Actelion On The Defensive: Corporate Governance White Paper

First, there were just words. Then there was a maiden dividend, the first of regular payouts to shareholders. Now there's a white paper on good corporate governance. Whether or not Elliott Advisors, a new-ish, almost-6% shareholder in Actelion, succeed in their (apparent) mission to force the sale of the company, they've certainly done a good job, it seems, reminding the company of its duties to its shareholders.

We're not taking sides here. Far from it. We dislike short-term, profit-seeking hedge funds just as much as the next (average) man (or woman) who isn't getting part of the spoils. (And Elliott, for the record, claims it's a long-term investor).

But Actelion's responses thus far to Elliott's Feb. 3 public missive, calling for CEO Jean-Paul Clozel and for Chairman Robert Cawthorn to step down from the board, and accusing the Swiss biotech of poor corporate governance, hint that perhaps management wasn't quite doing enough previously to explicitly reassure investors that they do, indeed, consider all the strategic options and judge each in terms of shareholder value, rather than against Clozel's personal, and well-documented, drive for long-term independence.

To the latest defense weapon, then: two dozen slides highlighting the company's super-high corporate governance standards, by Cawthorn.

"Eight out of nine of our board members are independent," shouts the slick slide-deck (Clozel is the odd-man out, which is why Elliott wants him off). We meet regularly and consider input and feedback from shareholders, it says. (We're paraphrasing a little.)

But not content with emphasizing its own (high) standards, Actelion's board is arguing that it's corporate governance is BETTER than your average U.S. standards. Under Swiss law, the full board is called to make more major strategy decisions than is the case for U.S. companies; Swiss companies need shareholder approval for many more actions than their U.S. counterparts, the deck claims, including dividends and issuing new equity.

If that isn't enough, the white paper goes on to essentially remind Elliott and their ilk of the power that they do have, as significant shareholders, over the composition of the board. Firstly, investors owning at least 1.5% can submit proposals for adoption at the AGM. Second, Swiss law allows a majority of voting shareholders to force directors out without cause, giving them "a powerful tool to assure their ongoing satisfaction with the Board." (In the U.S. removing directors requires a supermajority vote in most cases, says the paper).

It seems the corporate governance system is working rather well, then; no doubt Elliott will continue to leverage all the rights granted to it as a large shareholder. The company's May 5 AGM should be an interesting event.

Meantime, Actelion's board will be hoping that enough other investors join Rudolf Maag's camp: the 4.2% shareholder on March 7 became the first to speak out in support of the company's standalone strategy.

image by flickrer Ran Yaniv Hartstein under creative commons

"We ARE Creating Shareholder Value," Argues Actelion's Clozel

Actelion's CEO Jean-Paul Clozel clashed entertainingly with one of the Swiss biotech's biggest (and newest) shareholders during the company's full-year results announcement Feb. 17.

The clash came despite Actelion's management unashamedly using the event to reassure investors that the company DOES have their interests at heart, that it IS creating optimal long-term value and that"to consider a sale at this time [in the company's evolution] would be the worst time imaginable" for existing shareholders.

The context: a Feb. 3 letter from Elliott Advisors, a hedge fund that only months before had become among the largest shareholders. The letter called for Clozel's resignation, accused management of stifling several alleged take-over approaches, thereby denying investors the chance to cash in, and claimed poor corporate governance (CEO on the board; board Chairman a supporter of CEO).

Actelion, we felt, fended off the letter rather well. (It also retorted that "there have been no offers for the company".) But it is surely no coincidence that the company chose today to declare its first ever dividend, the first of regular payouts to its shareholders? And that each member of the management team presaged his talk with a quick big picture sketch to drive home the "we're committed to unlocking shareholder value" message?

"I feel I'm a little closer to my shareholders as a result of this dividend distribution," said Clozel. "It's a way for us to share with our long-term investors what we have been able to build up." CFO Andrew Oakley seemed to suggest it was entirely normal for Actelion to pay a dividend given the company's strong profitability, commercial muscle and its healthy pipeline. "It's a logical step for the company."

This is a company staunchly defending its independence. Fighting off the sharks. It's a company arguing that it has gone through the start-up and build-up phases of a biotech's evolution and is now entering the 'leverage' stage, when it has its pipeline, its infrastructure, its buildings (including a spanking new five-storey steel business center, opened in Dec. 2010), and is now waiting for the rewards to pour in.

As such, to sell out now would "deprive all the employees and loyal shareholders the possibility of sharing in the rewards" that they're due, said Clozel, "for the benefit of a few people wanting to make a quick profit."

This dig at the hedge funds was picked up by a member of Elliott Advisors in the audience -- which is when the real fun began (fun that Actelion management had wanted to avoid, by allegedly barring some hedge funds from the presentation). "We're here for the long-term," the Elliott representative claimed, so don't accuse us of looking for quick gains. After pointing out that there weren't many shareholders in the room (it was an analyst and media event, mind you), he went on to ask about the company's processes for receiving and reviewing takeover approaches (read our letter, said Clozel), about how the company dealt with conflicts of interest generated by Clozel's being on the board (it's very useful and important that management is represented on the board, he said) and ....how the company justified building such an expensive building...when pharma is facing severe regulatory challenges and when shareholders are being asked to finance hundreds of millions in R&D that have led to failures?"

