaningful conversations with patients on the spot.

Providers will have access to select information such as patient prescription fill history and hospital data. Importantly, the system also is designed to work in a range of different settings, across multiple IT systems, avoiding integration and interoperability issues that have been a drain on many big data approaches.  That said, the initiative, from GSK’s perspective, is strictly about learning – there’s no marketing component, it is not tied in any way to GSK’s portfolio, and any business opportunity will be a secondary benefit and entirely independent of GSK’s core drug business.

So, how does this deal fit into GSK’s big-picture agenda? It will enable compilation of information that health care system participants are keep to collect in the face of changing customer dynamics. As the system shifts its reimbursement emphasis from volume to paying for value, biopharm has been working hard to incorporate data on the cost effectiveness and systems-wide savings benefits of its drugs into its R&D and commercial portfolios.  But getting accurate data to support those efforts is a struggle, particularly post-approval. For a variety of reasons, ranging from business priorities to legal constraints, pharma has to date largely been edged out of risk-sharing arrangements now gaining traction among users and payers.

It will provide GSK with a ‘window’ to learn about medication adherence and population management – two interrelated trends that are shaping health care decision making down the road. To drive home the point, McKesson Corp.’s president of specialty health, Marc Owen, noted at an investor meeting in June that the size of the U.S. market for pharmaceuticals could double if medication adherence was 100% enforced, adding that “It costs a lot less to get a patient to take a medication than to treat him in the ER.” As he observed, within the health care world, “you either change the dialog to include value or you’ll end up in a discussion on pricing for service” – in other words, negotiating around discounts. While he was referring to his own neck of the woods, specialty pharma distribution, he could well be signaling a warning to pharma in some of its crowded categories.

This new initiative places GSK in a different role entirely. Although it is a small endeavor, it has the endorsement of senior management, and demonstrates GSK's interest in learning from new health care delivery systems and payment models. It is one pharma’s creative way of broaching the divide, without running into regulatory, legal or historical hurdles that all too often stump even the best-intentioned deal makers and strategists.

Velcro close-up from flickr user Marie Janice Yuvallos

Deals Of The Week: Can Endo Succeed By Copying The Valeant Model?


Santa’s sleigh may be loaded to the brim with gifts come Christmas Eve but it was Deals of the Week that carried a heavy load during the final full business week before the Yuletide holiday. That’s roughly 20 business development transactions, and counting, for the week of Dec. 16-20 as this column went to press.

Below are some of the highlights, but let’s start with the latest stocking-stuffer at Endo Health Solutions, which has always relied on deal-making to fill its pipeline but may be poised to increase its prior business development pace since Rajiv De Silva signed on as CEO from perpetual deal-maker Valeant Pharmaceuticals in February. On Dec. 16, Endo agreed to acquire NuPathe and its recently approved sumatriptan patch, Zecuity, for $105 million upfront plus potential contingent payments pegged to future sales of the migraine product.

This closely followed the Nov. 5 $1.6 billion buyout of Canadian specialty pharma Paladin Labs, a move that would expand Endo’s international footprint to Canada, South Africa and Mexico, while providing tax advantages by allowing the suburban Philadelphia company to re-domicile in Ireland. It’s been a frenetic pace since De Silva took over and moved toward a Valeant-like pursuit of expansion via M&A activity.

While Wall Street did not rave about the NuPathe acquisition, perceiving it as mainly the acquisition of a single asset likely to post smallish sales but also enhance Endo’s pain product portfolio, analysts told Deals of the Week they approve of De Silva’s approach to re-making Endo.

“I actually like the strategy he’s pursuing,” said UBS Investment Research analyst Marc Goodman. “De Silva came in and said ‘we need to restructure this place first because our costs are out of whack with our revenues.’ That’s pretty much the same thing Valeant did a few years ago. The second thing he did was look at the assets and ask what they wanted to be in and what they didn’t. They decided to get rid of [urological services provider] HealthTronics, so that’s on the block. And it wouldn’t surprise me if in 2015 or afterward, once they fix [medical device unit] AMS that they sell AMS.”

Speaking to the Credit Suisse Healthcare Conference Nov. 12, De Silva said plans to divest HealthTronics, termed “not … a strategic fit with us anymore,” are making solid progress. “We have retained an investment bank and we are in the midst of doing management presentations and are optimistic about the level of interest that has been expressed so far,” the exec said. He didn’t address any plans to sell off AMS but said that apart from its women’s health offerings, the unit is showing quarter-to-quarter performance improvement, including year-to-date revenue growth compared with 2012.

The $105 price tag for NuPathe works out to about $2.85 per share. But if Zecuity, approved by FDA in January but not yet launched, meets certain sales thresholds, NuPathe investors stand to get additional payouts. They’ll get $2.15 per share if net sales of Zecuity top $100 million during any four-quarter period up to the ninth anniversary of the first commercial sale of the product. And they can obtain an additional $1 per share if the product reaches $300 million in sales during a four-quarter period during that same time span.

The only FDA-approved prescription patch for migraine, Zecuity is a disposable, single-use, battery-powered transdermal patch that delivers sumatriptan through the patient’s skin. Its approval was based on a Phase III program that tested nearly 10,000 units of the product in 793 patients.

While Goodman thinks Zecuity is unlikely to top the sales marks established under the deal’s contingent payment language, he believes the technology behind the patch product will make it hard to duplicate, frustrating attempts at generic competition and providing Endo with a “very long tail” of revenue (sumatriptan itself, developed and sold by GlaxoSmithKline, has been generic since 2008).

