Friday, February 22, 2013

Deals Of The Week Wonders What Merck's Latest Biosimilars Move Really Means

Ever since Merck jumped into the biosimilar field in 2008 with a ferocious go get ’em attitude more fitting of an NFL tackle than a big pharma, we’ve been following their progress – and then lack of progress – closely. Back when most pharmaceutical manufacturers were still griping about defending their biologic brands, Merck’s early aggressive ambitions made an interesting case study in how a big pharma might strike offensively by positioning itself as a contender in the biosimilar space.

So the company’s announcement Feb. 20 that it has partnered with Korea’s Samsung Bioepsis to develop multiple undisclosed biosimilar candidates, while delivered quietly in a concise statement, struck us as a noteworthy change in strategy.

You didn’t have to read tea leaves to see that Merck’s original strategy wasn’t working out. In 2008, Merck established a business unit devoted to the field and pledged to invest $1.5 billion and launch six or more biosimilars between 2012 and 2017. But last year, as we reported here, the company closed Merck BioVentures, the unit it created devoted to biosimilars, and folded the research into biologics and vaccines at Merck Research Labs. And Mike Kamarck, the charismatic proponent of biosimilars who led Merck’s charge into the field, left the company.

Now, we can’t help but wonder what the latest announcement means for Merck’s biosimilar strategy.
Is it a reaffirmation of the company’s commitment to biosimilars, albeit through a more modest path, or is Merck effectively washing its hands of biosimilars while still holding out for some hope of an eventual commercial reward? Samsung will be responsible for preclinical and clinical development, manufacturing, clinical trials and registration of any candidates, while Merck will commercialize the products. It’s not clear how much Merck is putting behind the effort either, as the financials of the deal were not disclosed; Merck is paying Samsung an upfront and has agreed to milestones.

Merck declined to offer further insight on the move, but said the deal with Samsung will complement its internal effort. The only biosimilar Merck has in its internal pipeline that has been publicly disclosed, however, is a copy of Roche/Biogen Idec’s Rituxan, the one drug Samsung Bioepsis won’t be developing because the company – formed in 2011 out of joint venture between Samsung Biologics and Biogen – won’t make any biosimilar versions of Biogen products.

Given Merck’s inability to get new drugs to market of late, the decision to take a contract research approach to biosimilars may be the best way for Merck to hold onto the potential commercial upside of biosimilars without the investment internal development requires. Merck ran into the field at high speed, and we admired their optimism, but given the evolving regulatory and commercial dynamics, a cautious path may be the wiser one.

And let’s not forget why the decision to jump into biosimilars was easier for Merck to make than for some other big pharmas: Merck never had a history in biologics and hasn’t traditionally had treasured blockbuster biologic brands to protect. It gained some knowledge of the field and rights to Remicade in certain territories outside the U.S. through its mega-merger with Schering-Plough. But it’s hard to envision Merck’s inexperience as a competitive advantage in a notoriously difficult field like biologics. Development and manufacturing is just as hard for biosimilars, even when manufacturers have a reference molecule to use as a road map.

Three years after the U.S. government laid a regulatory framework for biosimilars, no applications have yet been filed through the new pathway with FDA. Today, while Merck has adopted a more subtle tone when it comes to biosimilars, Amgen – a biologics expert – is crowing about its grand ambitions for the field.

Roche/Chiasma: Roche and privately held Chiasma Inc inked a deal Feb. 18 to develop and commercialize the Israel-based biotech’s proprietary pill Octreolin, initially for acromegaly and, afterwards, for neuroendocrine tumors (NET). Their pact brings a new Phase III drug to Roche’s pipeline, targeting both an oncology (NET) and non-oncology indication (acromegaly). It gives Roche worldwide exclusive license to Octreolin, and Chiasma receives upfront payments of $65 million and future milestone payouts of up to $530 million, along with tiered, double-digit royalties on Octreolin net sales. Roche said it decided to partner with Chiasma and commercialize Octreolin in part because of the convenience and improved quality of life an oral therapy might offer patients. The pill may consequently command a higher price to injectables and there appears to be little oral competition on the horizon near-term. Delivering octreotide orally twice daily would be a major advantage for patients with acromegaly as they would avoid the painful monthly injections involved in current treatment options such as Novartis' Sandostatin LAR. - Sten Stovall

Chiesi/Cornerstone: Cornerstone Therapeutics’ majority shareholder is looking to buy out the company. North Carolina-based Cornerstone announced Feb. 20 that it received a letter from its majority shareholder – Italy’s Chiesi Farmaceutici – offering to buy the remaining outstanding shares of the company. Chiesi offered $6.40 to $6.70 per share for the 40% of the company it doesn’t already own – valuing the specialty pharma at $177 million. In a letter from Chiesi to the board of directors of Cornerstone, Chiesi’s CEO Ugo Di Francesco said the company “has adequate liquidity available and excellent relationships with our banks to effect an all cash bid.” Di Francesco added that Chiesi has “conducted an extensive review of Cornerstone based on publicly available information, our own deep experience in the pharmaceutical industry and consultations with our outside advisors.” The Italian drug maker plans “to move promptly” in regard to the bid “and is committed to working vigorously and expeditiously with [Cornerstone] to complete a transaction.” Cornerstone said in a statement that “no decisions have been made by the board of directors with respect to Chiesi’s proposal.” The two companies paired up in May 2009 when Chiesi granted Cornerstone an exclusive U.S. license to sell its porcine-derived lung surfactant Curosurf (poractant alfa) for a 10-year period. In return, Chiesi took an equity stake in the company that now accounts for a 60% share. - Lisa LaMotta

Janssen/Pharmacyclics/Abbott: Partners Janssen Biotech and Pharmacyclics will work with Abbott to develop a molecular diagnostic test to identify patients with a genetic sub-type of chronic lymphocytic leukemia (CLL). Abbott will develop the test using its proprietary FISH (fluorescence in situ hybridization) technology; the test will identify hard-to-treat CLL patients who have a deletion within chromosome 17p (del17p). These patients are likely to respond to ibrutinib, a small molecule inhibitor of Bruton tyrosine kinase (BTK). At the American Society of Hematology conference in December, the partners presented positive Phase Ib/II data in a subset of relapsed/refractory CLL patients with the 17p deletion. The partners have an ongoing Phase II trial for ibrutinib in CLL patients with the 17p deletion. The company expects enrollment in this trial will take about 12 months to complete. On Feb. 12, FDA granted breakthrough designation to ibrutinib to treat two B-cell malignancies: relapsed or refractory mantle cell lymphoma (MCL) and Waldenstrom’s macroglobulinemia (WM). This could mean an approval for ibrutinib as soon as early next year. Pharmacyclics’ share price has been on a white-hot streak since last May, climbing more than 200%. News of the breakthrough designation bumped shares up about 20%. Details of the Abbott partnership remain undisclosed. - Stacy Lawrence

Eisai/Valeant: Valeant Pharmaceuticals announced Feb. 21 that it has acquired U.S. rights from Eisai Inc., the U.S. subsidiary of Japan's Eisai Co. Ltd., for cutaneous T-cell lymphoma treatment Targretin (bexarotene). Eisai received $65 million up front and is eligible for additional payments tied to undisclosed milestones. In March 2011, Eisai granted exclusive rights to Minophagen Pharmaceutical to develop and commercialize Targretin in Japan, expanding that agreement in April 2012 to cover Asia, Oceania, the Middle East, Eastern Europe and other regions. And in a deal similar to the Valeant agreement, in December 2012, Eisai sold U.S. commercial rights to Gliadel Wafer (carmustine) for glioblastoma to Arbor Pharmaceuticals. Gliadel and Targretin are aging products. However, the company’s cancer pipeline – oncology is 70% of Eisai’s revenues – has shown recent signs of stumbling. Farletuzumab, which entered Eisai’s pipeline with its 2007 acquisition of Morphotek, demonstrated disappointing results last January in platinum-sensitive ovarian cancer, not meeting the primary PFS endpoint in its first Phase III attempt. And Halaven (eribulin), approved in the U.S. in 2010 for metastatic breast cancer, missed its primary endpoints last year in a head-to-head Phase III superiority study against Xeloda (capecitabine). Much of the excitement around eribulin at the time of its approval was the likelihood of extending its label, which is now drawn into question. Eisai said the deal with Valeant would maximize the product’s value in the U.S. It went on to add that the agreement would enable Eisai to “strategically reallocate resources to other mid-to-long-term business growth areas” but it didn’t elaborate. As for Valeant, this deal continues its strategy of acquiring what it considers to be undermanaged commercial assets. - Mike Goodman