This was getting funny: Clozel, who's built up Europe's most profitable and successful biotech company, was being saddled with all of Big Pharma's productivity woes. And being asked to justify his new business center (it came in "within budget" and "before it went up, Otto [Schwarz, BD and Operations] had been sitting in a container since 2008").

There was more entertainment to come. Did the audience like the building, Clozel asked. (We weren't there, but we gather hands were raised). Who didn't like it? Well, this Elliott guy, surprise surprise. Who was then, in the grand finale to this extraordinary -- public -- exchange between CEO and shareholder, accused of being "the son of Prince Charles." An allusion, we hasten to add, to that British royal family member's well-known disregard for modern architecture.

What about the numbers? Ah, the numbers. Revenues up 13% in local currencies, EBIT up 19% in local currencies, lots about managing the cost base, lots about how wonderfully the shares have done over the long-term...and plenty of reminders about the CHF 800 million share buy-back program, initiated in Nov. 2010.

image by flickr user USFWS Pacific used under a creative commons license.

Clozel: We're Fine on Our Own, Thanks

Actelion CEO Jean-Paul Clozel used the opening ceremony of a new office building on Friday to remind reporters that the company is not for sale, according to Bloomberg. Amgen is said to be considering an offer for the company that last year declared its ambition to become "a Genentech in Europe."

No, Clozel wasn't saying he wanted to be acquired by Roche, either -- the company that Clozel and Actelion's other co-founders came from. He was saying that Actelion should remain independent and continue to create value for its shareholders, and that message is the same today.

"We have created so much value that of course somebody would like to catch this value," Clozel was reported as saying last week. But "we will have a 20-year future," he said, and might have added that we're certainly not going to be bought while our shares our down (nearly 5% this year).

Another part of Clozel's message has changed, though. Back in 2009, Actelion was poised to move into the GP domain, on the back of Phase III pipeline candidate almorexant, partnered with GSK for sleep disorders. It wasn't just talk: Actelion had re-organized its commercial organization and hired a bunch of GP-experienced folk. It was all about diversifying away from PAH treatment Tracleer (which accounts for the bulk of Actelion's SFr 1.7 billion in revenues), and about "following innovation wherever it leads."

That particular innovation doesn't appear right now to be leading anywhere: the Phase III trials of almorexant threw up some safety concerns and further investigations are underway with a decision on whether to continue expected early next year.

Meanwhile it's back to rare diseases, then--the precise reason Amgen's interested (as are a few others, no doubt). Actelion's signficant success to date (it became profitable in just six years and is one of the few European biotechs to have created its own commercial infrastructure) is built around Tracleer in particular, and around PAH more generally, an indication that it more or less built itself, albeit initially more as a result of chance than design.

Today, then, Clozel's message isn't about "being as good as Pfizer" when it comes to primary care marketing. Both are so passe. So, apparently, are prospects for Tracleer beyond PAH (the drug failed Phase III trials in idiopathic pulmonary fibrosis in March).

Today's story is back to PAH again, but it's about macitentan: you guessed it, a Tracleer-follow-on. Due to report Phase III trials in 2011, macitentan could be even more potent than Tracleer, say some, since it's a highly tissue-specific endothelin antagonist.

"At the end of next year we will be a completely different company because we will have macitentan," Clozel told journalists at the site opening. Not so different as if it had almorexant, though. But, as Clozel implied, different enough to be worth a lot more than what today's share-price says -- assuming things work out, of course.

Back in 2009, Clozel said that Actelion had specifically not tried to turn itself into 'the endothelin company'; the message being that it would not limit itself to a specialist indication or approach.

Forced now, by pipeline upsets, to lean back on that original focus, it's this specialization that nevertheless makes Actelion an attractive take-over target. And if macitentan goes the same way as almorexant and as clazosentan, which failed in a late-stage study in vasospasm earlier this year, Amgen's offer, if it exists, may yet prove the most valuable option for those shareholders after all.

image by flickr user secretlondon123 used under a creative commons license

While You Were Throwing Snowballs

At least on the East Coast, March has apparently lived up to its reputation and come in like a large cat. Here at IVB we're not so much concerned with the way it begins and ends, but instead would rather focus on the Madness in between.

Speaking of madness: while you were making snowmen ...

• That Sebelius/HHS announcement that made so much news this weekend? Ramsey Baghdadi had the scoop for the IN VIVO Blog.
  
• Art imitates life imitating comedy imitating sad state of the world: Pharma Giles at PharmaGossip.
  
• Wyeth's Prevenar approved in Russia.
• Roche scheme to enhance Pulmozyme compliance probably needed a little more thought, don'cha think? The company has now been censured in the UK for giving out Toys R Us gift certificates to children on the drug, reports the FT.
  