UBS initially will include annual sales of less than $100 million in its modeling for Endo, because of the highly genericized competition in migraine, the resulting pricing pressure and the possibility that doctors with patients who failed to obtain relief on an oral sumatriptan product might not be greatly inclined to try a sumatriptan patch in those very same patients. “I just wonder about the pecking order,” Goodman said.

Meanwhile, Morningstar analyst David Krempa sees the transaction as keeping with the tradition of bolt-on deals De Silva would have learned to value while serving as president and chief operating officer at Valeant.

“It’s a relatively small deal that basically fits in with the strategy they talked about, pursuing bolt-on deals similar to what we saw at Valeant, combined with the occasional mega-deal like we saw with Paladin,” Krempa noted. “Those are the kinds of deals that Valeant has had success with, ones in which it can acquire a product or asset and take out all the revenue without needing to add on any expenses. They don’t need the sales force that [NuPathe] has and so they add the new product onto their existing sales force’s portfolio and get all of the sales without taking on much of the expense that typically would go along with it.”

But Krempa shares Goodman’s concerns about the viability of the migraine space and pain therapy in general. Endo needs to seek out business areas offering “less pricing pressure and better organic growth prospects,” he said, citing dermatology, ophthalmology, branded generics and over-the-counter products as possible targets. The Paladin acquisition gives Endo entrée into some of those spaces, he added.

Meanwhile, plenty of other companies, including Valeant of course, were negotiating their own deals during the final shopping days before Christmas. Read on as we present a red-and-green tinged edition of ....




Valeant/Solta Medical: Serial buyer Valeant moved to expand its aesthetics business this week with the addition of Solta Medical, the makers of medical device systems for aesthetic applications. Valeant announced Dec. 16 it will acquire Solta for $250 million in the latest in a string of acquisitions by the Canadian firm in recent years, including several that have expanded the company’s portfolio in medical devices and dermatology. Solta will complement Valeant’s portfolio on both fronts by augmenting its offerings to dermatologists and plastic surgeons. Its 2012 revenues were $145 million, coming from products like Thermage CPT radiofrequency skin-tightening system, Fraxel skin repair system and the Clear + Brilliant laser skin-resurfacing system. Solta has made a number of major acquisitions in recent years, including Sound Surgical Technologies in February 2013, and the LipoSonix business from Medicis Pharmaceutical in 2011. Valeant ultimately acquired Medicis in 2012 for $2.6 billion, building significantly on its dermatology and aesthetic offerings at the time. - Jessica Merrill

Merck/GlaxoSmithKline: Merck announced Dec. 18 that it is teaming up its highly anticipated early-stage cancer compound, MRK-3475, with GlaxoSmithKline’s kidney cancer drug Votrient (pazopanib), which was approved in October 2009. The two pharmas will test the protein kinase inhibitor with the anti-PD-1 immunotherapy in a Phase I/II clinical trial that will evaluate the safety and efficacy of the combo in treatment-naive patients with advanced renal cell carcinoma, they said in a statement. Financial details of the collaboration were not disclosed. But the dollar amount attached to the deal is almost irrelevant; for Merck, the anti-PD-1 immunotherapy is one of its few programs to garner much enthusiasm of late – both inside and outside the company – as the New Jersey pharma struggles to move drugs through its pipeline successfully. Merck is relying heavily on the cancer immunotherapy – which has shown a lot of promise but is still very early – to deliver its first blockbuster in several years; and the company intends to partner, partner and partner some more. “We look forward to initiating further collaborations to investigate MK-3475 in combination with other anti-cancer agents across a range of tumor types,” said Iain Dukes, SVP of Licensing and External Scientific Affairs at Merck Research Laboratories. So expect to see plenty more of these little tie-ups in 2014 – but don’t hold your breath for any financial terms to be revealed. - Lisa LaMotta

Pfizer/Siemens: Pfizer and Siemens Healthcare Diagnostics have entered into a master collaboration agreement to design, develop and commercialize diagnostic tests for therapeutic products across Pfizer’s pipeline. Siemens is providing in vitro diagnostic tests that Pfizer can use in its clinical trials and potentially as companion diagnostics for Pfizer drugs. Terms were not disclosed, nor were development priorities, but Trevor Hawkins, SVP, strategy & innovations, diagnostics division of Siemens Healthcare, said the deal is open-ended and could be applied to Pfizer’s entire portfolio, from early-stage development to commercialized drugs. The partners already have two active programs, one of which requires Siemens to identify a marker for a compound and the other of which requires Siemens to develop a test for a biomarker that Pfizer has identified already. The partners have set up a joint governance committee, which is meeting weekly. Both companies have partnerships with others around companion diagnostics, but those are mostly one-offs; Siemens, for example, in June, entered into a global agreement with Janssen Pharmaceutica to create a companion diagnostic for an early-stage heart failure therapeutic. Pfizer has at least three companion diagnostic deals, including one with Qiagen, which it signed in 2011 to develop a molecular test for dacomitinib, then in Phase III for non-small cell lung cancer. And in 2012, it signed a deal with Roche Diagnostics Corp. to develop an immunohistochemistry companion test for Xalkori (crizotinib), also for NSCLC. Pfizer isn’t the first pharma to enter into a master agreement around companion diagnostics; Eli Lilly has one with Qiagen. As the deal’s reach shows, pharma’s inherent skepticism about the value of companion diagnostics is gone, although many uncertainties remain, both technical and commercial, about the field. - Wendy Diller