UCB/ConfometRx: Belgium’s mid-sized pharma company, UCB, is to link up with the Santa Clara, Calif.-based G-protein coupled receptor (GPCR) structural biology firm, ConfometRx, to discover new drugs in UCB’s sweet spot, the neurosciences. As often stated, GPCRs are the target for 25%-30% of marketed products, but GPCR research is hampered by the difficulty in extracting active receptors from cell membranes for use in research and drug screens. ConfometRx is developing crystallization techniques for GPCRs to make the screening process easier for GPCR-targeted drugs and antibodies. The two-year, multi-target research collaboration between UCB and ConfometRx is intended to gain insights into modulating GPCR targets in order to design differentiated drugs, the companies said Feb. 21. ConfometRx will receive an upfront payment, research funding and milestones, but further details of the agreement were not disclosed. UCB is building “super-networks” of innovation, which include tie-ups with Harvard University and the University of Oxford’s medical sciences division over the past three years. ConfometRx already is collaborating on various GPCR-related research projects with Bristol-Myers Squibb, Novo Nordisk and Lundbeck, while other companies active in providing research insights in the GPCR space include Heptares Therapeutics of the U.K., France’s Domain Therapeutics and San Diego-based Receptos. - John Davis

Photo credit: Wikimedia Commons

Thursday, February 21, 2013

Financings of the Fortnight Navigates Sequester Seas, Mega Moguls and Mini VCs

With several IPO hopefuls now in registration and a very odd venture round raised by a San Diego biotech, there was plenty of financing news to chew on the past couple weeks. But we’re sailing in a different direction for this fortnight’s most interesting financing.

With the sequester on the horizon, a big question mark looms over National Institutes of Health and other basic science funding. The scientific research lobbying group Research!America (that’s their exclamation point, not ours) says the NIH budget will drop by $2.4 billion, part of $3.6 billion in science research cuts across several agencies, or 7.8% of their fiscal 2011 budgets.

The $2.4 billion in NIH cuts alone is $300 million shy of the 2011 external grant totals of the National Institute of Allergy and Infectious Disease, or nearly half the total budget of the National Cancer Institute. NIH director Francis Collins has quoted studies that equate the cuts to 2,300 grants that NIH would not be able to award.

In Boston, which year after year receives the most NIH funding of any American city, health care officials and politicians are warning about 1,700 jobs lost.

As we slouch toward another 11th hour (and 59th minute) Beltway showdown, let’s focus instead for a moment on a small – OK, tiny – counterexample. In San Francisco this week, former Genentech CEO Art Levinson and friends unveiled a new science award, the Life Sciences Breakthrough Prize, which will distribute $3 million to its winners. The inaugural group holds 11, but future years the winners’ pool will be limited to five.

Like we said, tiny. And the prizes are achievement awards, not grants for future projects, so it’s by no means a replacement for NIH’s role. But as fret about the future sources of scientific funding, what caught our eye was the presence of two non-life-science people on the new foundation’s board: Facebook chief Mark Zuckerberg and super-investor Yuri Milner. In 2011, this column made an open plea for Milner to throw some of his vast sums into the life science arena.

Since then, his investment firm Digital Sky Technologies has dipped a toe, joining syndicates for cancer diagnostics firm Foundation Medicine and consumer genome analysts 23andMe. No pure biopharma or device investments yet for Yuri, as far as we can tell, and so far he's following the same late-stage pattern as his highest profile tech investments (both Foundation and 23andMe have marketed products). Still, we’re encouraged by his involvement with a group that is rewarding research-stage biomedical breakthroughs.

High-tech giants are increasingly turning their profits into venture funds, and some of those funds are trickling into health care and the life sciences. Last year, we profiled the nascent health-care ambitions of San Francisco’s Founders Fund -- which came to life in part from Facebook and PayPal investor Peter Thiel’s fortune -- and now we’re starting to see Google Ventures make a health-care splash, too. (In fact, it’s a co-investor with Milner in Foundation Medicine.) Its latest investment is cancer-data analytics firm Flatiron Health, and the new issue of START-UP has a report.

Whether they're high-tech moguls or faces in the crowd at the other end of the spectrum, new sources of life-sciences capital will always be a front-and-center topic for us and our readers. This column has followed a couple crowdfunding efforts, and now our colleagues at IN VIVO have just published a long look not just at crowdfunding but also other ways the biopharma business is tapping into more open or distributed resources. It’s a highly recommended read, as of course are all the latest articles in START-UP and IN VIVO.

Which brings us to that odd round of venture we mentioned up top: San Diego biotech Elcelyx Therapeutics just raised a $20 million Series C round, but the management formed its own fund to lead the syndicate. The entity, GSM Fund LLC, is a “friends and family” group of Elcelyx executives and others from the San Diego biotech community, CFO Martin Brown told FOTF. In planning the round, Brown also spoke with conventional VCs but had this idea in the back of his mind, particularly because Rick Barry, the founder and managing director of now-defunct Eastbourne Capital Management, had wanted to invest in Elcelyx for some time. Under the C round, Barry will join the Elcelyx board of directors. The GSM Fund members have all committed to reserves that, if called, could end up doubling their investment.

What started as a backup plan became the reality, said Brown. “I was keeping a book and pretty soon we had more than enough,” he said. “It just happened that the LLC got a first-mover advantage. The timetable was really important to us because getting the financing locked in allowed us to commit to some pivotal studies. If the financing had taken a lot longer, we would have had to put some of our plans on hold.”

There were really no secondary benefits to the LLC model for Elcelyx itself, Brown added, although it was a different story for the individual investors. “There are advantages for the investors in the way we structured this,” he said. “It’s not a typical VC fund where there are management fees and carry. Every dollar that was invested by the members of the LLC purchased shares in Elcelyx.”

Jeffrey Sohl, director of the University of New Hampshire Center for Venture Research, told FOTF that it’s rare but not unprecedented for angels to create a one-time limited partnership structure to invest in a company as sort of a mini VC.

We have more details on the Elcelyx deal in the roundup below. All you have to do is scroll down. From friends and family to Facebook fortunes, from mega-moguls to mini-VCs, we cover it all here in… 

Elcelyx Therapeutics: For its new $20 million Series C round, privately held Elcelyx led a syndicate by forming its own venture fund, GSM Fund LLC, which takes its name from Elcelyx’s proprietary Gut Sensory Modulation technology. The round includes previous backers Morgenthaler Ventures, Kleiner Perkins Caufield & Byers and Technology Partners. Those three VCs had financed a two-tranche, $21 million Series B during 2011 and 2012. The LLC is structured so that its members can be called upon to double their investment if necessary. The roster includes four area biotech CEOs, four or five local MDs, about a dozen PhDs and a host of biotech executives and lawyers. New board member Rick Barry, one of the GSM Fund contributors, owned 19.9% of Amylin Pharmaceuticals and was a major investor in Telik and Sarepta Therapeutics when he ran the now-defunct Eastbourne Capital Management. Elcelyx is working to bring both a delayed-release version of metformin (NewMet), currently in Phase II, and an over-the-counter weight-loss supplement (Lovidia) to market. “The timetable was really important to us because getting the financing locked in allowed us to commit to some pivotal studies” CFO Martin Brown told FOTF. “If the financing had taken a lot longer, we would have had to put some of our plans on hold.” – Joseph Haas

Jounce Therapeutics: Jounce is the latest project incubated by Third Rock Ventures to see the light of day. The firm emerged from stealth mode Feb. 14 to reveal a $47 million Series A round, in which Third Rock was the sole investor. Jounce will attempt to develop cancer immunotherapies using a proprietary development platform, which company executives say will be a broader approach than that taken by some others in the field. Although it hasn’t yet named any specific targets, Cambridge, Mass.-based Jounce has already identified antibodies it plans to develop. A group of three Third Rock partners will serve as Jounce’s interim management team, including Cary Pfeffer as CEO, Robert Tepper as chief scientific officer and Robert Kamen as chief business officer. In an interview with our “Pink Sheet” colleagues, Pfeffer said the 2011 approval of Bristol-Myers Squibb’s cancer immunotherapeutic Yervoy (ipilimumab) for metastatic melanoma spurred Third Rock’s increased interest in the field. After establishing the company quietly later that year, Jounce’s management has built an advisory board that includes key research specialists from the University of Texas MD Anderson Cancer Center, Johns Hopkins University, the University of Chicago and the Georgetown Lombardi Comprehensive Cancer Center. – Lisa LaMotta and Paul Bonanos

