The IN VIVO Blog

DOTW Diagnoses the Meaning Behind Roche’s Hostile Bid For Illumina

2012-01-27T14:58:00.001-05:00

It’s a cat-and-mouse game in the whole-genome sequencing space, as Roche made a hostile $5.7 billion bid for Illumina on Jan. 25, which the German gene-sequencing powerhouse responded to by adopting a “poison pill.” While stating that its board of directors would review Roche’s offer to determine if it is in the best interest of its shareholders, Illumina adopted a shareholder rights agreement Jan. 26 under which shareholders will receive one preferred share of stock as a dividend for each common share held if Roche or another bidder increases its holding in Illumina to 15% or greater.

Roche’s offer represents a significant premium over Illumina’s recent share prices, which rose substantially after the unsolicited bid, but market analysts have speculated that the Swiss pharma will need to increase its bid to land its prey. (And why not: we've seen this show before, back when it was called Genentech or before that, Ventana.)

With an eye toward pushing gene-sequencing into the routine clinical diagnostic space and a longer-term goal of using the technology to create companion diagnostics for drugs, Roche has been active in acquiring gene-sequencing companies. In 2007, it bought out 454 Life Sciences for $155 million. In a related effort that demonstrated the pharma’s mettle in landing a desired target, Roche made a late increase to its bid to land genetic-testing firm Ventana Life Sciences for $3.4 billion after a seven-month struggle in 2007-08.

As our colleagues at The Gray Sheet explained, Roche’s goal is not merely to grow its diagnostics business, where it is in fierce competition with Abbott, but to accelerate the transition of whole-genome sequencing from research to clinical use. Roche projects a $2 billion-plus sequencing market in 2015 – the worldwide market for sequencing was about $1.2 billion in 2010, with Illumina reporting revenues of roughly $900 million that year.

That revenue, however, did not come from clinical diagnostics but from research applications. About 80% of Illumina’s customers are academic or government labs, with just 10% comprising pharmaceutical and biotechnology companies using the firm’s sequencing and microarray technology for drug-discovery efforts.

Daniel O’Day, chief operating officer of Roche Diagnostics, predicted that while FDA likely will delay very near-term adoption of clinical diagnostic sequencing in the U.S. as it reviews the technology, the opportunity for market applications may arrive more quickly in Europe.

“I don’t think this is something that is five or 10 years out, in Europe in particular,” he said. “I think it’s something we see already and that we can foster and begin to drive. It won’t be a black-and-white situation. There won’t be one day [when] it’s in the research world, the next days it’s in the clinic world, but it will evolve and it will evolve quicker in Europe than it will in the United States.”

While we await Illumina’s next move regarding the hostile bid from Roche, business development folk at numerous other biopharmaceutical companies kept quite busy this past week. Therefore, it’s time for another installment of …

Watson/Ascent – With an eye on expansion in the Australian market, Watson Pharmaceuticals acquired Ascent Pharmahealth, which has a strong generics base in Australia and Southeast Asia. Watson announced the acquisition Jan. 24, buying the business from Indian-based generics company Strides Arcolab Ltd. for AU$375 million ($395.8 million). The acquisition will fortify Watson’s position in Australia and Southeast Asia; the company already has a presence in Australia through its Spirit Pharmaceuticals and Willow Pharmaceuticals subsidiaries, but after the acquisition, Watson will be the fifth-largest generic pharmaceutical company in the country by revenue and the second largest in terms of molecules, according to Watson. Executive VP-Global Generics Sigurdur Olafsson explained the rationale behind the buyout during a same-day investor meeting. The Australian market is growing at about 8%, and has a fast growing penetration rate of 60% that should reach 75% by 2016. “It is a very difficult market to enter,” he added. “The top five companies are 98% of the market.” Ascent also has a strong presence in Southeast Asian markets, including Singapore, Malaysia, Hong Kong, Vietnam and Thailand. The unit had sales of approximately AU$150 million ($158.3 million) in 2011. Ascent markets generics, branded-generics, some brands and over-the-counter and dermatology products in Australia. In Southeast Asia, the company markets branded-generics and OTC products through a sales force of 45. The company employs approximately 300 employees. Strides Arcolab divested the business to focus on its specialty business called Agila, which makes hard-to-replicate sterile injectables. The deal will allow the company to reinvest in capital expenditures for the business, management said during a same-day conference call.—Jessica Merrill

Amgen/Micromet – With its eye on the market for hard-to-treat cancers, Amgen announced plans Jan. 25 to acquire Micromet, a biopharma known for its Bispecific T cell Engager (BiTE) antibody platform that can redirect the immune system to fight tumor cells. Amgen agreed to pay $1.16 billion in cash, roughly $11 per share, a 33% premium over the company’s closing price Jan. 25. In exchange, it gains a promising Phase II asset, several earlier-stage partnered assets and a validated technology platform that could have broad applications in a range of hematologic malignancies and solid tumors. The primary focus of the deal is blinatumomab, a BiTE antibody targeting CD19, Micromet’s lead asset in Phase II clinical development for acute lymphoblastic leukemia (ALL) and in Phase I testing for non-Hodgkin’s lymphoma. The rest of the company’s portfolio is in earlier stages of development – and much of it is partnered. The acquisition moves Amgen further into hard-to-treat cancers, an area where it says it wants to play, and Amgen could benefit from bolstering its oncology pipeline. And, Micromet is no stranger to Amgen. The two have been partnered since July. “We have been interested in Micromet for a long time, basically since the company was started,” Executive VP R&D Roger Perlmutter said. Amgen intends to keep Micromet’s research center located in Munich, Germany, where the company was founded in 1993 by a small team of scientists from the University of Munich. The site will operate as an Amgen R&D center of excellence, the firm said. As for Micromet’s existing partners on the BiTE technology (MedImmune, Bayer Healthcare, Sanofi and Boehringer Ingelheim), Amgen said it is committed to maintaining those relationships. Future out-licensing opportunities could even be on the table. “While we have what we think are a lot of good ideas with respect to how to use the BiTE platform, there are a lot of other smart people in the world who have other ideas, and we do not want to exclude other people from being to employ BiTE technology in order to further their programs,” Perlmutter said.—J.M.

Celgene/Avila – In a move to further diversify its product portfolio away from its Revlimid (lenalidomide) franchise, Celgene announced that it will acquire Massachusetts biotech Avila for $925 million in upfront and eventual milestone payments. The acquisition was announced just prior to Celgene’s fourth quarter earnings call on Jan. 26 and is expected to close during the first quarter. Celgene will pay $350 million upfront, as well as $195 million in milestones tied to Avila’s lead drug candidate AVL-292, a treatment for hematological cancer and autoimmune diseases. AVL-292 will begin Phase II trials in the second half of the year and be developed in conjunction with Revlimid. The deal will bring five-year-old Avila’s investors a strong exit; the aggregate invested capital multiple is almost 7x on the $350 million upfront that Celgene will pay and is more than 11x for the $575 million in milestone payments that will be paid out. “With minimal cash outlay up front (CELG generated nearly $2B in cash flow in 2011), and an asset that fits nicely into CELG’s portfolio, we view this as a nice tuck-in acquisition,” wrote Baird & Co. analyst Christopher Raymond in a note.—Lisa LaMotta

AstraZeneca/Karolinska Institutet – AstraZeneca and Karolinska Institutet of Sweden have a new research agreement – their second – to develop potential imaging biomarkers and diagnostics using Karolinska’s expertise in positron emission tomography (PET) imaging to support AZ’s drug discovery and development programs. The three-year collaborative research agreement builds on the partners’ earlier work, a joint venture, which focused on neuroscience. But the new agreement expands the focus to include pain control, gastrointestinal and cardiovascular applications; AZ has numerous compounds in Phases I and II trials in all of those areas. The joint venture, put in place in 2006, included an investment by AZ in the university’s imaging facilities and has yielded more than 10 novel ligands for PET and many more implemented in AZ’s development programs, the pharma said. These include identification and early development of two compounds that detect amyloid by PET imaging, likely useful in studying and diagnosing Alzheimer’s disease. AZ scientists will supply the expertise for synthesizing and developing new imaging molecules, while Karolinska will be responsible for radiochemistry labeling of the imaging molecules and PET studies. AZ will spend about $1.7 million a year for three years to fund seven full-time positions at Karolinska and facilitate a specific number of PET measures and joint research projects.—Wendy Diller

BioLineRx/Genoscience – Israeli biotech BioLineRx, which has five compounds in clinical development in a variety of indications as well as 12 preclinical programs, added another asset Jan. 24, when it licensed worldwide rights to Phase I-ready hepatitis C candidate BL-8020 from France’s Genoscience. No financial terms were disclosed. The news caused an instant and significant uptick in BioLineRx’s share price in trading on both the Tel Aviv exchange and NASDAQ. Additionally, there was speculation that the Israeli company could join Idenix and Achillion as a buyout target in the red-hot HCV space that has seen a pair of clinical-stage biotechs snapped up at record prices in recent months. BL-8020 offers a different approach to treating HCV, Genoscience claims, by inhibiting HCV-induced autophagy. The compound has demonstrated safety and efficacy in preclinical trials, the company says, along with a synergistic effect when used with other HCV drugs. BioLineRx believes ‘8020 could increase other drugs’ potency and reduce their adverse effects, while also enabling reduced doses of other drugs and shortening total therapy duration. The deal is BioLineRx’s fourth in-licensing transaction in the past two years, following deals to acquire cancer cachexia candidate BL6020 from Santhera, Phase II-ready irritable bowel syndrome drug BL7040 from Hebrew University and neuropathic and inflammatory pain candidate BL7050 from the tech transfer office at Tel Aviv University.—Joseph Haas

Elanco/ChemGen – In a transaction that will continue the ongoing consolidation of the animal health industry, Eli Lilly division Elanco Animal Health will buy out privately held ChemGen Corp. at undisclosed terms, the two companies announced Jan. 24. Lilly said the deal was driven by a desire to increase Elanco’s expertise and pipeline in innovative feed enzyme products that can improve the efficiency of poultry, egg and meat production. The enzymes ChemGen produces are naturally occurring digestive enhancers that help animals unlock and better utilize nutrients in the feed they receive. ChemGen, which will maintain research operations in Maryland and manufacturing activities in Indiana, will become a wholly owned subsidiary of Lilly as well as an operating unit of Elanco. Jeff Simmons, Elanco president, said ChemGen’s existing presence in poultry and swine markets in North America and Asia will benefit Elanco, while Elanco’s presence in Europe and Latin America will offer a growth opportunity for the ChemGen product line. “This acquisition allows Elanco to leverage our expertise in developing trusted, science-based solutions into the enzyme space, which is an emerging field with significant growth potential,” he added. Animal health, while producing small revenues overall for big pharma, nonetheless has offered strong growth rates in recent years, helping explain why Lilly and others have increased their emphasis on this portion of their business.—JAH

Spectrum/Bayer – Oncology drug developer Spectrum Pharmaceuticals now has full global rights to lymphoma treatment Zevalin (ibritumomab tiuxetan), thanks to a new deal to acquire Bayer AG’s license to commercialize the drug outside the U.S. The publicly traded, Henderson, Nev.-based Spectrum has held full U.S. rights to Zevalin since spring 2009, when it acquired the 50% it did not already own of a joint venture with Cell Therapeutics to market the drug; CTI had previously licensed Zevalin from its originator, Biogen Idec. For a one-time payment of €19 million ($24.7 million), Spectrum said it gains all rights to marketing, sales and intellectual property of the drug covering ex-U.S. territories, as well as access to Bayer’s existing inventory of it. Spectrum may seek additional partnerships to market the drug outside the U.S.; it says it will rely on a combination of alliances and company resources. Zevalin, a radiotherapeutic that is given by intravenous injection, is approved in more than 40 countries, including locations in Europe, Latin America and Asia, to treat follicular non-Hodgkin’s lymphoma. The merchant banking group of Burrill & Co. advised Spectrum as it completed the acquisition.—Paul Bonanos

Ipsen/Santhera – In our “No-Deal of the Week”, Ipsen returned to Santhera ex-North American and Japanese rights to Parkinson’s disease drug fipamezole on Jan. 24. Never mind that neurology – and in particular movement disorders – remain a key focus area for the mid-sized French group, following its restructuring last year. And never mind that the drug, a first-in-class selective adrenergic alpha-2 receptor antagonist for managing levodopa-induced dyskinesia in PD patients, fits perfectly with Ipsen’s dystonia treatment Dysport, one of its most important commercial assets. Ipsen gave fipamezole the boot because its development wasn’t going anywhere very fast: Biovail, which licensed U.S. and Canadian rights to the Phase II drug in mid-2009, handed back the asset – still in Phase II – in October 2010, following its acquisition by Valeant. Santhera in early 2011 said it would find a new partner for Phase III, but that didn’t materialize. So Ipsen, with its newly streamlined and de-risked R&D, isn’t about to continue forking out co-development fees for a drug that’s effectively sitting on the shelf as no one’s priority (Santhera’s focal point remains Friedreich’s ataxia drug Catena, even now that it has global rights to fipamezole). And besides, “all our R&D efforts are now focused on peptides and toxins,” as per the 2011 re-structuring, explained an Ipsen spokeswoman. Still, if fipamezole ever does get any closer to market (Santhera declares it to be ‘perceived by clinicians as one of the most promising drug candidates for PD-related dyskinesia’), Ipsen wants a way back in. That’s why it has maintained a call option for worldwide license to the program ‘under certain conditions’. We assume that means if Santhera or someone else starts to de-risk the Phase III. Meantime, Ipsen is owed milestone payments and royalties based on any future partnering and commercial success of the drug.—Melanie Senior

image by flickr user dennis defreyne via creative commons

Financings of the Fortnight Puts Its Own Lens on Early-Stage Investments

2012-01-26T16:44:00.001-05:00

Since we last gathered, dear FOTFriends, end-of-year venture numbers came out. According to the National Venture Capital Association and PriceWaterhouse Coopers, venture cash into biotech was up 22% from 2010, but "first-round" funding volume took a dive to its lowest level in 15 years, with only 153 drug and device companies getting seeded.

Ryan Flinn of Bloomberg News and Luke Timmerman of Xconomy translated that figure into grim news for industry start-ups, with Timmerman enumerating the fears that neither a chastened and constrained federal government, nor Big Pharma, nor other investors have the wherewithal -- or the "guts" -- to fill the early-stage venture void and turn innovation into products.

It's worth noting that the other big VC data shop, DowJones VentureWire, also released its own year-end totes and came to slightly different top-line conclusions: Total biotech funding (biopharma plus devices), for example, came to $7.2 billion in 2011 compared to $6.5 billion in 2010, an 11% rise (compared to NVCA's reported 22% rise). There are other oddities, such as DJVW attributing the entire 11% difference between 2010 and 2011 to a jump on the device side -- albeit with nine fewer companies funded.

We've pointed out before in this column how hard it is to square the two groups' data sets and sometimes divergent attitudes, so we won't try to figure out who's more accurate this time. But there's one number we'd like to circle: the 153 newly-funded companies tallied by NVCA/PWC and cited by Bloomberg as evidence for an early-stage funding crisis.

We don't have access to their raw data, but we can lean on our own database and legwork and turn to our annual The A-List, in which we count Series A rounds for drug, device and diagnostic companies. (We leave out rounds expressly called "seed" rounds, which you're welcome to take issue with, but we feel that seeded ideas worth their salt will progress to an A round.) And we found that in 2011, Series A rounds were slightly up from 2010, 97 to 88, as were the dollars committed ($1.1 billion to $876 million). It's not sunshine and donuts by any means -- it's the third lowest dollar total we've recorded since we began the A-List in 2004 -- and everyday we hear biotech people, from scientists to investors to executives, worry where funding for innovation will come from in the next decade.

But by our one small measure, we note that some of the downward trends stopped trending downward in 2011. Is it a significant shift, or a momentary upward blip in an otherwise inexorable fade? We won't go nearly as far or as fiercely as Atlas Venture partner/blogger Bruce Booth, who took to task both the above-mentioned reporters for turning positive data into negative headlines. (He also complained in a tweet that the VC quoted about the early-stage crisis was from Warburg Pincus, which isn't down in the company-formation trenches.)

Booth, who of course has much at stake in calming fears that early-stage biotech investing is a dying art, digs into the NVCA data strictly from the biopharma side (a mild case of cherry-picking, perhaps). And he finds a few trends that, in shape if not in precise number, mirror what we found in our Series A analysis: Early-stage investments made a modest recovery last year. (We should also mention that two of Atlas' A-round investments made our A-List, in large part to show how Booth and his colleagues, by experimenting with new models of company formation, have acknowledged the serious problems with traditional biotech venture.)

Your friendly FOTF correspondent is a Libra, so you astrologers out there won't be surprised to find we come down somewhere in the middle. The data show some signs of life for new companies, but those chronicling the industry from the outside can't ignore the actions that speak louder than -- or at least alongside -- the numbers: The venture firms shutting down; the titan LPs like CalPERS reducing their VC allotment; the early-stage survivors trying asset financing (Atlas) or option deals (Third Rock, Versant) to gain some down-side protection.

We were hoping that by the time you read this, we'd have an intriguing gauge of public-market sentiment: the reception of Verastem's planned IPO. But as of this writing, the pricing isn't due for another day. If investors shrug off caveats like the one we found in Verastem's S-1 a couple months ago...

"Research on CSCs [cancer stem cells] is an emerging field and, consequently, there is ongoing debate regarding the existence of CSCs."

...we'll certainly have a lot to discuss in the next column. But let's not get ahead of ourselves. We've barely even scratched the surface of our latest...

Neurocrine Biosciences: In its first financing since 2010, Neurocrine Biosciences grossed $77 million in a follow-on public offering of 9.5 million shares for $8.10, slightly lower than the stock has been trading for the past month (at its highest, shares closed at $8.66 just a couple weeks ago). Neurocrine--which was founded in 1992 and has a broad pipeline covering CNS disorders, women and men’s health, and cardiometabolic diseases--had previously focused on the insomnia treatment indiplon. Since that compound's flame out, Neurocrine has bounced back. The company is now pursuing four Phase II projects, two of them in partnerships with Big Pharma. Abbott has exclusive worldwide rights to Neurocrine’s lead candidate elagolix for endometriosis pain and uterine fibroids. This past October, Neurocrine collected a $20 million milestone payment from Abbott for holding a pre-Phase III meeting with the FDA. And GSK holds an exclusive license to the CRF1 antagonist 561679 for stress-related disorders. Earlier in the pipeline, Neurocrine has also secured another partner in Boehringer Ingelheim, for its GPR119 agonist Type II diabetes program. -- Amanda Micklus

Prosensa: The Dutch rare disease firm said January 25 it has raised €23 million ($30 million) in new venture funding, its first since a €18 million Series B round in late 2008. New investor New Enterprise Associates (NEA) led the round with participation from existing investors Abingworth, Life Sciences Partners, Gimv, Idinvest Partners and MedSciences Capital. Prosensa is cashing in on the popularity of rare disease projects among Big Pharma, which fueled big rounds for new firms Ultragenyx Pharmaceutical and Orphazyme last year, as START-UP notes in the new A-List. The Prosensa round also comes as European biotech waits for more debt-crisis shoes to drop. Despite signs of a revival in early 2011, funding deteriorated as the year went on, even more so for follow-on rounds than for Series A rounds, to add up to a particularly grim year, as our colleagues at "The Pink Sheet" report here. In that context, Prosensa did well to attract such a large round; lead investor NEA says that Prosensa is its first European biopharma investment. A Prosensa spokesman declined to say whether the latest cash is tranched. It will help the firm bring its first unencumbered compound not just into the clinic later this year but also all the way through clinical trials without a partner. Both that compound and Prosensa's lead compound, which is partnered with GlaxoSmithKline, aim to treat variants of Duchenne's muscular dystrophy. -- Alex Lash

RaNA Therapeutics: The Atlas Venture portfolio got a new addition January 18, as RaNA Therapeutics announced a $20.7 million Series A financing that should see it through IND-enabling studies for the first candidate from its long non-coding RNA (lncRNA) technology platform. RaNA's backers believe long non-coding RNA offers several advantages over earlier RNA-interference technologies. It is expected to enable selective activation of single target genes and the expression of therapeutic factors, and its therapeutics should not require a delivery vehicle. While most RNAi therapeutics in development require intravenous infusion, most lncRNA drugs should work through simple subcutaneous injection, said RaNA CEO Arthur Krieg. Atlas led the Series A, joined by SR One, the venture capital arm of GlaxoSmithKline, Monsanto and Partners Innovation Fund. Monsanto will do unspecified early preclinical work for the start-up, which says it is considering 20 indications as it works toward a first clinical candidate. Krieg comes from Coley Pharmaceutical, which was bought by Pfizer for $164 million in 2007. Atlas partner Jean-Francois Formela, who will take a seat on RaNA’s board, says GSK's involvement should give the Big Pharma, which has a significant investment in epigenetics, a better sense of the feasibility of RaNA's science. -- Joseph Haas

Trius Therapeutics: The San Diego antibiotic developer said Thursday, January 26 it has priced a public offering of its stock that should raise about $45 million. It is selling 8.6 million shares at $5.25 a share, a 9% discount to its closing price the previous day, and well off the six-month high of $8.74 from July. Shares were off an additional 7% Thursday, down to $5.39, which could also be a reaction to the company's announcement that the Securities and Exchange Commission is looking into earnings statements concerning Trius's collaboration with Bayer Pharma. The company has hit bumps before. It was planning its IPO in March 2010 when it the FDA said it had to revise its Phase III trial for skin and soft tissue infection caused by drug-resistant Stapholoccocus aurueau. Executives including CEO Jeffrey Stein learned of the FDA ruling soon after they boarded a flight to Switzerland, where they were slated to start the road show. They landed in Geneva, had dinner, and turned right around to fly back to the US. Trius finally went public in August 2010 and raised $50 million. With the new offering, underwriters have the option to buy up to 1.29 million additional shares. The deal is underwritten by Citigroup and Piper Jaffray, with help from Canaccord Genuity and Ladenburg Thalmann. -- A.L.

Self-portrait courtesy of flickr user Jen and a Camera.

Deals of the Week Decompresses

2012-01-20T14:40:00.002-05:00

Sales and earnings season kicks into full swing Jan. 22,so maybe that explains the hush that fell over the deal-making front this week.Or, after hunkering down on the battlefield known as the Westin St. Francis Hotel during the JPMorgan Healthcare Conference last week, the dealmakers went back to their desks to digest what they learned and put up their feet.

The execs at Genentech remained diligent though (theydidn’t have far to travel after all), signing a big deal in the epigenetics spacewith Constellation Pharmaceuticals. The partnership included the biggest up-front payment yet in the emerging area of science - $95 million including both up-front and research funding, way more than the $20 million GlaxoSmithKline paid upfront in its epigenetics tie-up with Epizyme last year.

Then there was the announcement Jan. 17 that Gilead closed on the $11.2 billion acquisition of hepatitis C specialist Pharmasset. Gulp.Maybe that was a big enough deal for the industry to swallow in one week. Notthat you need reminding after Gilead announced the acquisition in November, but Gilead is paying the most ever for a clinical-stage biotech, with the multi-billion dollar buyout representing an 89% premium over Pharmasset’s closing share price before thedeal was announced.

Lastly, there was a deal that fell apart. Though hardly a surprise at this point, Pfizer’s decision to end its collaboration with Medivation to develop Dimebon for Alzheimer’s disease after a second Phase III flop still had to sting. The program represents a whole lot of cash down thedrain, and Pfizer still has bapineuzumab to sweat over. We already had a feeling the dimebon deal was done though, didn’t you? - Jess Merrill

Genentech/Constellation: Cambridge, Mass.-based Constellation Pharmaceuticals is among the best-funded start-ups in the nascent field of epigenetics. Until this week, however, it was the most mature company in the sector without a commercial partner. On Jan. 17, Roche-owned Genentech and Constellation announced a three-year collaboration that covers a broad range of epigenetics programs spanning multiple target classes; Constellation’s two lead programs remain under the start-up’s full control, however. Genentech paid $95 million in up-front and research funding, making the new deal the largest yet in the epigenetics field, which relates to the science of chemically modifying specific DNA sites to amplify or suppress gene expression. For its money, which could also include milestone payments of unspecified size as well as double-digit royalties, Genentech also gets an option to acquire Constellation outright at a pre-determined but undisclosed time in the future, for a pre-negotiated price plus contingent value rights. The deal follows by a year GlaxoSmithKline’s deal with Constellation rival Epizyme, for $20 million up-front, as well as a smaller tie-up between Eisai and Epizyme in March 2011. Constellation has raised $86 million in two rounds of funding from VCs including Third Rock Ventures, the Column Group,Venrock, and Altitude Life Science Ventures, as well as SROne, GSK’s venture unit; most recently, it topped off its Series B with $15 million in June 2011. – Paul Bonanos

Bayer/Ventana: Pharma is the latest in a string of pharmas to partner with Ventana to develop a companion diagnostic for a drug in development, Ventana’s pharma partners have disclosed three other companion diagnostic deals already in the first few weeksof the year. The deal with Bayer, announced Jan. 17, is for the development of a test to identify patients most likely to benefit from a novel andibody-drug conjugate in development at Bayer. The test will be based on Ventana’s immunohistochemistry platform. None of the financials were disclosed, but Ventana President Mara Aspinall told “The Pink Sheet” DAILY that it has signed some “encouraging” deals with pharmaceutical manufacturers. We’d still like to see some actual financials. — Jessica Merrill

Life Technologies/DaAn Gene: Life Technologies, a leading U.S.-based supplier of sequencing systems and other life science tools, and DaAn Gene, based in Guangzhou, have formed a joint venture to develop in vitro diagnostic assays in oncology, infectious diseases, and genetic diseases for wide distribution in China. The first order of things is for the partners to plan the test menu for Life Technologies’ 3500Dx Genetic Analyzer for IVD, which the Chinese regulator, the SFDA, cleared in October. They have collaborated before: working with Applied Biosystems (now LifeTech’s sequencing business) DaAn brought PCR technology to China. Although LifeTech is aiming at the China market, the press release announcing the venture also highlighted DaAn’s intention to bring its products to “the global marketplace,”suggesting the capillary sequencing-based kits it develops may be appropriate for approved uses outside of China as well as within. According to its website, DaAn “claims a presence” in 70% of the molecular diagnostics market in China over the past decade. LifeTech transitioned from a local dealer network to a direct selling model in China for its sequencers in 2011 and after a bumpy start, expects better than 20% organic growth there in 2012. LifeTech declined to comment on how the joint venture will split expenses and revenues from kit development and sales. --Mark Ratner

Genzyme/Veracyte: Sanofi-owned Genzyme broadened its thyroid-related offerings via a partnership with molecular diagnostics specialist Veracyte. In a global deal for undisclosed financial terms, Genzyme said it would co-promote Afirma,Veracyte’s personalized diagnostic analysis platform for patients suspected of having thyroid cancer. Traditionally, co-promotes between pharma and diagnostics companies have been hard to pull off because the economics vary widely for various products, making it difficult for partners to align their incentives. Given the new realities of personalized medicines and targeted therapies, this one should be interesting to follow. Veracyte’s gene expression tests are designed to help cytopathologists classify indeterminate results of fine needle aspirations. The companies say current methods of FNA analysis are so challenging to interpret that most patients also undergo thyroid resection for a definitive diagnosis; even that procedure is highly imperfect. Genzyme and Veracyte claim that use of Afirma in combination with cytopathology expert analysis to interpret FNAs could prevent tens of thousands of surgeries annually in the U.S. The companies will first co-promote the procedure in the U.S., but eventually will do so elsewhere in the world. Genzyme already markets Thyrogen (thyrotropin alfa for injection), a diagnostic and adjunctive therapy for patients with well-differentiated thyroid cancers. Founded in 2008, privately-held Veracyte is backed by Domain Associates, Kleiner Perkins Caufield & Byers, Versant Ventures and TPG Biotech, and raised $28 million in Series B funding in June 2010. – P.B.