Bristol-Myers Squibb/AstraZeneca: AstraZeneca announced Dec. 19 that it will acquire the entirety of Bristol-Myers Squibb’s interests in their diabetes alliance, including drug assets, staff and infrastructure, paying $2.7 billion on deal completion, $1.4 billion in regulatory and commercial milestones, and royalties up to 2025. The deal ends a seven-year diabetes alliance between the two parties that culminated in the 2012 co-purchase of Amylin Pharmaceuticals for $7 billion. With the dissolution of the alliance, AstraZeneca gets all patents and global rights to DPP-4 inhibitor Onglyza (saxagliptin) in all combinations and formulations, SGLT4 inhibitor dapagliflozin (Forxiga in Europe), metreleptin (recombinant leptin) for treatment of lipodystrophy, and Amylin’s GLP-1 assets Bydureon (exenatide, weekly injection) and Byetta (exenatide, twice-daily injection). The transaction illustrates the divergence in strategy between the two companies, as AstraZeneca believes its geographic reach and its scale in diabetes assets, infrastructure and capabilities position it to succeed. Bristol, on the other hand, will use the breakup to accelerate its transformation into a sharply focused specialty care company and to re-allocate its resources toward its PD1 program and its immuno-oncology franchise, said CEO Lamberto Andreotti on a same-day business update call. AstraZeneca’s focus in 2014 will be on its upcoming launch of dapagliflozin in the U.S., on building the Bydureon brand, and on life-cycle management of Onglyza. - Mike Goodman

Bayer/Algeta: Everyone likes to see a billion-dollar acquisition or two quickening the markets a bit going into the annual industry festival that is the JPMorgan Healthcare Conference. Obligingly, Algeta and its partner Bayer are providing one; the biotech said on Dec. 19 that it has agreed to be acquired by the pharma for $2.9 billion. Algeta originally disclosed an offer from Bayer on Nov. 26. In the intervening weeks, it got the pharma to sweeten the pot a bit to NOK 362 per share from NOK 336. That increase raised the offer from the original price of about $2.65 billion. The price is a 37% premium to the closing price on Nov. 25, the day before it disclosed the original Bayer offer. The pair partnered on prostate cancer therapy Xofigo (radium-223 dichloride), which was approved and launched in the U.S. in May. It subsequently was approved in the EU in November. In a market crowded with new and expensive entrants, the therapeutic offers a new mechanism of action and is aimed specifically at the treatment of castration-resistant prostate cancer in patients with symptomatic bone metastases, a critically ill subset. In Xofigo’s first full quarter of sales, it had $17 million in revenue during the third quarter. Administration sites have to be licensed to sell the product because of its radioactivity; as of Oct. 18, Algeta said there were 626 facilities licensed to treat patients with Xofigo in the U.S. That number had progressed faster than expected. Algeta received €100 million ($137 million) in Xofigo milestones during the first three quarters of 2013. Half of this amount came due on the FDA submission for Xofigo, with the other half tied to the first sale of the product. Under the terms of the 2009 partnership, Bayer paid €42.5 million up front. Then in 2012, Algeta exercised its option to co-promote Xofigo in the U.S., which entitled it to a 50/50 split with Bayer of profits and commercialization costs. Bayer owns sole rights ex-U.S., paying Algeta a tiered double-digit royalty on product sales. Analysts estimate Xofigo will be a blockbuster. Bayer clearly was unwilling to share any upside with its biotech partner and, with enough cash, it didn’t have to. - Stacy Lawrence

Jazz/Gentium: Recently re-domiciled in Ireland, as Endo now is planning to do, Jazz Pharmaceuticals signed an agreement Dec. 19 to purchase Italy’s Gentium for $57 a share, a bid that would total out to about $1 billion. Key to the deal is Defitelio (defibrotide), approved by the EU this past October to treat veno-occlusive disease in adult and pediatric patients undergoing hematopoietic stem-cell transplantation. The sale is structured as a tender offer – both companies’ boards of directors have approved the transaction. Based on a single-stranded oligodioxyribonucleotide extracted from DNA in pig intestines, defibrotide had been filed for approval in the U.S. but Gentium withdrew its NDA in August 2011 after learning that FDA would refuse to file the application over questions of data quality and the conduct and monitoring of clinical trials. “Incorporating Gentium into Jazz Pharmaceuticals is a strong strategic fit, as Defitelio would diversify our development and commercial portfolio and complement our clinical experience in hematology/oncology and our expertise in reaching targeted physicians who treat serious medical conditions,” Jazz Chairman and CEO Bruce Cozadd said in a release. “Because Defitelio is already approved in the EU, the acquisition would add a new orphan product that has potential for short- and long-term revenue generation, high growth and expansion of our multinational commercial platform.” In a Dec. 20 note, Brean Capital analyst Gene Mack said the acquisition should be immediately accretive for Jazz, with defibrotide bringing in a projected $71 million in sales in 2014, crossing the $200 million annual sales threshold in 2018 and nearing $500 million in 2023. - Joseph Haas

Photo credit: Wikimedia Commons

Financings Of The Fortnight Spreads Some Cheer




Well, that flew by. Unlike the little elf in the video above (and if you don't know Nick Lowe, 'tis the season to make your acquaintance), no one in biotech has had time to wait around this year, it seems. The calendar has been marked by several trends that we and our colleagues have followed closely, but none as important as the rush to jump through the IPO window.