Retrophin: The pediatric orphan disease firm, whose shares trade over the counter, raised $10 million in a private placement to help complete what could be a pivotal Phase II trial for its lead candidate. RE-021 is being tested to treat focal segmental glomerulosclerosis (FSGS). With an eye toward the favored status insurers and regulators are granting orphan drugs these days, Retrophin in-licensed the small molecule a year ago from Ligand Pharmaceuticals for $1 million upfront. Ligand had tested the compound to treat hypertension, but in its new indication Retrophin hopes to gain accelerated approval from FDA. The biotech  was founded in 2011 by then-hedge fund manager Martin Shkreli, who has since shuttered his MSMB Capital Management to devote himself to running the company. In December 2012, Retrophin completed a reverse merger with an OTC-traded shell company. Shkreli told FOTF that Retrophin will likely do either another reverse merger with a company on a major exchange or de-list and conduct an IPO.  In the placement, Retrophin sold 3.3 million shares at $3 each, a 6% discount to its close on Feb. 12, the day before the financing was announced. The deal included 1.5 million warrants, each with an exercise price of $3.60. On Feb. 20, Retrophin shares closed at $4.20, giving it a market cap of $35 million. MSMB led a $4 million Series A round in May 2012. – Stacy Lawrence

e-Therapeutics: The UK network pharmacology company said February 11 it would seek to raise £40 million in a follow-on offering, upon approval of its shareholders. The cash would help finish Phase I studies of its lead cancer therapy ETS2101 then move it through Phase II testing in brain cancer and Phase Ib/II testing for several other cancers. The company hopes the clinical activity will lead to licensing in 2017. Part of the new fundraising will come from existing investor Invesco Asset Management, which will boost its stake in e-Therapeutics from 45.9% to 49.9%, the company said. New shares will be priced at 32 pence each, a 4% premium to the closing price February 10. E-Therapeutics is one of a handful of companies to use modeling of disease pathways (sometimes called network biology or systems biology) to identify the critical points to attack and match them with drug candidates. Another publicly traded network-based company with products in the clinic is Merrimack Pharmaceuticals, which debuted on the Nasdaq one year ago. Merrimack has used its network biology platform to build an antibody combination product, which we describe in a feature in the new START-UP magazine. – Alex Lash

All of the Rest
: Bind Biosciences, which is selectively targeting disease sites with its Accurin platform, raised an $8.7 million tranche out of a potential $20.25 million from foreign investors… To support its human plasma gelsolin for inflammation, BioAegis Therapeutics closed on a $3 million round… Reports here and here state that Aerial Biopharma has completed the second tranche of its $12 million Series A financing… Ophthalmic implant maker PolyActiva completed a $A9.2 million Series B… Longbow Capital led a £1.5 million financing for UK drug discovery company DomainexHelmedix, which is developing autoimmune peptides derived from helminthic worms, raised $A1.25mm in funding… Burrill & Co. was the sole investor in Strand Life SciencesSeries B… To back its work on injectable drug delivery devices, Unilife completed a $12 million registered direct offering… Regenerative medicine company Cytomedix could realize up to $27.5 million in a combination loan and equity financing…  Developer of oncolytic viruses Oncolytics Biotech publicly raised $32 million… In a FOPO, Medgenics, which is delivering therapeutic proteins using the patient’s own tissue, grossed $29.4 million Imprimis Pharma completed a $9.7 million public sale in support of its drug reformulations using the Accudel system… Cancer therapeutics and diagnostics company Novelos closed on a $5.5 million FOPOStem Cell Therapeutics announced a units offering TetraPhase Pharma filed for an IPO to advance work on antibiotics against multi-drug resistant infections… Ambit Biosciences re-filed for its IPO after withdrawing its offering in June 2011… Deerfield Management loaned Discovery Labs $30 million to support development of its candidates for RDS in premature infants… With commitments of $245 million, Lux Capital closed its third fund focused on energy, technology, and health care. -- Amanda Micklus

Photo courtesy of flickr member potat0man.

Friday, February 15, 2013

Deals Of The Week Notes Bayer's Partnerships Are Paying Off

Bayer Healthcare’s pharmaceuticals division has certainly had its ups and downs, and some ultra-tense relationships with partners—notably the very public lawsuit Onyx Pharmaceuticals filed against it, which the partners settled in October 2011.
News announced in recent days however, puts Bayer in a very different position. The company's pharma business is flourishing, based on its partnerships--as well as the fortunate position it is in because it lacks any big drugs going off patent. Bayer's alliance with the Norwegian biotech Algeta ASA, now more than three years old, is at a turning point. On Feb. 13, FDA granted priority review for the investigational oncology drug radium-223 dichloride (formerly Alpharadin), for which Bayer and Algeta submitted an NDA (and an MAA in Europe) in December.

That drug would be indicated, initially, for chemotherapy-naïve castration-resistant prostate cancer patients with bone metastases. CRPC is one of the more crowded areas of oncology, but radium-223 demonstrates a survival benefit that other bone-targeted agents haven’t shown. 

Also kicking in are sales of Eylea, the drug for wet age-related macular degeneration that Bayer licensed from Regeneron in 2006, after Regeneron’s partner Sanofi decided not to pursue ophthalmology indications for the compound. (The oncology version of the drug is Zaltrap, which received approval in the US in August.)  Bayer has exclusive ex-US rights for all eye indications to the drug, which it launched late in 2012 in Australia and Japan, and which it is slowly rolling out across Europe as payers make reimbursement decisions. The partners have a 50-50 arrangement, both on sales and profits. 

For a variety of reasons, Eylea has been an immediate hit in the US, where Regeneron launched it in November 2011, and where it is the third most successful drug launch ever, according to Robert Terifay, SVP commercial, who briefed analysts on Eylea’s status on an earnings call on Feb. 14. Bayer believes the ex-US market presents a similar opportunity and is in the process of rolling out the drug globally. 

The German health care company reports full year 2012 financials on Feb. 28, but  Regeneron executives, without giving away much detail, said they’re pleased with Eylea’s ex-US performance so far. Eylea’s sales ex-US for the fourth quarter, its first on the market outside of the US, were $19 million. EU decisions on two additional indications, diabetes macular edema and central retinal venous ocolusion are also expected in 2013, Deutsch Bank analysts estimate these are smaller opportunities, each worth less than $500 million in Bayer's territories.

In addition, Bayer is in the midst of a global launch of the Factor Xa inhibitor Xarelto, which it developed internally, and which it licensed in 2005 to Johnson & Johnson to develop and sell in the US. The drug is currently approved in Europe for a range of indications, including venous thromboembolism prevention in orthopedic surgery and for stroke prevention following atrial fibrillation. It is pending approval in Europe for acute coronary syndrome, which analysts see as a long shot.  And FDA granted Bayer approval of Stivarga, an oral multi-kinase inhibitor, in September, for metastatic colorectal cancer. The drug is pending review in the EU.  

Many of the deals now bearing fruit were signed before the company’s current head of global business development and licensing, Nigel Sheail, joined it from Roche in November 2011 and certainly before he undertook a reorganization that consolidated business development functions across the healthcare subsidiary into one unit, with the aim of fostering a focus on integrated care across Bayer’s diverse health care subsidiaries. In an interview published in IN VIVO in September 2012, Sheail outlined where he sees health care heading and provided some insights into his business development priorities. His efforts have yet to prove themselves, but meanwhile Bayer has some solid launches to buttress the cash flow- and importantly, no patent cliff before it.  

Bayer’s overall stock is trading in the 90s, close to a 52-week high, partly because of the performance of its pharma division. Even though its chairman, Joerg Reinhardt, has left to become chairman of rival Novartis, and its former chief marketing officer, and global head of strategic planning, Flemming Ornskov, is settling in at Shire PLC, where he assumes the top spot in May, its near-to-mid-term future looks more secure than many of its peers.

Even as Bayer rushes to maximize the value of its deals, others are forging their own way. It's time for this week's edition of ....