Pfizer/Medivation: After more than four years of collaborating on once-promising Alzheimer’s disease drug Dimebon (latrepirdine), Pfizer and Medivation threw in the towel after a second failed Phase III efficacy trial. On Jan. 17, the companies announced plans to discontinue development of Dimebon for all indications and to terminate their collaboration on the drug. The decision followed the failure of a second Phase III trial, CONCERT, to demonstrate efficacy in Alzheimer’s disease. Dimebon failed to demonstrate statistically significant efficacy on either of two co-primary endpoints – the Alzheimer’s Disease Assessment Scale-cognitive subscale or the Alzheimer’s Disease Cooperative Study-Activities of Daily Living. The disappointing results came less than two years after another Phase III Dimebon trial in Alzheimer’s, CONNECTION, failed to meet efficacy endpoint measures of cognition and global function inpatients with mild-to-moderate disease. For Pfizer, Dimebon represented a risky bet from the start. It entered into a development and commercialization deal with Medivation in September 2008. The big pharma agreed to pay $225 million in cash upfront and up to $500 million in development milestones while also assuming 60% of development costs and commercialization expenses, premised upon encouraging results from a Phase II/III study that enrolled 183 Alzheimer’s patients with mild-to-moderate disease at 11 sites in Russia.—Sue Sutter and Joseph Haas

--Photo courtesy of Flickr user slworking2, used under Creative Commons license.

Financings of the Fortnight Leaves Its Aching Feet In San Francisco

2012-01-17T00:23:00.000-05:00

As FOTF favorite Ted Leo and the Pharmacists once sang, there was a whole lot of walking to do at last week's JPMorgan confab. One member of the team had blisters that turned his hosiery into a reprise of the Curt Schilling bloody sock incident. Another logged more than nine miles on foot in four days (2.5 miles the first day) without going more than a few blocks from the ground zero of the St. Francis.

Open wounds notwithstanding, we took the exercise as a blessing, because the annual healthcare confab is no place to eat right. (Go figure.) Soggy pre-made sandwiches, networking-break cookies, hotel catering, coffee, coffee, coffee, then instead of a proper dinner, cocktails and fried finger foods that magically appear every five minutes.

Indeed, what better place to walk off the pounds and kilos than the winter streets of San Francisco, glowing under clear 60-degree skies, and through the commons of Union Square, replete with the frequent fragrance of cannabinoid receptor agonist combustion? (Perhaps that particular odor was left lingering from the Monday night secret-society hootenanny of biotechies who surf, an offshoot of the Longboard Luau crowd who've hung ten for a good cause going on nearly two decades now.)

We kid, of course. Indeed, other than the outdoor aromas that can often surprise visitors to San Francisco, we thought the conference had a distinct lack of the getting-high-on-your-own-supply that often permeates the JPM atmosphere. FOTF chatted at the show with some of 2011's most prolific early-stage investors with plenty of cash in their pockets, but enthusiasm didn't bubble over into hype. When we mentioned that Series A investments in 2011 for biopharma were up 33% over 2010, Third Rock Ventures' Kevin Starr -- a man not shy about making a statement, sartorial or otherwise -- quickly countered that 2010 had set a depressingly low benchmark. (More coming soon on the year's Series A rounds in START-UP's annual A-List, in which we round up 11 new companies and, in a new twist for the feature, profile two investors that aren't on the list of usual early-stage suspects.)

While investors in the money were happy to chat -- Canaan Partners, Flagship Ventures and Cowen Royalty Healthcare Partners all had new funds to discuss -- the end of year venture data showed fundraising was a long way off from pre-recession highs, making more dropouts likely in the coming year. "Capital scarcity is tremendous," Forbion Capital Partners chairman Bart Bergstein told FOTF. That's good news for firms like Forbion, whose enthusiastic LPs signed up late last year for a second extra "top-up" fund of about $50 million to help push a few maturing portfolio companies toward an exit. But it's not good news for entrepreneurs who still have champagne wishes and FIPCO dreams, trying to stay afloat until they find IPO-friendly waters.

Those waters will be tested soon. The day after everyone flew home from San Francisco, Merrimack Pharmaceuticals launched its roadshow and set its sights on a $150 million IPO. Antibiotic developer Cempra Holdings and cancer stem cell biotech Versatem also set targets of $72 million and $45 million, respectively. (As we noted in this column in November, if the public market happily embraces Verastem, the bloom might be back on the rose.)

It's all about momentum, or the perception thereof. The firms vaulting from JPMorgan straight into a roadshow must be convinced that the new year's optimism has given them a running start. To that we say, never mind the blisters, here's the...

Warp Drive Bio: In a tranched deal with both equity and non-equity components totaling $125 million, newly launched Warp Drive has drawn what will surely be one of the largest Series A deals of 2012. The start-up aims to discover and synthesize new drugs based on genetic code found in naturally occurring microbes. Third Rock Ventures led the round, while Greylock Partners and Sanofi supplied the balance of the capital; the equity component is worth up to $75 million. For its contribution, Sanofi also receives collaborative development rights on an unspecified set of products, as well as a non-exclusive option to acquire the company for pre-determined terms; Warp Drive’s shareholders, on the other hand, can force a sale to Sanofi if the company reaches certain pre-set milestones as well. Third Rock partner Alexis Borisy said those terms include a potential return of 10 times the capital invested, and could value Warp Drive at more than $1 billion. Founded by Harvard professor and Third Rock partner Greg Verdine, the company has been incubated within Third Rock for a few years, but only now has officially launched; its co-founders include Harvard genetics professor George Church and University of California at San Francisco pharmaceutical sciences professor Jim Wells. -- Paul Bonanos

Synageva BioPharma: On January 10, Synageva closed a follow-on offering that reinforces public investor interest in rare diseases, an area where the venture community has also taken notice, exemplified by the recent pact between Shire and Atlas Venture. Having originally only planned to raise $60 million, Synageva ended up grossing $90 million by selling 3.6 million shares, including the overallotment, at $25.18, slightly lower than the stock had been trading in previous days. The stock then closed at $31.39 on January 10. In fact, the company’s shares have been steadily increasing the past several months since Synageva gained public status, and approximately $45 million cash on hand, by merging with publicly traded viral disease developer Trimeris in June. Synageva, which ended up with 75% ownership of the combined entity, is focused on orphan metabolic disorders, an area of great industry interest the past couple years that has produced creative liaisons such as the Shire-Atlas Venture tie-up. First up is lysosomal acid lipase deficiency, a lysosomal storage disorder that prevents the breakdown of certain fats and results in build-up of fatty material in the liver, spleen, and blood vessel walls. Synageva is tackling LAL deficiency with the enzyme replacement therapy SBC102, which completed enrollment for its first clinical trial, a Phase I/II study, in December and has orphan drug designations in the US and EU. Last year, prior to merging with Trimeris, Synageva raised $25 million in venture funding and signed two rare disease research collaborations with Mitsubishi Tanabe Pharma and to-BBB. -- Amanda Micklus

Elevation Pharmaceuticals: Respiratory disease-focused Elevation closed a two-tranche, $30 million B round on Jan. 4. With significant participation from new investor Novo Ventures, Elevation should have adequate capital to move its lead candidate, a nebulized formulation of glycopyrollate (EP-101), through to the start of Phase III. The B round will be broken into two tranches, $12 million that will be drawn down this year and another $18 million, if needed, in 2013. By the end of 2013, CEO Bill Gerhart told "The Pink Sheet," Elevation should have completed a pair of Phase IIb studies of its candidate for chronic obstructive pulmonary disease and have identified the minimum effective dose for Phase III study. Elevation may not need to use the second tranche if it lands a co-development and commercialization partner for EP-101 sooner than expected, Gerhardt said. “Our original hypothesis was that the optimal time for partnering would be just prior to entering Phase III … but we think that there might be an opportunity to partner the program earlier,” Gerhart said. The time lag between tranches let Elevation minimize dilution if it partners EP-101 but promises the necessary capital to get into Phase III if a partnership doesn't materialize. Novo Ventures led the B round, investing about half of the total proceeds, and will place partner Heath Lukatch on Elevation’s board of directors. The investors from Elevation’s Series A – Canaan Partners, TPG Growth, Care Capital and Mesa Verde Venture Partners – will provide the rest of the funds, which Gerhart described as an up round. Elevation's Series A, announced two years ago, totalled $32 million in two tranches. -- Joseph Haas

Acceleron Pharma: Just before Christmas, the Cambridge, Mass. firm announced a $30 million D round, notable in part because the firm's most important strategic partner, Celgene, participated deeply enough to place its business-development chief George Golumbeski on the Acceleron board of directors. Celgene previously had a small stake in the company from their first licensing deal, inked in 2008. The new round also pushes Acceleron's venture total over $100 million, with $180 million more raised from partnerships. All that, and it's just now taking its lead compound, ACE-011 or sotatercept, into late-stage trials in chemotherapy-related anemia in patients with metastatic non-small cell lung cancer. If eventually successful, the program would represent a nifty pivot for the firm and Celgene, which originally signed on to co-develop ACE-011 in 2008 as a bone-loss drug.-- Alex Lash

Deals Of the Week Compares the Comparison Shoppers

2012-01-14T15:33:00.001-05:00

One of the nice things about JP Morgan is the variety of routes a participant’s attention can take. Within any particular area, moreover, one can go as shallow or deep as desired. Big Pharma’s partnering priorities, for example, are a constant theme, as companies put forth broad comments on their criteria and interests in deal making. Even before the meeting got underway, a deal announced late on Saturday evening Jan. 8 set the tone for discussions on valuation: Bristol Myers Squibb agreed to buy Inhibitex for $2.5 billion in cash – for a nucleotide polymerase inhibitor in Phase II. Was this unique to the particular current situation in HCV and the nature of the competitive bidding process? Or will other highly competitive disease categories see similar reaching? Are expensive HCV regimens even what the market will want in five years?

The topic started off an interview with Pfizer’s Kristin Peck, EVP, worldwide business development and innovation: “I don’t really understand about that one. We at Pfizer are looking at much more risk sharing, collaborative, creative deal making,” she said, alluding to Pfizer’s growing preference for structured deals.

Late stage assets are clearly still on big pharma’s mind, although practically speaking -- i.e. valuation wise -- the pickings are slim; "We're opportunistic with late-stage deals," noted Peck. Much of the attention at JPM therefore focused on the benefits of moving existing assets into emerging markets, or for that matter buying assets in developing countries, although a dose of reality appears to have set in. Peck highlighted Pfizer’s 2010 structured acquisition of 40% of the family-owned Brazilian generics maker Laboratorio Teuto for $240 million, which includes an option to buy the remaining 60% beginning in 2014.

From another angle, GlaxoSmithKline’s CFO Simon Dingemans noted that his company is pleased with its 2009 acquisition of Stiefel, a maker of dermatology medications. “The reason we are so pleased is because we can take the portfolio, combine it with our legacy assets and push through sales into new markets," he said. Emerging markets was never one of Stiefel's strengths, "and now dermatology is one of our fastest growing parts of our emerging markets portfolio … it has had significant synergies above what we expected, improvement in quality, and we were able to fold it into our network. What we look for in our deals is, can we do something different with the asset than the existing ownership has done?”

AstraZeneca’s CFO Simon Lowth, speaking in a break out session, emphasized the company’s commitment to a “disciplined approach to deal-making” -- causing JP Morgan analyst Alexandra Hauber to wonder if strict adherence to discipline, given the competitive bidding environment, will cause AZ to “shrink.”

Loweth’s response: “That is a dangerous path to go down. We have done more than 100 deals in the last five years. The key is in situations where it is very competitive, you have to be very clear on the edge you bring.”

More to come on JP Morgan, but meanwhile as the 2012 deal-making session gets off and running in earnest, here's the latest round up of:

Shire/Janssen: Resolor has produced minimal sales to date, but Shire increased its bet on the chronic constipation drug Jan. 10, acquiring U.S. rights to the compound from Janssen Pharmaceutica NV. Financial terms were not disclosed. Shire picked up rest-of-world rights to the selective serotonin receptor agonist in its €428 million purchase of Belgian biotech Movetis in 2010. (Like Janssen, Movetis was a subsidiary of Johnson & Johnson before being sold.) Resolor, a 5-HT4 receptor agonist, was approved by the European Medicines Agency in October 2009 for the symptomatic treatment of chronic constipation in women for whom laxatives fail to provide adequate relief. Since launched in the U.K., Germany, Ireland, Greece, Belgium and France, the drug netted Shire only $4 million in worldwide sales through the first three quarters of 2011. Resolor (prucalopride) is not yet approved in the U.S. At the time of its purchase of Movetis, Shire predicted that Resolor could achieve peak sales of greater than €300 million annually.—Joseph Haas

Pfizer/SFJ: Why pay for Phase III trials if someone else will do it for you? That’s the spirit of Pfizer Inc.’s development agreement with SFJ Pharma Ltd., announced Jan. 9. Global development company SFJ, backed by venture capitalists, has agreed to fund and supervise a Phase III trial in Asia of Pfizer’s axitinib for the adjuvant treatment of patients at high risk of recurrent renal cell carcinoma (RCC) following nephrectomy. California-based SFJ – nominated for our financing Deal of the Year for a similar pact with Eisai -- will be owed milestones, but only if the drug is approved in certain Asian territories. In that case, Pfizer is obliged to commercialize the drug in that indication, according to SFJ CEO and President Robert DeBenedetto, and would owe SFJ royalty payments “for a fairly lengthy period of time.” The milestone and royalty rates are undisclosed. But you can be sure that they’re calculated to provide a healthy payback to SFJ and its backers -- Abingworth Management Ltd., Clarus Ventures and FinTech Global Capital -- in exchange for the risk incurred. Granted, with axitinib already filed for approval in the U.S., Europe and Japan, there isn’t a ton of risk. SFJ Pharma is essentially ensuring that Pfizer’s clinical data for the adjuvant indication is ideally designed and presented to maximize the chance of regulatory approval in the Asian territories involved; the Phase III trial is being conducted in six undisclosed Asian markets. The deal frees up Pfizer to focus on other programs and compounds and, importantly, removes or at least delays a cost that it would otherwise have incurred. – Melanie Senior

Pfizer/Cell Signaling Technology/Ventana: The latest link up among Pfizer, Ventana Medical Systems Inc., a subsidiary of Roche, and Cell Signaling Technology to develop the first fully automated and standardized immunohistochemistry companion diagnostic for ALK gene rearrangements illustrates how much the company’s – and Big Pharma’s -- thinking on companion diagnostics has evolved over the past decade. The test would be linked to Pfizer’s Xalkori (crizotinib), which FDA approved with a companion diagnostic for ALK gene rearrangements in August 2011. The label specifies Xalkori is intended for non-small-cell lung cancer (NSCLC) patients who test positive for the ALK mutation on an FDA-approved test. The companion diagnostic – the Vysis ALK Break Apart FISH Probe Kit – was developed by Abbott Molecular and approved simultaneously with the drug, also ahead of its user fee deadline. Pfizer and Abbott had agreed to collaborate on a test in August 2009. But Pfizer, apparently, isn’t satisfied with just the FISH probe – FISH is a common, although manual and somewhat complex and therefore somewhat subjective method of analysis. The Ventana test will identify NSCLC patients with ALK (anaplastic lymphoma receptor tyrosinekinase) genetic mutations, who may benefit from Xalkori (about 6% to 7% of the total patient population). The test will be based on CST’s D5F3 antibody and Ventana’s Optiview DAB detection and is aimed to run on the diagnostic system’s maker’s automated testing platform. It was only seven or eight years ago that AstraZeneca PLC struggled with the best way to identify patients who would benefit from its own NSCLC targeted therapy Iressa, initiating a model trial, I-PASS – after multiple setbacks and failed approaches – that had important implications for subsequent targeted therapies.—Wendy Diller

AstraZeneca/ IMS Health: AstraZeneca PLC’s deal with information provider IMS Health Inc. to generate real-world outcomes data from European patients should give the drugmaker a leg up as it makes a value case for new products, but more fundamentally, the firm hopes the collaboration can create a clearer picture of how medicines are being used across the region to help drive research and development decisions. The three-year deal, announced Jan. 11, comes less than a year after AZ’s similar tie-up in the U.S. with HealthCore, the health outcomes research branch of insurer WellPoint Inc. It follows a broader flurry of pharma-payer collaboration driven by the need for more value-focused data to support drug reimbursement. Indeed, AstraZeneca is hoping that this partnership will, in the near-term, help it support newly-launched treatments such as clot-buster Brilinta (ticagrelor) by providing payers with the real-world evidence of a drug’s benefit, how it’s being used, and the outcomes achieved. “We see a lot of [the deal’s] value in this launch-support space,” said Greg Rossi, AZ’s VP of Payer Evidence in R&D. But ultimately, he claimed, the deal’s biggest impact will likely be further upstream, in informing early-stage R&D, helping pick rel evant comparators and “endpoints that are important to various stakeholders in the health care system.” No financials were disclosed for the IMS deal. But besides granting AZ access to clinical outcome, economic and treatment pattern data derived from IMS’ electronic health records, it also includes plans to jointly develop an IT platform that integrates disparate datasts across diverse disease states and geographies.—Melane Senior

Leo Pharma/Virobay: The Danish dermatology specialist, Leo Pharma A/S, has made no secret of its plans to use acquisitions and in-licensing deals to further its global growth strategy, and this week supplemented its R&D pipeline with an unnamed preclinical psoriasis candidate from the U.S. virtual biotech Virobay. The two companies are to collaborate on developing the compound, with Leo paying $7 million up-front, milestone payments of up to $300 million, and tiered royalties, in a deal announced Jan. 9. The compound, likely a small-molecule cysteine protease inhibitor as that is the research focus of Menlo Park, California-based Virobay Inc., is expected to enter Phase I studies in the fourth quarter of 2012, and could be the first in its class to reach the market. There are only a small number of oral psoriasis therapies on the market, and all are associated with potential side effects and the need for monitoring, according to Leo. In 2009, the Danish company, which is owned by the Leo Foundation, an independent private institution, re-acquired U.S. marketing rights to its psoriasis therapies Taclonex and Dovonex, from Warner Chilcott, and in January 2010 it established U.S. headquarters in Parsippany, New Jersey.—John Davis

Shire/ICON: Shire PLC's specialty pharmaceuticals division has selected fellow Ireland-headquartered contract research organization, ICON, to be its sole provider of central laboratory services, and one of two providers of clinical trial services. ICON will provide Shire with clinical site and study team support, medical management and medical data review, clinical trial monitoring and regulatory submission services and Shire will also use ICON's global network of central laboratories. Strategic partnerships are bringing a rich vein of new business to ICON – during 2011 it became one of two preferred global providers of clinical trial implementation services to Pfizer Inc., and extended its agreement with Bristol-Myers Squibb to include not only providing support services for BMS clinical development pipeline, but also its early-phase clinical development as well. In the third quarter of 2011, ICON's success in attracting strategic partners led it to recruit more than 500 extra staff in the quarter. That was a rare bit of good news for the pharmaceutical sector on the recruitment front, which today learnt that the Swiss company Novartis is to cut nearly 2,000 positions at its U.S. subsidiary. –John Davis

Genentech/Xenon: Known for its expertise in oncology and immunology, Genentech Inc.—then independent and now a division of Roche -- said in 2008 it would explore neuroscience more deeply. Its pipeline in that area has barely materialized since, with only one Phase II Alzheimer’s drug in the clinic. Now, thanks to a new deal with Canadian start-up Xenon Pharmaceuticals, Genentech will add pain therapeutics to its portfolio. The Roche subsidiary will pay an undisclosed amount upfront to discover and develop new drugs and companion diagnostics to treat pain. Milestone payments could bring the deal’s overall value to $646 million, if multiple products of the collaboration reach their full potential. The companies aren’t discussing specific targets of the agreement, but Xenon specializes in voltage-gated sodium channels. Genentech says it’s expanding beyond neurodegenerative diseases, with an interest in spinal cord injuries and psychiatric disorders as well. Privately held, venture-backed Xenon’s lead pain program, XEN-402, is unaffected by the new deal. The start-up struck a deal with Roche in 2006 for a program using hemojuvelin inhibitors to treat anemia of inflammation; it has other relationships with Big Pharmas, including Novartis in metabolic disease and Merck in cardiovascular disorders. – Paul Bonanos

Deals Of The Week's Dance Card is Full

2012-01-07T13:58:00.000-05:00

Industry business-development executives rang in the start of what should be a most interesting New Year's (the score's been set for a while, but the performance is NOW: the biosimilars, patent cliffs, companion diagnostics, ongoing financing uncertainty and the big gorilla, health care reform) with half a dozen deals, including Forma's second big partnership in six months and a joint licensing agreement between Alnylam and Arrowhead.

Also this week 2012 saw its first NO DEAL! as Astellas opted out of a worldwide development and commercialization agreement with Theravance over the latter's Vibativ (telavancin), a bacteriacide, once-daily injection.

An as if to shock the troops to attention ASAP, Teva announced on New Year's Day an unexpected -- at least by most of industry -- management change, with Bristol Myers' newly resigned head of business development and strategy Jeremy Levin slated to succeed Shlomo Yanai as CEO in May, almost guaranteeing a higher biz dev profile for the global generics/specialty pharmaco.

By the end of the week the calendar new year seemed way back in the rear view as industry's own annual celebration loomed larger. And of course everyone's timing their news to next week -- deals, fundraising, and cocktails await. We'll see you in San Francisco. Meanwhile, it's ...

Forma/Boehringer Ingelheim: Cambridge, MA -based computational drug discovery platform developer Forma Therapeutics Inc. struck its second big partnership in just over six months on Jan. 5. Boehringer Ingelheim GMBH agreed to pay $65 million upfront, plus another $750 million in potential pre-commercial milestone payments, to discover oncology treatments that affect protein-protein interactions. The companies will select an unspecified number of targets jointly; a few have been determined already, but the remainder will be selected over the course of the four-year deal. In late June, Genentech Inc. and Forma agreed to discover cancer metabolism drugs in a deal of undisclosed size. Genentech received an option to acquire the program, which if exercised would return money to Forma’s venture investors. The BI deal also has “a return for our shareholders built in,” according to Forma CEO Steven Tregay, although there’s no buyout option this time. He declined to provide further details. Forma, which has additional platform discovery deals with Eisai, Cubist Pharmaceuticals Inc. and Novartis, has raised $33 million from Lilly Ventures, Bio*One Capital and the Novartis Option Fund in two venture rounds since 2008. It’s planning to develop drugs on its own as well, although Tregay said it’s still building a broad pipeline rather than concentrating on one or two candidates--Paul Bonanos.

Biogen/Isis: Isis Pharmaceuticals Inc. announced Jan. 4 that it garnered a deal with Biogen Idec for its antisense technology, adding to the list of large companies that have partnered with the biotech. Biogen and Isis have agreed to collaborate on the development of ISIS-SMN, a Phase I compound meant for the treatment of a rare genetic disorder called spinal muscular atrophy (SMA). Biogen will pay Isis $29 million upfront as well as $45 million in potential milestones for the option to license the compound after it has reached the proof of concept phase. Should Biogen choose to license the drug, it will assume full development and regulatory responsibilities. Isis will be eligible for another $225 million in milestone payments, along with double-digit royalties on sales, and also will retain some commercialization rights. Isis and Biogen may be the first companies to bring a treatment to market for SMA, but others are not far behind. Both Novartis and Roche have invested in preclinical treatments for the disorder. Roche agreed to pay as much as $490 million to PTC Therapeutics Inc. for the rights to its SMA program--Lisa Lamotta.

Alnylam/Arrowhead: With Alnylam Pharmaceuticals Inc. focusing mainly on internal pipeline efforts following the termination of collaborations with Roche and Novartis late in 2010, the pioneering RNA-interference company has licensed Arrowhead Research Corp.’s Dynamic Polyconjugate (DPC) technology to use toward developing an RNAi therapeutic. Terms were not disclosed for the deal, announced Jan. 5. Alnylam says it will deploy the DPC technology – a systemic small-interfering RNA delivery platform that enables efficient target gene silencing via polymer-based formulation chemistry – against an undisclosed target in its proprietary “5x15” pipeline, five assets it hopes to drive into advanced clinical development by the end of 2015. As part of the deal Arrowhead acquires a license to Alnylam’s intellectual property related to targeting the hepatitis B virus. Alnylam can receive milestones and royalties from Arrowhead on any product derived from its HBV RNAi intellectual property, while Arrowhead likewise can earn milestones and royalties from any marketed product resulting from Alnylam’s licensure of the DPC technology. Meanwhile, on Jan. 4, Alnylam announced it had achieved positive preliminary results from a Phase I trial of ALN-PCS, one of the 5x15 assets. In the study, ALN-PCS, which targets the PCSK9 gene to treat severe cholesterolemia, demonstrated statistically significant RNAi silencing of PCSK9, up to 66%, and reductions of more than 50% in LDL cholesterol levels in participants--Joseph Haas.

Ipsen/Oncodesign: Ipsen, the mid-sized French pharmaceutical company, is tapping the research of fellow French CRO and drug discovery firm, Oncodesign, to develop its new LRRK2 kinase inhibitors, which have potential to treat Parkinson's disease. The research collaboration could see Ipsen paying Oncodesign €115 million ($146 million) in research and opt-in fees, development milestones and sales royalties. The Ipsen deal is the first involving drug discovery with a major pharma company for Oncodesign, a private CRO set up in 1995 to provide preclinical oncology pharmacology services. Its investors include a trio of French venture capital firms: CIC-Vizille Capital Innovation, CDC Enterprises and Avenir Entreprises. At the same time, new Parkinson's disease therapies fit neatly into Ipsen's focus on neurology, one of four therapeutic areas the specialty pharma is now concentrating on. One of its major marketed products is the botulinum toxin product for dystonia, Dysport (botulinum toxin type A). Ipsen has landed two options to exclusively license worldwide development, manufacturing and commercialization rights to Oncodesign's LRRK2 inhibitor program when it successfully reaches clinical proof of concept. Oncodesign will receive a technology access fee, funding for the program's research and early development activities and upon exercise of the license options, opt-in fees and additional development, regulatory and commercial milestone payments potentially totaling €115 million for the development of molecules in two or more indications, and tiered royalties on net sales. Mutations in the LRRK2 gene, which produces a protein with multiple activities, including GTPase and kinase activities, have been linked to genetically inherited Parkinson's disease, and Oncodesign has developed a macrocyclisation process, Nanocyclix, which it says produces potent and selective kinase inhibitors.--John Davis

Ironwood/Bionomics: As it begins with various partners to traverse various global regulatory landscapes with its IBS/constipation compound linaclotide, Ironwood Pharmaceuticals Inc. has been on the prowl for earlier-stage assets to back-fill its pipeline. On Jan. 4, the company said it would pay $3 million upfront for worldwide development and commercialization rights to BNC210, a clinical-stage anti-anxiety program from Australia’s Bionomics Ltd. All told, the deal could be worth $345 million plus royalties for Bionomics, including the upfront and $10 million in payments expected in the next two years. The deal marks Ironwood’s third since last January, but the first that adds a clinical compound to its pipeline. Previous deals included a discovery alliance around Protagonist Therapeutics peptide technology and a delivery pact with Depomed Inc. BNC210 has completed two Phase Ib studies in a total of more than 80 healthy volunteers, and according to the company, acts by a novel (but undisclosed) mechanism of action that should avoid side effects common to anxiety medicines. It is Bionomics’ second most advanced project, behind the unpartnered Phase II oncology compound BNC105. Ironwood joins a stable of partners at Bionomics that includes Genmab AS and Merck Serono SA--Chris Morrison.

Endo/BioDelivery Sciences: Endo Pharmaceuticals, which has radically reshaped its product portfolio in recent years in order to diversify away from overdependence on the pain medication Lidoderm (lidocaine transdermal) is assuming worldwide exclusive licensing rights to BEMA Buprenorphine (bioerodible MucoAdhesive delivery system) from BioDelivery Sciences. The drug is a chronic opioid-based pain therapy that fits well with Endo’s pain medication franchise. Endo paid $30 million upfront, and has agreed to pay additional milestones totaling $150 million, plus tiered royalties ranging from the mid-to-upper teen percentages of net sales. The milestone breakdown is as follows: $95 million in potential pre-defined intellectual property, development and regulatory milestones, plus $55 million in commercial milestones. The BEMA delivery technology consists of a small, bioerodible, polymer-thin film, which is applied to the inner lining of the cheek. BEMA buprenorphine met primary endpoints in a Phase II trial in 2009 and is currently in Phase III trials, with potential to file in 2012. BioDelivery estimates its sales could reach $500 million--Wendy Diller

image courtesy flickr user EDubya/creative commons license

And the DOTY Goes To ... Congrats to Our Winners

2012-01-04T16:56:00.003-05:00

The In Vivo Blog's deals of the year, as chosen by our readers, are:

Alliance of the Year goes to Forma/Genentech, with nearly 47% of the vote,. The deal jumped out to an early lead and hung on, despite a last minute surge from AZ/Healthcore (20%) and the late entry from Abbott/Reata II (14%). Congratulations!