It’s fitting, then, that we kick off our final 2013 column with a chat about initial public offerings. TetraLogic went through some contortions to go public this fortnight (see blurb below), but it was more a stumble than a sprint for what was likely the sector's final IPO of the year. Activity hit its peak this spring and summer, then fell off sharply in the fall as the federal government bumbled its way into a shutdown and a botched launch of the “Obamacare” insurance exchanges. We’re not implying causality, mind you, although the shutdown did absolutely nothing positive for the economy. More likely, the sheer volume of IPOs (38 through October 31) skimmed the cream off the pot.

Can the pipeline reload for 2014? Public investors will return after the ball drops looking for late-stage, near-commercial (or near-approval) companies, of course, but we saw in 2013 a certain appetite for higher risk bets like bluebird bio and OncoMed Pharmaceuticals, whose paths to the public markets we chronicled recently in Start-Up.

And the prospect pool for biotech should be stronger than it’s been for several years. This is a bit counter-intuitive, so bear with us. The MoneyTree report, a collaboration between PricewaterhouseCoopers and the National Venture Capital Association, said recently that through September 30, the 541 publicized biotech and device venture deals comprised the lowest nine-month total since 2005. And only 104 life science companies raised first-time venture capital, the worst showing since 1996.

So what’s all this about a strong pool of prospects? By our near-final count, life science Series A fundings have already topped 2012’s count, both in deal flow and dollars committed. Note the difference: MoneyTree counts first-time venture raises; we count Series A’s, but not seed rounds, because we feel it’s a better gauge of companies with real promise. (See Bruce Booth’s description this week of Atlas Venture’s seed-funding program for a glimpse of the fragility of seed-stage biomedical companies.)

Landing Series A cash is obviously no guarantee of permanence, but the gatekeepers are ever more vigilant. For cutting-edge science, groups like Atlas, Flagship Ventures and Third Rock Ventures spend a year or more hammering on an idea, forcing it through iterations, proving its worth, before committing serious dollars. And if the ideas aren’t truly novel, there are other de-risking strategies; many Series As these days are for programs spun out of other companies, run by trusted management teams, or both.

In other words, there’s still plenty of risk in a Series A investment, but perhaps not as much as you’d think. And by our count, Series As particularly on the biopharma side are doing well. OK, maybe the $120 million A round for Juno Therapeutics has skewed the dollar figures just a wee bit, but the deal flow is still on track for well more than 100 financings in 2013, on top of the 100 or so in 2012. We’ll have the final count and a deeper dive into the Series A class of 2013 in the upcoming Start-Up, right around the time the JP Morgan conference is in full swing.

What do you think? Do the 200-plus companies that have had their Series A stockings stuffed in the past couple years represent a healthy pipeline? Since the Great Recession faded, the investors who've had cash to make bets with have insisted there's been no better time. In 2014, we should start to see if they're right.

Meanwhile, there's no better time for you to spend a few days unplugged from your screens, relaxing with friends and family. May your holidays be safe and warm, and here's your first present: A delicious, sustainable, locally sourced, gift-wrapped edition of...


Atara Biotherapeutics: With news of Atara’s new $38.5 million Series B round also comes news of its $20 million Series A, quietly completed in March. The Brisbane, Calif.-based company was established in fall 2012 via a partnership between Amgen and venture stalwart Kleiner Perkins Caufield & Byers, and endowed with a portfolio of six former Amgen assets, all in the transforming growth factor (TGF)-beta family of compounds. First-time backers in the new round included Amgen Ventures, Celgene Corp., and crossover fund EcoR1; they joined Series A investors Alexandria Venture Investments, DAG Ventures and Domain Associates, as well as KPCB. The Series B remains open, and Atara CEO Isaac Ciechanover told “The Pink Sheet” DAILY it hopes to bring in a final investor within 90 days. The corporate venture units’ investments were “purely financial,” he said; Amgen itself holds equity but did not invest cash during the Series A. Atara is an umbrella company that operates three “sister company” subsidiaries named for Christopher Columbus’s three ships used in 1492. Its most advanced drug, PINTA745, is a myostatin inhibitor already in Phase II for a muscle-wasting disorder found in end-stage renal disease patients; it’s housed in Pinta Biotherapeutics. The company also hopes to submit an IND for activin inhibitor STM434, one of Santa Maria Biotherapeutics’ three compounds, and begin trials in ovarian cancer during 2014; farther along will be Nina Biotherapeutics’ antibody NINA842 for cancer cachexia, which Ciechanover said is about 18 months from the clinic. – Paul Bonanos

Crescendo Biologics: The UK firm has raised £17.5 million ($28 million) in a Series A financing to pursue development of its variable heavy-chain antibody fragments as therapeutics. The round was led by new investor Imperial Innovations Group, and included for the first time Astellas Venture Management. Sofinnova Partners (the European group) also participated in the round after providing seed funding to Crescendo, which was formed in 2009. The funds are expected not only to support development of the platform technology but also proof-of-concept clinical studies of its antibody fragments, applied topically in psoriasis. The firm will also pursue studies in oncology. Crescendo makes its fragments by first eliminating antibody production involving genes located in three chromosomal regions in mice, and then adding DNA-containing genes for the human antibody heavy chain. Marianne Brüggemann and colleagues at the Babraham Institute in Cambridge, UK, pioneers of the first wave of transgenic technology exploited by Medarex and Regeneron Pharmaceuticals, were involved in this work, Crescendo CEO Mike Romanos told “The Pink Sheet” DAILY. Psoriasis has been selected as the first target for Crescendo’s fragments as they can be formulated into creams and penetrate into the relevant region of the skin following topical application, Romanos said. Although systemic monoclonal antibodies have had a tremendous impact on severe psoriasis, milder cases are poorly served with current therapies, and a non-immunosuppressive treatment should be useful, Romanos said. The first fragment should enter clinical trials at the end of 2015 in psoriasis, and if successful, the work could be expanded to include atopic dermatitis and other inflammatory dermatological disorders. – John Davis