Mylan/Biocon: Close to a year after Pfizer walked out of a deal with India’s Biocon for development and commercialization of a range of insulins, the Indian company has sprung back forming what it called an “exclusive strategic collaboration” with the world’s fourth-largest generic drug maker Mylan. Under the deal, the two companies will develop biosimilars of Sanofi’s Lantus (glargine), Eli Lilly’s Humalog (lispro) and Novo Nordisk’s Novolog (aspart), the three major insulin analogs. The combined global sales of the three brands reached $11.5 billion in 2012, making it a compelling business plan as regulatory pathways for biosimilars across nations gain further clarity. Lantus alone crossed sales of $6.6 billion last year. But the terms of the deal with Mylan differ substantially from the deal Biocon signed with Pfizer in 2010. Biocon didn't disclose financials, except to note that the deal includes an upfront and cost sharing, backed by a profit sharing arrangement, and no milestones; the Pfizer deal consisted of a $200 million upfront and $150 million in milestones. Unlike the Pfizer deal, the Mylan deal does not include recombinant human insulin, which Biocon is developing on its own. --Vikas Dandekar

Merck/Lycera: The two companies, which have been partnered since May 2011 on an oral interleukin-17 discovery deal, announced Feb. 12 that they have agreed to a second collaboration to discover and develop other treatments for autoimmune disorders. The new deal will focus on multiple targets that are known to play a role in autoimmune diseases, including psoriasis, rheumatoid arthritis, and multiple sclerosis. The companies would not identify the exact targets it will be focusing on under the collaboration. Merck will pay the Ann Arbor-based biotech an undisclosed upfront, as well as $300 million in milestones.  Merck and Lycera first began working together in the field of autoimmune disease in March 2011, when Merck paid $12 million upfront and agreed to $295 million in milestones in a similar discovery and development collaboration. Work under the original partnership is still in preclinical development; that initiative is focused on a specific target -- the retinoic acid related orphan receptor (RORyt), a transcription factor responsible for the differentiation of T-helper 17 (Th17) cells. Th17 cells produce interleukin-17 (IL-17), a pro-inflammatory cytokine that is understood to play a role in autoimmune diseases. Lycera received its first milestone payment from Merck under this collaboration, an undisclosed sum, in December 2011. – Lisa LaMotta

Lilly/Qiagen: Eli Lilly has broadened its relationship with diagnostic developer Qiagen NV by signing a “master collaboration” under which Qiagen will develop companion diagnostics for Lilly medicines across all of the pharma’s therapeutic areas. In what has become a hallmark of deal-making between pharmaceutical manufacturers and diagnostic firms, terms of the arrangement were not disclosed. Lilly and Qiagen are comfortable bed fellows. The two have been partnered on the development of single tests, including a September 2011 partnership to develop a test for Lilly’s clinical-stage Janus kinase 2 inhibitor. Last year, Lilly/Bristol-Myers Squibb Co.’s Erbitux secured approval in newly diagnosed KRAS wild-type metastatic colorectal cancer patients with Qiagen’s companion diagnostic kit for the drug. Work on those tests led to the expanded deal, Qiagen said, announcing the deal Feb. 13. The new partnership will all allow for efficiencies in future development programs by standardizing interfaces and processes between the organizations, the firm said.--Jessica Merrill

MorphoSys/Heptares: In a bid to develop more G-protein coupled receptor (GPCR)-targeted monoclonal antibodies, German drug discovery company MorphoSys is to use Heptares' stabilized GPCRs as targets to screen its Ylanthia monoclonal antibody library, in a deal announced Feb. 13. AstraZeneca, Takeda, and Cubist Pharmaceuticals have already licensed Heptares' technology to use in their drug discovery programs. GPCRs are the site of action of more than 25-30% of marketed small-molecule drugs, but they've never been a popular target for monoclonal antibodies. That's because the receptors are unstable when taken out of membranes and difficult to use as antigens to produce antibodies when injected into animals. The only marketed monoclonal antibody that interacts with a GPCR is Kyowa Hakko Kirin's Poteligeo, which is indicated for adult T-cell leukemia-lymphoma and which was launched in Japan in  May 2012. It binds to chemokine receptor 4 (CCR4). MorphoSys will propose GPCR targets, which will then be generated by U.K.-based Heptares and used to screen MorphoSys' Ylanthia monoclonal antibody library. MorphoSys will have the right to sublicense to pharmaceutical companies the identified targets and therapeutic antibody candidates, with Heptares receiving upfront and research funding payments, plus a share of those sublicense revenues. Heptares, which is building up its own pipeline, will also select a GPCR target of its own against which to screen MorphoSys's Ylanthia library. MorphoSys will receive license fees, milestones and sales royalties on any Ylanthia antibody developed by Heptares as a result of that work.--John Davis

RQx Pharmaceuticals/Genentech: Just weeks after buying the entire kinase-inhibitor discovery program at Afraxis, Genentech announced Feb. 12 it is collaborating with RQx Pharmaceuticals on a discovery and development tie-up to create novel antibiotics that kill Gram-negative bacteria while avoiding the multi-drug resistance plaguing many of today’s antibiotics. Including an undisclosed upfront payment and earn outs, the deal could total $111 million along with the potential for sales royalties on any product reaching market. The transaction eventually will create an exit for RQx’s primary backer, the hybrid venture capital firm Avalon Ventures, which provided seed funding and a majority of its Series A financing. This makes the third exit already this year for an Avalon portfolio company, following January deals in which BioMarin purchased Zacharon for $10 million plus potential earn-outs, as well as the Genentech/Afraxis agreement. RQx’s work derives from research conducted at the Scripps Research Institute in La Jolla, Calif., to unlock the secret of why an exploratory antibiotic, arylomycin, no longer was effective against bacteria, said RQx CEO Court Turner. Arylomycin, discovered by Eli Lilly in the early 1980s, was used as a chemical scaffold for RQx antibiotic candidates against a novel, undisclosed target, he said. “This is kind of a standard Avalon investment, where we see an old target that gets new completely new insights from a very reputable lab,” explained Turner, also a venture partner at Avalon. Arylomycin addresses signal peptidase, a target that big pharma had wanted to direct antibiotics against for years, but never developed any successful candidates. Turner would neither confirm nor deny that RQx’s work with Genentech will focus on the signal peptidase pathway.—Joseph Haas

Bristol-Myers Squibb/ Reckitt Benckiser: After announcing a change in strategy last year to intensity investment in higher-growth consumer and emerging markets, Reckitt Benckiser entered into a $438 million three-year agreement with Bristol-Myers Squibb to expand its consumer health foothold in Latin America. The deal, announced on Feb. 12, gives Reckitt marketing rights to seven BMS OTC brands for a period of three years. Reckitt will pay BMS a $438 million fee for the right to license the products, and an additional $44 million for an option to acquire them outright after the three-year period at a price to be determined by net sales during the preceding three years. The products included in the deal include Dermodex (nystatin) for diaper rash, Luftal (simeticone) anti-gas treatment and Naldecon (phenylephrine) cough/cold remedy, all sold primarily in Brazil. The products sold mainly in Mexico are Graneodin-B (benzocaine) sore throat remedy, Micostatin (nystatin) antifungal, Picot (sodium bicarbonate) antacid and Tempra (acetaminophen) analgesic. Combined, they brought in an estimated $102 million in 2012 sales, Reckitt said. Slough, U.K.-based Reckitt hopes the BMS brands create a foundation forhealth care product distribution and growth in Brazil and Mexico, where the firm’s business currently is weighted toward household cleaners and other home care products. For BMS, the deal represents its latest move away from non-core consumer businesses to refocus energy and resources on biopharmaceuticals. In 2009, it spun off pediatric nutritionals maker Mead Johnson in an initial public offering and sold its Asian OTC assets to Taisho. --Michael Goodman

GSK/ Vanderbilt University – GlaxoSmithKline is expanding its Discovery Partnerships with Academia program, which itlaunched in 2011, in a new deal with Tennessee-based Vanderbilt University. The collaboration will focus on the discovery and development of treatments for severe obesity. The team will target the melanocortin-4 (MC4) receptor, which plays a role in energy homeostasis. Vanderbilt will be responsible for pre-clinical activities, while the pharma will handle development. The collaboration is expected to bring a compound into the clinic by 2016. Vanderbilt scientists have developed positive allosteric modulators that increase activity to the MC4 receptor. It’s believed that activity at this receptor plays a role in early-onset obesity. GSK and Vanderbilt are hoping to develop a compound that will not raise a patient’s blood pressure like some of the other recently developed therapies for obesity. GSK will provide research funding under the three-year collaboration, as well as undisclosed milestones and royalties on any products that are commercialized. - LL

AstraZeneca/ N.N. Petrov Institute of Oncology: AstraZeneca has signed a research collaboration with one of Russia's leading cancer research institutions, the Petrov Institute, to identify genetic mutations in cancer patients. The deal, announced Feb. 12, will pave the way for scientists from both organizations to identify specific types of cancer tumors that have potential drug-sensitizing gene mutations; specifics were not disclosed. AZ will be able to analyze data generated by the Institute's archive of tumor samples, which is one of the largest in Europe, with more than one million samples from over 270,000 patients.  The Institute scientist who will direct the collaboration with AZ helped establish EGFR testing of AZ's Iressa patients in Russia and Eastern Europe. The deal also bolsters AZ's efforts to help the Russian government build a local world-class innovative biopharma industry. --WD 

image by flickr user sam_goody500 // creative commons

Friday, February 08, 2013

DOTW: Biogen Puts Offshore Cash to Work

When it comes to corporate tax planning, biopharmas as a group aren’t spectacularly sophisticated. (A few exceptions come to mind, most notably specialty pharma Valeant and Bristol Myers-Squibb, the latter of which upped its game and expects to drop its tax rate to 16% in 2013. That's down from 26% in 2011.)