M&A of the Year was won by Sanofi/Genzyme, with about 29% of the vote. Oddly the M&A category, normally one that draws a lot of interest, had fewer votes than the others this year. Our runner up was Gilead/Pharmasset (24%), followed by Abbott/Abbott Pharma (19%).

Exit/Financing of the Year goes to Quanticel, with 45% of the vote. In second place was Arteus (23%), and in third BMS/Amira (20%).

Congratulations to our winners (to collect your prize, click CTRL-P and cut out the picture, then tape it to your office door [paper and tape not included in prize, some restrictions may apply]), and as in years past if any of them would like to make an 'acceptance speech' here on the blog, please let us know.

Finally, thanks to our readers who cast votes.You can see all the final tallies here. Hope to see many of you next week in San Francisco. Happy New Year from all of us at IVB/EBI.

GSK's Witty Knighted For Services To UK Economy

2012-01-04T07:33:00.015-05:00

With the New Year in the UK comes the Honours List, recognizing outstanding achievements and service across the country. Amid a flurry of awards and medal ceremonies -- including In Vivo Blog's own highly-esteemed Deals of the Year Awards -- (voting time is now down to only a few hours, so please cast if you haven't already), joining the Honours List bestows individuals with a certain cachet that few other accolades can provide.

Henceforth, then, we'll be requesting interviews with Sir Andrew, aka GSK chief Andrew Witty, upon whom the Queen bestowed a knighthood for services to the UK economy as well as services to the pharmaceutical industry. Smith & Nephew's chairman John Buchanan also became a 'Sir', and, not forgetting R&D, Her Maj. bestowed awards on a couple of well-known biotech researchers.

Cynics may be suspicious of the timing of this flurry of biopharma-focused decorations. They came only a couple of weeks after the UK government outlined its new Life Sciences Strategy, in which much hope was placed on the sector helping to pull the UK economy out of the doldrums. Surely, though, courting the sector with awards doesn't spell a lack of confidence in the success of the goverment's apparently more solid set of support programs?

Either way, no one wants the UK to have to swallow another Pfizer Sandwich (aka the huge R&D facility that was shut down in Kent).

Sir Andrew's distinction, although fine, probably underlines the hours spent in UK Prime Minister David Cameron's Business Advisory Group. (Ouch. We don't mean that.) Sir Andrew also has a European string to his bow, as the current president of the European Federation of Pharmaceutical Industries and Associations (EFPIA), but obviously Cameron didn't hold that against him.

Still, Sir Andrew's award may have a bitter tang to some of those R&D chiefs that may have seen their Drug Performance Units culled as part of GSK's high-profile three-year review cycle (results expected to be made public in February).

The timing of Sir John's award came just prior to the latest in series of acquisitions and divestments that he has overseen since 2006 at the artificial hip and knee maker. Smith & Nephew on Jan. 4 announced it was spinning off its biologics business into a US-based JV with private equity firm Essex Woodlands.

Other knights of 2012: obesity expert Prof. Steve Bloom of Imperial College London, who co-founded the UK biotech Thiakis Ltd in 2004, to research the therapeutic potential of gut peptide hormones in controlling appetite. Thiakis was acquired by Wyeth (now Pfizer) in 2008. Prof. Mark Pepys, formerly of University College London, also becomes a Sir. He co-founded Pentraxin Therapeutics, a UCL-spin out with a focus on the rare disease, amyloidosis. Pentraxin entered into a research collaboration with GSK in 2009.

Order of the British Empire Awards (OBEs) were awarded to Richard Barker, who retired as director general of the UK trade association, the ABPI, in the middle of 2011, and Dr John Stageman, currently vice-president of UK science affairs at AstraZeneca. Stageman was closely involved in developing AZ's biotech strategy, including the acquisition of Cambridge Antibody Technology and the US company, MedImmune Inc.

image courtesy of flickrer sincerelyhiten

A Reminder: Vote for Our Deals of the Year!

2012-01-02T13:07:00.000-05:00

Click HERE to vote in our DOTY polls (make sure to vote in all three!), which will stay open until 3pm ET on January 4th.

Twas DOTW Before Christmas ...

2011-12-23T05:00:00.000-05:00

Twas DOTW before Christmas, when all through the house
Not a creature was stirring, not even a mouse.
The term sheets were hung by the chimney with care,
In hopes that St Gilead soon would be there.

The VCs were nestled all snug in their beds,
While visions of 20x danced in their heads.
Though mamma's kerchief biz had a low market cap,
As reverse-merger shell we'd name it after a cat.

When out on the lawn--

With apologies to Clement Clarke Moore, we'll stop there. It's a long damn poem and we've got a surprising amount of deals to get to this week -- nearly enough that we almost switched to a Twelve-Days-of-Christmas theme. It was not to be, but in any case, joyous readers who haven't yet shut down your laptops for some inexplicable reason, do feel free to finish or improve upon our parody for us in the comments. And to all a good ...

AstraZeneca/Hutchison MediPharma & AstraZeneca/Astellas: Avid followers of AstraZeneca's R&D pipeline have had a rollercoaster ride this week, with the U.K. pharmaceutical company announcing early-stage deals with Hutchison MediPharma and the Astellas subsidiary Prosidion, just a day after revealing it had suffered setbacks with two late-stage compounds, olaparib and TC-5214. The approach of the company’s patent cliff and the seemingly constant misfiring of AstraZeneca's R&D engine has sparked suggestions that larger-scale M&A might be a better option for AZ than the slow slog of building a research pipeline. AZ is paying Shanghai-based Hutchison MediPharma $20 million upfront for global licensing, co-development and commercialization rights to volitinib, an IND-stage c-Met receptor tyrosine kinase inhibitor. Hutchison MediPharma will continue to lead the compound's development in China; AZ is leading and funding development elsewhere. Hutchison could receive up to $120 million in clinical development and ‘first sale’ milestones. Additional commercial milestones and up to double-digit percentage royalties on net sales sweeten the pot. AstraZeneca has made significant investments of its own in China, including an R&D facility and its recently opened global clinical operations hub. It is the second largest-selling pharmaceutical company in the country, with a turnover of more than $1 billion in 2010. Hutchison MediPharma already has discovery deals in place with a raft of other multinationals, including Johnson & Johnson, Eli Lilly, and Merck KGaA, but this is the first time it has out-licensed one of its own research programs. Hutchison MediPharma is majority owned by UK-AIM listed Chi-Med, a healthcare group primarily based in China.

AstraZeneca's second in-licensing deal this week adds to the company's already significant efforts in the diabetes area. It picked up an option to acquire two of Prosidion's early-stage diabetes assets, PSN821 and PSN842. Both are potentially first-in-class GPR119 receptor agonists – the GPR119 receptor regulates incretin and insulin secretion, and in preclinical studies the compounds have lowered blood glucose, reduced food intake and reduced body weight. Financial terms were not revealed, other than to say AstraZeneca has paid a non-refundable fee, and will make upfront and milestone payments if it decides to exercise the option after Phase IIa. -- John Davis

Amgen/Watson: Amgen has finally tipped its hand regarding its biosimilar strategy after playing both sides of the issue for years. The Big Biotech and Watson Pharmaceuticals announced on December 19th an alliance to build an oncology biosimilars business focused on monoclonal antibodies. Amgen will make pre-commercial investments, taking the lead in R&D, manufacturing, and initial commercialization; while Watson will contribute $400 million to the venture along with its expertise in commercialization and life cycle management in highly competitive markets. The partners come late to the biosimilars party but still in time for the second wave of more complex biologics, most notably MAbs, projected to lose exclusivity post-2016. Watson, with its lower cost structure and competitive culture will take over commercialization if and when a certain level of maturity and competition sets in. How that level will be defined will be flexible, based on geographic and product characteristics. Neither company would disclose specifics as to how commercial responsibilities will evolve over time. Amgen’s proprietary oncology drugs are excluded from the deal, although both parties agreed that that provision could be revisited later. Should Amgen reverse that decision, Watson will have right of first refusal to negotiate a deal on those drugs. Importantly, Watson is free to develop biosimilar versions of Amgen’s drugs independent of the deal, either on its own or with partners. The deal allows both parties to pursue the biosimilar market together and independent of the alliance, an arrangement that could pit them against each other in the future. Amgen enters the biosimilars field in the context of a weak late-stage pipeline, competitive pressures, a mixed record on recent launches, and the recent departure of its CEO and head of R&D. -- Mike Goodman

Takeda/Intellikine: In one of two deals this week around inhibitors of phosphoinositide-3 kinase (PI3K), Takeda added to its US biotech holdings by purchasing Intellikine for $190 million upfront. In the deal announced Dec. 21, the Japanese pharma’s Millennium unit will take over global development responsibility for Intellikine’s two anti-cancer clinical programs. Intellikine, founded in 2007 and backed with $41 million in venture capital funding, also could earn up to $120 million in milestone payouts tied to potential clinical development events. With the acquisition, Millennium/Takeda also go into business with Infinity Pharmaceuticals, which paid $13.5 million upfront last year for a license to INK1197, a dual PI3K delta/gamma-selective inhibitor for inflammatory conditions. Now called IPI145, that compound moved into a pair of Phase I trials this past October. Driving the buyout were INK128, an mTOR C1/2 inhibitor slated to enter Phase II next year, and INK1117, a selective inhibitor of PI3K alpha, which entered clinical testing in September. -- Joseph A. Haas

Merck/Exelixis: In the other PI3K inhibitor deal this week, Merck on Dec. 21 paid $12 million upfront for an exclusive worldwide license to Exelixis’ PI3K-delta R&D program, including lead compound, XL499. Phase I-ready, the compound has shown potential application in preclinical study in rheumatoid arthritis, allergic asthma and hematologic malignancies, Exelixis says. Under the deal, Exelixis, whose internal focus is on the development of Phase III dual MET/VEGF inhibitor cabozantinib in multiple cancer indications, could earn regulatory and development milestones of up to $239 million from Merck, along with sales-performance milestones and royalties on net sales should any of its PI3K molecules reach the market. -- J.A.H. UPDATE: Exelixis announced via 8-k on Friday that it had parted ways with partner Sanofi -- the two companies had been working in the PI3k space since 2009.

ImmunoGen/Lilly: Despite a licensing deal with Eli Lilly & Co. announced on Dec. 20, ImmunoGen CEO Dan Junius says that the company’s first priority is still its wholly-owned pipeline (which currently has one compound in the clinic and another in IND), a stance the company announced in early 2011. Yet, in an interview Junius acknowledges that partnerships – like the one with Lilly – help the company “leverage its resources and affords ImmunoGen a scale that would not be possible otherwise." ImmunoGen will receive a $20 million upfront in exchange for the rights to an undisclosed number of licenses to ImmunoGen’s TAP (Targeted Antibody Payload) technology. The TAP technology will be used with Lilly’s monoclonal antibodies to develop antibody-drug conjugates (ADC) for the treatment of cancer. ImmunoGen will potentially receive $200 million in milestones for each target that is developed under the collaboration, as well as royalty payments. Any compounds that result for the collaboration will be added to Lilly's cancer portfolio, which includes Alimta (pemetrexed) and Gemzar (gemcitabine), which has seen declining sales since going generic. ADC technology, which allows a monoclonal antibody to carry a therapeutic payload that can target a specific tumor type, has become a hot area in the oncology space. Look for a new feature on the next generation of ADC drugs and drug developers in the next START-UP. -- Lisa LaMotta

Agenus/NewVac: Massachusetts-based Agenus announced Dec. 19 that it has signed a development and commercialization agreement with Russia’s NewVac, a subsidiary of ChemRar High Tech Center, whereby NewVac will commercialize Agenus' Oncophage in Russia and other CIS countries. Oncophage (HSPPC-96; vitespen) is a non-cell based protein pharmaceutical that uses a patient’s own tumor cells to activate an immune response through recognition of their cancer’s unique antigens. The vaccine is currently approved in Russia for the treatment of renal cell carcinoma in the adjuvant setting; a population of about 5,000 to 6,000 people. Agenus currently manufactures the vaccine in Lexington, Mass. NewVac will build a manufacturing facility in Russia where it will begin to make the product itself, and Agensus will get an unspecified royalty on sales. NewVac also will begin studying Oncophage in other indications – specifically melanoma, ovarian cancer and lung cancer. It will be responsible for all costs of development, but Agenus will again receive royalties. Agenus (nee Antigenics) has been having a tough time over the last few years as its stock price dipped below $1 after the failure of Oncophage to meet certain endpoints in renal cancer in a pivotal trial and the rejection of the drug by European authorities. Despite the trial failure, the company had enough clinical evidence to pursue approval in Russia. -- L.L.

Metamark/Janssen: Privately held Metamark Genetics has inked a deal with Johnson & Johnson subsidiary Janssen Biotech for its cancer diagnostic platform. The Massachusetts-based company will get an undisclosed upfront, as well as $365 million in potential milestone payments and royalties on products associated with the companion dx -- no small feat for a diagnostics play. Metamark's Prognosis Determinants platform is meant to identify specific cancer targets that may play a casual in promoting tumor progression. -- L.L.

BMS/Gladstone: Bristol-Myers Squibb and the Gladstone Institutes in San Francisco are teaming up for three years to investigate novel targets in Alzheimer's disease, the groups said Thursday, December 22. The partnership will focus on tau-mediated dysfunction. Tau is one protein in the brain implicated in Alzheimer's; normally it provides internal structure to healthy neurons, but as neurons die, the tau aggregates into clumps, or "tangles," in the brains of Alzheimer's patients, although it's unclear if the tangles are a cause or an effect of the pathology of the disease. Other companies such as TauRx and Allon Therapeutics have investigated tau-related interventions, but most clinical development in Alzheimer's has focused on amyloid beta (a-beta), the protein that aggregates into tell-tale plaques in the brains of victims. BMS and Gladstone did not disclose terms of their three-year discovery-stage collaboration. They have a common bond: Gladstone president R. Sanders "Sandy" Williams is on the BMS board of directors. The next year should be a big one in Alzheimer's research, with data due from high-profile Phase III trials of bapineuzumab, an anti-a-beta treatment developed by Elan and now mainly in the hands of Johnson & Johnson and Pfizer. Bristol's most advanced Alzheimer's treatment is in Phase II trials. -- Alex Lash

Viropharma/Meritage: Viropharma has paid $7.5 million up-front, and could pay $12.5 million more in development milestones, for the right to acquire Meritage Pharma at pre-set terms. We love a good option-to-buy around here. As we've seen before, they don't always work out, but as in the case of the recently abandoned Actelion/Trophos option, they can provide a good way to both finance development of a rare- or orphan-disease drug candidate as well as set up investors with a tidy if not home-run return. To wit, Meritage is pursuing development of oral budesonide against eosinophilic esophagitis, a chronic inflammatory condition for which no drug is approved. Phase IIb data from a pediatric study were presented in May 2011 at the DDW conference. The company, which emerged from the rubble of the once-promising pediatric specialty play Verus Pharmaceuticals, is narrowly focused around oral budesonide and backed by $30.5 million from Domain Associates, Laterell Venture Partners and the Vertical Group. Like Verus (and a large handful of other biotechs) it's the brain-child of founder, chairman and prolific entrepreneur Cam Garner. Following the completion of additional Phase II work, and once FDA has agreed on a Phase III plan for oral budesonide, Viropharma can opt to pay $69.9 million plus earn-outs to acquire the program. --CM

Baxter/Momenta: Baxter and Momenta said on Dec. 22 that they would team up to develop and commercialize follow-on biologics (that's biosimilars to some of you). Momenta gets $33 million up-front and up to ~~$470 million~~ $391 million in potential future milestones, $28 million in potential option fees, plus royalties. The deal adds Baxter to current Momenta partner Sandoz, which sells Momenta's generic Lovenox and hopes to one day sell its generic Copaxone as well, and comes on the heels of a flurry of activity in the biosimilars space. Besides Amgen/Watson, above, two weeks ago Biogen got together with Samsung Biologics in a biosimilars JV. Now that everyone's into the pool, expect to see a lot of splashing around. As a November feature in IN VIVO describes, for several recent entrants, the biosimilars game isn't just about creating copies; it's about promoting and branding a new kind of hybrid proposition where the innovation isn't in the molecule, but in how you make it, position it, and support it. In this sense biosimilars reflect the broader payor-driven push away from scientific novelty toward a focus on value. --CM & MS

Financings of the Fortnight Wraps Up The Year With Rare Gifts

2011-12-22T16:06:00.000-05:00

We here at FOTF holiday headquarters (not pictured above) can't think of abetter Hannukwanzamas present than a treatment for a rare disease whosepatients previously had few or no options to help them. One of the big stories this year in our neck of the woods is that many in thebiopharma industry are thinking the same thing, too. Of course, motivations forsome are fueled in part by premium pricing and favorable regulatory pathways, termsthat don't exactly invoke the holiday spirit. But if remedies come to market,we won't quibble. Capitalism is the worst of all pharmaco-economic systemsexcept for all the others.

We've already noted several fundings, including the new companies Ultragenyxand Orphazyme, in this column this year; in the upcoming issue of START-UP, the Capital Matters team will examine a new NIH program, dubbed Therapeutics for Rare and NeglectedDiseases, or TRND, that helps both academics and biotechs bring rare-diseaseprograms across the valley of death. TRND has already helped push treatments for sickle-cellanemia and relapsed chronic lymphocytic leukemia into the clinic, with hopesfor two more clinical programs in 2012. (TRND's full roster of programs ishere.)

Now Atlas Venture and the specialty pharma firm Shire, which has aggressively built arare-disease business to complement its ADHD franchise, are teaming to vet rare-disease programs and, if considered worthy,house them in entities co-financed by the two entities.

The arrangement is a spin on an idea Atlas has alreadyimplemented and that other VCs are working on, as well: Since acquisitions these days are practically the only way to exit an investment, bring the potential buyerin early, preferably as a funding partner. For every project Atlas and Shirefund upfront, Shire gets an option to purchase down the road within apre-negotiated time frame. Shire already has had notable success in the rarediseases arena, as its human genetic therapies unit continues to lead its sales and revenue growth. In 2010, the HGT unitgenerated 64% sales growth over the prior year, thanks to strong sellers suchas Elaprase(idursulfase), Vpriv (velaglucerase alfa) and Replagal(agalsidase).

Atlas has its Atlas Venture Development Corp. (AVDC), a group that's looking to in-license compounds, develop them quickly through proof of concept, and if possible sell them back to the original licensee. Its first deal was for an Eli Lilly & Co. migraine drug, now housed in an LLC called Arteaus Therapeutics.

Versant Ventures also likes the find-the-buyer-earlyapproach. It recently launched a cancer genomic analysis firm QuanticelPharmaceuticals with $45 million from Celgene, which gets exclusive use ofQuanticel's technology and exclusive rights to buy Quanticel, including anypipeline candidates Quanticel develops on its own, within three and a halfyears.

With Shire, Atlas might find rare-disease programs thatlend themselves to an asset-financing, virtual-development approach, but it couldtake a "platform approach" and perhaps build a more substantialstand-alone operation, as Atlas principal Ankit Mahadevia told our colleagues at "The Pink Sheet".

If you haven't noticed, both Atlas (for Arteaus) and Versant (for Quanticel) are nominees for our Deal of the Year in the exit/financing category, and voting just started. Cast your vote, please; it's all we want for Christmas, other than a little less unmet medical need in the world. Have safe, peaceful holidays, and we'll see you in 2012 with the next edition of...

Ember Therapeutics:Third Rock Ventures launchedEmber Therapeutics Dec. 15 with a $34 million Series A round. As Ember’s loneinvestor right now, Third Rock will seek another backer that can offer theright expertise in the relatively new field of targeting brown fat augmentationto fight obesity, as well as insulin sensitivity, an approach to diabetes thathas been plagued by safety problems. Ember's programs are currently in thepreclinical stage. Louis Tartaglia, a Third Rock partner and interim CEO ofEmber, told The Pink Sheet that a new investor could be a traditional VC or aventure arm of a pharmaceutical company "with which we do a large R&Dalliance." If the latter, the corporate venture investor would likely bebrought into the A round, Tartaglia said. Ember will be Third Rock’s thirdentry into the metabolic health arena, following Zafgen, which is workingon methionine aminopeptidase 2 (MetAP2) inhibition to treat severe obesity, andRhythm Pharmaceuticals, which is focused on MC5 agonists to treat obesity andtype 2 diabetes. Ember is Third Rock's fifth publicly disclosed Series Ainvestment in 2011. -- Joseph Haas

Aviir: TheIrvine, CA company and Stanford University spinout disclosed it has raised $10million of a planned $30 million Series B round to push its TruRisk cardiacrisk diagnostic test to market. The round was led by Merck Global InnovationFund, the fund's first disclosed investment as parent company Merck looks to put venture cash to use both directly and indirectly. (The January IN VIVO has a Q&A with Merck's new top dealmaker, Roger Pomerantz, which you can read here.) Previous Aviir investors NewLeaf Venture Partners, Aberdare Ventures, and Bay City Capital joined Merck in the B round. Those threealso contributed more than $11 million to a planned $25 million round disclosedin regulatory filings in 2007, but it's unclear how much more Aviir raised in that round -- which documents also classified as a Series B -- or how much venture funding total the firm has brought in. A companyspokesman did not return requests for clarification. TruRisk measures apatient's blood level of seven proteins associated with arterial plaque at riskof breaking off and causing heart attack. -- Alex Lash

Covidien: Diversified life-science firm Covidien said Dec.15 it would spin out its pharmaceutical business into a standalone publiclytraded company and keep its medical devices and supplies, which currentlycontribute 83% of sales to the US-Irish firm. (Covidien was formerly TycoHealthcare.) The pharma unit, which consists of generic and branded drugs, activepharmaceutical ingredients and imaging agents, posted a compound annual growthrate of zero between 2007 and 2011. It accounts for about $2 billion in annualsales of products such as bulk acetaminophen, generic methadone for opioidaddiction, and the painkiller Exalgo(hydromorphone). There were no immediate estimates of the amount Covidien couldraise in the spin-out of the unit. Executives say they've been planning themove for years. The pharma unit has been without a president for about a year,but executives said recently that they have hired someone to run the unitbefore the spin-out. The hire will come on board in early 2012, and the pharmaunit will be prepared for a sale in September, Covidien CEO Jose Almeida saidlast week. Abbott Laboratories is another diversified firm that plans to divestpharma holdings, but unlike Covidien, Abbott will keep its generic drugproducts under the same roof as devices and diagnostics. -- David Filmore

Ariad Pharmaceuticals: Cancer drug developer Ariad said Tuesday,Dec. 20 it had finalized its $243 million secondary offering, selling 24.7million shares at $10.42 each, as it prepares for life as a commercial company. A marketing application for its mTOR inhibitor ridaforolimushas been submitted to authorities in the US and Europe by its partner Merck& Co., with an FDA decision expected in mid-2012. Ariad plans to co-promotethe sarcoma treatment in the US. Next year, the firm could submit pan-BCR-ABLinhibitor ponatinib for leukemia. It is currently in a pivotal Phase II trial,with interim results released earlier this month. The perils of first-time launches for biotechs are legionas they shift resources away from R&D and into sales and marketing, allwhile investors typically shun the company's stock in a habit known as"shorting the launch." Those that manage to stay independent for thelong haul tend to outperform their peers, although giving up some of theirmarketing rights can cloud the picture, as this analysis in July's IN VIVOshows. Meanwhile, Ariad's stock price is trading above the offering price. Sharesclosed Wednesday, Dec. 21 at $11.60 a piece. Underwriters bought their fullextra allotment of 3.2 million in the deal. J.P. Morgan, Cowen and Co., andJefferies & Co. were the lead underwriters. -- A.L.

Thanks to Joe Haas for his contribution to this week's intro.

Photo courtesy of flickr user Howard Dickins.

IVB's 2011 Deals of the Year: Vote Here!

2011-12-22T06:30:00.000-05:00

The three polls ~~below~~ HERE (make sure to vote in all three!) will stay open until 3pm ET on January 4th.

Please vote, tell your friends, families, colleagues and pets to vote. (But resist the urge to vote seventeen times, we rely on your discretion.)

Thanks for participating, and we look forward to crowning our new DOTY winners in two weeks.

We've relocated the polls to make them easier to view: CLICK HERE TO GO TO THE VOTING BOOTH

And the Nominees for IVB 2011 Exit/Financing of the Year Are ...

2011-12-22T05:00:00.002-05:00

OK, IN VIVO blog readers, it's time to have your say. We've supplied the nominations but YOU will decide the winners. Once again we've created a special page so you can vote on all three categories in one place. Remember you much click on the "VOTE" button in each individual category--Alliance, M&A, and Exit/Financing--to record your choices.

CLICK HERE to go to the voting booth!

In no particular order, the nominations for In Vivo Blog's 2011 Exit/Financing of the Year are:

Ascletis: One of the largest Series A rounds ever in biopharma -- $50 million in the first tranche, with another $50 million guaranteed to follow when the company hits certain milestones -- and a serious nod toward the growth of China on the global biopharma stage. Click here for the deal nomination post.

BMS/Amira: This $325 million buyout was a great return for Amira's backers and the result of an interesting structure that sees former Amira assets seeding a handful of newco's. Click here for the deal nomination post.

Radius Pharma: The twin moves that garnered Radius a DOTY nomination came on the heels of what might become a frequent occurrence in the option-heavy dealmaking world we live in: partner Novartis declined to pursue the company's Phase III ready osteoporosis compound. To go it alone, Radius nailed down a $91 million cash-and-debt Series C and floated its shares via reverse merger with a public shell company. Click here for the deal nomination post.

Eisai/SFJ: In a move that gives it greater development bandwidth, Eisai is handing the bill for Phase III studies of its thyroid cancer treatment lenvatinib to SFJ. Eisai will pay milestones to SFJ only if lenvatinib gains regulatory approval, and Eisai itself conducts the global trials and also keeps all commercial rights. . Click here for the deal nomination post.

Quanticel: This Stanford-grown genomic analysis company's emergence illustrates an important trend in biotech financing: linking investment to exit, even if that means ruling out a home-run return. Quanticel, backed by Versant Ventures, took in $45 million from Celgene for rights to its platform for three and a half years and an exclusive option to buy the company. Click here for the deal nomination post.

Arteaus: Asset financing as a concept isn't quite new, but 2011 saw several venture investors build out the asset-centric model in a way that's uniquely suited for these capital-constrained times. Arteaus is the first asset-financing play out of Atlas Venture's Atlas Venture Development Corp. The molecule in question, a migraine drug candidate, has Lilly roots and potentially a Lilly future, as that Big Pharma has lined up an option to reacquire the asset from Atlas. Click here for the deal nomination post.

And the Nominees for IVB 2011 M&A of the Year Are ...

2011-12-22T05:00:00.001-05:00

Sanofi/Genzyme: Something for everyone: publicly traded earnouts, rare diseases, diversity, and one heck of a long, drawn out negotiation over price. Oh yeah, $20 billion for an industry trailblazer. Click here for the deal nomination post.

Endo/AMS: Every good company constantly evolves, but only a few complete radical makeovers as rapidly as Endo has. The acquisition of AMS really cements Endo's transition from drug co to 'pelvic health' company, drugs, devices, services and all. Click here for the deal nomination post.

Daiichi/Plexxikon: An extremely solid exit driven by a well executed partnering strategy on one of the year's most watched and important drugs. There aren't too many 12x deals out there. Click here for the deal nomination post.