Acucela: The Seattle biotech filed on December 17 to raise up to $125 million in an IPO on the Tokyo Stock Exchange’s Mother’s Market. The company has a partnership with Otsuka under a 2008 deal for lead compound, emixustat, which is in Phase IIb/III testing to treat dry age-related macular degeneration (AMD). Acucela started the trial in the first quarter of 2013 and expects that if 12-month study results warrant, it will submit to FDA and EMA for approval. There is no FDA-approved treatment for dry AMD. If you’re not familiar, biotech offerings on the Mother’s Market are for the most part relatively small, and like the London Stock Exchange’s AIM market, often raise tiny subsequent offerings. They typically suffer from chronic low liquidity and languish with little investor attention as small caps. Retail investors, and their whims, are a big factor on the Mother’s Market, which specializes in high growth and emerging stocks. That combination makes it very volatile. This year, some biotechs have proven hugely popular. For example, peptide therapeutic company Peptidream, which isn’t in the clinic yet but has several discovery partnerships, conducted a $68 million IPO on the Mother’s Market in June and is now worth about $1.6 billion. Acucela founder, President and CEO Ryo Kubota is a Japanese ophthalmologist who has trained, practiced and taught in both the US and Japan. In addition to its Seattle headquarters, the biotech also has a Tokyo office. – Stacy Lawrence

TetraLogic: The Phase II cancer company closed on December 12 with what was likely the final IPO of the year, but that was only after it had slashed its price in half to $7 per share from a range of $13 to $15. Even with the discount, its shares have remained flat in early trading. That’s with existing investors Amgen and Pfizer as well as company executives agreeing to purchase most of the shares offered at IPO. Not just some, but most: That’s a first in our IPO experience. Was this a venture round or an IPO? Insiders bought a whopping 4.6 million shares of 7.2 million sold.  (TetraLogic hasn’t yet fared as well as another recent discount IPO: Relypsa, which priced in November and is now up 137%.) Overall the biotech IPO class of 2013 is holding its own. The 44 IPOs this year are up 41% as a group with more winners than losers. Only about one-quarter of them have lost ground or are flat from their IPO prices. That’s better than coin-toss odds – and that’s saying something in biotech. TetraLogic hopes to gain some traction with its small molecule mimics of Second Mitochondrial Activator of Caspases technology (SMAC-mimetics). Its lead program is birinapant, which is in Phase I and Phase II testing in hematological malignancies and multiple solid tumors. The biotech plans to start a randomized Phase II trial for birinapant and azacitidine versus azacitidine alone to treat myelodysplastic syndromes in the first half of 2014. – S.L.

Best of the Rest (Highlights of Other Activity This Fortnight): In the second Xention spin-off following Provesica three years ago, Ario Pharma completed a $3M Series A round to pursue TRPV1 antagonists in chronic cough…in its second secondary offering in the last few months, Xoma netted $54M to pay for development of Phase III gevokizumab for non-infectious uveitis and its preclinical XMet program of insulin activators and sensitizers…days before announcing its acquisitions of CNS spec pharma NuPathe, Endo raised $700M in a 5.75% convertible notes sale…and Versant Ventures pledged investments in Canadian life sciences start-ups. – Amanda Micklus

Thursday, December 19, 2013

2013 Alliance Of The Year Nominee: Celgene/OncoMed

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


Celgene loves the option-based deal almost as much as it loves bringing new oncology candidates into its early-stage pipeline, and Deals of the Year can prove that mathematically.

The big biotech's early December tie-up with OncoMed for a six-pack of anti-cancer stem cell therapeutic candidates was Celgene's ninth deal of 2013, after negotiating seven transactions in 2012. And of those 16, at least nine involve cancer and eight were option-based agreements.


The deal once again put Celgene at the forefront of early-stage oncology dealmaking and added to the already impressive smorgasbord of drug candidates and technologies to which it holds rights or options. This is not to say the complicated deal with OncoMed was business as usual, for it was one of the most complicated agreements of the year in biopharmaceuticals, necessitating a term sheet that might have resembled a Rube Goldberg machine, and quite lucrative for OncoMed -- potentially very lucrative.

To wit: Celgene paid $177.25 million up front ($155 million cash along with a $22.25 million equity investment in OncoMed, which totaled 1.47mm shares at $15.13, a 15% premium.) It also committed to a myriad of milestones dependent on the success of up to six different projects.

In return, Celgene will receive option rights on six novel stem cell therapeutic candidates, including the lead asset, demcizumab (OMP-21M18), a humanized MAb inhibitor of Delta-Like Ligand 4 (DLL4) in the Notch signaling pathway. The deal also covers five preclinical or discovery-stage large-molecule programs to target cancer by stopping cancer stem cells from replicating and/or differentiating such cells to make them more vulnerable to chemotherapy. Celgene gets full license to one of the preclinical programs, while OncoMed retains U.S. co-development and co-commercialization rights on the other five assets.