It’s particularly hard for U.S. biopharmas to do much with offshore cash. That’s unless they buy something outside the U.S. or pay a high tax rate to bring cash into the U.S. Or they can opt to keep stockpiling cash ex-U.S. in hopes a cash- repatriation tax holiday is on the horizon, an unlikely scenario anytime soon given the ongoing fiscal standoff.

This week, Biogen Idec made a bold move by using offshore cash to acquire full rights to multiple sclerosis drug Tysabri (natalizumab) from its previously 50/50 partner Elan. The deal manages to turn cash sitting on its balance sheet, much of it offshore, almost immediately into a bump for EPS and cash flow - a neat trick. Deutsche Bank analyst Robyn Karnauskas upped her 2013 EPS estimate to $7.76 from $7.15 and her 2013 revenue estimate to $6.6 billion from $6.1 billion. She expects the new structure to be in place in the second quarter.

The deal includes a $3.25 billion upfront payment from Biogen to Ireland-based Elan. Most of this will come from offshore cash, Biogen CFO and EVP Paul Clancy said on a Feb. 6 call. Biogen Idec had $3.7 billion in cash at Dec. 31. In addition, Elan will receive 12% of Tysabri sales in the first year and then after that 18% on sales under $2 billion and 25% on sales over $2 billion. Tysabri had 2012 sales of $1.6 billion, with some analysts modelling peak annual sales well above $2 billion.

Biogen CEO George Scangos made reviving Tysabri revenue growth a priority when he began his tenure in June 2010. After a 2004 approval, Tysabri was withdrawn from the market in 2006 due to reports of the fatal brain disease, progressive multifocal leukoencephalopathy (PML). It re-entered the market in 2006 with a label for second-line use and a boxed warning. Scangos pushed for the development and approval of a test for JCV antibodies to assess PML risk. In January 2012, FDA updated the Tysabri label on include information quantifying the risks of developing PML according to JCV antibody status. Last month, the partners submitted applications to FDA and EMA for first-line use of Tysabri in patients who test negative for antibodies to the JC virus.

Wall Street initially was wildly enthusiastic about Biogen’s move, spiking shares up 6% in early trading Feb. 6. But since then, the Street has become a bit more cautious, with the gain retreating to about 2% by market close on Feb. 7. Skeptics worry Tysabri won’t live up to revenue expectations or that Biogen’s execution of this deal just ahead of the March 28 PDUFA date for the oral MS drug formerly known as BG-12, now called Tecfidera (dimethyl fumarate), indicates reduced optimism for the new treatment. On the Elan side, buysiders worry about whether President and CEO Kelly Martin will use that mountain of cash to make useful deals. The company doesn’t have the best track record when it comes to strategic transactions. Elan shares were off 6% by the end of Feb. 7 on the deal.

Biogen Idec is hardly alone among biopharmas in having stacks of offshore cash. At the end of 2011, biopharma companies had a  total of $183 billion in cash most of which was offshore, according to a March report from Moody’s. To put that in some context, that is roughly equal to the combined market caps of Amgen, Gilead Sciences and Bristol. Biopharma is second only to the technology industry when it comes to the sheer amount of cash on the books. Last week, the IT sector also offered an instructive example with the privatization of Dell, which itself could be a partial end-run around offshore cash and corporate taxation issues.

The top biopharma cash hoarders in 2011 were Pfizer ($35.3 billion); Johnson & Johnson ($32.3 billion); Amgen ($20.6 billion); Merck ($18 billion) and Bristol ($11.6 billion). Now that the immediate panic of patent cliffs is behind many of them, perhaps biopharmas will take a breather, look around and think of more creative, tax-efficient ways to deploy all that cash.

For a look the rest of the money that was spent in this week's biopharma deal activity, you need go no further than this week's edition of . . .

Alnylam/The Medicines Co. Hospital specialist The Medicines Co. is jumping into the PCSK9 race for the treatment of high cholesterol in a partnership with RNAi therapeutics developer Alnylam Pharmaceuticals, announced Feb. 4. But the program is far behind other PCSK9 drugs in development at Sanofi/Regeneron and Amgen, which are both in Phase III development. The product, which has completed Phase I testing, will have to prove itself to be differentiated from the leaders if it is to become an eventual commercial success. Alnylam and TMC don’t think that’s a problem because as an RNAi therapeutic ALN-PCS works through a different mechanism of action than the leading drugs in development, which are monoclonal antibodies. That could yield a best-in-class drug, the companies predict, although the results will have to bear out in clinical studies. Alnylam will be responsible for developing the programs further for an estimated one to two years to complete preclinical and Phase I clinical studies of the subcutaneous formulation, and TMC will be responsible for leading and funding development from Phase II forward and for commercializing the program if successful. TMC will pay $25 million upfront and Alnylam stands to receive potential development and commercial milestone payments of up to $180 million and could earn scaled double-digit royalties on sales of the resulting products. It’s not an enormous value for an asset that hits such a hot target. Alnylam Chief Business Officer Laurence Reid admitted the upfront portion of the deal reflects the competitive dynamics in the PCSK9 field and the fact that there are several drugs in later stages of development. - Jessica Merrill

Inspiration/Cangene: French company Ipsen is finally free of U.S. partner Inspiration Biopharmaceuticals. Cangene has agreed to buy rights to IB1001, a recombinant factor IX (rFIX) for the treatment of hemophilia B, which FDA put on clinical hold in 2012. The deal, announced Feb. 6, completes the sale process of all Ipsen and Inspiration hemophilia assets and follows the Jan. 24 news that Baxter would buy the troubled biotech’s flagship hemophilia drug OBI-1 and related Boston manufacturing facility. Inspiration entered Chapter 11 protection at the end of October 2012 to restructure and find a buyer for its two main hemophilia products: OBI-1, a recombinant porcine factor VIII (rpFVIII) for treating hemophilia A with inhibitors, and IB1001. In return for global rights to IB1001, Cangene agreed to pay $5.9 million upfront and up to $50 million in potential additional commercial milestones, as well as net sales payments equivalent to a tiered double-digit percentage of IB1001 annual net sales. Meanwhile Baxter, in its transaction pact for OBI-1, will pay $50 million upfront, up to $135 million in potential additional development and commercial milestones as well as tiered net sales payments ranging from 12.5% to 17.5% of OBI-1 annual net sales. As Inspiration's only senior secured creditor and as the owner of non-Inspiration assets that will be included in the sale of both OBI-1 and IB1001, Ipsen will get some 60% of the overall upfront payments. Ipsen is clearly relieved to have found a buyer for IB1001 given the medicine’s shaky regulatory prospects after the FDA-imposed clinical hold on IB1001 impacted two ongoing phase III trials. Since Inspiration filed for bankruptcy protection, Ipsen has backed the biotech with $23.6 million in debtor-in-possession (DIP) financing to keep it going amid efforts to sell its assets. Ipsen expects to cover the DIP amount with its share of upfront payments from the two asset sales with Baxter and Cangene. The French biotech may take a €100 million impairment charge for the hemophilia assets such as convertible bonds used to finance the collaboration and its investment in the Milford, MA plant. A fuller picture should come on Feb. 27 when Ipsen reports 2012 earnings. - Sten Stovall