Takeda/Nycomed: This $13.7 billion acquisition gives Takeda sought-for diversity by moving it further into OTC, branded generics and emerging markets. Nycomed's PE investor base had long aimed for an exit -- via sale or more recently rumored IPO. This is a tidy one indeed. Click here for the deal nomination post.

Abbott/Abbott Pharma: Is it really M&A? Who cares. Diversified Abbott has jettisoned its Humira-dominated pharma business in a spin out with roughly $18 billion in revenue. Click here for the deal nomination post.

Gilead/Pharmasset: When $14 billion speaks, people listen. Pharmasset's record-setting sale to Gilead put a smile on the face of the biotech's investors that could be seen from space. It was by a long stretch the largest ever acquisition of a clinical-stage company and cranks up the heat in the already intense HCV development space. Click here to see the deal nomination post.

And the Nominees for IVB 2011 Alliance of the Year Are ...

2011-12-22T05:00:00.000-05:00

Pfizer's CTIs: Pfizer's city-based networks of medical institutions will, in theory, throw up the projects that the pharma giant needs to fuel is biopharmaceutical pipeline. The biggest academic-alliance splash in ... forever? Click here for the deal nomination post.

Lilly/Boehringer: Lilly married its struggling diabetes franchise with what's still only a pipeline at private German group Boehringer Ingelheim -- the year's biggest pharma-pharma alliance and a template for deals to come? Click here for the deal nomination post.

Genentech/Forma: Isn't it about time that biotech alliances began looking more like acquisitions? This deal, which offers the potential of some liquidity for Forma's backers, helps to provide return-without-exit and if successful offers a new path for biotech independence. Click here for the deal nomination post.

Pfizer/Puma: Don't call it a cougar -- the next big cat in Alan Auerbach's menagerie licensed an intriguing cancer asset from Pfizer, raised $60 million, and went public via reverse merger. Click here for the deal nomination post.

Merck/Roche: Long adversaries in the HCV treatment space, Merck and Roche teamed up this year to sell Merck's first-to-market direct antiviral Victrelis as well as test out new HCV therapy combinations. Score one for pragmatism, pharma-pharma pre-commercial cooperation, and frenemies everywhere. Click here for the deal nomination post.

AZ/Healthcore: What's development and regulatory success without the means to convince payors and patients to shell out their cash for your drug? In 2011 we saw a flurry of pharma-payor dealmaking that illustrates industry's awakening to addressing the needs of those who hold the purse strings. Click here for the deal nomination post.

Reata/Abbott: AIM high and vote for the second huge deal between these two companies -- and their second DOTY nomination -- in the past two years. Reata gets $400 million up-front for worldwide co-dev/co-promo rights to its preclinical antioxidant inflammation modulator portfolio. The private company is sitting on at least $850 million in Abbott cash and has set itself up nicely for an independent future. Click hear to read the deal nomination post.

2011 Alliance of the Year Nominee: Abbott/Reata

2011-12-21T05:07:00.005-05:00

It's time for the IN VIVO Blog's Fourth 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 Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) 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™.

Do you like sequels? We know, they're never quite as good as the original (we're looking at YOU, Temple of Doom). But sometimes they surprise on the upside. And that was the case for last week's Abbott/Reata deal, which just makes it in under the wire to close out our 2011 DOTY competition nomination process.

Last week Reata said Abbott would pay $400 million up-front for worldwide co/co rights to its preclinical stable of antioxidant inflammation modulator compounds. That's on top of the $450 million up-front that Abbott paid Reata last year for ex-US rights to the company's lead AIM compound, bardoxolone. Those of you with long memories may remember that the first Abbott/Reata deal put in a suprisingly iffy showing in the 2010 DOTY contest, finishing with just 7% of the vote. The sign of a strong field, perhaps, but equally likely is the voting public wasn't swayed by the large upfront payment for Reata's Phase II asset.

This time around there are some more interesting wrinkles. First, it's a preclinical deal. And that means, among other things, a measure of DOTY revenge. Last year's DOTY/alliance winner was Celgene/Agios, which at $130 million upfront was until last week the largest ever downpayment on preclinical assets, according to our Strategic Transactions database. Reata's haul vaults it to the top of the preclinical deal charts, by a mile.

Second, Abbott isn't paying Reata milestone payments. This is an oft-discussed but seldom-seen type of structure that allows Reata to cash in immediately and set itself up as an independent biotech for years to come, and to plan for the potentially burgeoning clinical pipeline it may have in a year or so.

That brings us to the third facet that makes this deal sequel better than the original: its broad scope. The global agreement covers a wide range of molecules in several therapeutic areas, with the two companies slated to split development and commercialization costs, as well as profits, equally, except for rheumatoid arthritis and other autoimmune indications. In those categories, Abbott will cover 70% of costs and also take 70% of any profits.

Finally, the Abbott angle. You've seen the Abbott split-up (one of our M&A noms this year) and know about Abbott Pharma's continued reliance on Humira. The bet Abbott has made on Reata's compounds -- at least $850 million so far, not counting any clinical expenses around bardoxolone -- suggests the Big Pharma sees the AIM platform as a key aspect of its diversification strategy going forward.

Who knows, perhaps bardoxolone clinical success could set this Abbott/Reata sequel up as part two of an epic trilogy. For that you'll need to wait for a future DOTY competition.

image via thisblogrules

2011 M&A of the Year Nominee: Gilead/Pharmasset

2011-12-21T04:36:00.000-05:00

We're not sure we've got to sell this one, folks. Why vote for Gilead's acquisition of Pharmasset for IVB's M&A of the year? We've got eleven billion reasons for you.

If the sheer enormity of Pharmasset's $11 billion price tag doesn't sway you -- and as a reminder it was by far the largest price paid for a clinical stage biotech, nearly four times the value of the previous record -- you mightn't have a pulse. But to be fair, bigger isn't always better, but in this case we've got more than just dollar signs to convince you.

Ask around, and you'll hear a range of responses from industry business development people. They range from the conspiratorial to the astounded to the unintelligible to the silent, wide-eyed, mouth-agape, frozen-faced and slightly head-bobbing look that you see on sitcoms that kind of says "holy crap, right?" The kind of silent, wide-eyed, mouth-agape, frozen-faced and slightly head-bobbing look that translates into DOTY votes.

Mostly, non-Gilead people think Gilead overpaid. The safety signal in a Phase IIb trial of PSI-938 that emerged last week would seem to support that view, but in reality the value attached to anything outside of PSI-7977, another of Pharmasset's hepatitis C polymerase inhibitors and the hottest drug candidate in the clinic, is probably minimal.

What's not up for argument is that Gilead now wholly owns the hottest molecule in the hottest clinical space around. Nevermind that they'll need to get it to market quickly and make it a blockbuster several times over without taking their sweet time about it to make the deal pay off.

Vote Gilead/Pharmasset for the size, sure. Vote for the deal because it demonstrates that even in today's troubled times, there's seemingly no ceiling on the value of a top asset -- even a Phase II one -- in the right hands. Vote for it because HCV will continue to be one of the most rapidly-evolving and intriguing development and commercial spaces to come along for some time. Or just because of that face people make when you ask them what they think of it. That face is priceless.

2011 Exit/Financing of the Year Nominee: Arteaus

2011-12-21T03:37:00.000-05:00

Blink and you might have missed it, although our Pink Sheet colleagues didn't.

In October, Atlas Ventures made its first asset-financing play under the umbrella of its Atlas Venture Development Corp. (AVDC), teaming with OrbiMed Advisors to share the funding of Arteaus Therapeutics with an $18 million A round. Arteaus is one thing and one thing only: an in-licensed migraine drug; no office, no outside management, and no backup R&D programs.

As we've been discussing for a couple years now, funding single assets instead of entire biotechs is an intriguing model for VCs who don't want -- or can't afford -- to see a company through to a sale or an IPO. In fact, in this story we compared AVDC and CMEA Capital's Velocity fund before either had an asset under their roofs. (Velocity still hasn't announced a first project.)

We nominate Arteaus not only because it's the first out of the gate, but also because of its odd circumstances. The migraine drug comes from Eli Lilly, which has made plenty of noise in the past year or so about building a network of three "mirror" funds to do what Atlas is doing: take compounds that Lilly doesn't want to develop on its own, bring in outside funding help, and give Lilly a "clawback" option once the drug reaches an agreed-upon milestone. But wait a minute: Atlas isn't one of Lilly's mirror funds. Which either means Atlas and OrbiMed gave Lilly a deal it couldn't refuse, or the mirror fund thing is a bigger headache than first expected. Well, we knew the latter already, to some extent: Before launch, CMEA's Velocity was supposed to be one of the mirror funds; Lilly was even named as a strategic backer in the Velocity fundraising material. But those plans disintegrated in late 2010 or early 2011, and when Velocity formally launched in June, it was no longer a Mirror fund. (Velocity is being funded from the current CMEA VII, and the San Francisco firm has no plans to raise an eighth fund.)

Another twist is that AVDC will contract with Lilly's Chorus division, a semi-autonomous R&D group meant to drive proof of concept development faster than Lilly's traditional process, to run the migraine compound's Phase I and II trials. Lilly has an option to re-acquire the drug after proof of concept. If it does, Atlas and OrbiMed would be owed undisclosed payments and royalties, as well as an upfront payment that would allow them to exit (thanks to Arteaus being structured as a limited liability corporation).

The compound in question, by the way, is a monoclonal antibody that binds with calcitonin gene-related peptide, or CGRP, a potent vasodilator linked to migraines and implicated in transmission of pain. The larger point is that Lilly wanted to share the risk of developing it, and Atlas has provided a vehicle for doing just that, all while separating the value of the asset from the distraction of building a standalone company to house that asset. Or, you might say, the distraction of fighting for resources inside Lilly.

Photo courtesy of flickrer Quinn.Anya via a Creative Commons license.

Deals of the Week Notes the Holiday Generosity

2011-12-15T20:24:00.008-05:00

(Click for larger)

This week's Reata/Abbott deal with the monster upfront (as opposed to last year's Reata/Abbott deal with the monster upfront) got us thinking about the vague notion we get around this time each year: that up-front payments tend to get larger after the leaves have fallen off the trees.

Do buyers really get into the holiday spirit, or have we just had too much of a different sort of spirit to keep us warm? This year it seemed simple enough to dig up the data in Strategic Transactions, and so we have.

Above you can see that upfront payments really have trended upward (at least according to Excel's trendline tool). To create this chart and trendline it's important to note we didn't include every biopharma alliance. Rather we used our favorite dataset: alliances/licensing deals where the licensing partner or senior alliance partner was a commercial-stage pharma or biotech company (so that's Big Pharma, Big Biotech, the large Japanese and European players, and revenue generating specialty pharma companies of all stripes), and where we know the up-front payment. The data charted above ranges from 2007 through this week, and comprises 329 datapoints.

UPDATE: See below for Median (blue) and Mean (red) charted by month.

(Click for larger)

If the Reata deal described below does skew the results, it's only by the tiniest smidgen. And -- we went back and checked! -- looking at each year on its own, this upward trend is the case for every year individually, since 2007, even the years when Abbott doesn't throw down a multi-hundred million up-front. Some years the trend is more pronounced than others, but each year it's pointing in the same direction.

So what to make of this fourth quarter generosity? It probably has something to do with buyers wanting to get deals done under the year-end budget wire. Or maybe it's a holiday miracle. Also miraculous? 2011's penultimate ...

Abbott/Reata: Another financial record in biopharmaceutical deal-making tumbled as Abbott Laboratories Inc. agreed Dec. 12 to pay Reata Pharmaceuticals Inc. $400 million upfront in exchange for a worldwide license to co-develop and co-commercialize the biotech’s preclinical antioxidant inflammation modulator (AIM) compounds. Reata has discovered and developed AIM compounds to treat central nervous system, respiratory and autoimmune diseases. The previous recorded high amount paid upfront for a preclinical biopharmaceutical asset was Celgene Corp.’s 2010 deal with Agios Pharmaceuticals Inc., in which Celgene paid $130 million upfront for a three-year exclusive option on Agios’ cancer candidates based on “metabolic rewiring." With Reata’s upfront take more than tripling the previous record, recent weeks also have seen deals in which Gilead paid the highest buyout fee for a clinical-stage biotech in its $11 billion tender for Pharmasset, while Janssen Biotech NV paid the largest single-asset upfront this year less than a week ago for the right to co-develop Pharmacyclics’s Phase II hematological cancer candidate PCI-32765. Reata is extending an existing relationship with Abbott, which previously filled its coffers in a 2010 licensing agreement for bardoxolone methyl, considered to offer the potential to become the first treatment to reverse the progression of chronic kidney disease. Reata is funding Phase III development of bardoxolone under its partnership with Abbott, but the big pharma will play a much larger development role in the AIM programs. The global agreement covers a broad range of molecules in several therapeutic areas, with the two companies slated to split development and commercialization costs, as well as profits, equally, except for rheumatoid arthritis and other autoimmune indications. In those categories, Abbott will cover 70% of costs and also take 70% of any profits.—Joseph Haas

Bristol-Myers Squibb/Simcere: Bristol-Myers Squibb Co. and Simcere Pharmaceutical Group have inked a second collaboration to develop a BMS drug candidate in China. The companies said on Dec. 13 that they will co-develop the CETP (cholesteryl ester transfer protein) inhibitor BMS-795311, with Simcere holding exclusive development and commercialization rights in China. Simcere will pay all development costs. The arrangement in essence is an out-licensing deal involving a drug candidate that BMS stopped working on in preclinical development because of “portfolio reasons,” although it “continues to believe in the scientific promise of the compound.” At least three multinationals have CETP inhibitors already in clinical development in Western markets, making BMS a late-comer. Moreover, the class was notoriously set back by Pfizer’s catastrophic experience with torcetrapib, which dramatically increased the rate of cardiovascular events in a Phase III trial. Nevertheless, initiating development in China could be a good option for a high risk project because of the lower trial costs and the country’s large, treatment-naïve population. Simcere is becoming the go-to local company for MNCs. BMS and Simcere say the business model is similar to a deal they signed in Nov. 2010. That deal involves the preclinical MET-VEGFR-2 inhibitor GMS-817378. Under that deal, Simcere is responsible for obtaining clinical trial approval in China and conducting those trials through proof-of-concept Phase IIa. BMS’ involvement with the drug in later stage trials is yet to be determined. –Dan Poppy

Intarcia/Quintiles: Diabetes treatment developer Intarcia Therapeutics says a pharma partnership is imminent for its implantable pumps that deliver the GLP-1 analog exenatide. But first, Intarcia has worked out a deal with Quintiles, the world’s largest contract research organization, to conduct six Phase III trials on its product. Specific financial terms weren’t released, but Quintiles revealed that it made two simultaneous investments in privately-held Intarcia. One is non-dilutive, designed to bring returns as the product, ITCA-650, reaches unspecified milestones. Quintiles also took an equity stake, although finance group global VP Chip Gillooly said that investment was smaller than the product investment. Intarcia CEO Kurt Graves said the company is in late-stage discussions with two “finalist” pharma partners, with the aim of retaining 50% of U.S. rights. Negotiating both a CRO deal and a pharma partnership simultaneously saves several months’ worth of time on ITCA-650’s development clock, he added. The devices, which can be implanted for up to a year, delivers a controlled-release formulation of exenatide, the compound in Amylin’s Byetta and Bydureon that’s known for regulating insulin and glucagon production in the pancreas. Graves said that Amylin has no composition-of-matter patent on the drug, leading Intarcia to believe it has freedom to sell the drug in another form. – Paul Bonanos

Enlight Biosciences/ AstraZeneca and Enlight/ Novo Nordisk: Enlight Biosciences announced on Dec. 15 the identities of its two newest partners: AstraZeneca, and Novo Nordisk. The Pink Sheet previously wrote about the formation of the partnerships, but at the time, Enlight could not reveal the companies’ identities. Terms were not disclosed, but the deals give each drug company an opportunity to participate in Enlight's novel business structure in which pharma companies collaborate at a pre-competitive stage to exchange ideas about unmet medical needs, contribute to the evaluation of technology solutions, and select and guide early development of novel technologies, with opportunities to make investments in commercialization. To fund these endeavors, each pharma “member” pays an upfront fee (the figure for its first six members was $13 million, according to its website). Once an opportunity is identified, Enlight proposes an idea for launching a start up company around the technology and members have the option to invest at varying levels. They will, in exchange, have opportunities to participate in any returns that accrue. So far, Enlight has launched two companies, Endra (molecular imaging) and Entrega (oral delivery of proteins). For AstraZeneca, and its biologics arm, MedImmune, it’s an opportunity to collaborate with peers and contribute to development of novel tools, the company said in a statement. Novo Nordisk expects to apply its expertise in protein engineering and expression, formulation and delivery to bring new therapies to market. – Michael Goodman.

Eli Lilly/TransPharma: In a "No Deal" signaling just how tempting - and how hard - it is to improve osteoporosis treatment, Eli Lilly & Co. has dropped its options and licensing agreement with Israel’s TransPharma for a transdermal patch formulation of Forteo (teriparatide), Lilly's well-established injectable parathyroid hormone analogue. The companies formed the collaboration in June 2008, when Lilly committed $35 million upfront to development of TransPharma's ViaDor-PTH1-34, a then-Phase II-ready patch-formulation of teriparatide. The Big Pharma chose not to pursue its option on the product after the drug failed to meet its primary endpoint in a Phase II trial, despite showing strong efficacy and safety results in a Phase Ib trial. Forteo has a niche in osteoporosis, for difficult to treat cases, because it is the only drug on the market with bone building properties, despite a black box warnings. But its sales -- $830 million in 2010 -- are flattening. The race to create a more convenient version of Forteo is hotly contested, with California-based Zosano Pharma Inc. also competing to get transdermal delivery systems for PTH approved. Lilly is also developing a nasal spray version of the drug. Zosano recently secured an Asian partner to market their drug and is preparing for a phase III trial. Both companies have planned to seek shortcut approval via the 505(b)(2) pathway, so the distinctions between their technologies – and how well they work-- will be crucial in the long run. -- Lisa LaMotta, Malorye Branca.

Actelion/ Trophos: Lilly isn’t the only company to pass on an option this week; Swiss biotech Actelion Pharmaceuticals Ltd. decided not to exercise its option to acquire privately held Trophos SA, after the French company reported Dec. 13 that its lead compound, olesoxime, had not reached its primary endpoint in a Phase III study in amyotrophic lateral sclerosis, better known as Lou Gehrig's disease. Actelion and Trophos paired up in 2010, providing Trophos with a $13 million upfront and Actelion with the option to buy the company for $163 million. --John Davis

Takeda/Affymax: And Takeda Pharmaceutical made a no-go decision on a regional deal, by deciding to pass up on the opportunity to market partner Affymax's anemia drug Hematide, in Japan. The companies are partnered elsewhere in the world, including in Europe and the United States. Takeda said in a statement that the drug was not a good fit for its strategy in Japan, although it has survived most of the final-phase trials there. The partners plan to explore other options for the drug in Japan. --Wendy Diller

2011 Alliance Of The Year Nominee: AZ/HealthCore

2011-12-14T14:07:00.000-05:00

Never mind scientific or regulatory challenges. Payers are arguably the single most important hurdle between pharma and future profits -- and a flurry of 2011 deals showed that drug firms know that. They also know that, where payers are concerned, it's time to move from the battlefield into bed.

AstraZeneca's February 2011 tie-up with HealthCore was the first and among the most ambitious of 2011's pharma-payer deals, so that's our nomination here, but votes count toward any/all of the copy-cat deals, too: Sanofi/Medco (June) and Pfizer/Humana (October). They are all aimed, ultimately, at measuring health outcomes and understanding how drugs contribute (or not) to those outcomes. They're looking at cost-effectiveness. They're seeking to identify the inefficiencies in the provision of health care, and, in theory, feeding that information back into pharma development plans and pipelines.

Hoorah! These alliances are the surest sign yet that industry realizes that the game isn't about getting novel chemicals (or biologicals) past FDA, fun as that might be. That the way to reap future financial rewards involves developing practical, value-for-money health care solutions to prop up a crucial service within modern society that's on its knees.

Now if that financial-crisis-defying, social-responsibility-ridden big picture doesn't draw your vote from you, let's dig down. AstraZeneca -- which hasn't shied away from declaring its ambition to be a leader when it comes to payer interactions -- has tied up for at least four years with HealthCore, which is the clinical outcomes research unit of WellPoint, the U.S.'s largest managed-care organization. The partners aim to generate real-world data on the most cost-effective ways to treat chronic diseases like diabetes, cardiovascular disease and dyslipidemia -- and to evaluate drugs' cost-, clinical- and comparative-effectiveness.

In sum, AZ hopes that, by drawing on HealthCore's database of pharmacy and medical claims from 36 million members of Blue Cross and Blue Shield insurance plans, it can get better at persuading payers to cover its drugs, not least by better anticipating the kinds of cost-effectiveness studies that payers will use to decide whether or not to reimburse. The deal may also help identify where AZ should invest its future R&D efforts.

So for now, it's mostly words. But they're the right words. AZ is working more closely with the groups that influence drug purchasing decisions, and that's sensible. It may be ambitious in its aim to expand the project into a public-private consortium, including other drug firms, payer organizations and governments, but working with real-world data on real-world problem-solving is big and requires multiple collaborators. That's in part why the U.K. government recently announced plans to make accessible unnamed patient records from the country's vast National Health Service.

Indeed, AZ's business development chief Shaun Grady has made it clear he wants to emulate the HealthCore deal in other geographies, likening these actual and future collaborations to "building up a toolbox of solutions and approaches" to addressing health care issues.

What about the potential conflict of interest (since WellPoint is a big customer)? Not an issue, said AZ's executive director, corporate business development Mahmood Ladha, speaking at Elsevier's Pharmaceutical Strategic Alliances conference in New York in September. "There's an extraordinarily solid firewall" between HealthCore and its parent. "This is not a vendor relationship. HealthCore is a true partner."

Sanofi no doubt would say the same of its global deal with Medco Health Solutions and its United BioSource health economics and outcomes research unit. This tie-up appears to be more directly focused on informing development strategy for drugs in Phase II and III of the French giant's pipeline. But the thrust is the same.

So is that of the five-year Pfizer-Humana deal. Speaking in October to "The Pink Sheet" DAILY, Jim Harnett, Pfizer's Senior Director of U.S. health economics and outcomes research, neatly summed up why this trio of deals deserves your vote: "Previously we had not [included] the decision-makers" in our work to identify and define a research agenda.

Seems silly, really, doesn't it?

2011 Exit/Financing of the Year Nominee: Quanticel

2011-12-14T10:35:00.000-05:00

Time was, the only words scarier than "carried interest tax" to a venture capitalist were "capped upside." So when Versant Ventures launched its latest portfolio company, Quanticel Pharmaceuticals, in early November, it was obvious we had entered a new era.

Incubated for more than a year at Versant, Quanticel is a genomic analysis firm spun out of two Stanford University labs, and Celgene has not only signed up for exclusive three-and-a-half-year rights to the technology but also has options to buy Quanticel outright. All for an upfront fee of $45 million.

In other words, Versant, the only venture investor in the company, is taking a higher ownership stake in exchange for a prenegotiated acquisition price -- a capped upside. Brad Bolzon, the Versant managing director involved in the deal, calls it a "different risk-reward ratio" than the traditional venture model, and he says he's looking to craft similar upfront arrangements with potential acquirers. Celgene could owe more milestone payments beyond the initial outlay; the triggers and conditions for their acquisition options are undisclosed.

To sweeten the lure, Quanticel wants to build its own pipeline in oncology indications unclaimed by Celgene. Their single-cell genomic analysis technology aims to shed light on the role of drug resistance due to tumor cell heterogeneity, which is the increase in the genetic diversity of cells as the tumor expands from a single ancestor. The aim is to learn which cells grow resistant to a drug regimen over time, and target new drugs, or combinations of existing drugs, accordingly. A top Celgene executive says the company has already chosen a number of cancers to which Quanticel's analysis should be applicable (but wouldn't disclose details).

The drumbeat for biotech investors and entrepreneurs working more closely with potential pharma acquirers is growing louder. Until the IPO returns as a viable exit strategy, if ever, drug companies with cash will have leverage to shape early-stage R&D and company formation, and investors still interested in company formation are wising up. (We were going to say "caving in," but we'll only go so far for a cheap joke.)

Celgene knows the score, too. In 2010 it paid handsomely ($130 million) to grab exclusive rights to much of the still-preclinical work at the cancer metabolism research firm Agios Pharmaceuticals, a tie-up that won last year's Roger for Alliance Deal of the Year. Agios isn't necessarily tied to Celgene's hip, however; it closed a $78 million C round in November to fund a rare genetic disorder program beyond the scope of the Celgene alliance.

Not so with Quanticel, with platform and pipeline bound tightly to its potential acquirer from the get-go. "We hope it ends in an acquisition by Celgene," Quanticel CEO Stephen Kaldor told us. "That's the design."

Photo courtesy of flickrers robstephaustralia via a Creative Commons license.

2011 Alliance of the Year Nominee: Merck/Roche

2011-12-12T18:58:00.000-05:00

The May 2011 approvals of the first two direct-acting antiviral drugs against hepatitis C virus provided us with an unusual opportunity to watch a head-to-head marketing battle in a reinvigorated blockbuster market. Merck & Co. hit the market first with Victrelis, its HCV protease inhibitor, which was approved May 16. And before rival Vertex could launch Incivek only a week later, Merck had already called in the cavalry.

On May 17 Merck said it had partnered with Roche -- a longtime rival (of Schering-Plough, anyway) that bested it in the first big HCV marketing battle over long-acting interferon therapy -- to both promote Victrelis and to examine future HCV drug combinations.

It wasn't quite "dogs and cats living together, mass hysteria!" Gatekeeper-Keymaster action, but for folks in pharmaland, it was pretty close. Then again, the deal makes perfect sense. And when marketing enemies become friends, underscoring the emerging trend of pharma-pharma collaboration, the importance of a strong start in a rapidly evolving HCV market, and pre-market drug combo testing, DOTY gets all tingly.

The financials of the deal were not disclosed, but a Merck spokesperson confirmed that the Roche partnership does not "alter the economics of Victrelis for Merck." In exchange for its marketing muscle, Roche gets to hedge against the probable decline of its Pegasys interferon franchise while its reps gear up for the eventual launch of Roche's own direct anti-virals (Roche's latest-stage compounds, the protease inhibitor danoprevir and the polymerase inhibitor RG7128 -- the latter partnered with Pharmasset -- are in Phase II).

More importantly to pique DOTY's interest, Merck and Roche are working together to test combinations of not-yet-approved HCV drugs. There are dozens of molecules in the clinic whose developers hope to hit on combinations that avoid the need to use interferon and cure HCV patients more quickly and efficiently than standard therapy. That regimen now typically involves an interferon, ribavirin, and either Merck or Vertex's pioneering PIs (more probably Vertex's, which thus far holds a commanding lead in the second massive HCV commercial battle).

That Merck and Roche realize the benefits of teamwork as a substitute for an entirely home-grown or acquired compound portfolio isn't surprising, but this kind of deal remains all too rare. That this kind of peer dealmaking remains an exception to the rule -- even in the exciting but increasingly crowded worlds of HCV or, say, oncology -- suggests the companies that embrace it most quickly will have a lingering edge.

And so we offer the alliance DOTY nod to two old foes. Their detente is unlikely to last forever, but in the fast-paced world of HCV drug development, where Phase II assets can command billions, it might just save each company from obscurity.

kreg.steppe photo via flickr, used under creative commons license

2011 Exit/Financing of the Year Nominee: Eisai/SFJ Pharma

2011-12-12T16:53:00.000-05:00

With development budgets stretched, it's difficult for burn-minded companies to conduct multiple late-stage clinical trials simultaneously. Biopharma firms with promising assets can always try to find a partner to share the risk and widen the development funnel -- but that means giving up back end rewards. Unless of course you can find someone to foot the bill without asking for a slice of the commercial pie in return.

Enter this year's latest DOTY candidate, Eisai/SFJ.