Celgene can exercise its option on demcizumab after the completion of planned Phase II studies. The antibody is being tested in three Phase Ib trials with standard of care: with gemcitabine and Abraxane in first-line advanced pancreatic cancer, with carboplatin and pemetrexed in first-line advanced NSCLC, and with paclitaxel in patients with platinum-resistant ovarian cancer. The last of those is a Phase Ib/II study being conducted at MD Anderson Cancer Center.

If Celgene options demcizumab, the two companies will share global development costs, with Celgene covering two-thirds of the expense. If the drug is approved by FDA, they will co-commercialize it in the U.S., with 50/50 profit sharing. Outside the U.S., Celgene would develop and commercialize the antibody, with OncoMed eligible for milestones and tiered double-digit royalties.

In September Celgene got label-expansion approval for Abraxane to treat pancreatic cancer, which Hastings says is the greatest unmet medical need in cancer at present. But the executive said Celgene was motivated just as strongly by demcizumab’s showing to date in NSCLC patients.

“They were equally impressed with the NSCLC data, in terms of response rate and some durability that we’re seeing there,” Hastings said. “What this deal enables us to do is more Phase II studies than we would have done on our own, so we’ll be looking at additional Phase II studies beyond these two to give the drug multiple shots.”

Celgene also gets rights to OncoMed’s preclinical anti-DLL4/vascular endothelial growth factor bispecific antibody, as well as four preclinical or discovery-stage biologics programs that target other cancer stem cell pathways, including RSPO-LGR, a pathway in which human R-spondin proteins are targeted by antibodies to disrupt binding with their receptors, the leucine-rich repeat-containing G-protein coupled receptors. Celgene’s exclusive license is to one of those four biologics programs.

For the four programs not outright-licensed by Celgene, the Redwood City, Calif., biotech gets terms similar to those negotiated for demcizumab – two-to-one global development cost-sharing with Celgene covering the larger portion, 50/50 U.S. co-commercialization with profit-sharing, and mid-single-digit to mid-double-digit royalties on sales outside the U.S. For the licensed program, OncoMed can earn mid-single-digit to mid-double-digit royalties on worldwide sales.

Got all that? If you care about bio-bucks totals, OncoMed could earn more than $3 billion over the lifetime of the collaboration, if virtually every box in the agreement gets checked off. Even if earn-outs don't reach 10 figures, though, it's a lucrative and validating deal for OncoMed, which just raised $88.8 million in an IPO this past July.

image via Wikimedia commons

Wednesday, December 18, 2013

2013 M&A of the Year Nominee: The Ibrutinib Royalty

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


Royalty deals have long been the provenance of more conservative private-equity vehicles. Then came... The Ibrutinib Royalty, soon to be a major motion picture starring Matt Damon.

But seriously, it was odd not just to see two venture firms join the royalty deal but also to hear how much each was putting up. Aisling Capital and Clarus Ventures said in August they had paid $48.5 million for a tiny slice of sales royalties from ibrutinib, a cancer drug that hadn't been approved yet.

It's approved now; the FDA granted accelerated approval for mantle cell lymphoma (MCL) to its sponsor Pharmacyclics in November, and it goes by the name Imbruvica. (The Imbruvica Approval, starring Daniel Craig as Richard Pazdur!)

Please, would you pay attention, 007: The PDUFA date for a much larger indication, chronic lymphocytic leukemia, comes in late February 2014. Ibrutinib could be a best-seller. If it isn't, Aisling and Clarus will have trouble recouping their cash. Certainly it’s a less risky investment than they and their brethren are accustomed to. But even if ibrutinib can garner multi-billion dollar sales at its peak, will it bring venture-like returns to Clarus and Aisling?

Here’s some math: in an interview in “The Pink Sheet” DAILY, Royalty Pharma officials pegged the royalty stream in the mid-single digits as a percentage of total ibrutinib sales. We don’t know the exact number, so let’s call it 5%. Clarus and Aisling have each bought 10% of that stream; let’s call it 0.5% of total sales apiece. Under that scenario, it will require nearly $10 billion in ibrutinib sales for each firm to recapture its investment; more than $19 billion to double it, and $29 billion to capture a “venture-like” 3x return.

Even by optimistic projections – this summer, Barclays Capital estimated peak annual sales between $2 billion and $3.6 billion, while others have gone higher – it will take ibrutinib years to reach those figures. Venture firms like Aisling and Clarus investing from the tail ends of their funds need extremely patient limited partners to wait years, but the ibrutinib scenario could play out – and pay out – in two different ways.

First, the VCs will have a steady stream of returns to pass through to LPs as soon as sales begin. Such near-term returns, however incremental, would be far less likely if the VCs had spread the $50 million among a few earlier-stage biotech companies or other investments.

Second, now that ibrutinib is approved, the value of the royalty stream will probably jump. Other investors, including other royalty funds, don’t take pre-commercial risks the way Aisling, Clarus, and Royalty Pharma, the lead investor in the deal, did. With those risks all but eliminated, perhaps Clarus and Aisling could flip their royalty rights to new buyers. Aisling’s Dennis Purcell and Clarus’ Nick Simon acknowledged as much earlier this year, before the drug's approval.

The firms joined Royalty Pharma, the 800-pound gorilla of royalty funds, to buy the ibrutinib royalty rights from Quest Diagnostics for $485 million, a deal first announced in mid-July without disclosure of the VCs’ names or financial details.  (Quest obtained the rights in 2011 when it bought Celera Corp. for its diagnostics business.)

Royalty funds – firms that pay up-front cash to scientists, institutions, biotechs, and pharmas for royalty rights that they collect over time – don’t typically risk regulatory failure on top of commercial uncertainty. But Royalty Pharma has been more creative of late, even making an acquisition play for Elan Corp PLC that was ultimately unsuccessful.