Pfizer/OxOnc: Drug-development group OxOnc, which is funded by health care hedge fund OrbiMed Advisors, signed a deal with Pfizer to co-develop Xalkori (crizotinib) in a pivotal clinical trial intended to enable the approval of the drug in Asian countries in a new indication. Xalkori is already approved in the U.S., EU, Japan and other countries to treat patients with ALK-positive advanced non-small cell lung cancer (NSCLC). This trial would be in ROS1-positive advanced NSCLC patients. The trial will be at multiple sites in Japan, China, Taiwan and South Korea. OxOnc will be eligible to receive undisclosed milestones if Xalkori is approved in this indication. No further details were disclosed. - Stacy Lawrence

Isotechnika /Aurinia: Isotechnika licensed out exclusive rights a year ago to its lead drug in a couple of indications and now it’s planning a merger to get it back. Last January, the Canadian company licensed rights to voclosporin to treat lupus and proteinuric nephrology indications to Vifor Pharma. Swiss specialty pharma Vifor subsequently spun out Aurinia with the asset. Isotechnika and Aurinia now are planning to merge under undisclosed terms with post-merger ownership of 60/40, respectively. The merged company will trade on the Toronto Stock Exchange and be known as Aurinia. Management will come from both companies. Aurinia’s management is primarily from Aspreva Pharmaceuticals, which was acquired by the Galenica Group for C$915 million in 2008. Vifor is also part of the Galenica Group. The merger is expected to complete by March 15, pending approval from Isotechnika shareholders and the Toronto Stock Exchange as well as the raising of C$3 million by Isotechnika. The new company plans to start a Phase IIb study this year of voclosporin, in addition to standard of care, to treat lupus nephritis. - S.L.

Stacks of Euros photo courtesy of flickr user aranjuez1404

Financings of the Fortnight Sees Signs That Point To Going Public

Oh, the siren song. The new year arrives, the buzz and handshakes at the JPMorgan conference get everyone hopped up, and a scramble of biotech IPO activity lights up the wires. In 2012 it was Verastem, Adocia, Cempra and Chemocentryx all going through the looking glass by early February. This year, the early birds are KaloBios Pharmaceuticals, Stemline Therapeutics, and Zoetis, the last being an outlier in that it’s Pfizer’s animal health products division, not a human biopharma, and it instantly zoomed to a $13 billion market capitalization. (If you’ve read The Omnivore’s Dilemma, by the way, you’re not likely to invest.)

Two diagnostics firms and an Israeli drug developer could also jump soon, and back on the mega-IPO front, there are stories afoot that Quintiles is eyeing the public markets. Whatever the actual fervor of behind-the-scenes activity, the leaks are a sign that the market is at least promising enough to float a trial balloon through the press.

After the initial flurry in 2012, however, the rest of the year brought about a dozen more IPOs. That same count in 2013 would be a disappointment. Sure, the U.S. government’s chronic can-kicking of fiscal cliffs, debt ceilings, and sequestrations means that we’ll probably never have the predictability markets crave, but the economy continues to creep forward, regulations are in place to (theoretically) make IPOs easier, and the FDA is approving more drugs than ever, except for 1996. No, really. The final count last year was 39 novel drugs; the only year in the PDUFA era with a higher total was 1996, with 56.

What’s more, the class of 2012 has had a strong post-IPO performance – shares up 41% mean, 36% median – which should give them the luxury of financing less frequently, according to a recent BMO Capital Markets analysis. In turn, that might free up more investor cash for new issues. That’s our own speculation. The thing is, a few high-profile biotechs recently have brought on board crossover investors who expect an IPO in the not-too-distant future. They really want to get deals done, and they're motivated to buy shares on the public side, too. Like the economy, it's not a slam dunk indicator of more IPO activity, but it's another potential factor to add to the mix.

One veteran biotech investor now in the thick of all this crossover action is Jim Tananbaum, and his new firm Foresite Capital just closed a $100 million fund. It already has six investments on its books, and we have the details below in our roundup.

We’ve discussed the crossover-biotech relationship quite a bit lately, and we bring it up again with regard to antibody developer KaloBios' new listing. Mutual fund giant Fidelity led its Series E round last May, about six months before KaloBios said it would attempt to sell 3.85 million shares for $12 to $14 apiece; it later  lowered the range to $8-$9. It sealed the deal February 1, selling 8.75 million shares at $8 apiece. (The upcoming Start-Up magazine will take a closer look at KaloBios’ winding path to the public markets.) The other biotech IPO this fortnight was Stemline Therapeutics, which closed its IPO of 3.8 million shares including the overallotment at $10 per share, netting $35.5 million. The firm had been on file since April.

It's been a winding path, perhaps even a long strange trip, just to get to this point in our every-other-weekly wordfest. Time to cross over to the other side of this snappy little JPEG, where you, dear reader, will find yourself soaking in the latest edition of...

Zoetis: Pfizer continued its march toward pharma-only status by debuting shares of its animal-health division, Zoetis, in an initial public offering on January 31 that raised $2.2 billion and immediately valued the new company at $13 billion. Since the start of 2011, Pfizer has sold off its formulation business Capsugel to private equity firm KKR for $2.4 billion and its nutritionals unit to Nestle SA for nearly $12 billion. The moves were set in motion by CEO Ian Read, who took the reins in late 2010 and put everything in the drug giant’s portfolio up for review. Pfizer retains an 80% stake in Zoetis, although analysts say it’s likely to divest the rest through a stock swap later this year to avoid taxes, a move similar to Bristol Myers Squibb’s IPO-fueled sale of its Mead Johnson Nutrition infant formula unit in 2009. Pfizer and its underwriters, led by JPMorgan Chase, Bank of America Merrill Lynch and Morgan Stanley, first aimed for a target between $22 and $25 a share. Zoetis sold 86.1 million shares at $26 apiece, and the price rose as high as $31.74 during the first day of trading. The stock closed February 6 at $31.01. – Lisa LaMotta

Bone Therapeutics: The Belgian regenerative medicine firm announced January 28 it has raised €7.7 million ($10.4 million) in a Series D funding round from current investors and regional bodies to support Phase III trials of its lead cell therapy, PREOB, in patients with osteonecrosis or non-union bone fractures. Like other clinical-stage private European biotechs, Bone Therapeutics is tapping its existing investment syndicate for a relatively small amount to fund a Phase III clinical study while it waits for a more benign investing climate. As our colleague Mark Ratner explained in the most recent issue of In Vivo, the field of cell therapy is undergoing a prominent evolutionary step right now as scientists reconsider the role cells play in the regeneration of tissue, but few large firms except for Shire have invested aggressively in the area. The financing includes €6.1 million from existing investors including Nausicaa Ventures, BAMS Angels Fund I and Life Science Research Partners and €1.6 million in grants from the Societe Regionale d'Investissement de Wallonie (SRIW) and Sambrinvest, both in the Walloon region of Belgium. Up to now, the company has raised around €30 million in funding since it was set up in 2006, including €18 million in capital and €12 million in grants and subsidies. PREOB’s production involves extracting mesenchymal stromal cells from patients' bone marrow, and treating and culturing them ex vivo using a proprietary method, so they develop into bone-forming cells, osteoblasts. These are then injected percutaneously into the necrotic or fracture region, avoiding the need for more invasive surgical procedures. "We think we are the only company pursuing osteoblast cells for therapeutic purposes in oesteonecrosis, whereas potential competitors are using differentiated bone stem cells,” CEO Enrico Bastianelli told our Pink Sheet DAILY colleagues. Osteonecrosis is a progressive degenerative disease of bone, most commonly seen in the hips of relatively young patients age 30 to 50 years. – John Davis

Ariad Pharmaceuticals: Fresh from the FDA’s accelerated approval of its chronic myeloid leukemia treatment Iclusig (ponatinib), Ariad raised $310 million, the latest in a series of follow-on mega-financings for for mid-tier biopharma companies. The firm sold 16.5 million shares at $19.60 each, with the cash going to help marketing and manufacturing of Iclusig, which is aimed at patients with a genetic profile associated with resistance to currently approved tyrosine kinase inhibitors. J.P. Morgan, Cowen and Co., and Jefferies & Co. led the underwriting. Iclusig was one of several oncology drugs in 2012 that earned FDA approval before their user fee date, a remarkable trend in a year that saw the most novel drug approvals from the agency since the mid-1990s. Ariad owns full rights to Iclusig, and CEO Harvey Berger said it will “move heaven and earth” to get it approved next for front-line CML by the end of 2014 before generic versions of Gleevec (imatinib), the breakthrough therapy for the indication, hit the market. It remains to be seen, then, how much Ariad will spare for its other pipeline candidates from the follow-on bounty just raised. In October the firm reported Phase I data for AP26113, its dual ALK/EGFR inhibitor, at the European Society of Medical Oncology meeting, and noted that patients on the drug did not develop the rash typically produced by EGFR inhibitors. AP26113 is designed not to inhibit “native” EGFR, which is widely expressed in normal tissue like the skin. – Alex Lash