In their deal announced in September, Eisai is handing the development bill on its thyroid cancer treatment lenvatinib to SFJ, which will pay for Phase III studies. Eisai will pay milestones to SFJ only if lenvatinib gains regulatory approval, and Eisai itself conducts the global trials and also keeps all commercial rights. The financial details weren't disclosed. Levantinib, a home-grown tyrosine kinase inhibitor, is one of Eisai's three oncology assets that have reached Phase III globally; the SFJ deal will allow Eisai to spend its own cash elsewhere in its late-stage pipeline.

Though SFJ isn't conducting the lenvatinib Phase III, it's a CRO itself, and presumably has a pretty good inkling that the drug will eventually get approved. Well, SFJ isn't a CRO, exactly, but nor is it typically simply an investor, as appears the case here. It bills itself as a specialty pharma, and it raised a $45 million Series A round in early 2009, with Abingworth Management and Clarus Ventures in the lead. It hopes to in-license drugs and bring them to market in Japan itself, but has not done so yet (or at least hasn't said so publicly). In its two deals prior to Eisai, SFJ has written the clinical protocol and is conducting the trials. Data from one were supposed to be due in December.

SFJ, which limits its development and commercialization ambitions to the Japanese market, was founded by a former executive at NovaQuest, the ex-financing arm of Quintiles. (It has since split off from Quintiles.) Quintiles has a risk-sharing deal with Eisai in oncology in which the two sides develop an unspecified number of Eisai compounds to proof-of-concept. We asked SFJ President and CEO Bob DeBenedetto about the NovaQuest/Quintiles influence, and he said SFJ's partnering terms and structures were different. But that hasn't prevented them from working together. DeBenedetto told the IN VIVO Blog recently that SFJ and Quintiles are teaming up on other pharma clinical deals for which SFJ provides the cash and the two conduct the trial.

Here, SFJ is again the bankroller, but Eisai holds the clinical reins. The deal -- a straight financing -- allows Eisai to boost the bandwidth of its late-stage development program in the highly competitive oncology space. SFJ is simply making what it hopes is a solid bet -- with a near-term payout.

2011 M&A of the Year Nominee: Abbott/Abbott Pharma

2011-12-12T08:30:00.001-05:00

When the IN VIVO Blog polled its readers on their preferred name for the newco drug company to be spun out of the break-up of Abbott, the hands-down favorite was Costello, the hapless, blimp-like other half of the comedy duo. Once again, Sagacious Reader, you have cut to the heart of matter: Who’s on first?
We’ll get to that in a moment. First, we want to note that the decision to bust up comes at an historic moment for the industry, and captures several of the issues that make CEOs and directors wake up at night in a cold sweat:

Diversification vs Focus. Focus is in. Diversification, not so much. Leading analysts have lately been beating the drum for diversified companies to unlock value by breaking up into pure-play splitcos. The valuation argument has its dissenters – Barbara Ryan (Deutsch Bank) isn’t persuaded that split-ups have made anyone much money, though she concedes it might make sense in Abbott’s case. As to which model best serves innovation, we note that the drug divisions of J&J and Roche, both diversified companies, outshine their peers; while BMS, the poster company for slimming down, has been delivering a superb pipeline.

Portfolio Rationalization. Is anyone minding the store? CEO Miles White has acknowledged that the pharma company was masking the value of the device company, and that its Humira-driven growth had thrown the diversified giant’s balance out of whack. Apart from questions about the value and depth of Abbott’s later-stage pipeline, analysts have fastened on the extraordinary concentration risk posed by Humira which accounts for nearly half of the pharma unit’s $18 billion in annual sales. Jami Rubin of Goldman Sachs recommends diversifying away from that risk and several analysts believe the best route to that end is through a smart acquisition.

The Influence of the Street. Rubin, who’s been the most vocal of the breakup-to-unlock-value school, appears to be getting heard in the C-Suites and boardrooms of some pharmas. Which raises the question of whether the agenda of sell-side analysts should influence the strategy of large, research-based pharmaceutical companies.

The Allure of the East. Speaking of strategy, what more powerful force is there than emerging markets for redistributing capital, infrastructure, and operations across the globe? White was clear: the device company, which will include diagnostics and the established products business, faces eastward toward China, India, Russia, and Turkey, while the drug company “is very much a developed market game.” The established products business, which includes branded generics, will be the beneficiary of the emerging market synergies of the Piramal and Solvay acquisitions.

The Abbott break-up deserves the nomination because it marks the first time that a diversified healthcare company has spun off its pharmaceutical division. In the past such split offs have been the province of global chemical companies like Eastman Kodak, Du Pont, BASF (whose drug unit, Knoll, Abbott purchased to get Humira), and Akzo Nobel. It may also mark the ascendance of investor interest in devices – the biggest life science M&A of 2011 by a good margin was J&J’s acquisition of Synthes – over drugs.

At a recent industry conference in London sponsored by the Financial Times, Miles White had to fend off speculation that Abbott’s drug business might be on the block. We don’t hear anyone speculating that the device business will be for sale. Who’s on first? Ask Miles White.

2011 M&A Of the Year Nominee: Takeda/Nycomed

2011-12-09T15:47:00.000-05:00

Takeda's $13.7bn acquisition of privately-held Nycomed in May was a rich deal, both monetarily, and strategically. It allowed Takeda to tick off several of its strategic imperatives in one (expensive) swoop: jumpstarting an emerging markets presence, deepening a European footprint, fashionably diversifying the product mix to include OTC and branded generics, providing an immediate revenue- and income-boost and, not least, pepping up Takeda's stuffy corporate culture.

No wonder the Japanese group was happy to stump up over three-times Nycomed's revenues, to the deep satisfaction of Nycomed's private-equity backer Nordic Capital. Nordic had long been bent on an IPO for its Swiss-based protegee, but settled for quintupling its initial 2005 investment via M&A.

It's a deal that illustrates how M&A, for all its drawbacks, can, when properly engineered, help industry players out of tight corners. Takeda's typical in facing generic competition to its biggest drug, Actos. And despite prior internationalization moves, not least its 2008 purchase of Millennium, it was also still rather typically Japanese, with too much big-company conservativism.

Nycomed allowed Takeda to show investors once again that it could act decisively and win big prizes. This was the largest cross-border transaction by a Japanese company, and, although the borrowing requirements (Y600-700bn) prompted a credit-watch from ratings agencies, taking on debt makes sense in a low-interest environment.

Coming after months of negotiations and at least a week of press speculation, the deal multiplied Takeda's emerging markets sales by eight (sensible, in today's environment), lifted its European ranking from 29th to 18th (Europe still matters, despite its problems) and should, CEO Yasuchika Hasegawa promised, deliver $375m in annual cost savings after three years, and be EPS-accretive from year one.

Never mind the numbers, Nycomed provides its new owner with regulatory expertise and infrastructure across the globe, low-cost emerging markets manufacturing, and knowledge of how to tailor product mix to meet invidual market needs -- a very important skill as reimbursement hurdles rise, both nationally and regionally.

Takeda wanted to keep "as many as possible" of the key Nycomed people on board, in order to transfer those valuable skills, but it was hardly going to keep Nycomed CEO Hakan Bjorklund: he scooted off to join private equity firm Avista Capital Partners in October 2011.

So it's not all going to be smooth sailing. Daxas, the COPD drug that was ostensibly the branded jewel in Nycomed's crown, is coming up against reimbursement hurdles. It just got slammed by U.K. cost-benefit watchdog NICE which confirmed it wouldn't recommend public reimbursement for the drug, at least not without further trials.

But at least Takeda's sails are still up. Indeed, Nycomed's European and EM infrastructure appears crucial to the group's 2012 ambition to build a global vaccine division. Any deal that permits such progress, in today's stormy pharma world, deserves an accolade.

photo by cseward via flickr, used under creative commons license

Deals of the Week Ponders 13 Ways Of Looking At A Mockingbird

2011-12-09T15:00:00.007-05:00

Like mockingbirds, biosimilars are emerging as some of the pharma industry's best mimics, but are different indeed from their patented predecessors -- and the business models they're evoking differ from those of traditional generics. Biologic copies of compounds losing patent exclusivity are poised to become big business. But, as IN VIVO's Melanie Senior noted in this November feature story, for a biosimilar to garner market share, its owners still need not only to provide compelling evidence of bioequivalence, but also to innovate in pricing, market, positioning, production and support. That's potentially making the biosimilar a bird of a different feather altogether.

As this week's dealmaking news whirled in the autumn winds, Biogen Idec became the latest pharma to forge an agreement around biosimilars, in this case with Korea's Samsung. This week's Pink Sheet explores the deal, which creates a Korea-based joint venture with $300 million in commitments from its parent companies. Just $45 million, or 15%, will come from Biogen, while Samsung will hold the remaining stake based on its $255 million investment.

As the IN VIVO feature explains, pharmas including Merck, Pfizer, Novartis and Teva that have already gotten into biosimilars have various ways of looking at the drug mimicry market. Biogen still may still be of multiple minds (three, perhaps, if the Stevens poem is any guide), as the JV won't be launched formally for another three months. Samsung, however, has already flown into the fray, pushing ahead with a biosimilar of Biogen's own Rituxan (rituximab) for rheumatoid arthritis and certain cancers, and has set up a contract manufacturing organization as part of a separate joint venture with Quintiles, which would provide services to any drugs that come out of the Biogen deal.

Samsung insists the Biogen JV won't develop any biosimilars for Biogen drugs, calling into question whether it will continue to pursue the Rituxan descendant now that the new arrangement is in place. Likely, it'd be far behind others: At least nine companies are already developing Rituxan biosimilars; one, Dr. Reddy's Laboratories, has already launched a product in Peru, Vietnam and the Middle East, while Korean biosimilar specialist Celltrion said last week it would begin trials on a Rituxan follower it's developing with Roche.

Others in Asia, such as Korea-based Hanwha and China's 3SBio, are continuing to develop biosimilars, and Japan's Kyowa Hakko Kirin and Fujifilm said last month that they would begin clinical trials on biosimilars beginning next year. Competition seems to be heating up, particularly in the Far East, for a subset of drugs that Morgan Stanley's David Risinger said in a research note could result in a mid-to-late-decade surge of interest in the U.S. With apologies to the great Wallace Stevens, the river is flowing; the mockingbird must be flying.

Biosimilars mark the edge of one of many circles. Read all about the others in this week's installment of...

J&J/Pharmacyclics: Sunnyvale, Calif.-basedsmall-molecule drug developer Pharmacyclics has partnered one of its most advanced programs, the Phase II cancer treatment PCI-32765, with Johnson &Johnson’s Janssen Biotech division. The arrangement brings Pharmacyclics an up-front payment of $150 million, but milestone payments could add $825 million to the deal’s value. An inhibitor of Bruton’s tyrosine kinase, thought to be useful in fighting hematological malignancies, PCI-32765 acts on the B-cellantigen receptor pathway. It’s currently being studied in chronic lymphocytic leukemia, non-Hodgkin lymphoma and multiple myeloma. The two companies will split development costs 60/40 in favor of Janssen, including the bills for multiple Phase III trials. If the drug is approved, Pharmacyclics will lead U.S. commercialization initiatives, while Janssen will take the lead outside the U.S.; the two will share profits and losses equally. The two companies will also create a shared governance structure to oversee development and commercialization. – Paul Bonanos

AstraZeneca/Guangdong BeiKang: Biogen aside, at least one other pharma made a deeper move into Asia this week as well. A day after saying it would lay off 24% of its U.S. salesforce due to a “challenging environment,” AstraZeneca PLC indicated it would continue to invest in higher-growth markets like China by acquiring injectable generics maker Guangdong BeiKang Pharmaceutical Company Ltd. for an undisclosed amount. The deal gives AZ a portfolio of medicines for infections while demonstrating its commitment to selling locally manufactured, high-quality branded generics in China. Although the company also successfully sells several innovative therapies in China, including lung cancer treatment Iressa (gefitinib), AZ, like many multinationals, has focused primarily on the branded generics market segment thus far. The British pharma says the deal is part of a strategy to increase access and affordability of medications to Chinese patients, particularly ones who are currently underserved. The company appears to be reaching for rural areas and second-tier markets beyond the major cities along China's eastern seaboard; in a statement, it noted that 800 million Chinese citizens have limited access to treatments available more broadly in larger hospitals in China's major cities. AZ previously invested $200 million on a new plant in Taizhou, China, to manufacture intravenous and oral solid dosage branded generics.- Joshua Berlin

AstraZeneca/MedicalResearch Council - AZ announced a separate deal closer to home as well. AZ and the U.K.’s Medical Research Council announced a collaboration Dec. 5 in which 22 compounds discovered by the pharma will be made available free of charge to U.K.-based academic researchers. MRC will manage the programon AZ’s behalf and solicit proposals to study the compounds in orderto explore new treatment opportunities. MRC will award grants totaling up to £10 million for projects of up to three years, the council explained in a call for proposals published on its website. AZ moved the compounds into clinical development but then de-prioritized them for varying reasons, a company spokesman explained. “The compounds will fall into two categories: those deemed suitable for both studies in patients and in preclinical models, and those likely to be restricted to preclinical research,” he said. If a researcher chosen by MRC succeeds in producing research AZ would like to continue, the pharma holds the right to collaborate with MRC researchers working on the company or take back the intellectual property it provided through collaboration. New IP developed by the researchers will be the property of the researchers. Perhaps the best-known of the compounds AZ is providing for the research is zibotentan (AZD4054), an endothelin A receptor antagonist, which the company advanced into Phase III in prostate cancer. It was among the late-stage programs the company said it had halted in 2010 due to poor Phase III results or rejection from regulatory bodies.—Joseph Haas

BMS/J&J: Bristol-Myers Squibb and Johnson & Johnson plan to conquer the $30 billion hepatitis C market through an interferon-free combo of their respective compounds, Bristol’s NS5A replication complex inhibitor daclatasvir and J&J subsidiary Tibotec Pharmaceuticals’ NS3 protease inhibitor TMC435. The combo will be tested in a Phase II study of patients with genotype 1 hepatitis C, slated for early 2012, on their own and in conjunction with one or both parts of the current standard of care –ribavarin and pegylated-interferon. Terms of the collaboration were undisclosed. The tie-up follows news that Gilead has bought out biotech Pharmasset for $11 billion in an effort to get its hands on its mid-stage HCVcompound PSI-7977. Interferon-free combo regimens are thought to be the next frontier of treatment for the liver disease, since the current standard of care has severe side effects. Both daclatasvir and TMC-435 are being tested in combination with Pharmasset’s PSI-7977. - Lisa LaMotta

Momenta/Virdante: Antibody developer Virdante Pharmaceuticals raised at least $30 million across multiple tranches of a Series A round during 2008 and 2009, but now has sold key intellectual property to publicly traded biotech Momenta Pharmaceuticals for just $4.5 million, and appears to be shutting down. The sale includes $47 million in potential milestones -- roughly the amount its Series A investors were said to have committed if the final tranche of Virdante's Series A round appeared. Momenta gets Virdante's Sialic Switch technology, originally developed at Rockefeller University and thought to allow regulation of anti-inflammatory protein activity. Virdante's Web site was unresponsive late Thursday, and the company was said to be winding down operations; its investors included Thomas McNerny & Partners, Osage Partners, MedImmune Ventures, Clarus Ventures, Venrock and Biogen Idec Ventures. - Paul Bonanos

Many thanks to Joseph Haas and Melanie Senior for their biosimilars reporting.

Mockingbird photo -- "my luckiest picture," according to Flickr user andymw91 -- reproduced under Creative Commons license.

Financings of the Fortnight Ponders The Twilight of the Eurozone

2011-12-08T15:15:00.000-05:00

Three years past the downfall of Lehman Brothers, the defining seismic event of the U.S.-led recession, life-science venture capitalists are still weak-kneed from the aftershocks. Now walls are tumbling down in Europe as the Euro heads toward, well, no one knows exactly, but the "unthinkable" -- as Sofinnova Partners managing partner Antoine Papiernik calls a potential currency break-up -- is now imminently thinkable.

So where does that leave already beleaguered life-science VCs in Europe, only a few months after the landscape was starting to brighten? Our colleagues will examine that question in detail in this week's Pink Sheet. The outlook isn't good, unsurprisingly, but not everyone is stocking up on bottled water and canned beans. Take Papiernik, who says his firm is just starting to raise its seventh fund. The currency crisis matters less than the regulatory landscape, which in Europe is far more consistent than in the U.S, says Papiernik. “Never mind the Euro," he says. "We've lived through massive fluctuations in the dollar-euro exchange rate” but still made money. “The buyers [for our companies] will be there, whether they pay in dollars, Euros or even rubles.”

As in the U.S., some firms will carry on, raise cash, and find themselves with a wide-open field to invest in. But they'll still have to hold more in reserve for portfolio companies, because the specter of supporting them farther down the road looms large. Fewer VCs mean syndicates will need to forge iron-clad commitments for the long haul "so you don’t get stuck somewhere if the pharma partner doesn’t show up on time," says Regina Hodits of Wellington Partners.

Our European editor Melanie Senior will also examine whether pharma corporate funds will (or even should) ride to the rescue, either as direct investors in biotechs or as limited partners in venture funds. We've certainly seen more enter the fray sometimes in rather complicated ways, as our IN VIVO colleagues detailed here in a feature about the American Merck's corporate venture plans.

Or will governments plug the gap? Two new funds have made news this week. In the U.K., prime minister David Cameron popped in on the Financial Times' pharma conference to announce a £180 million ($280 million) biotech fund -- half of which is new cash, the other half drawn from previous research allocations -- to help both academicians and early-stage private companies take research across the so-called "valley of death" and into the clinic. (In the U.S. a like-minded scheme under the National Institutes of Health has awarded grants to 14 projects, both public and private; we'll profile it in START-UP's next Capital Matters column.)

EMBL Ventures also announced a new fund, with €40 million ($55 million) for the first closing. The German firm is mainly backed by the fund-of-funds ERP-EIF Dachfonds, which in turn gets its cash from the German government and other European Union sources.

Keep an eye out, too, for those looking to pick up the pieces others leave behind. Accountants at Ernst & Young told the FT in the story linked above that they're fielding questions about a possible euro-zone breakup from private equity financiers who see the disruption as a time to buy. There have already been glimmers of secondary activity in life-science venture, but nothing akin to the high-tech side, where private shares of Facebook and the like have spurred new exchanges.

Whether it's picking up pieces, spinning new cloth or folding up tents, you can find all the latest life-science VC moves in...

TopiVert: In straitened times, you have to use a tea bag twice. That, or something like it, is what Imperial Innovations and SV Life Sciences are doing by investing £8 million ($12.5 million) in TopiVert, a start-up created within Imperial College, London, that’s developing topical medicines for inflammatory diseases of the eye and gut. TopiVert has licensed IP developed at RespiVert, another of Imperial Innovation’s spin out companies, acquired by Johnson & Johnson in 2010. Imperial Innovations made nearly five times its money in three years from RespiVert, and hopes to do the same again this second time around. TopiVert will build on RespiVert's chemistry and clinical work on narrow spectrum kinase inhibitors (NSKIs), but seek to leverage these compounds’ potential in treating new therapeutic areas, allowing RespiVert to concentrate on respiratory and pulmonary disease. “It keeps the start-up atmosphere, and allows faster progress than in a larger organization,” noted Maina Bhaman, Director of Healthcare Investments at Innovations and a non-exec board director at TopiVert. RespiVert (and thus J&J) gets an undisclosed, uncontrolling stake in the new seedling in exchange for the IP. Innovations and SV Life Sciences have each committed £4m to TopiVert, tranched against undisclosed milestones. Innovations is among the ‘haves’ in Europe’s austere funding landscape, after raising £140 million in December 2010. It invested £35 million during 2010 and expects 2011’s total to be similar. As such, “we have another couple of years [of investment runway] at least,” noted CEO Susan Searle. But that, it seems, is no reason not to squeeze the most out of existing assets. -- Melanie Senior

Dendreon: After its launch flub, the maker of the prostate cancer immunotherapy Provenge said Dec. 6 it sold for $125 million the royalty rights to Hepatitis C drug Victrelis (boceprivir). CPPIB Credit Investments, a fund related to Canada's national pension plan, bought the rights, which stem from intellectual property Dendreon acquired in 2003 and later licensed to Schering-Plough. Merck & Co. bought Schering-Plough in 2009 and brought Victrelis to market, with FDA approval in May 2011. The royalty rate was not disclosed, but in a Dec. 6 note, ISI Group analyst Mark Schoenebaum estimated it to be 5.5%. The extra $125 million in Dendreon's coffers helps bridge the revenue gap the company revealed in its second-quarter earnings, which showed sales of $51 million and sparked a massive sell-off of shares. Third-quarter results were 30% higher, at $66 million, although $3 million of those came from the Victrelis royalties. Dendreon plans to submit a marketing application for Provenge in Europe early next year and contract out sales, though not necessarily strike a third-party deal for marketing rights. If Dendreon goes it alone in Europe, it remains to be seen if it will need to raise new funds for that effort. -- Alex Lash

Inhibitex: Oneof the more eagerly watched biotechs of the moment is Inhibitex, which hasunveiled impressive Phase II efficacy data for its nucleoside polymeraseinhibitor INX-189 in hepatitis C. With Gilead Sciences paying $11 billion lastmonth to acquire Pharmasset, another clinical-stage virology biotech postingimpressive mid-stage data with a “nuc” in HCV, market analysts have speculatedthat Inhibitex is a promising and lucrative buyout target. Investment house BreanMurray, Carret & Co. recently increased its target price for the stock from$4 to $10. On Nov. 29, the biotech announcedit had raised just under $20 million in an “at-the-market” financing – avehicle more common in the real estate arena, but which is seeing modest use by life sciences companies. In April, Inhibitex had raised$44 million in a follow-on public offering, moving 11.5 million shares at aprice of $4.10. In its more recent ATM deal, it managed to sell 1.95 millionshares at $10.25 each, under an arrangement with McNicoll, Lewis & Vlak LLC tosell registered shares into the open market from time to time under aneffective shelf registration. ATM deals offer companies advantages such as a low distribution cost ranging between 1% and 3%, muchlower than a typical follow-on financing. -- Joseph A. Haas

Celsion: Celsion, a cancer-focused biotech that recently moved its corporate headquarters from Maryland to New Jersey, raised $13.9 million in a private placement that closed on Dec. 6. But the offering pointedly did not include Celsion's largest shareholder, who has been agitating against the company in public filings. The additional funding is needed to continue Celsion's Phase III trial for Thermodox (a heat-activated liposomal encapsulation of chemotherapeutic doxorubicin) to a final analysis of 380 progression-free survival events in patients with primary liver cancer. Celsion, which had about $21 million in cash on hand at the end of the third quarter, had hoped mid-stage data would be sufficient to wrap up the trial early, but the Data Monitoring Committee could not halt the trial for efficacy based on 219 PFS events at an interim look. This led Celsion to announce the private placement Dec. 1 that would sell nearly 6.5 million new shares at $2.3125 a share, plus provide five-year warrants for another 3.24 million shares at an exercise price of $2.36 per share. The placement closed without the participation of Mangrove Partners, run by Nathaniel August. The day after it announced the placement, Celsion in a regulatory filing cited Mangrove's negative attitude and opinions of Celsion's performance. Celsion said it had offered to let Mangrove participate if it would sign a standstill agreement, but the parties "were unable to agree to terms," according to Celsion's filing. Celsion also said Mangrove had sought two seats on its board but said “it is in the best interests of the company and its stockholders at this time to maintain the current composition of the board and continue the company’s current strategic plan and direction.”-- JAH

Many thanks to Melanie Senior and John Davis for their help with this week's introduction.

Image under Creative Commons license, courtesy of flickrer Images_of_Money.

Exit/Financing of the Year Nominee: Radius Pharma

2011-12-07T12:00:00.000-05:00

It’s been a transformative year for Radius Health. The biotech is currently developing two formulations of a novel analog human parathyroid hormone-related protein that it hopes will supplant Eli Lilly’s Forteo (teriparatide) as the standard of care in postmenopausal osteoporosis. To finance those ambitions, the Cambridge, Mass.-based biotech laid the groundwork to reach the public markets in May through a reverse-merger with a listed shell, raised $57.3 million of a planned $91 million, three-tranche, cash-and-debt series C round, and eventually floated its shares on the OTCBB. (UPDATE: The rest of that $91 million was raised, the co announced 16 Dec.)

The company's maneuverings also give us a window onto the post-option biotech world, where biotech second-acts are in part defined by second-chance opportunities with once-partnered (or spoken-for) compounds. It's this vantage and the significant capital available for solid clinical opportunities, as much as the company's fundraising efforts, that earn Radius our nomination for financing of the year.

Radius's 2011 was set in motion years earlier, by Novartis’ 2009 decision to opt out of an opportunity to co-develop its hPHrP analog (BA058), an anabolic bone-building treatment that is in Phase III in injectable formulation and about to move into Phase II in a transdermal formulation. Novartis originally took an option to the program -- an early example of the now-common deal structure -- back in September 2007. That deal's financials were never fully disclosed, but future development, regulatory and commercialization milestones would have paid the small company upwards of $500 million. Instead, Novartis walked for what Radius calls "a strategic consideration," despite Phase II data that convinced Radius and its investors that pivotal trials were worth pursuing.

What Radius did next may be a roadmap for other companies who find themselves estranged from option-holding partners thanks at least in part to shifting tastes or strategic upheavals among industry's in-licensors.

Radius merged in May with MPM Acquisition Corp., an acquisition shell created by one of its venture capital backers, MPM Capital, putting its investors on an unusual path to liquidity. (Currently, the company offers stock on the OTC Bulletin Board and plans to apply for a Nasdaq listing in 2012.)

Concurrent with the reverse-merger, Radius raised $28.5 million in the first tranche of its C round from MPM and new investors BB Biotech AG, Brookside Capital, Saints Capital, contract research organization Nordic Bioscience AS (which will manage Radius's Phase III program) and specialty pharma Ipsen Pharma SAS. Then, in November, it raised the second tranche, bringing in $21.4 million from existing backers, and $6.25 million in debt from GE Capital, Healthcare Financial Services and Oxford Finance.

For now, Radius awaits its Phase III fracture data -- expected in 2013 -- and has designs on a new partnership once that's in hand. The other hand just might be holding our DOTY award. — Joseph Haas & Paul Bonanos

flickr photo by dorena-wm, courtesy creative commons license

2011 Alliance of the Year Nominee: Pfizer/Puma

2011-12-07T08:00:00.000-05:00

Hard to say what we like best about Puma Biotechnology and the sequence of deals in which Alan Auerbach repeated the formula by which he jumpstarted Cougar Biotechnology and later sold it to J&J for just shy of a cool billion. Was it the speed and ingenuity of the three-step transaction or the audacity of in-licensing a novel-acting agent against a tumor type owned by an entrenched powerhouse?

Yes and yes. The cat man is back and he’s telegraphing his intention to prove that his little guy’s solution to the IPO squeeze is replicable. How else to interpret the fact that puma is another name for cougar? Or that the reverse merger unfolded in the same way – reverse merge a start-up biotech into a Form 10 shell concurrent with raising money through a private placement. Or that, once properly funded, the same speed-to-market clinical strategy was implemented at both companies. This time around, however, the trick was fine tuned.

For starters, the time frame was compressed into a matter of days. Where Cougar licensed in abiraterone two years prior to reverse merging into the public shell SYRK 4, Puma licensed in neratinib from Pfizer days before reverse merging into Innovative Acquisitions Corp and raising $60 million in two tranches from its institutional investors. That raise, by the way, was the biggest for a reverse merger since Athersys pulled the same maneuver in 2007. Innovative Acquisitions, indeed.

Speed and size weren’t the only distinguishing features this time around. By licensing in neratinib – a potent, oral, pan-ErbB (Erb 1, 2, and 4) kinase inhibitor against Her2/ErbB2 positive breast cancer in adjuvant and metastatic settings – Puma is going up against Roche’s Herceptin. And it’s doing so in what’s shaping up to be a crowded field, with about 50 trials of agents against Her2+ metastatic breast cancer in Phases II and III.