Meanwhile, Clarus and Aisling have looked for deals that emphasize shorter timelines to potential returns as they invest from the tail ends of their current funds. In July, an Aisling-backed start-up, Loxo Oncology, in-licensed an undisclosed preclinical oncology candidate from Array BioPharma, with trials to start in 2014.  Clarus has invested in a series of clinical development companies – mini-CROs, of a type – that run late-stage trials of drugs owned by Pfizer and other big drugmakers, with milestone and royalty payments on offer if the drugs succeed.

It’s all part of a scramble within life sciences venture to woo back limited partners turned off by poor returns the past decade. The 2013 IPO boom might help bolster venture returns, but with the fickle window, life science VCs aren’t likely to abandon the pursuit of deals that shorten the time to exit and shore up lower risk, lower reward returns.

flickr image courtesy Deb Roby, creative commons

2013 Financing of the Year Nominee: Juno Therapeutics

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


With a name connoting royalty and godliness, it’s no wonder Juno Therapeutics received one of the year’s richest rounds of funding. And although its namesake’s existence was only in the minds of her ancient followers, the ambitious start-up’s $120 million Series A funding was no myth. Launched in December, the Seattle-based company instantly became a major player in the rapidly evolving cancer immunotherapy sector.

Juno unites researchers from three different institutions: Fred Hutchinson Cancer Center and the Seattle Children’s Research Institute in Seattle, and Memorial Sloan-Kettering Cancer Center in New York. Prior to the deal creating Juno, MSKCC’s closely watched chimeric antigen receptor T cell program was conspicuously un-partnered, especially after the cancer center revealed in March that it had induced a complete response – total remission – in a handful of patients; at December’s American Society of Hematology meeting in New Orleans, it unveiled further data showing full remission in 15 out of 17 patients treated with its immunotherapy.

That data has researchers ecstatic, and persuaded investors to fund Juno’s clinical research. The company uses autologous cell therapies, in which a patient’s own immune cells are removed from the body, genetically modified, and re-infused into the body so that they target tumor cells. The Hutch had a similar CART program underway, as well as a high-affinity T cell receptor program that aims for specific proteins inside tumor cells. Investor and board member Robert Nelsen of ARCH Venture Partners told us that Juno plans to begin no fewer than 13 trials by the end of 2014, in a variety of cancers. (ARCH invested alongside the Alaska Permanent Fund, a diversified, state-operated group.)

Juno is also notable because it unites cancer centers sometimes seen as rivals; Nelsen said they’ll essentially fight it out scientifically in pursuit of the best treatments. “Everyone has the big goal in mind,” he said. “We’ll run parallel programs and let the data decide. The scientists are perfectly willing to throw competing programs in, and see which ones are better.” Others are competing too. Novartis struck a deal for the University of Pennsylvania professor Carl June’s well-regarded CART program in August 2012, bypassing VCs altogether and taking rights for an undisclosed upfront payment and future milestones; at ASH, the pharma released data showing full remission in 19 of 22 patients.

Juno is well-positioned to capitalize on multiple trends. Barriers are falling in the broader area of genetic modification of cells using viral vectors, the field of gene therapy; the European approval of uniQure’s Glybera (alipogene tiparvovec) last year led to a spate of fundings in 2013. And BMS’s antibody Yervoy (ipilimumab) for melanoma, a cancer immunotherapy that doesn’t require genetic tweaking, is one of the year’s success stories; analysts believe sales will clear $1 billion this year.

Researchers don't talk about curative treatments lightly, but the "C" word has been tossed around when discussing Juno's and June's techniques. If it's too early to say Juno has achieved that goal, there's still time for it to claim a smaller victory in 2013, if only you'll consider it for the Roger in our Financings category.

Thanks to Flickr user Richard Mortel for bringing his camera to the Vatican; we've reproduced his photo under Creative Commons license.

Tuesday, December 17, 2013

2013 Financing Of The Year Nominee: GSK/Avalon Team Up

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


Pharma needs innovative pipeline candidates. VCs need faster, cheaper and easier exits. The partnership between Avalon Ventures and GlaxoSmithKline aims to accomplish both.

In April, the pair put their money where their chocolate-and-peanut-butter-filled mouths are: up to $30 million from Avalon and up to $465 million from GSK will fund up to 10 new companies, each built around a single drug candidate. We'd say that that's a lot of "up to," but like our headphone-wearing pals in the video below, you'd be all "WHAT?" So never mind.



The pharma's portion includes funds for seed financing and R&D support, as well as preclinical and clinical milestones. The initial financing for each company is expected to be around $10 million, with about $3 million coming from Avalon and the remainder from GSK.

The co-investors plan to take about three or four years to create all the newcos. The first company resulting from the deal, Sitari Pharmaceuticals, was disclosed just last month. The start-up was staked by Avalon and GSK with a $10 million Series A round (though GSK's contribution isn't necessarily cash, but could be in-kind services).  Sitari is working to address celiac disease, an autoimmune digestive disease caused by intolerance to gluten, by inhibiting the transglutaminase 2 (TG2) pathway. The intellectual property licensed from the Stanford University lab of Chaitan Kholsa. (Oh and if you're sitting there saying, 'hey In Vivo Blog, doesn't this belong in the alliance category?' Well then just imagine the nomination is for Sitari. Feel better?)

