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