We assume that Puma will aim to exploit well known vulnerabilities of Herceptin – its controversial efficacy in early-stage cancers, its IV formulation, and its risk of heart damage. Also, neratinib’s irreversible binding to the tyrosine kinase offers a mechanistic difference from Herceptin. And as Wyeth established, the pan-ErbB approach has promise in a variety of solid tumors, including gastric and lung cancers. For now, though, Auerbach is following the abiraterone playbook – winding down two Wyeth trials in early stage patients and gearing up to test (and launch) the drug as a second-line treatment in advanced HER2+ breast cancer patients.

Auerbach has upped his game with Puma. The terms of the deal with Pfizer, which were partially disclosed in Puma’s S-1 form filed on December 2, called for “substantial payments upon the achievement of certain milestones totaling $187.5 million, if all such milestones are achieved.” The agreement also calls for royalties on net sales of any compounds, including neratinib, licensed from Pfizer. Neratinib, after all, has undergone big pharma testing in phase II and III trials. That’s different from abiraterone, which was in a tiny Phase I trial when Cougar licensed it from small UK specialty firm BTG International Ltd.

But why do we really like this deal? In his first outing, Auerbach demonstrated that company creation around a cheap, innovative asset, and development to proof-of-concept and a successful exit-by-acquisition can be done fast and on a shoestring budget. In a way, he helped to democratize the financing of drug development. Of course, it didn’t hurt that he was a savvy, ex-sell side analyst who knew how to source, vet, and develop an early-stage cancer asset. Cougar was an object lesson in resourceful financing and hyper-capital efficiency. With Puma, he’s up to the same game, but he’s come back to show he can play with the big boys.

image by victor+ via flickr courtesy creative commons license

2011 Alliance Of the Year Nominee: Pfizer's CTIs

2011-12-07T04:03:00.008-05:00

We can always count on Pfizer to make the biggest splash. While it might be glad to have shed its traditional image as the big clumsy beast with the largest swarms of reps and the hugest mouth to swallow up its biotech prey, Pfizer would nevertheless be proud to have its Centers for Therapeutic Innovation (CTI) network held up as one of the most prominent and ambitious examples of pharma's growing love-affair with academics.

This DOTY candidacy, then, is about the spirit of the times. Pharma's attraction to academia as the answers to their R&D problems remained, we argue, among the most important alliance trends for 2011, with ever-more deal flavors and sizes coming forward.

CTIs deserve a vote for being one of the most interesting (though let's vote in a couple of years on whether they were most productive): they're city-based networks of medical institutions that will, in theory, throw up the projects that the pharma giant needs to fuel is biopharmaceutical pipeline. In a "pioneering, open-innovation partnering model", Pfizer commits anywhere between $85m-$100m per city, sets up a physical space in those locations to pull together its chosen academic collaborators with Pfizer scientists, and invites proposals from those entrepreneurial (and reward-seeking) academics that reckon they have the kind of novel, fast-to-clinic large molecule programs that Pfizer's looking for.

The first CTI spawned in San Francisco in late 2010, since then they've popped up in New York (assembling seven medical centers with up to $100m funding) and Boston, and there are satellites in San Diego and Philadelphia. The initial plan envisioned 8 cities, including in Europe; that may be an under-estimate, though, said Tony Coyle, VP of the CTI programs, back in June 2011. The full scope depends on whether the program works, and yields clinical candidates.

And there's the crunch. Will enough scientists propose sufficient high-quality programs that meet Pfizer's tight selection criteria, or will the generous funding available simply sift out the greediest (leaving the truly talented to aim for dwindling NIH money)? Will Pfizer (and other big Pharma) hold to its promise to be fair and equitable with its academic partners (which, let's face it, wasn't the case in yesteryear's fruitless tie-ups)?

According to JC Gutierrez-Ramos, one the project's main drivers who also runs biotherapeutics R&D at Pfizer, the three CTIs have generated 14 funded programs to date (out of 280 submissions), and he expects 22 funded programs by the end of the first quarter of 2012. Selection took somewhat longer than expected in some cases, according to one academic partner, and not all institutions have contributed suitable projects as yet. But JC claims 75 Pfizer employees are now involved (of which 50 are new recruits).

So things are moving. And although they'll take time to bed down, Pfizer's aiming big: to have 40-70 CTI programs across the globe in a couple of years' time, the first clinically-validated candidates entering Phase III within 4-5 years (at a "fraction" of the cost of doing this internally) and for the overall project to hold up as a viable, productive alternative model to the VC-backed biotech start-up route.

Vote for the ambition, if not the concept.

2011 M&A of the Year Nominee: Endo/AMS

2011-12-06T11:16:00.010-05:00

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (half a dozen in each category throughout December) 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™.

Endo’s $2.9 billion in cash acquisition of American Medical Systems Inc., in June 2011, throws the spotlight on the use of deal-making to go beyond the quick fix. In doing so, Endo had to overcome internal resistance, investor second-guessing, and industry's current preference, it seems, for high-stakes specialization over diversification.

But overcoming obstacles in order to exercise a grand ambition is not the chief reason Endo deserves the DOTY reward. No, the real draw here is management’s adamant vision in the face of a changing reality. Every good company constantly evolves, but only a few complete radical makeovers as rapidly as Endo has. Clearly, external drivers forced Endo’s hand: namely its over-reliance on one therapeutic area, and one medication, Lidoderm, in particular, the ever-riskier reliance on R&D innovation, and the long-term implications of health care reform.

Faced with similar problems, however, many companies, large and small, have huckered down and focused harder on innovation in their core expertise. Others have turned to in-licensing late-stage assets, withdrawing from the R&D-based business model. Endo has taken a third approach – not ditching pharma R&D completely, but moving beyond it to define its strategy not by therapeutic area, but by its customer base, that is, through a “continuum of care” approach that binds it closer to doctors and payers.

Endo was on the finals list for DOTY in 2010 for its HealthTronics acquisition—the first of its major diversification moves--but didn’t win; its return to the polls in 2011 is a testament to management’s perseverance and guts, this time, with a deal that follows similar reasoning on a larger scale and in doing so erases all doubts.

The deal in question thrusts Endo further into urological devices and services, a sector it had little presence in two years ago. Until 2008, Endo derived close to 90% of sales from its pain medication franchise, led by the best-selling topical pain drug Lidoderm. Urology now accounts for $1 billion of its sales, or more than a third of Endo’s total revenues; its key therapeutic areas have expanded to urology and oncology -- and not just drugs but devices and services as well. AMS complements other key acquisitions that Endo has made since ex-J&J executive David Holveck took over as CEO in April 2008: Indevus Pharmaceuticals (2009), HealthTronics, Qualitest (2010), and Penwest (2010).

As such, the company has built a presence in urology that “includes a broad network of partnerships and relationships with the overwhelming majority of US-based urologists,” CFO Alan Levin told analysts at a recent investor forum. The data generated by intensifying relationships is “critical to enhancing the organic growth potential of our urology franchise,” says Holveck. The company furthermore has identified potential cross selling opportunities for several of its product lines – a sticking point, until now, with Wall Street -- and a savvy way to gain more market data. A pilot program now getting underway, for example, trains AMS' men’s health division on selling the Fortesta gel, a newly launched topical testosterone replacement for hypogonadism, which Endo gained from the Indevus deal. The pharma urology reps are getting trained on AMS men’s and women’s health products. Other opportunities for selling synergies include Endocare cryoablation therapy, which came with the HealthTronics acquisition, and AMS’s GreenLight laser for benign prostatic hyperplasia.

If R&D-focused pharmacos are struggling to find the right value in innovation, Holveck says Endo has found the right mix through diversification, both within pharma and beyond it. “Understanding how the continuum of care is given and the products that interrelate with that care,” adds value to the urology practice, he says. And it also reduces event risk, which is implicit in the branded portfolio. Health care reform’s impact is a case in point. Endo estimates it will cut $40 million from the branded pharma business’ top line due to increased discounts to payers, particularly reflecting the higher Medicaid drug rebates. But it should also lead to higher sales on the generics side of the business. And, pointed out Levin, devices have not been greatly affected by health care reform proposals, aside from a 2.5% tax on US revenues, which takes effect in 2013.

For this opportunity, Endo has paid well – the multiple for AMS, itself a spin out from Pfizer, which private equity firm Warburg Pincus acquired in 1999 -- was approximately 14 times trailing EBITDA, the Qualitest multiple slightly less. The process wasn’t at all easy, as Endo’s management is first to admit, and the combination of devices and drugs still leaves Wall Street a bit queasy. But the stock has climbed nearly 50% since Holveck came to the company in April 2008, and although it's just treading water year to date 2011, that’s better than most of the industry. Just as important, Endo is poised to move swiftly in a rapidly changing health care environment.

Deals of the Week Checks on Gilead/Pharmasset Ripples

2011-12-02T19:38:00.000-05:00

The $11 billion Gilead Sciences paid for Pharmasset and its promising Phase II nucleoside polymerase inhibitor on Nov. 21 opened eyes, but also sparked a great deal of speculation. Particularly, what would this record-shattering deal mean for other biotechs with un-partnered candidates for hepatitis C?

Deals of the Week posed the question to Mark Schoenebaum, the highly vocal biotech and pharmaceuticals analyst for ISI Group. “It’s unknown,” he responded. Well, so are the combatants in next year’s Super Bowl, but presumably the football analysts at ESPN have their guesses.

“There’s speculation that it was a competitive process to get Pharmasset, so presumably there’s more than one company willing to pay a big number,” he continued. “So it begs the question why wouldn’t [the losing bidders] just have gone after Inhibitex, which has shown similar potency" [with Phase II nucleoside INX-189 to Pharmasset’s PSI-7977]? Idenix, in contrast, so far has not shown similar potency [with nucleoside polymerase inhibitor IDX184]. These companies in short could have turned to Inhibitex or Idenix, but he observed, “They’ve already chosen not to.”

That is a minority opinion on Wall Street, if a perusal of market analyst commentary in the past week is a good indication. Headlines about Inhibitex like “And Then There Was One … INX-189 Represents The Best Chance to Compete with Gilead’s New Hep C Franchise” (Brean Murray, Carret & Co., Nov. 29) have been plentiful.

While Inhibitex has dominated the chatter, fueled in part by new data indicating INX-189 might work better in combination with current HCV standard ribavirin than PSI-7977, Idenix and Achillion have benefitted too. William Blair & Co. upgraded Idenix’s stock to “outperform” and raised its target share price from $4 to $10, while it nudged up Achillion’s target price from $7 to $8. Meanwhile, Wells Fargo initiated coverage of Achillion with a rating of “outperform.” (Achillion CEO Michael Kisbauch, who has steered the company through multiple ups and downs, has wasted few opportunities in recent weeks to talk up his company as a burgeoning M&A target.)

Achillion will not be the sought-after party, if other HCV players, such as Merck, Roche or BMS try to match Gilead’s acquisition. While it can boast a pipeline of five clinical candidates for HCV, all are protease inhibitors, NS5A inhibitors and NS4A inhibitors — that is, certainly not first-in-class. Idenix has two clinical candidates for HCV, although its non-nucleoside polymerase inhibitor (aka “non-nuc”) currently is stalled (apparently for financial reasons) in Phase IIa.

However, Idenix has IDX184 in Phase IIb, and that class is considered the hottest item in hepatitis C as companies race to develop a combination of direct-acting antivirals that will render long-scorned (but effective) pegylated interferon unnecessary in treatment of the virus.“Presumably, people are trying to get a hold of nucleosides right now,” Schoenebaum said, dismissing Achillion as a likely acquisition. “Protease inhibitors, NS5A inhibitors and non-nucs seem to be a dime a dozen. The whole premise behind the Pharmasset acquisition was to get a nuc.”

While Inhibitex seems positioned ahead of Idenix, thanks to cure data that range closer to PSI-7977’s impressive mid-stage stats, Schoenebaum is reluctant to say that company is the next hot takeout candidate or even that a bidding war could occur among big pharma for either of these properties.“In biotech, companies that everybody thinks are going to get bought generally aren’t,” he cautioned – and vice versa. “In the last few months, people said ‘Pharmasset isn’t going to get bought, it’s too expensive now.’ Well, it got bought. Now, everyone is saying Inhibitex is going to get bought – it might. But often those are the ones that don’t get bought.”

Wall Street analysts won’t be the only ones eagerly watching the next moves in the HCV space – we’ll be on hand in the In Vivo Blog and "The Pink Sheet" to give you all the play-by-play. Now, read ahead for news on other intriguing, if not record-shattering, business development happenings over the past week. It’s time for the latest installment of …

Transcept/Purdue: On Nov. 23, FDA approved Transcept Pharmaceutical’s Intermezzo (zolpidem tartrate) for middle-of-the-night waking. A week later, the biotech’s partner Purdue Pharma exercised its option to commercialize the first-of-its-kind sleep agent in the U.S., Canada and Mexico. Intermezzo is the first fruit of Purdue’s efforts in recent years to diversify away from reliance on its flagship product OxyContin. Intermezzo was approved despite two complete response letters and lingering FDA concern about the potential for abuse and next-day impairment. As Glenn Oclassen, CEO of Transcept, announced during a business update call on Dec. 1, Purdue plans to launch Intermezzo in the second quarter, “and to invest approximately $100 million to support the first 12 months of sales and marketing.” Oclassen stated that the terms of the deal include milestone payments, royalties and a Transcept option to co-promote the drug to psychiatrists “as early as the first anniversary of the commercial launch, and as late as approximately four and a half years post launch.” But the most valuable aspect of the deal, he told investors, lies in the base royalty on U.S. sales; Purdue will pay Transcept tiered royalties ranging from the mid-teens to the mid-20% level. On exercise of the co-promote option, Transcept is entitled to additional co-promotion royalty from Purdue on net revenues from sales to psychiatrists. This additional royalty ranges from a high of 40% down to approximately 20% depending on when, post launch, Transcept begins marketing to psychiatrists. The syndicate of investors that backed the biotech included NEA, Newleaf, and Interwest.--Mike Goodman

Servier/MacroGenics: Among the dozens of antibodies MacroGenics acquired when it bought Raven Biotechnologies in 2008 was MGA271, which targets a protein over-expressed in a variety of cancers. This week, French biopharma Servier purchased an option to license the drug in Europe and many emerging markets for $20 million up-front, which it can exercise for another $40 million upon receipt of Phase I data. MacroGenics would retain rights in North America, Japan, Korea and India, while Servier’s option covers the rest of the world. MacroGenics began dosing patients in July for a Phase I study, but complete data isn’t expected for two to three years, at which time Servier has a limited window in which to exercise the option. The antibody targets B7 homolog 3, one among many B7 immune receptors that affects T-cell growth. MacroGenics CEO Scott Koenig said the March 2011 approval of Bristol-Myers Squibb’s ipilimumab, which acts on a similar pathway, spurred interest in the compound, as did an increase in published literature about the mechanism of action. MacroGenics will continue to fund the Phase I study itself, but if Servier exercises its option, the two will fund ongoing trials jointly; ongoing milestone payments could add $390 million more to the deal. In October 2010, MacroGenics announced a pair of partnerships with Boehringer Ingelheim and Pfizer simultaneously; the company took back diabetes drug teplizumab from Lilly after development was halted following receipt of discouraging Phase III data. – Paul Bonanos

Infinity/Mundipharma: Mundipharma has extended its R&D collaboration with Infinity Pharmaceuticals, making a $50 million commitment Nov. 29 to fund continued development of PI3 kinase inhibitor IPI-145 and other programs. Ultimately, that dollar amount could be increased to include funding for mid-stage Hedgehog pathway inhibitor IPI-926. Infinity is completing Phase II trials in pancreatic cancer and myelofibrosis and then will seek an end-of-Phase II meeting with FDA to determine the compound’s future development path. Mundipharma began its collaboration with Infinity in 2008 under a “big brother” arrangement in which the biotech swapped the majority of its promising pipeline in exchange for independence from the capital markets. Last year, Mundipharma agreed to provide another $110 million in R&D funding for Infinity’s programs in 2012. In total, Mundipharma has provided R&D funding of $50 million in 2009, $65 million in 2010 and $85 million this year. Including the additional commitments set for next year and 2013, Mundipharma’s total contribution to Infinity’s R&D efforts will be at least $360 million.—Joseph Haas.

Affymetrix/eBioscience: The funding pressures on academic and government R&D programs that have caused the market caps of sequencing companies like Illumina and Life Technologies to plummet similarly affect Affymetrix and its array business. Affy also has to be cognizant of the looming threat posed by sequencing, as both next-gen and targeted resequencing machines drive down the costs and widen the breadth of genomic analyses over all. Hence the company’s articulated strategic plan to diversify into markets downstream of genomics and discovery – a goal its acquisition of eBioscience, a maker of consumables for single cell, proteomic, and genetics analysis and the number two player in flow cytometry reagents (behind Becton Dickinson Pharmingen) -- fits nicely. Through prior acquisitions Panomics and USB in 2008 and 2007, respectively, the company gained a foothold in the cytogenetics and life sciences reagents businesses, supplementing its core gene expression technology. Now, Affymetrix is paying $330 million cash, or 4.5x revenue and 14x EBITDA in 2011. The steady expansion of the reagents business makes sense. Although many of eBioscience’s competitors – including BD, Sigma-Aldrich, and Beckman Coulter – have deep pockets and could make growing market share difficult, these companies have not been very aggressive in filling their channels with the reagents needed to implement newer, innovative R&D approaches like single-cell analyses.--Mark Ratner

Curis/The Leukemia & Lymphoma Society: Curis has paired up with The Leukemia & Lymphoma Society to develop CUDC-907, a Pi3K and HDAC inhibitor that has shown preclinical promise as a treatment for B-cell lymphoma and multiple myeloma. Under the terms of the agreement, LLS will fund half of development costs – up to $4 million – from now until proof of concept at either Phase Ib or Phase IIa. Curis expects its first payment from LLS for an undisclosed portion of the $4 million will be at the beginning of the third quarter next year, shortly before the company files an IND. LLS stands to receive 2.5 times its original investment -- $10 million – should ‘907 reach commercialization, whether through Curis itself or with the help of a partner. The partnership with the society will help move the pre-clinical asset forward; something Curis couldn’t do on its own. The company recently received an $8 million milestone from Big Pharma partner Roche, when its subsidiary Genentech filed an NDA for Curis’ late-stage asset vismodegib. Curis expects to begin collecting revenue from the drug in 2012. -- Lisa LaMotta

PTC Therapeutics/Roche: PTC and Roche announced Nov. 28 that they have entered into another venture, the first between the Big Pharma and the biotech since their deal in 2009. PTC, based in South Plainfield, N.J., will receive $30 million upfront and has the potential to earn $460 million in development and commercial milestones, as well as double-digit royalties. In exchange, Roche will have an exclusive worldwide license to PTC’s spinal muscular atrophy (SMA) program, including three pre-clinical assets and potential back-up compounds. Roche will handle all development funding. The collaboration includes the participation of the SMA Foundation, which has contributed $13 million to the funding of the program so far. The SMA Foundation has three clinical sites at Harvard, Columbia, and the University of Pennsylvania, where it hopes that the clinical trials will take place once the PTC compounds move into the clinic. SMA is caused by a lack of the SMN1 gene. These patients have a “back-up gene” called SMN2, but SMN2 has a splicing defect and fails to produce the proper protein, as would the SMN1 gene, Virani explained. PTC has been working to develop a method that could help fix the splicing issue with the SMN2 gene.—L.L.

Elan/University of Cambridge: The sale of its drug formulation and manufacturing unit to Alkermes Inc. earlier this year has been transformational for Elan Corp. With that deal, the Dublin, Ireland-based biotech has been able to reduce its debt pile from $1.2 billion to $600 million, and is now able to concentrate on making targeted research investments in the neuroscience field, like the $10 million tie-up announced this week with researchers at the University of Cambridge. The new Cambridge-Elan Centre for Research Innovation and Drug Discovery will bring together researchers from Elan's research facility in South San Francisco, Cal., with academics in Cambridge, U.K., in a 10-year effort to find innovative therapies for Alzheimer's and Parkinson's diseases. They will be evaluating the role of protein misfolding, long thought to be a cause of neurodegenerative conditions like Creutzfeld-Jakob disease.— John Davis

image from flickr user JPott used under creative commons license

2011 M&A of the Year Nominee: Sanofi/Genzyme

2011-12-02T08:29:00.001-05:00

Sanofi’s drawn-out and complicated acquisition of Genzyme was the story that had it all – a hostile takeover attempt (which eventually morphed into friendly merger talks); more than a year’s news flow with well-timed leaks and opportunities to interpret cryptic “he said, he said” commentary from the two companies’ principals – Chris Viehbacher and Henri Termeer (neither a shrinking violet); a huge price tag ($20.1 billion); a relatively novel deal add-on in the form of a contingent value right pegged to sales performance of Lemtrada and manufacturing of Cerezyme and Fabrazyme; and, oh yes, regulatory controversy.

When Sanofi began “kicking the tires” of the Boston big biotech, Genzyme was digging out from a summer 2009 plant shutdown due to viral contamination in a bioreactor, a six-week interruption in production that plagues the availability of top-selling enzyme replacement therapies Cerezyme and Fabrazyme to this day. By the time Viehbacher and Co. completed their quest for diversification into biologics and ultra-rare diseases, Genzyme was operating under an FDA consent decree and constantly fielding complaints from patient advocacy groups about rationing of Cerezyme and Fabrazyme.

But Sanofi had good reason to go ahead with the acquisition – it was facing near-term loss of patent exclusivity for blockbusters like Plavix, Lovenox and Taxotere. Despite its manufacturing woes, Genzyme could add $4.05 billion in product sales to Sanofi’s top line and $422 million in profits to the bottom line. In addition, Genzyme’s portfolio of drugs for rare diseases offered Sanofi another growth platform, like the consumer health products and expertise it gained in its 2009 purchase of Chattem.

Ultimately, the French pharma closed the deal in February 2011, buying out Genzyme for $74 a share, a decent premium and a bit up from its initial bid of $69 a share, but not in the range of the $87 a share or so that Termeer lobbied for in the press and behind the scenes. The uncertain future of Cerezyme and Fabrazyme, complicated by competition from new drugs from Shire and Pfizer partner Protalix, hamstrung Genzyme’s bargaining power, and ultimately one of the most-celebrated U.S. biotech success stories ended up just a subsidiary to a multinational Big Pharma.

The CVR continues to intrigue nearly a year after the deal closed – it brought shareholders the potential for up $14 per each Genzyme share tendered to Sanofi. Of that, $13 will be tied to future sales performance of Lemtrada, a pipeline candidate for multiple sclerosis. It’s anyone’s guess at this point how much, if any, of that return will be realized – Lemtrada remains in clinical development, but Genzyme announced promising data from the Phase III CARE-MS II trial in mid-November. The remainder, dependent on Genzyme meeting 2011 guidance for production of Cerezyme and Fabrazyme, already is a lost cause, as Fabrazyme in particular has met one production snag after another since the 2009 shutdown.

Other DOTY candidates in the M&A category may beg for votes – the oft-delayed Sanofi/Genzyme marriage simply does not need to. It was the story of the year in biopharmaceutical M&A.—Joseph Haas

image from flickr user f-oxymoron used under creative commons license

2011 Exit/Financing of the Year Nominee: BMS/Amira

2011-12-01T09:00:00.000-05:00

It's time for the INVIVO Blog's Fourth Annual Deal of the Year! competition. This year we'representing awards in three categories to highlight the most interesting andcreative deal making solutions of the year. The categories are: M&A Deal ofthe Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'llsupply the nominations (half a dozen in each category throughout December) andyou, the voting public, will decide the winners (by voting early and often,commencing once we've announced all the nominees). Strap yourselves in, it'sThe Race for the Roger™.

Perhaps you're wondering why we've nominated Bristol-Myers Squibb’s $325 million buyout of fibroticdisease specialist Amira Pharmaceuticals in the exit/financing category, not under M&A. It's for the fecundity. No less than five new entities have originstied to BMS/Amira, a deal whose creative structure gives it additional importance beyondidiopathic pulmonary fibrosis, the disorder that Amira’s lead molecule is designed totreat. It also doesn't hurt that the deal delivered a double-digit return multiple forAmira’s earliest investors; but the union mainly merits the Roger because of the way it’s produced descendants. Sowhen you vote, please, we beseech you, thinkof the children.

As buyers circled prior to Amira’s late July sale, thestartup and its board found plenty of interest for the fibrosis program, butpotential suitors were concerned about one complicating factor: Amira’s existingpartnership with GlaxoSmithKline for a FLAP inhibitor for asthma, with amilestone and royalty stream hanging in the balance, still carried risk for a buyer.Not every acquirer was interested in Amira’s DP2 antagonist for chronicobstructive pulmonary disease, either. Rather than bundle the assets the buyersdidn’t want with the one they did, the two were spun out in separate companiesso that the IPF program could be sold with Amira itself. (BMS also acquiredAmira’s preclinical autotaxin program, which addresses chronic pain and cancermetastases.) And so the first two descendants were born: FLAP LLC and PanmiraLLC, each created as a limited liability corporation for tax-saving reasons.Each could be sold or partnered relatively easily.

But the deal’s fertility didn’t stop there. VersantVentures, one of the firms that cashed out in the sale, drew up a whole newinvestment model designed to avoid Amira’s complications – and hired Amira’schief scientist, Peppi Prasit, to get it off the ground, formally establishing three new companies in the process. Versantfirst established Inception Sciences, a drug discovery “mothership” that will spinout asset-focused companies to house drug candidates as they reach maturity;the firm also invested $5 million apiece in Inception I and II, the first twoLLCs that will shepherd those assets along. Versant’s Brad Bolzon said the“gymnastics” of the Amira deal inspired him to create a model in which assetscould be lodged in separate companies much earlier in the development process,rather than spinning them out when a sale became imminent.

Progeny aside, the deal gives BMS a hard-charginghorse in the race to own the first IPF drug approved in the U.S.; LPA-1 receptorantagonist AM-152 could bring relief to a U.S. patient population of about100,000. The drug is thought to have disease-modifying properties, setting itapart from InterMune’s Esbriet(pirfenadone), already approved overseas, and other candidates in the hands ofJ&J and Boehringer Ingelheim that slow progression but do not alter thedisease itself. Amira’s price tag was higher than that of Arresto Biosciences,another startup with an IPF drug that was acquired by Gilead Sciences in late2010 for $225 million; the deal also intensifies competition for Stromedix, the lastventure-backed startup left with an IPF-fighting asset that holds similarpromise.

Moreover, Amira’s high up-front price also led to a generous payout for itsshareholders. Novo Ventures’ Heath Lukatch confirmed to "The Pink Sheet" DAILY that Series A investorsVersant and Prospect Venture Partners would receive double-digit returns ontheir 2005 investment, while Novo would receive roughly seven times itsinvestment, provided the first milestone payment appears as expected by year’send. It’s just one more way BMS/Amira was the year’s most fruitful deal – andmost deserving of a Roger.

Photo courtesy of Flickr user anyjazz65, reproduced under Creative Commons license.

"The Trenton Patient"

2011-11-30T16:05:00.001-05:00

In Tuesday's New York Times, biotech writer Andrew Pollack has an overview of the work in progress to reach a cure for HIV, a story that we covered in the October issue of Start-Up.

Our favorite part of the story is Pollack's quotes from the anonymous HIV-positive patient whose early-stage clinical results were highlighted in September by Sangamo BioSciences. Sangamo's treatment SB-728-T aims to replace an HIV-positive person's immune cells with versions that lack the CCR5 receptor, the virus's main avenue of infection, and render them resistant to HIV.

The patient, who participated in a Phase I trial of SB-728-T at the University of Pennsylvania, was a lively interview. Identified only as "the Trenton patient," he told Pollack that the Sangamo treatment has made him feel both "like Superman" and "like Oliver Twist," the Dickensian orphan who held out his empty bowl and asked for more, please.

He might get his wish. As we explained in Start-Up (excerpted below), the Trenton patient's results were remarkable enough to encourage two more clinical trials, including one in patients who carry the same genetic quirk:

The Penn trial also included a three-monthinterruption of the patients' HAART regimens to see if the genetherapy had any effect on viral load. In one patient, viral loadwent down until the virus was undetectable and stayed that wayuntil the end of the treatment interruption. That patient turned out to be heterozygous; one of his two CCR5genes was already mutant, which means the treatment resulted in ahigher amount of biallelic modification in the patient – inother words, mutations to both copies of CCR5 genes. It's what[Sangamo CEO Edward] Lanphier calls "an important clue" that biallelic modificationcould have a strong correlation to reduction of viral load, and itwill be the basis for Sangamo's next two studies scheduled to startin the first half of next year, with their clinical phase not yetdetermined. One study will focus on heterozygous patientsspecifically to see if results from the Penn trial patient can berepeated; the second study will use engraftment enhancementtechniques already in use for cancer treatments to boost biallelicmodification and make SB-728-T potentially applicable to a muchbroader HIV-positive population, not just heterozygotes.