Celiac disease isn’t a precise fit with GSK’s major product areas, which are infectious diseases, cancer, heart disease, respiratory indications including asthma and chronic obstructive pulmonary disease (COPD), as well as epilepsy.  But GSK does have a handful of autoimmune clinical candidates such as vercirnon, a CCR9 antagonist that is in Phase III testing to treat Crohn’s disease. It also has at least three Phase II autoimmune candidates: a Sirtuin 1 (SIRT1) activator to treat psoriasis, a Janus kinase 1 (JAK1) inhibitor to treat lupus and psoriasis and a chemokine receptor 1 (CCR1) antagonist to treat rheumatoid arthritis.

Under the Avalon/GSK structure, the pharma can exercise an option to acquire each newco once it produces an IND-ready candidate. If GSK declines to exercise an option, Avalon retains all rights to that asset and can proceed with IND-enabling work on its own or with other partners.

An acquisition would return three to four times Avalon’s investment, Avalon managing director Jay Lichter told our START-UP colleagues. Once in GSK’s hands, a drug’s progress could earn Avalon milestone payments and bump the return to 14x by the time it launches.

Avalon sometimes favors a strategy of founding a company, investing a minimal amount and then partnering or selling the company; it’s had at least a couple of exits matching that description this year.

Avalon and GSK also plan to save money by sharing managerial, operational and R&D resources among their portfolio companies. To that end, they created COI Pharmaceuticals, which stands for Community of Innovation. It will provide operational support, a fully equipped R&D facility and an experienced leadership team to Sitari and the other start-ups, including Avalon portfolio companies.

If it works, the Avalon/GSK model could provide a less painful and more seamless model for VCs and pharma to transition academic research projects into pharma clinical candidates.

"WHAT?" Just vote for Avalon/GSK and enjoy your Reese's.

2013 Alliance of The Year Nominee: Amgen/Astellas

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


In announcing a strategic alliance with Astellas Pharma in May, Amgen has placed an economic bet on Japan. It is also, indirectly, a bet on economic recovery in the U.S. and Europe, Japan’s two biggest export markets.

In fact, Amgen has been talking up its Asian ambitions since first broaching the idea at a business review meeting in New York last February. After rapid-fire acquisitions in Brazil and Turkey, and a partnership in Russia, “expanding into Japan and China are next on the Agenda,” said CEO Robert Bradway.

Four months later, Amgen inked a two-pronged alliance with Astellas. In the first stage, the partners co-develop and co-commercialize five Amgen drugs for the Japanese market: one in cardiovascular, one in  osteoporosis, and three oncology candidates. Among them are AMG145, the Phase III antibody against PCSK9 for hyperlipidemia and Phase II blinotumomab, the anti-CD19 bispecific BiTE antibody against hematological tumors picked up in its 2012 acquisition of Micromet. At a recent Credit Suisse event, Amgen CFO and EVP Jonathan Peacock projected the first launch in 2016.

The second stage, a joint-venture that is 51% owned by Amgen, opened in Tokyo in October. Operating as Amgen Astellas BioPharma KK, the JV is structured to allow Amgen to turn the operation into a wholly-owned Japanese affiliate as early as 2020, and a direct channel into Japan for any molecule in its portfolio including its six biosimilars in development. Eiichi Takahashi, a cardiologist in Pfizer’s Japan subsidiary who led Pfizer’s medical affairs organization for the Asia Pacific region, will head up the JV.

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The move feels like a do-over. Amgen had launched a JV with Kirin Brewery in 1984, and in 1992 it formed Amgen KK in Japan, as a wholly owned subsidiary. It pulled the plug on Amgen KK in 2008, selling shares in the subsidiary to Takeda as part of an agreement in which it licensed 13 molecules to Takeda for development and commercialization in the Japanese market. Takeda paid $200 million upfront and is on the hook for over $700 million in development costs and success-based milestones, as well as Japan-specific royalties. Back in 2008, then-Amgen R&D chief Roger Perlmutter insisted to IN VIVO that Amgen was not "abandoning Japan." Rather, partnering was the answer.

And to be sure, partnering is still the answer. The Big Biotech knows first-hand the challenges, particularly as regards recruitment, in establishing a de-novo presence in Japan. But it is confident that it’s chosen the right partner in Astellas, whose strong cardio franchise and whose savvy moves in oncology recommended it to Amgen.

And it is confident that it’s targeted the right region in Japan, whose economy was the fastest growing in the developed world this year, goosed by the fiscal expansionary policies of Abenomics and by a recovery in exports – particularly car shipments, which grew 31% year-over-year last October. And according to Evaluate Pharma, Japan was the best performing region – using government-reported data – in terms of US$ Rx sales, posting 17% growth in 2010/2011 compared to 3.8% for Europe and 1.5% for the US, and likewise clobbering the US and Europe in terms of local currency growth.

And while the Japanese drug market has recently been slowed by biennial price reductions, generic inroads, and a price constraining national health budget, the future holds an easing of regulatory burden, an aging demographic, and a strong pipeline. Traditional regulations protecting the domestic market have crumbled over the past two decades, ushering in western investment and the presence of western firms. Takeda’s recent announcement naming GSK vaccines chief Christophe Weber as COO, putting him in line to succeed Yasuchika Hasegawa as CEO, is a symptom of this larger opening to the west.

In a canny move, Amgen, in its bold deal with Astellas, finds itself at the intersection of these global trends, and poised to cash in. Definitely worthy of our alliance of the year accolade. 

Thanks to Eddie O. for the flickr image // creative commons