Foresite Capital Management: A bit of fund news comes this fortnight from a grizzled industry veteran. Jim Tananbaum was among the founding partners at Prospect Venture Partners’ second and third funds in the 2000s, and the decade before that, he founded GelTex Pharmaceuticals and sold it to Genzyme for $1.6 billion. Now his investment firm, Foresite, has closed its first fund with $100 million committed. It’s already made six investments: AcelRx Pharmaceuticals, Intarcia Therapeutics, Keryx Biopharmaceuticals, Puma Biotechnology, Solta Medical, and Tarsa Therapeutics. Two of those companies have been in the news recently. Puma rewarded its shareholders with an unusual path to a New York Stock Exchange listing last year. It used the Form 10 pathway, reverse-merging into a public company shell, then making a pit stop on the bulletin boards on its way to the Big Apple. Intarcia, developing an implantable version of type-2 diabetes drug exenatide, attracted a huge mezzanine venture round last November: $160 million in equity, $50 million in debt. We assume it’s mezzanine, because it featured a host of cross-over investors who, as has become more common in biotech, are looking for late-stage private companies that will be ready to go public fairly soon. New to Tarsa, Foresite led its Series B round in 2012; at the time the firm already had in hand a Phase III oral candidate to treat osteoporosis, but the drug class, recombinant salmon calcitonin, is drawing regulatory scrutiny for possible ties to cancer. – A.L.

All of the Rest: In an extension to its February 2011 Series D financing, Ocular Therapeutix (ophthalmic drug hydrogel delivery) raised an additional $9.8mm tranche for a total round of $23.8mm… In what appears to be its Series C round, cancer, infectious disease, and biodefense vaccine developer Aduro Biotech has brought in $6.5mm… Connecticut Innovations has backed CyVek’s $5.5mm Series D round to support commercialization of its immunoassay technology, CyPlex, a biomarker analysis platform with applications in life sciences, drug discovery, and clinical research… Baxter Ventures participated in a $2.7mm Series A round for start-up Zytoprotec GmbH, a start-up developing peritoneal dialysis solutions and cytoprotective peptide treatments... MentiNova, which has filed an IND for an oral medicine for Parkinson’s symptoms, has raised $500k in early-stage capital from Foundation Venture Capital… German biotech Apceth received funding to accelerate the progress of its first cancer therapeutic, Agenmestencel-T, which uses a patient's own modified adult mesenchymal stem cells… Recently formed Avillion, with a business plan to partner with biopharmas to co-develop and finance late-stage therapeutics, closed an initial financing round through Abingworth and Clarus… Through a private placement, publicly traded Champions Oncology grossed $9.3mm… Nasdaq-traded Israeli biotech BioLineRx brought in $8mm with a private offering of units… Public NanoViricides raised $6mm through a private placement to fund clinical trials of its influenza vaccines… Concurrent with a reverse acquisition for a public listing on the OTC BB, cancer treatments company DelMar Pharmaceuticals completed a $5.4mm PIPE… First planning to bring in money through a FOPO, but later deciding on a private offering, Canadian company Immunovaccine hopes to gross $2mm to support preclinical/clinical trials of infectious disease candidates… Antibody developer Celldex Therapeutics netted over $83mm in its public offering of 12mm shares at $7.50… Keryx Biopharmaceuticals is putting its $70mm in FOPO proceeds into continued studies of iron-based compound Zerenex (ferric citrate), which has completed a US Phase III trial for treating elevated phosphate levels in end-stage renal disease patients… NewLink Genetics will apply the $42.8mm raised in a public offering to progress its clinical-stage cancer pipeline… Anthera Pharmaceuticals (candidates for inflammatory conditions including cardiovascular and autoimmune diseases) netted $37.6mm in a FOPO of 60.6mm shares at $0.66… A follow-on for GI-focused Ventrus Biosciences brought in $20mm… Transdermal drug delivery firm Echo Therapeutics netted $9.5mm in a FOPO… Tel-Aviv-traded Can-Fite BioPharma, in a public offering of units, raised $7.2mm… An at-the-market financing garnered almost $4.5mm for Navidea Biopharmaceuticals to fund further development/launch of cancer and CNS radiopharmaceutical imaging agents including Lymphoseek (technetium tc 99m tilmanocept), NAV4694, NAV5001, and RIGScan… Through an offering of common stock and warrants, Opexa Therapeutics raised $3.25mm to support continued trials of Phase IIb MS vaccine Tcelna... Research-focused Pacific Biosciences completed a $20.5mm debt offering through Deerfield Management to support continued adoption by biological research firms of its SMRT sequencing technology… Deerfield also led a $15mm debt offering for Flamel Technologies to advance its R&D pipeline of drugs formulated with its Medusa and Micropump delivery technologies... Nutritional supplements company MusclePharm completed a $3.5mm RDO of convertible preferred shares led by the Frost Group… In an SEC filing, cardiovascular device maker Covidien restated its previously announced intent to spin-off its Mallinckrodt pharma business.

Photo courtesy of the U.S. Navy.

Friday, February 01, 2013

Deals Of The Weeks Wonders If A Biopharma Super Bowl Is Imminent

Deals of the Week is torn as the Super Bowl approaches – you see, most of this feature’s contributors live either in 49ers country near San Francisco or in the case of this author, a short drive from the home field of the Baltimore Ravens. With our loyalties clearly divided, rest assured DOTW will take a non-partisan approach toward the big game.

But the Super Bowl’s attendant hype puts us in mind of the biopharmaceutical industry’s closest equivalent, the mega-merger, such as those that combined Pfizer and Wyeth and then Merck and Schering-Plough in 2009. A month into 2013, we wonder, what are the chances of a mega-merger in 2013?

Industry sentiment seems inclined against one. In recent earnings calls, CEOs of major companies have disavowed their interest in disruptive deals that require multi-year, complicated integration.

Raghuram Selveraju, the head of health care equity research at Aegis Capital, recently finished up a deep-dive into the mid- and late-stage pipelines of 12 big pharmas. And while he sees companies among the big 12 that badly need a course correction, he does not think a deal the size of Pfizer/Wyeth is likely near-term.

“Some pharmas have out-performed, some are in the middle of the pack and some are absolutely abysmal,” Selveraju said. “If we look at the ones that are performing abysmally, we find clues as to who might do a mega-merger. If a company is doing well on its own, it’s very unlikely that it’s going to do a mega-merger. A company only resorts to a mega-merger only if it feels it cannot go on sustainably in a standalone manner or feels that it doesn’t have sufficient critical mass to continue performing earnings-wise with its existing panoply of products and its existing pipeline.”

At present, Selveraju views Sanofi, Novartis and to a somewhat lesser extent Roche as the top performers in the sector. The middle of the pack consists of GlaxoSmithKline, Bristol-Myers Squibb and AbbVie. But he reserves the “abysmal” label for AstraZeneca and Eli Lilly.

“I think AstraZeneca should find someone to dance with, and Lilly definitely should,” he said. “But both are run by CEOs, especially Lilly, who believe they can just grow organically and discover and develop products internally to justify being a standalone entity. I don’t agree with either – I think AstraZeneca’s approach has been very patchwork.”

One obvious solution might be for AstraZeneca and Lilly to merge, which certainly would qualify as a mega-merger. But Selveraju is unsure they would complement each other in the way that Pfizer and Wyeth did. Of the two 2009 major deals, Selveraju contends that Pfizer made out far better than did Merck.

“Merck’s decision to buy Schering-Plough, on the face of it today, looks like an unmitigated disaster,” he said. “Virtually all of Schering’s once-vaunted late-stage pipeline has fallen flat. Boceprevir (Victrelis) is a commercial failure more or less and probably never will be a success … Merck hasn’t been able to put together a successor for Vytorin (ezetimibe/simvastatin) or expand its usage. It’s been a litany of failures. Now, Merck has resorted to falling back on two other drug candidates that didn’t come from Schering: odanacatib for osteoporosis and suvorexant for insomnia.”