For more on the revival of hope in HIV treatment, as well as some hard questions about who will fund the important work, read our story and let us know what you think.

Image courtesy of flickr user Sully Pixel via a Creative Commons license.

2011 Alliance Of The Year Nominee: Lilly/Boehringer

2011-11-30T14:00:00.000-05:00

It's one of the biggest risk-sharing deals ever. It has oral drugs. It has insulins. It has biosimilars. And it's still making waves (including deal-breakers) in the already-choppy ocean that is diabetes.

Who would have expected Indianapolis-based Lilly to marry its struggling diabetes franchise with what's still only a pipeline at private German group Boehringer Ingelheim? The culture clash in itself deserves a DOTY nomination, but then there's so much more besides.

The January 2011 deal saw Lilly and BI agree to develop and market two of BI's oral diabetes compounds, a DPP-4 inhibitor Tradjenta (linagliptin) and a SGLT-2 inhibitor, and two of Lilly's basal insulin analogs, including a potential biosimilar version of Sanofi's Lantus (basal insulin glargine). So far, so fair. Except that BI gets an initial $388 million up front from Lilly, plus an option to co-develop and co-promote Lilly's chronic kidney disease antibody once it reaches Phase III.

Deal of the year for BI, then, perhaps, which gets paid to enhance its emerging diabetes portfolio and to tap into the services of an experienced diabetes marketing partner. This perceived imbalance is in part explained by Lilly's desperation, as it faces one of industry's steepest patent-cliffs, with the recent US expiry of $5 billion schizophrenia drug Zyprexa compounded by that of Gemzar in 2010, and by Cymbalta and Evista in 2013 and 2014. It's also in part about Lilly's defiant anti-M&A stance.

So to those ocean waves that, along with the chunky upfront, sheer number/size of big drugs involved (combined peak sales of $10 billion, predicts BI...), and not-to-be-sniffed at regulatory-milestones (over $800 million for BI for its hopefuls, and $650 million for Lilly for the insulins) make this a mightily strong DOTY candidate.

The effects of the Lilly/BI deal have rippled well beyond these two unlikely spouses. The deal provided a window onto the fascinating dynamics of the diabetes market, and -- importantly to those dynamics -- triggered Amylin's walk-out from its own Lilly partnership on the first-to-market GLP-1 agonist Byetta (exenatide) and once-weekly follow-on Bydureon. (No-deal-of-the-year nominee, perhaps?)

After almost ten years in bed with Lilly, Amylin felt let down by Lilly's agreement to co-commercialize BI's Tradjenta, which it felt would compete with its GLP-1s, even though the latter are injectable. After a lawsuit, Amylin paid (up to $400m in up-fronts and milestones) and left. Now the question is which of the diabetes leaders (Sanofi, Novo?), or indeed, which diabetes hopeful (GSK, Pfizer?) will buy Amylin? (Let's make that deal a 2012 nominee ... see, we're just so ahead of ourselves).

If the big-picture twisting-and-turning plot of this deal haven't convinced you yet, consider some of the commercial back-stories in the fast-moving diabetes space: can third-to-market Tradjenta carve out any niche in what has become a comfortable playing field for Merck & Co. Inc.'s first-to-arrive Januvia (sitagliptin)? And do safety concerns raised by an FDA panel over BMS/AZ's dapagliflozin, the first SGLT-2, spell the end for BI's second asset in the deal? As such, is Diabetic Investor's David Kliff right in saying that "Lilly has made a huge mistake" with this deal?

Meanwhile, can Lilly, whose strength has lain in insulins, rather than oral diabetes drugs, successfully apply the aggressive pricing tactics that have recently bought it some time (and market share) in existing insulin markets, to its insulin glargine candidate?

The story of Lilly-BI and the sub-plots it has generated is un-putdownable. There will be further series to follow. It's not a single DOTY, its a whole DOTY (and non-DOTY) franchise. Never mind those 'biggest ever', or 'most-creative ever'. Vote for the most interesting -- and get more bang for your vote.

image by flickrer watch4u, used under creative commons

2011 Exit/Financing of the Year Nominee: Ascletis

2011-11-30T12:39:00.000-05:00

Emerging biotech Ascletis Inc. is embarked on a truly ambitious attempt to create a trans-global pharma company and, in doing so, has raised one of the largest Series A rounds ever in biopharma -- $50 million in the first tranche, with another $50 million guaranteed to follow when the company hits certain milestones. Based on those achievements alone, Ascletis surely qualifies as a top-gun deal-maker of 2011.

The money speaks for itself—only 10% of 2011’s year-to-date Series As raised more than $40 million—and of those, only one other, Hua Medicine, also a Chinese biopharma, raised $50 million.

Asceltis’ round was the largest by far but the company is distinct in other ways that enable it to creatively exploit a host of industry-wide trends. Its strategy is to search globally for appropriate clinical-stage in-licensing candidates, which it can develop and eventually commercialize in China. It also plans to discover new drugs internally and bring them through mid-stage trials before seeking global partners for large-stage development and commercialization.

The aim, it says, is creation of a true hybrid model, poised, on the one hand, to capitalize on the innovation and strategic expertise of Western trained executives and scientists and, on the other hand, China’s capital efficiencies and opportunities for accelerated research. To drive its point, Ascletis recently broke ground on a new China headquarters and R&D center in the Zhenjiang Province in China and is planning a U.S. headquarters in Research Triangle Park, NC.

With la creme de la creme Western-trained management talent moving to China, more opportunities for savvy in-licensing deals exist there. The therapeutic areas of interest are oncology and infectious diseases, reflecting the expertise of its co-founders and scientific advisors, Jinzi Wu, a former VP, global HIV drug discovery at GlaxoSmithKline, Xiao-fan Wang, a professor of cancer biology at Duke University Medical Center, and Allan Baxter, former global head of medicines development at GSK.

And the financial largesse stems from the generosity of one angel investor, real estate billionaire Jinxing Qi, with additional commitments from unnamed private investors in the U.S. and China and elsewhere. That in itself is a trend, as angel investors, stepping in seem likely to be playing increasing, albeit limited, roles in early-stage biotech financing. And, of course, China itself is a massive commercial opportunity for the right talent, with a CAGR of 17% estimated between 2011 and 2015, according to IMS Health, which predicts China will be the world's second largest pharma market by 2016, up from No. 3 in 2010.

Of course, finding solid development stage assets is a hurdle, even for large, deep-pocketed companies. And the hybrid U.S.-China combined development strategy didn’t pan out for some earlier companies. But Ascletis, by dint of its multi-faceted strategy, highly experienced, globally-oriented management team, and angel-backed financial cushion, is de-risked more than most, even as it positions itself to benefit from one of the industry’s biggest current opportunities. A deal-maker of this caliber surely deserves Deal Of The Year recognition.

Guest Post: Advancing Next-Generation Combo Therapy in Oncology

2011-11-30T09:00:00.000-05:00

By Aidan Finley, Consultant, Health Advances

We are all well aware that oncology is rapidly undergoing significant changes. Encouraged by recent FDA guidance, we've begun a transition from empirical combinations developed post-approval to rational combinations co-developed in the clinic. In this month's IN VIVO, Health Advances addresses the past and future of combination therapy for oncology.

As demonstrated by the recent launches of Xalkori and Zelboraf, the right ingredients are finally in place: more comprehensive genetic and biologic understanding of tumors, better tumor pathway definitions, availability of companion diagnostics, and a burgeoning armamentarium of clean targeted single and multi-kinase inhibitors. To transform these ingredients into successful drugs is no mean task: both clinical trial design and dealmaking need to change.

Fortunately, clinical trials are changing. We see an increase in combination trials, not just of established assets, but of novel agents early in development. For example Novartis recently combined its novel mTOR inhibitor Afinitor with Pfizer’s aromatase inhibitor Aromasin to great effect in breast cancer, showing PFS and OS survival benefits. And Syndax Pharmaceuticals released findings at AACR showing beneficial combination of its HDAC inhibitor entinostat with exemestane in breast cancer, and published a trial of entinostat in combination with Vidaza in NSCLC.

We also see more development of precisely dual targeted kinases, like Roche’s dual PI3k/MTOR inhibitor (GDC-0980) or Novartis’s competing dual P13k/MTOR inhibitor (BEZ235), or VEGF/FGF inhibitor dovitinib. Clinicians are also embracing the potential of new agents and combinations to affect resistance, a durable unmet need: At this moment at the MGH there are 4 trials opening for patients resistant to BRAF inhibitor in melanoma and 10 trials for patients with resistance to targeted agents in lung cancer. Collectively, these trials and abstracts represent the growing consensus around next generation combination therapy and the route by which sponsors, clinicians, regulatory authorities, and patients can advance care.

But biopharma partnership strategies need to evolve to allow for testing of more and better drug combinations (and we see more room for improvement here). Ultimately, developers need to balance the control of intramural development with the flexibility and risk-sharing of partnerships and joint ventures. AstraZeneca and Merck famously began their ALK and MEK collaboration in 2009 in part because their research directors bumped into one another at a security queue while traveling to a conference. Despite growth in cancer-specific partnerships since (e.g. Merck-Serono and Sanofi in 2010, Roche and BMS in 2011), has a better mechanism for identification and execution of partnership been identified?

One necessary change is a tighter coordination between R&D and BD. R&D efforts can no longer be siloed, or pursued in isolation without consistent reference to corporate strategic goals. BD efforts need to be partially focused on identifying both potential strategic partnerships and as well as agent-extending in-licensing efforts. Staying on top of the literature, BD can work to bring in complementary agents to better achieve dual inhibition of a target (e.g. to achieve something like the demonstrated benefits of trastuzumab and pertuzumab in Her2+ breast cancer) or actively seek agents targeting newly validated targets like EML4-ALK rearrangements after high-profile publications.

Given these factors, it makes perfect sense that oncology deal-making is aggressively moving earlier (pointed out by Campbell Alliance, here). But in-licensing alone cannot satisfy Pharma and Biotech’s need to mitigate risk. Companies need to get better at working together, using the Merck/AstraZeneca joint venture as a template. Sharing risk by sharing assets, development costs, trial designs, and ultimately regulatory risk will be necessary to capture full value for these complex oncology assets.

The situation gets even more complicated when biomarkers are considered. Using an established biomarker developer like Roche or Abbott will make negotiations between the existing two members of the partnership more complex, but these players may be the only ones capable of arbitraging the clinical and economic risk of companion diagnostic development. Pfizer and Abbott had their own difficulties developing their partnership over crizotinib, though the companies surmounted these difficulties with a successful joint application. Unfortunately for Abbott, they will receive only $1,500 per patient, compared with Pfizer’s $9,600 per month.

The market is already focusing on modular, diagnostic-aware, targeted therapies that can be slotted into multiple therapeutic lines and extended by combination or mechanism into adjacent indications. We want to see both intelligent in-licensing driven by R&D/BD alignment and data-driven opportunism as well as more structured joint ventures and collaborations focused on mitigating risk and better delivering complex, multi-company, multi-agent trials of out-of-the-box combination therapies. These are exciting times in oncology, and it is important to create the types of agents and combinations capable of dramatically advancing standard of care.

2011 M&A of the Year Nominee: Daiichi/Plexxikon

2011-11-29T12:04:00.001-05:00

In an era in which biotechs struggle to get financing and Big Pharma is hungry for new drugs (but typically favors deals that delay rewards), Plexxikon was dealt a top R&D hand and played its cards exceedingly well. Its strategy culminated in one of the priciest private buyouts in recent history, its $805 million up-front acquisition by Japan’s Daiichi Sankyo Co. Ltd. And if that don't scream M&A of the year, we don't know what does.

You want more? OK how about a deal that validates Plexxikon's previous partnering strategy, around a drug (the BRAF inhibitor Zelboraf/vemurafenib, which was at the time in pivotal studies) that wowed FDA so much the agency approved it later in the year in a brisk three and a half months? That drug was already half-owned by Roche, Plexxikon's partner since 2006, but the other half stayed at partner-rich Plexxikon, which cannily (some over the years would have said unnecessarily) hung on to its co-promotion rights.

Maybe what'll sway you even more is that little bit extra in earn-outs, cash that could take the value of the deal to $935 million? Or perhaps the estimated 12x return on the average venture investment dollar? (Plexxikon had raised only about $67 million from a syndicate that included Advanced Technology Ventures, Alta Partners and Astellas Venture Capital, thanks largely to its ability to bring in non-dilutive partnership dollars.) Or is it the surprise victor in what was clearly a competitive bidding process for Plexxikon, the seemingly suddenly deal-hungry Daiichi Sankyo?

The truth is there are many reasons to vote this deal to the top of a competitive DOTY field in the M&A category. Not least that Zelboraf, alongside Bristol-Myers Squibb's Yervoy, is one of only a pair of drugs approved to treat melanoma in a decade. In a year of big approvals and some big deals, Zelboraf and the acquisition of Plexxikon are among the biggest.--Chris Morrison & Emily Hayes

image from flickr user mrdelayer used under creative commons license

2011 Alliance of the Year Nominee: Forma/Genentech

2011-11-28T19:30:00.000-05:00

It's time for the IN VIVO Blog's Fourth 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 Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) 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™.

For years now, acquisitions of private biotech companies have more often than not resembled alliances, with their upfront-and-milestone deal structures. Isn't it about time alliances borrowed some characteristics of acquisition -- like liquidity for investors?

In fact, in 2011 we saw just that. And though it's not the first, the licensing agreement between private Forma Therapeutics and Roche's Genentech unit, announced in late June, is at least for now, the best specimen of the rare but intriguing species.

Forma's a drug discovery company. The kind of drug discovery company that goes after tough targets. The biotech's focus is on oncology, using its platform to generate compounds against targets in epigenetics and tumor metabolism. And its early progress -- the biotech emerged from stealth in early 2009 and had pulled in nearly $50 million in funding from Lilly Ventures, Bio*One, Cubist Pharmaceuticals and Novartis Option Fund -- attracted Genentech to take a look at the start-up's technology.

Though the large company has only licensed worldwide rights around Forma compounds targeting a single tumor metabolism target, the deal -- structured as an option-to-buy -- could provide Forma's backers with an exit, CEO Steven Tregay told START-UP this year. All while keeping the rest of Forma, and the additional value it may generate for investors, intact.

Genentech will pay the biotech an undisclosed up-front fee plus research funding and can acquire Forma's program against that undisclosed target, at a predetermined point for a predetermined sum. In the long run, the deal allows Forma to do what most biotechs cannot: build value by maintaining a focus on a potentially extremely lucrative platform while at the same time driving a solid exit for investors by pushing a single, promising program forward on someone else's dime.

And not just anyone else's. "Genentech is one of the best in the world in patient stratification and rapid clinical trials. There is no one better to do a deal with," said Tregay at the time. Meantime, Forma can stay centered on "what it's good at, without taking on the risk, cost, and burden of building a clinically focused organization," he said.

Forma's alliance with Genentech is more than a rare bird. It's a new, and potentially replicable, way to sustain a thriving, discovery-focused biotech company. And that's a rare opportunity --and worthy of a Deal of the Year nomination -- indeed. -- Chris Morrison & Ellen Licking

How Do Drug Firms Get New Pills In Front of Doctors?

2011-11-25T10:19:00.003-05:00

How indeed? The U.K NHS has never been the fastest at adopting new medicines and technologies, and the emergence of new, regional-level gatekeepers looks set to make things worse.

As U.K health care reforms grant commissioning powers and budgetary levers to local groups of community doctors, with similar decentralization in other European countries, including Spain and Italy, a big question for drug firms is how to get their new pills in front of those community doctors. They no longer have battalions of sales reps. Nor, we're told, can they rely on the use of key opinion leaders (KOLs), since they're mainly hospital-based specialists, while adoption decisions are being made by a mix of advisors, managers and local doctors, many of them new to the process.

"Through no fault of their own, many of these people don't have the necessary experience or skills to understand what is being put in front of them, or to make informed decisions on new technologies," says Sally Chisholm, head of a small group of NHS planners, called the NHS Technology Adoption Centre (NTAC).

NTAC is attempting to accelerate adoption of new drugs and technologies in the U.K, having spent the past four years looking at the widespread, numerous and often unexpected barriers to uptake.

It appears that some basic skills are lacking when it comes to exchanging the old for the new. Quite often, Chisholm reports, no-one knows the steps that need to be taken to adopt a particular technology, how to measure the change that it causes, or how to halt or decommission traditional practices. "It really is quite tricky," Chisholm said.

NTAC's still tiny -- just 12 researchers -- and it has remained largely under-the-radar since its 2007 inception. But the group has intimate knowledge of procurement, budget setting and process management within the NHS, and is now starting to come up with structured procedures that can be followed by industry and doctors to speed the adoption of new technologies. For example, it has shown how barriers could be overcome to adopting a lymph node assay to check, during an operation, if breast cancer has spread. The barriers to adoption include its effects on operating theatre use, and nurse rotas, in addition to the actual cost of the assay.

Small wonder, then, that NTAC is beginning to attract interest from drug firms keen to explore its expertise to help them overcome adoption barriers. They may even be willing to fund its work.

NTAC wants to avoid any accusation of being an industry mouthpiece, although Chisholm says she is not averse to industry commissioning its work. A similar NHS organization, the National Institute for Health and Clinical Excellence (NICE), has in the past piloted the provision of advice, for a fee, to other organizations and companies.

Thus far, NTAC has produced an online tool called "generic adoption process" to help NHS organizations, and has pulled together some detailed analyses of approved technologies it believes the NHS should take on.

NTAC doesn't endorse the use of products in the same way that NICE does. It just provides a roadmap of how a new technology could be adopted, after it has been granted approval. As the route to new tecnology and drug adoption gets more complicated, NTAC's roadmaps could yet emerge as an increasingly important tool for drug firms seeking to get their products introduced into clinical practice.

Financings of the Fortnight Gives Thanks

2011-11-23T13:30:00.001-05:00

You'll have to forgive your fortnightly columnist. Thanksgiving, our favorite holiday, always makes us a little maudlin. Too few people do what the holiday intends us to do: stop, smile, look at the faces around the table, and be thankful for what we have, wherever we are.

We won't be gnawing turkey legs with her tomorrow, so we want to give our thanks today to Ellen Licking, our friend and colleague, who is moving on to work for our former boss. (You can follow her odyssey tweet by tweet at @RealEndptsEllen when it goes live.)

Ellen has been one of many colleagues from whom we learn every day; we're thankful for those generous with their knowledge, and we're thankful for being able to write about an industry filled with folks who, once past the elevator pitch and into a more expansive mood, just might blow your mind. When we were young, Mama FOTF told us, "Try to learn something new every day." No better way than to be a journalist. Folks in our profession have many and various reasons for doing what they do, not all of them savory, but for us, being able to talk regularly with brilliant people working on fascinating, often intractable problems is a main reason we get out of bed in the morning. (Oatmeal with walnuts and brown sugar is another.) We're also thankful that we can say, "I don't understand, please explain," and on the whole people are happy to do so.

We're thankful for a few days off, and to spend those days with family, which the people we write about sometimes don't have time to do. Please do so; as we all learned this week, life can play cruel tricks. We wish everyone a happy, healthy and safe Thanksgiving.

Agios Pharmaceuticals: Agios has plenty to be thankful for. Nowhere close to having a compound in the clinic, the Cambridge, Mass. firm closed a Series C financing on Nov. 17, bringing in $78 million to help fund new research in rare genetic disorders. Agios CEO David Schenkein said the money would help fund the company’s research for the next “three to four years” and that it will allow the pre-clinical company to bring “multiple programs into the clinic simultaneously.” The cancer metabolism firm was backed by previous investors Third Rock Ventures, ARCH Venture Partners, and Flagship Ventures, along with Celgene and three undisclosed public investment funds. Agios previously raised $33 million in a Series A and struck a lucrative deal with Celgene for its pre-clinical cancer metabolism research in April 2010. The deal included a $130 million upfront and gives Celgene the exclusive option to any products that result from the platform. The deal included a modest equity investment. Celgene extended the deal in October 2011, providing Agios with a $20 million payment and gaining further equity in the company. The new research program will focus on diseases caused by inborn errors in metabolism and will give Agios some distance from its partner, Celgene. The close relationship was exactly why Schenkein decided to gauge the interest from public investors and begin research in an area outside cancer metabolism. Prior to the recent round of financing and the new research platform, Agios was so closely tied to Celgene that it cut off any chance that it could be bought by another company. -- Lisa LaMotta

Idenix Pharmaceuticals: Now that Hepatitis C competitor Pharmasset has been snapped up for a stunning $11 billion by Gilead Sciences, Idenix is one of two firms remaining with unpartnered nucleotide polymerase inhibitors, or "nucs," in the clinic to treat HCV. The firm raised needed cash in a registered public offering of its stock Nov. 21, selling 9.4 million shares at $6.50 a piece, but its timing was unfortunate; since the Pharmasset news, Idenix shares have traded nearly a dollar higher (they're were at $7.45 in mid-day trading Nov. 23). The clinical-stage biotech, which is focused on developing oral, direct-acting antiviral drugs for Hepatitis C, lately has placed its bets mainly on Phase II nucleotide polymerase inhibitor IDX184. Even before the Pharmasset announcement, Wedbush Securities analyst Duane Nash wrote Nov. 15 that Idenix itself could be ripe for a merger or acquisition, as it and Inhibitex own the only unpartnered nucs in the clinic, and virtually every player in HCV believes such a compound will be part of the next HCV standard of care. Meanwhile, Idenix has suspended development of its other Phase II asset, IDX375, a non-nucleoside polymerase inhibitor, also for HCV. During its quarterly earnings call Nov. 2, the Cambridge, Mass. firm reported $64.7 million cash on hand as of Sept. 30 and a nine-month net loss of $33.9 million, attributable mainly to R&D spend. The biotech noted its net loss was $11.5 million lower than a year earlier, due in part to the shelving of ‘375. -- Joseph Haas

Oxyrane UK: In a bid to trump Shire and Genzyme at their own rare diseases game, British biotech Oxyrane on Nov. 17 pulled in $26.5 million in a D round led by Morningside Group, with participation from Forbion Capital Partners and existing investor New Science Ventures. The round hardly wins any records for size, but the idea’s nice: to create enzyme replacement therapies (ERT) for orphan diseases that are more effective, and cheaper and easier to manufacture, than current ERT drugs like Genzyme’s Cerezyme (imiglucerase). The funds will be used to advance a pre-clinical ERT candidate in Pompe’s disease, and to validate Oxyrane’s technology platform, which uses the Yarrowia lipolytica yeast to produce human lysosomal enzymes that are taken up faster by cells, and are more targeted, than existing commercially-available versions. Relatively simple batch production processes may also allow Oxyrane to scale up manufacturing so as to “dramatically alter” production economics, according to investors. It wasn’t just the prospect of cheaper ERTs that pulled investors in. Oxyrane’s technology could have far broader application, for instance, in more efficient antibody production. That opens the door to future partnering deals with companies looking for large-scale antibody production capability, or with those trying to create cheaper biosimilars. -- Melanie Senior

Portola Pharmaceuticals: It’s tough to partner an anticoagulant these days, thanks to an increasingly crowded market that already includes Bayer and Johnson & Johnson’s Xarelto (rivaroxaban) and Boehringer Ingelheim’s Pradaxa (dabigatran), and which may soon feature Bristol-Myers Squibb and Pfizer’s Eliquis (apixaban). Case in point: Astellas Pharma gave up on Phase II candidate darexaban in September after failing to find a partner. Portola Pharmaceuticals could have been in the same boat after its two-year arrangement with Merck concerning Factor Xa inhibitor betrixaban fell apart in March, but instead the eight-year-old company has turned to private investors yet again, securing $89 million in new Series D funding that will give it enough cash to launch a Phase III trial on its own. Portola will also bring a companion Factor Xa antidote into the clinic. The new money brings the total invested in the company to $306 million, not counting a $9 million equity investment from Biogen Idec last month in connection with a partnership for spleen tyrosine kinase inhibitors; the company also has received non-dilutive money from Novartis for its 2009 elinogel partnership, as well as $36 million from Biogen and Merck’s $50 million up-front payment from the since-scuttled deal. Eastern Capital of the Cayman Islands and Temasek Holdings of Singapore led Portola’s new round, which also included longtime VC backers Frazier Healthcare Ventures, Advanced Technology Ventures, Alta Partners, MPM Capital, Prospect Venture Partners, Clarus Ventures and Sutter Hill Ventures. -- Paul Bonanos

Photo courtesy of flickr user Sugar Daze via a Creative Commons license.

Hopes Dashed For Biosimilar Enbrel?

2011-11-23T12:04:00.000-05:00

Not a happy start, we think, to the Thanksgiving break for the likes of biosimilar hopefuls Merck & Co., Celltrion, Teva and Hospira. Late on Nov. 22, Amgen declared, in a thoughtfully-timed, rather succinct missive, that the patent life on RA and psoriasis blockbuster Enbrel (etanercept) had just been extended by 17 years.

Enbrel had been widely touted as one of the first complex biological likely to appear in biosimilar form, with protection assumed to expire in late 2012 in the U.S., and three years later in Europe. It was going to mark the start of the real returns for biosimilars, after their lackluster first round. Now it may be that the frontrunner copycats' race may have been futile.

Ok, so we're not patent lawyers. But U.S. patent 8,063,182, issued to Roche (and via exclusive license to Amgen), “describes and claims the fusion protein that is etanercept, and by statute, the ‘182 patent has a term of 17 years from today.” It looks pretty real to us, and composition of matter patents (which is what this is) are usually stronger than the kinds of formulation and process patents that had apparently been defending the drug to date.

Merck in June 2011 signed a deal committing it to pay up to $720 million for Korean Hanwha’s Phase III copy of the fusion protein (up-front money wasn’t revealed, nor whether this patent was factored in, so we won't get too hung up on numbers. But let's just say it has been an expensive week for Merck). It was one of the “eight to ten” compounds in Merck’s biosimilars pipeline that BioVentures chief Mike Kamarck has been particularly excited about.

Merck doesn’t feel it’s appropriate at the moment to share its feeling towards ‘182.

Others do. “This is HUGE,” declared one senior lawyer who has followed biosimilars for many years. And although the new U.S FDA 351 (k) pathway for biosimilar drugs in theory allows for patent litigation to begin, and thus potentially be resolved, early (e.g. before the product is launched), it also has some serious drawbacks that make it unclear how widely it will be used. (Kamarck, however, has said that Merck plans to use 351 (k).)

Perhaps Merck has anticipated and figured its way around this patent; after all, it was filed back in 1995. And even if not, '182 needn’t stop Enbrel competitors, such as Abbott’s Humira, Roche’s Rituxan or J&J’s Simponi from facing generics. Nor need it stop generic Enbrel in Europe.

Either way, any resulting litigation from the unexpected issuing of ‘182 could provide a meaty test for the dispute-resolution provisions in the new FDA biosimilar pathway.

Deals of the Week, Arlo, Ellen, and Eleven Billion Reasons to Invest in Biotechs

2011-11-23T11:00:00.000-05:00

No 'official' Deals of the Week post this week, but we wanted to drop in and wish all stateside and US expat IVB readers a Happy Thanksgiving. The rest of you too -- enjoy either a long, turkey-scented weekend or a couple of quiet days before Saturday.

We'll be back next week with the launch of this year's Deals of the Year competition. For now our only deal-related comment is this: Eleven Billion Dollars for a Phase II Biotech? Eleven Billion Dollars for a Phase II Biotech.

Meanwhile, enjoy IVB's take on an old classic. And join us in wishing well Ellen Licking, who's off for challenges anew and who among much else wrote the parody below that we dust off each Thanksgiving week. In Vivo magazine readers will continue to see her by-line now and then, but we'll miss her around the virtual office and in our small, hopefully sharp, and sometimes sarcastic corner of the internet. All the best. --CM
This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why I called the post Deals of the Week.