The other possibility for a mega-merger, Selveraju said, would occur if AstraZeneca or Lilly tried to buy out AbbVie, which he thinks could bring one of those companies some of the same benefits Pfizer derived in acquiring Wyeth. “AbbVie is a lot like Wyeth was – it has Humira (adalimumab), just like Wyeth had Enbrel (etanercept), it’s got an interesting set of late-stage candidates in clinical development, none of which are super-great but any one of which potentially could prop up earnings. And we know Humira is going to be very resistant to generic erosion.”

Buying AbbVie seems more feasible for AstraZeneca, the analyst added, as AstraZeneca has a market cap of about $60 billion, compared with AbbVie in the $40 billion range. “It’s not outside the realm of possibility that AstraZeneca could find a way to swallow AbbVie,” Selveraju said. “There’s a lot of synergy there in terms of focus – AstraZeneca likes inflammation and autoimmune disease. AbbVie also has a lot of stuff, just like Wyeth did, that would be easy to divest.”

But Selveraju thinks more focus these days is on the 2011 Sanofi buyout of Genzyme, which he sees as a much better model than either of the 2009 mega-deals,

“That deal is a major reason why Sanofi’s share price has performed so well,” he noted. “And now we’re looking at Lemtrada (alemtuzumab) potentially being approved in multiple sclerosis later this year or early next year – that could be another value-driver because it’s a biologic with an advantageous dosing schedule. Things just keep getting better and better for Sanofi.”

So Selveraju thinks big pharma should look for deals that will increase their exposure to therapies for rare diseases and bring in more “biotech-like stuff.” Two companies to watch as potential targets in the year ahead, he said, are Alexion  and BioMarin. But in the meantime, smaller but nonetheless important deals are being finalized each week in the biopharma arena. Now, let’s check in on the latest survey of …

Idenix/Janssen: Looking to advance its hepatitis C program while its nucleoside polymerase inhibitors are being reviewed for cardiovascular safety concerns by FDA, Idenix Jan. 28 announced a non-exclusive collaboration with Janssen Pharmaceuticals to test two- and three-drug combinations in the virus. FDA placed “nucs” IDX184 and IDX368 on clinical hold last year after a Bristol nuc (BMS094) was shut down due to cardiovascular adverse events that included one death and eight hospitalizations. No financial terms were disclosed for the Idenix/Janssen collaboration. It will involve testing Idenix’s Phase II pan-genotypic NS5A inhibitor IDX719 with Janssen’s protease inhibitor TMC435 (simeprevir) and non-nucleoside polymerase inhibitor TMC647055. The firms will conduct a drug-drug interaction study beginning this quarter, to be followed by a Phase II study of ‘719 and simeprevir dosed with current therapeutic standard ribavirin over 12 weeks in treatment-naïve HCV patients. After that, the two firms plan to try a three-drug combo of ‘719, simeprevir and ‘055, dosed with and without ribavirin. Idenix will conduct the trials and each company will retain all rights to their respective compounds. “This [agreement] will allow us to achieve a key goal of ours for 2013, which is to advance the development of IDX719 as part of all-oral HCV combinations in two- and three-drug regiment,” Idenix CEO Ron Renaud said in a release. - Joseph Haas

Genentech/Afraxis: Genentech has bought a full license to the entire kinase-inhibitor discovery program of Afraxis for an undisclosed upfront fee and up to $187.5 million in milestones. Although not described as a sale, the Jan. 29 deal effectively is the end of the road for Afraxis, which was founded in 2007 by Avalon Ventures. Avalon remains its sole shareholder. Avalon managing partner Jay Lichter, also Afraxis’ CEO and president, tells DOTW that his preference would have been a sale, but the licensing structure still affords Avalon an exit. Lichter declined to say how much Avalon put into the company, but SEC filings show the total could be as high as $11 million. Afraxis originally derived from research in the Massachusetts Institute of Technology lab of Susumu Tonegawa that pointed toward a cure for Fragile X Syndrome, a severe form of autism, by inhibiting P21-activated kinase (PAK) through genetic manipulation of mice, work that gained some attention at the time. Afraxis received funding from the National Institutes of Health’s TRND program to push forward a small-molecule Fragile X compound, but Genentech’s parent Roche has a Fragile X drug in advanced clinical trials. Genentech is likely to use Afraxis’ library of kinase inhibitors to pursue other indications. “Our initial goal was PAK, but we have a variety of compounds selective for other kinases, and I don’t know what indications they’ll move forward in,” Lichter said. - Alex Lash

Immunomedics/Algeta: Norwegian oncology company Algeta agreed to collaborate on an antibody-drug conjugate with New Jersey-based antibody specialist Immunomedics. Under the Jan. 28 deal, Algeta would join its thorium-227 alpha emitter with Immunomedics’ epratuzumab, an anti-CD22 antibody already being studied in both hematological cancers and autoimmune disorders. Specific terms of the deal weren’t released, but Algeta will issue an upfront payment to Immunomedics, and will owe an antibody-delivery milestone and manufacturing payments. The companies said Algeta will fund preclinical and clinical work on the compound through Phase I, after which the parties will negotiate a license for Algeta based on certain pre-existing but undisclosed parameters. Immunomedics previously partnered epratuzumab with UCB, but re-negotiated that deal in late 2011 to recover full worldwide oncology rights to the drug. UCB returned its buy-in option in cancer, and continues to hold worldwide rights in autoimmune diseases; it is conducting Phase III trials of the antibody in lupus. The compound has shown promise in leukemia and non-Hodgkin’s lymphoma, both on its own and in an yttrium-90 labeled form. Immunomedics has two other antibody-drug conjugates in the clinic: the Phase I milatuzumab-doxorubicin in relapsed multiple myeloma and labetuzumab-SN-38 in colorectal cancer. - Paul Bonanos

Bristol/Lilly: In the first of two “No-Deals” of the week, Eli Lilly during its fourth-quarter call on Jan. 29 revealed to investors that its collaboration with Bristol regarding Phase III oncology asset necitumumab has been terminated in North America and Japan. Bristol pulled out of the three-year partnership for the squamous non-small cell lung cancer treatment, leaving Lilly with sole worldwide development and commercialization rights. A Phase III non-small cell lung cancer trial was dropped two years ago due to safety concerns. “The decision to provide notice of termination for necitumumab was based on a careful review and prioritization of our entire development portfolio, which the company regularly undertakes,” said a spokesperson from Bristol in an e-mail. Lilly assured investors that it intends to continue the development of necitumumab and that data from the late-stage SQUIRE trial are expected in late-2013/early-2014. The company plans to make the therapy part of a comprehensive treatment continuum for lung cancer that also includes Alimta (pemetrexed) and clinical-stage drug ramucirumab. Oncology is one of the main therapeutic areas driving Lilly’s pipeline beyond its so-called “YZ” years that are plagued by patent expirations of blockbuster drugs. - Lisa LaMotta

Teva/CureTech: As part of a pipeline review initiated by new top management, CEO Jeremy Levin and CSO Michael Hayden, Teva has terminated its collaboration with oncology biotech CureTech. CureTech’s lead compound is CT-011, a humanized monoclonal antibody that interacts with PD-1, a B7 receptor family associated protein. It has been assessed in Phase I and Phase II clinical trials for hematological malignancies and solid tumors, including large B-cell lymphoma, colon cancer, metastatic melanoma and other indications. Teva did not say much about the trial results to date, but Hayden, in a statement, noted, “As we looked closely at CT-011 and the most recent clinical and biochemical data, we have made the strategic decision to invest our resources elsewhere, where we can have the most impact for patients.” In the mid-2000s, Teva began dipping its toes into innovative oncology R&D with a few small in-licensing deals, but Levin and Hayden have made it clear that while the company will not completely jettison oncology, it is no longer a priority for Teva’s innovative R&D program, largely because the field is so crowded and also because Teva’s strengths lay elsewhere. The deal revolved around a 2006 agreement that Teva drove, under which it paid $6 million upfront and took an option to invest another $23 million if CureTech met certain development milestones, as well as to buy the rest of the company if CT-011 were approved. At the time, CT-011 had completed Phase I testing. Unlike many other in-licensed assets under review, this one originated at the Israeli drug maker, not one of the companies Teva has acquired. Indicative of the homegrown nature of the deal, CureTech also is based in Israel, where Teva is headquartered, and for a long time, one of Teva’s top executives, Aaron Schwartz, sat on CureTech’s board. Teva is taking a $109 million noncash charge as a result of the impairment cost of the termination. - Wendy Diller

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