Now it all started four Thanksgivings ago; it was four years ago on Thanksgiving, when Chris Morrison and I started writin' a blog about deals, but not every day, just once a week. And writin' about deals once a week, you know it's a lot of work. (Hint. Hint.)

And there's a lot of garbage you gotta sift through, but we decided it would be a friendly gesture on behalf of readers. So we trolled around the Internet with our shovels and rakes and other implements of destruction (a.k.a. EBI's Strategic Transactions database) looking for deals to analyze. But then a big bad editor (also known as Officer Roger) said why are you doin' that? We are closed on Thanksgiving.

And we had never heard of a blog closed on Thanksgiving before (we don't get out much) so with tears in our eyes we drove off into the sunset looking for another place to dump our garbage -- I mean our deals.

We didn't find one. So we wrote our post anyway, went back and had a Thanksgiving Day that couldn't be beat, went to sleep, and didn't get up until the next morning when we got a call from Officer Roger... And it's been a recurring feature here at IVB ever since.

But fortunately, not another case of American blind justice since we always arrive at the truth of the matter and it doesn't even require 27 eight-by-ten color glossy pictures with circles and arrows and a paragraph on the back of each one.

In honor of the day, we hope you consider joining the IN VIVO Blog Movement. All you've got to do is walk into the office wherever you are, just walk in and say ,"You can get anything you want at IN VIVO Blog." And walk out.

You know if one person, just one person does it, they might think he's really sick and they won't take him... And can you, can you imagine fifty people a day, I said fifty people a day (okay, we'd really like 1000) walking in, quoting a line from IN VIVO Blog and walking out?

And friends, they might think its a movement. And that's what it is, the IN VIVO Blog Movement.

Remember Deals of the Week? (This is a post about Deals of the Week.)

Without further ado, we bring you this week's installment. Feel free to sing along in four-part harmony. With feeling. Cuz'...

You can get anything you want at IN VIVO Blog.
You can get anything you want at IN VIVO Blog.
Log right in, it's a click away.
Just a finger tap. You don't have to pay.
You can get anything you want at IN VIVO Blog. (Excepting Roger.)

Changes at Versant

2011-11-23T07:19:00.000-05:00

Last week’s column in Fortune Magazine by venture capitalist Lisa Suennen of the Psilos Group appropriately asked “Hey, where are all the health care investors going?” As evidence, Suennen cited the departures of CMEA Ventures from medical devices and Highland Capital from health care (both of which were reported in Start-Up several months ago). But Exhibit C – “that Versant Ventures appears to be on the verge of reducing its health care practice” – surprised us.

After a few days of beating the bushes and collecting rumors by the bushel, we reached Managing Director Ross Jaffe, one of the founders of the firm, to get the details. Jaffe (careful not to tread into talk of fund raising so as not to violate securities regulations) did speak to changes that will occur at Versant.

The good news is the firm isn’t going anywhere. Versant will raise a new fund, although we believe that it will likely be smaller than the $500 million partnership it closed in 2008.

The less than good news is the roster of Versant managing directors is shrinking. Jaffe says four of the firm's managing directors opted out of participating in the next fund. The departures shouldn’t impact the firm’s overall investment strategy. Two of the departing partners – Brian Atwood and Camille Samuels – invested in biopharmaceutical companies while the other two – Kevin Wasserstein and Rebecca Robertson – managed medical device investments. The firm generally balances its fund between the two sub-sectors. Jaffe declined to discuss specifics of a fund but said their fund size always derives from the number of partners sitting around the table

All four will continue to invest from Versant’s fourth fund.The decisions not to continue as active investors came during Versant’s planning for a fifth fund, Jaffe said, when each managing director was asked outright if they’re in for the long haul of a 10-year partnership. “If you are going to build a venture capital firm for the long haul you need to be thinking about individual partner’s plans and how the firm itself will evolve,” Jaffe says.

The four partners in question either declined comment or did not return requests for comment for this story.

According to Jaffe, Atwood and Wasserstein intend to remain active in the life sciences industry, while Samuels and Robertson are backing away from active investing. Atwood will concentrate on his current portfolio and may assist in new deal flow but won't be taking on new board seats. Wasserstein will work more closely with smaller device companies, including possibly some within Versant's portfolio.

Versant did promote Kirk Nielsen in January to managing director. He joins Bill Link in Versant's Orange County office while Brad Bolzon, Charles Warden, Jaffe and Samuel Colella work from Menlo Park.

No doubt, some might see Versant's decision as another knock on the prospects for life sciences investors as firms like Prospect Venture Partners and Scale Venture Partners scrap plans for raising news funds. Jaffe says Versant’s intentions shouldn’t be seen as a sign of weakness for the firm or the industry. “While everyone agrees this is a challenging investment environment with the FDA, reimbursement and other issues, we continue to see great opportunity for firms that have capital,” he says. “And we’ve had pretty good success.”

The firm was an early investor in several medical device companies that commanded significant prices from acquirers including LenSx, developer of surgical lasers for the eye, atrial fibrillation company Ablation Frontiers, balloon sinuplasty device marker Acclarent, laser vision correction company IntraLase, and St. Francis Medical, maker of a spinal implant.

On the biopharma side, the firm exited Amira Pharmaceuticals this summer through a sale to Bristol-Myers Squibb for $325 million upfront plus earnouts. More recently it participated in the much-anticipated IPO of Clovis Oncology, in which Versant and other investors bought more than 40% of the offering at the $13-a-share offering price. That leaves Versant holding 2.2 million Clovis shares, worth about $27.6 million at the end of trading Monday, November 21.

Like other biopharma investors, Versant has recently explored new models in acknowledgment that the traditional build-a-biotech strategy is increasingly difficult to justify. One idea, which sprang from the Amira exit, is a drug discovery kitchen dubbed Inception Sciences (we wrote about it here) that will spin out compounds into separate corporate entities that let potential buyers choose assets a la carte instead of having to buy the whole restaurant. The second idea binds a potential acquirer to a start-up right away, which Versant did recently with the cancer genomic analysis firm Quanticel Pharmaceuticals. At launch, Celgene paid $45 million upfront for exclusive technology rights, a small equity stake, and exclusive options to buy Quanticel a few years down the road.

Several non-Versant sources familiar with the firm's plans told us that Versant is under the same pressures as its peers, as LPs become increasingly fearful of larger funds and unwieldy teams. Jaffe sees it differently: “We have a very different business culture at Versant. Each of my partners is thoughtful about how we approach our business and how we handle our careers. People will believe what they want to believe but this is what is going on.”

Alex Lash contributed to this report.

Alex Barkas

2011-11-22T10:57:00.001-05:00

From Prospect Venture Partners

It  is  with  great  sadness  that  we  share  the  news  that  our  partner  Alex  Barkas  passed  away  on  November  21,  2011,  suddenly  and  unexpectedly.  Alex  was  an  extraordinary father,  and  husband,  friend  and  colleague,  deeply  admired  and  respected  by  all  who  had  the  special  privilege  to  know  and  work  with  him.  In  nurturing  those  that  he cared  about  the  most, whether  it  was  his  family,  friends,  colleagues,  entrepreneurs or  his  charitable  interests,  Alex  brought  passion,  wisdom,  sincerity  and  an  unrivaled love  of  life.  Alex  leaves  behind  for  us  a  legacy  of hope  and  commitment  to  achieve  greatness  with  kindness,  care  and  perseverance.  He  will  be very  deeply  missed.

Our condolences to his family and all who knew him.

The Avastin Decision: Bad For Genentech, But Good For Industry?

2011-11-18T17:42:00.003-05:00

On its face, FDA Commissioner Margaret Hamburg’s decision to rescind Avastin’s breast cancer claim is a clear (though likely not unexpected) blow for Genentech, which waged an aggressive, creative and undoubtedly expensive battle to maintain its blockbuster VEGF-F inhibitor’s accelerated approval for first-line metastatic disease.

But, look a little deeper and you’ll understand why the decision should be (and perhaps already is) being cheered by the larger biopharmaceutical industry.

Hamburg’s 69-page opinion is confirmation that the accelerated approval mechanism is alive and well, and this is because the regulatory pathway’s accelerated withdrawal mechanism has now been validated.

“The Pink Sheet” touched on this briefly in our initial coverage following the two-day Avastin hearing in June (“Avastin’s Breast Cancer Claim: Will FDA’s Hamburg Take A Middle Road?” “The Pink Sheet,” July 4, 2011). However, now that Hamburg’s verdict is in, we think the issue warrants further exploration.

Think of the chaos that would have been created for FDA and industry if Hamburg agreed with Genentech’s view that accelerated approval can and should be maintained until there is practically no hope of confirming clinical benefit?

How many CDER review division directors do you think would be willing to approve a novel therapy on the basis of an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint other than survival or irreversible morbidity, knowing that it would take an act of God to get a drug off the market when the sponsor ultimately either can’t (or won’t) confirm the benefit in post-marketing studies?

How many review division directors would want to go through the scrutiny, and at times embarrassment, that the oncology review division faced during the course of Genentech’s 11-month long battle?

Hamburg lays it all on the line on page 55 of her opinion:

“Withdrawal here is the essential counterpart to accelerated approval. When the accelerated approval pathway was established, it was done with full recognition of the risk that drugs might be approved and later found not to confer clinical benefit to patients. FDA deemed this risk worth taking for life-threatening illnesses in need of additional therapies, but also found it essential to mitigate that risk by providing for follow-up studies and withdrawal when benefit is not confirmed. The program has, on the whole, worked very well, making many new drugs available, particularly to cancer patients and AIDS patients, years before they would otherwise have been on the market. But when follow-up studies fail to confirm benefit, it is essential that approval be withdrawn in order to protect patients.”

If the accelerated withdrawal hammer had been rendered meaningless, we predict you would have seen a lot fewer accelerated approval announcements coming out of CDER in the years ahead. Better to wait three, four, five years for survival data, or confirmatory evidence on some other “hard” endpoint, before making an approval decision than having to face both the embarrassment and time-consuming work of defending your revocation decision at a public hearing, all the while wondering if your own commissioner was going to back you up.

Hamburg’s comments highlight the strengths and weaknesses of progression-free survival as a surrogate endpoint. Though the agency is still reticent of giving hard targets, as sponsors would prefer, it lays out that in many first-line settings, it is the only practical option and one the agency is happy to review. The level of benefit that counts as “clinically meaningful” may be a matter of debate, but even Genentech acknowledged during the hearing that FDA’s granting the MBC approval was “progressive thinking” on the part of the agency. For other sponsors, the Avastin process has added some clarity on FDA’s expectations surrounding PFS – in particular, that quality of life benefits could serve as evidence that the benefit is clinically meaningful. So the Avastin withdrawal shouldn’t just dissuade sponsors from using PFS, it should encourage them to design trials with supportive measures that can themselves turn into additional claims. (Indeed, Incyte’s Jakafi (ruxolitinib) just cleared FDA with a patient-reported outcome based symptom claim.)

By withdrawing Avastin’s MBC indication, Hamburg has introduced some predictability into the accelerated approval regulatory pathway, both for agency staff and drug developers. We’d be surprised if industry, and its investors, didn’t see that as a good result. -- Sue Sutter

Deals of the Week Takes a Backseat to Non-Deal Newsiness

2011-11-18T13:28:00.001-05:00

Not quite a goose-egg

Deals, Schmeals. What about Geron's stem-cell about-face? Denner's departure from Icahn's shop? And how about an IPO that wasn't underwater? Don't even get us started on MLB re-alignment or seeing Papelbon in a Phillies uniform. The news this week came thick and fast; it just didn't come for the most part in the form of alliances and M&A.

It has definitely been a big week for financings: Clovis Oncology took the prize when it took the rest of its Series A to the public markets, raising $130 million to fund its ambitions in tough-to-treat cancers. Staying private (for now) was Agios Pharmaceuticals, which raised a whopping $78 million in Series C funds to move beyond cancer metabolism (courtesy its existing venture backers and corporate partner Celgene, but also some shiny new-but-unidentified crossover types). And we haven't even mentioned molecular diagnosticians Biocartis' $100 million venture round, but at this point we'd better move on before FOTF smacks us over the back of the head with a shelf financing.

It's also been a big week for regulatory action: today's unsurprising surprise announcement from FDA Commissioner Hamburg revoking Avastin's metastatic breast cancer approval will not draw an appeal from Genentech even as it draws supporters' ire. But a couple nifty approvals for some niftily named new orphan drugs (Incyte's Jakafi and Erwinaze from EUSA Pharma) should dampen the enthusiasm of FDA-bashers. And of course there was the news that FDA may soon have some new approval mechanisms at its disposal, Progressive Approval and Exceptional Approval, as detailed in this piece from Monday's "The Pink Sheet".

Deals of the Week will take a break next week -- don't worry, you'll get your Alice's Restaurant -- as we gear up for our fourth annual Deals of the Year competition. But of course we've got a few nuggets to tide you over until December. Take a gander at...

Sanofi Pasteur/Curevac: The option-deal signed Nov. 15 between the private German biotech CureVac and Sanofi's vaccine division provides some measure of validation for the former's RNA-vaccine technology. It also gives the French drug maker rights to certain infectious disease programs, with R&D partially underwritten by Uncle Sam. On the same day Sanofi and CureVac said they were teaming up, the two companies also announced a $33.1 million, four-year R&D collaboration with further partners In-Cell-Art, a French nanotech company, and the US Department of Defense's Defense Advanced Research Projects Agency (DARPA). Because it has an option on the programs that in essence are being funded by the four-way collaboration (mainly by DARPA), Sanofi gets to kick the tires on CureVac's platform before committing significant cash. Its option rights -- based on pre-agreed license terms around vaccine programs against 'between five and ten' pre-defined pathogens -- are linked to the fulfillment of certain criteria within the DARPA-funded validation program. Pulling the trigger could cost Sanofi up to €101.5 million per pathogen in upfront and milestone payments for global marketing rights. That figure jumps to €150.5 million in the case where a prophylactic and therapeutic vaccine are developed. -- Melanie Senior

Shire/Shionogi: Shire has landed a Japanese market partner for undisclosed elements of its flagship ADHD franchise. The company said Nov. 18 it would team up with Shionogi & Co. to co-develop and co-commercialize ADHD meds in Japan, in exchange for an up-front fee and sharing future costs, though specific terms weren't released. Deal-wise, Shionogi has been more active in ex-Japanese markets this year (acquisitions in China and the US, for example) than at home, where it said earlier this year it would open a new R&D center. Compatriots like Daiichi and Ono Pharmaceuticals, which in recent months has licensed in Japanese rights to products from BMS, Merck-Serono, Servier, and KAI, have been more actively seeking out assets to sell in Japan. Shionogi has some experience in ADHD through its 2008 acquisition of Sciele Pharma, which sells Methylin for the condition. Hey, is that a goose in the back seat of an old Beamer?-- Chris Morrison

Genzyme/CFF: Genzyme (a Sanofi company) and the Cystic Fibrosis Foundation said Nov. 16 they would together work to identify "corrector" compounds that could fix malfunctioning CFTR proteins in patients with the disease's most common mutation, Delta F508. The collaboration will benefit from Genzyme's and Sanofi's extensive compound libraries, the companies said in a statement, and build not only upon past collaborations between the biotech and the CFF but also Genzyme's ongoing efforts in CF R&D. The company holds an option for ~~global rights~~ rights in all territories outside the US and Canada -- in all indications (except Duchenne/Becker muscular dystrophy) to PTC Therapeutics' ataluren (formerly PTC124), including CF, where the compound is in Phase III. The development of ataluren, which is being developed for a variety of genetic disorders involving nonsense mutations, was also partially funded by CFF grants. -- C.M. [Ed Note: the original version of the post misstated the territories/indications for which Genzyme has an option on PTC's ataluren. We regret the error.]

Medicis/Graceway: Medicis is buying the U.S. and Canadian pharmaceutical assets of bankrupt Graceway Pharmaceuticals for $455 million, subject to approval by Graceway’s board of directors. Graceway was founded in 2006 by private equity firm GTRC Golder Rauner and Jefferson Gregory, a co-founder and former chairman of King Pharmaceuticals. It filed for bankruptcy in September 2011. Details about the bankruptcy and other aspects of Graceway’s business are sketchy but the deal gives Medicis, a specialty pharma with projected 2011 sales of more than $730 million, a commercial portfolio with six key drugs with combined revenues of more than $125 million. The Graceway products complement Medicis’ focus on dermatology and aesthetics; they include Aldara (imiquimod) cream for basal cell carcinoma, Atopiclair for dermatoses, Maxair Autohaler (pirbuterol acetate inhalation aerosol) for bronchospasm, and Estrasorb (estradiol topical emulsion) for menopause. The deal also gives Medicis a small R&D program, including an undisclosed Phase II dermatology compound and a women’s health compound in Phase II. At the time it formed Graceway, GTRC said it would put up to $200 million into the company. Later, Graceway acquired the branded pharmaceutical business of 3M for $875 million, and rolled in with it another GTRC portfolio company focused on dermatology drugs, Chester Valley Pharmaceuticals. GTRC had formed that company in 2004 with an investment of $75 million. -- Wendy Diller

image by flickr user smohundro used under creative commons license.

Guest Post: In Oncology, Is Early Partnering The Name Of The Game?

2011-11-16T08:00:00.000-05:00

By Jonathon Fendelman, Senior Practice Executive, Campbell Alliance

The Celgene/Quanticel tie-up announced November 4, typifies a trend we’ll be discussing in greater detail at the coming Therapeutic Area Partnerships meeting: the trend of partnering early in oncology. Under the terms of the agreement, Celgene will commit $45 million to Quanticel during the initial three-and-a-half-year alliance term, with the ability to extend the collaboration in exchange for additional funding. Celgene will also take an equity stake in Quanticel and retains an exclusive option to acquire the company.

As IN VIVO Blog outlined in this post, Quanticel will utilize its platform to conduct single-cell genomic analysis of patient tumor samples and to identify predictive biomarkers for Celgene’s investigational drugs. Quanticel will also perform its own drug discovery, and via the acquisition option, Celgene retains the ability to access those pipeline candidates.

The upshot? As competition for good assets strengthens, pharmas are beginning to lock up rights to assets long before proof-of-concept data are in hand. To put some numbers on the trend, Campbell Alliance used Elsevier’s magic eight ball – also know as Strategic Transactions-- to identify the total number of alliances year-to-year with upfront payments of more than $10 million. We were only interested in deals centered on assets (as opposed to those centered around the resolution of patent disputes or R&D support, for example).

Using this metric, we found that the total number of licensing deals completed over the last several years has remained relatively consistent. In 2008, there were 62 deals completed based on our criteria. This was followed by 61 deals in 2009 and 62 in 2010. This year should see a similar number of deals, given 42 deals were completed as of the end of September.

What does this have to do with oncology deal making? In 2008 and 2009, 24% of the alliances were for oncology products. 2010 saw a slight downward blip, with only eight of the 62 deals, or 13%, in this therapeutic area. But oncology deals appear to have bounced back in 2011, with 28% of the 42 deals year-to-date involving cancer medicines.

Further analysis showed that in 2008 and 2009, there was a bias in the oncology deals toward products in Phase I and Phase II development. But in 2010, that bias swung even earlier, with five of the 8 oncology deals revolving around assets that were in preclinical or Phase I development.

As we'll discuss at TAP, that trend has continued in 2011. Of the 42 deals completed thus far this year, 12 involve oncology products, with half of those in Phase I development or earlier. These six alliances all involved first-in-class compounds that work via new mechanisms of action.

We see a clear enthusiasm for early-stage oncology deals. In the context of this enthusiasm, we anticipate any new oncology deals will also center on early-stage products, particularly compounds that work by a novel mechanism of action. Such assets offer the differentiation payers are more likely to reimburse for upon approval.

Not wanting to be caught with me-toos, drug makers are forced to tie-up rights earlier, before proof-of-concept, hedging their risk with option style alliance structures. As competition continues –and let’s face it, nearly every big pharma wants to be a top player in oncology – that energy will create a positive feedback loop, creating further incentives for earlier oncology partnering.

Image courtesy of flickrer Carol Myra used with permission through a creative commons license.

DOTW: This Is Spinal Tap Edition

2011-11-11T14:30:00.001-05:00

In the immortal words of one Bobbi Flekman, "money talks and bull**** walks."

And on 11.11.11, a day some are lauding corduroy and many are honoring our veterans and active service men and women, we look across the pond for the big money deal.

That's right. In a week when "most blokes, you know, will be playing at ten," Lundbeck and Otsuka took it to eleven with a multi-faceted alliance centered around two late-stage products from the Japanese pharma and up to three earlier stage programs from the Danes. (No word yet on whether Lundbeck's CEO Ulf Wiinberg or Otsuka's President Tatsuo Higuchi will play the role of Nigel Tufnel, alas.) The pipeline- and profit-sharing, co-development, co-commercialization deal requires Lundbeck to pay Otsuka 1.1 billion Danish Kroners, or 200 million George Washingtons, up front and potentially another $1.6 billion in development, regulatory, and sales milestones.

In spirit, Lundbeck/Otsuka recalls the major alliance Lilly and Boehringer Ingelheim struck in diabetes earlier this year --the consequences of that deal, as you will read about below, are still causing ripples. Interestingly today's eleven alliance sees two companies -- both heavily dependent for the bulk of their revenue on a single product that will soon go generic -- try to diversify not only their pipelines but also geographic reach. That Lundbeck is the one on the economic hook stems from the fact that its patent cliff is not only steeper but also arrives in a few months time.

The $200 million upfront Lundbeck is undoubtedly hefty, but analysts and investors in Denmark didn't smell anything rotten, sending the company's stock price, which trades on the Copenhagen exchange, up nearly 10% on the news. "We see this deal as clearly positive for Lundbeck and it bodes well for long-term revenue, top-line diversification and company perception" Nordea analysts wrote in a note to clients.

The reason for the optimism? Recall that Lundbeck is overly dependent on Cipralex (which is partnered with Forest in the US where it is sold as Lexapro) for sales revenue. In 2010, close to 40% of the company's DKK 14.8 billion in revenue came from the antidepressant, whose key patents begin to expire in 2012. And for this upfront payment, Lundbeck gets co-dev/co-commercialization rights in certain regions (North and Latin America, Europe, Australia, and "some other countries") to two late stage Otsuka products that can help smooth its revenue line starting in 2013.

The first is the Japan pharma's depot formulation of aripiprazole, which is the same active ingredient in Otsuka's anti-sychotic juggernaut, Abilify, a drug that is partnered with BMS and goes off patent in 2015. The second is OPC-37415, a partial D2 dopamine receptor agonist in Phase III trials for schizophrenia and major depressive disorder. According to the press release announcing the deal, Otsuka plans to submit an NDA for aripiprazole depot to US regulators "soon" -- and to EMA authorities in 2013.

Lundbeck has done other big deals in the past in a bid to deemphasize its reliance on Cipralex, including its 2009 acquisitions of Ovation and Life Health to gain access to the chorea treatment Xenazine. Those deals certainly helped bolster Lundbeck's US CNS presence (especially after the failed 2008 $100 million alliance with Myriad Genetics around Alzheimer's therapy Flurizan), but are nothing compared to the potential it might reap with this Otsuka alliance, should aripiprazole depot and '37415 both make it to market and enjoy strong payer traction.

And reimbursement remains an open and intriguing question, especially for aripiprazole depot. Note that $1.4 billion of the milestone payments are tied to development and regulatory advances not actual reimbursement, meaning Lundbeck is still on the hook, even if payers ding the next-generation anti-psychotic. And that could well happen. The anti-psychotic market is not only competitive, but ripe with cheaper alternatives, including since October 2011 a generic version of Lilly's Zyprexa. Over a year ago Medco and genetic test developer SureGene, meantime, launched a research project to validate biomarkers that could improve the cost effectiveness of atypical antipsychotic treatments.

For its part, Lundbeck and Otsuka seemed to play up in the press release the known safety and efficacy of the depot formulation, noting there may be an outcomes-based reason to prescribe the more patient-friendly version of Abilify. After all it has been designed to "reduce the chance of reoccurence of symptoms for the patients who sometimes forget to take their medication". Patient adherence to anti-psychotic regimens is admittedly a big problem; whether Otsuka has data convincing payers of this benefit is another question. It's also one that the Japanese pharma, and now Lundbeck, will need to answer effectively to make the economics of the new alliance work for both parties.

As David St. Hubbins would no doubt tell you it's such a fine line between stupid and clever. In the meantime, turn the amperage all the way to the right 'cuz you'll feel much worse if you aren't under such heavy sedation. With none more black than IVB, it's time for...

Merck Serono/Ablynx: In a move that might reduce the sting of last week’s announcement that Pfizer was handing back a pair of anti-TNF-alpha programs, Ablynx said this week that partner Merck-Serono would expand its alliance with the Nanobody specialist. The new deal will see the partners co-discovering and co-developing Ablynx’s brand of single-domain antibodies against two targets in osteoarthritis. Ablynx gets €20 million up-front (paid as two tranches over the next three months) and will conduct and fund all pre-clinical work on the programs. Merck-Serono can then opt in at IND stage at a price of €15 million per program, after which Ablynx gets the choice to move forward as a 50/50 partner or choose a more traditional milestone/royalty-based licensing structure. This is the two companies' third deal since 2008; they’re currently also working on programs in oncology, immunology and inflammation. The deal has done little to reverse the slide in Ablynx’s market value since the Pfizer news, however. That drop worsened this week when Ablynx said its lead proprietary asset, the IV-formulated anti-vWF ALX-0081, did not meet its primary endpoint in Phase II studies. – Chris Morrison

Salix/Oceana: Gastroenterology-focused Salix Pharmaceuticals will expand its product portfolio and increase its revenues almost immediately with the planned $300 million acquisition of privately held Oceana Therapeutics. Announced during Salix’s third-quarter earnings call Nov. 8, the acquisition brings the specialty pharma two marketed products – Solesta for fecal incontinence and Deflux for vesicoureteral reflux. The company’s optimism about Oceana seems largely based on the upside potential of Solesta, an injectable gel approved by FDA as a Class III medical device in June, to win a large share of the fecal incontinence market. Oceana launched Solesta in September at a price of $3,690 per treatment. It can be administered on an out-patient basis without anesthesia. By contrast, surgical methods for treating fecal incontinence are thought to cost about $30,000 per patient. Salix did not say how much Solesta has earned to date but CEO Carolyn Logan predicted the product could produce peak-year sales greater than $500 million. Also an injectable gel, Deflux was approved by FDA in 2001. It is indicated for children affected by Grade II to Grade IV vesicoureteral reflux, a bladder malformation that can result in severe kidney infections and irreversible renal damage. It also is approved and marketed in 40 countries outside the US and posted net sales of about $26 million through the first nine months of 2011. –Joseph Haas

Amylin/Lilly: Once a fruitful partnership, the nine-year tie-up between diabetes specialist Amylin Pharmaceuticals and Eli Lilly around the GLP-1 agonist exenatide is being unwound. Although the agreement produced an $800 million drug in Byetta, a twice-daily injectable compound that stimulates insulin production in the pancreas, and a potential blockbuster follow-on in the once-weekly Bydureon, the writing’s been on the wall for some time, as their relationship became frostier over time. Lilly co-developed a different drug, DPP-4 antagonist Tradjenta (linagliptin) alongside Boehringer-Ingelheim; that led to a lawsuit, as Amylin believed Lilly breached their confidentiality agreement by using a shared sales force for both Byetta and Tradjenta. To remedy the situation, Lilly will return worldwide exenatide rights to Amylin in exchange for $250 million up-front plus 15% of sales, the latter of which could be worth up to $1.2 billion. All related litigation will be dropped. The separation occurs as Amylin awaits approval of Bydureon in the US; the drug has a PDUFA date of January 28, 2012. In the meantime, as this "Pink Sheet" Daily story discusses, Amylin plans to build its domestic sales force while seeking an international partner to sell Bydureon, which is already approved in Europe. Some observers, however, think Amylin could be acquired by another pharma instead. – Paul Bonanos