• Actelion's application to expand Tracleer's use into PAH patients with less severe disease greeted with a complete response letter from FDA. FDA says Actelion's REMS first needs to be finalized and approved before it can finish its review of the sNDA.
• Have higher regulatory hurdles affected investment in early-stage Type-2 diabetes companies? VCs weigh in at The Pink Sheet.
  
• Offenses across the NFC East are breathing easier. Sadly, Brian Dawkins, no longer an Eagle, signs 5-year deal with Denver Broncos.
  

DotW: State of the Union

Okay, we at IVB know that Tuesday night's speech wasn't really a state of the union address. Call Obama's discourse a precursor, a practice run, a preliminary to the real thing coming in 11 months. Whatever you call it, there's no denying the officially unofficial address will likely go down in history as one of the most important events--after the budget, also released this week--of 44's first 100 days. Not necessarily because, as Ezra Klein at American Prospect notes, it was a particularly inspiring--or terrorizing--speech. But because "he didn’t wrap his agenda in a lot of rhetoric about America’s mettle or hide it behind stories and icons. He just sort of said it." Imagine.

In a week where the Dow plummeted to lows not seen since 1997 and news on rising unemployment and falling home sales only added to the gloom, it's perhaps natural to take stock of the biopharma state of the union. Sadly, as investors worried over the mind-boggling $3.6 trillion federal budget Obama submitted Thursday, the stock prices of pharma companies, med-tech outfits and insurers dropped, illustrating again that there is no such thing as a recession proof industry.

As the saying goes, you can't swing a dead cat without hitting a troubled biotech these days. Elan once again made the news with an announcement that it was shedding 230 jobs--half in Ireland and half in California--as it tries to control costs and marshall resources. (No word on the corporate jets.) Meantime, Vanda is the latest company to experience the full brunt of shareholder activism, while Intercytex shows regenerative medicine is still a tough area to grow a business.

And then there's Dynogen, this week's winner of IVB's little engine that couldn't prize. The company declared chapter 7 less than a year after trying to go public via the SPAC--or is it SCRAP?--route. Even as six law firms kvetched about their unpaid legal fees, Dynogen's venture backers, which include Oxford Bioscience Partners, SV Life Sciences, and Abingworth Management, took it on the chin despite sinking $67 million into the IBS developer.

In what is surely a sign of the times, this week Pfizer announced it was discontinuing work on two Phase III primary care products, PD 332,334 for generalized anxiety and esreboxetine for fibromyalgia, to redirect resources to drug candidates with more potential. The news shows that even Big Pharma face tough decisions these days about which programs to move forward and which to table. Could the news mark the beginning of the much vaunted Pfizer transformation CEO Kindler has talked about in the days since moving to acquire Wyeth? This blogger is reserving judgement until the New York pharma actually does some thing revolutionary, such as not just killing the programs but outlicensing them. (For another opinion on Pfizer's transormation potential be sure to check out this hilarous youtube video by a former Ann Arbor, MI-based employee.)

Meantime when it comes to dealmaking in the biopharma state, the big news this week was partnerships gone awry. Astellas made the decidely un-Japanese decision to go hostile in its quest for CV Therapeutics, despite the fact that the decision means Astellas violates a longstanding standstill agreement tied to the California biotech's Lexiscan imaging agent. The Roche/Genentech saga continues apace, with Roche marshalling its economic might by issuiing over $30 billion in bonds in the past two weeks, and Genentech preparing to woo investors at its annual R&D day in NYC on Monday. (Better be some good danish at that meeting...)





Synta’s shocking news that it was halting a Phase III trial of metastatic melanoma drug elesclomol due to excess mortality likely portends an end to its rich partnership with GlaxoSmithKline. Originally inked in 2007, the agreement has added just over $100 million to Synta’s coffers. And, as we wrote on Monday, Johnson & Johnson and Basilea seem poised to begin a very public fight over milestone payments tied to regulatory approval of the antibiotic ceftobiprole. Frustrated over European and US regulatory delays associated with the drug, Basilea announced it was seeking arbitration to obtain compensation from partner J&J for outstanding milestones and the value of the opportunity lost in not having ceftobiprole on the market.

Here at IVB, we know that not all deals are created equal. We, the bloggers, in order to form a more perfect industry, provide for the common defense and promote the general welfare, bring you another edition of Deals of the Week. (Domestic tranquility is not, however, guaranteed.)

Merck Serono/Ambrx: Merck Serono and Ambrx formed a more perfect union this week as they expanded their existing relationship to include the development and commercialization of a preclinical biological multiple sclerosis candidate, ARX424. According to the deal, announced Feb. 24, Darmstadt, Germany-based Merck Serono gains exclusive global development and commercial rights for the MS compound. In exchange, Merck Serono will pay an undisclosed sum to Ambrx, plus pick up an equity stake. Ambrx also stands to receive undisclosed clinical, regulatory and commercial milestone payments for drugs that make it to market, plus royalties on global sales, as part of the package. Furthermore, it has the option down the line of converting royalty rights in the US to a profit-and-loss sharing agreement. San Diego-based Ambrx is one of those increasingly rare beasts: a biotech with plenty of cash resources that's announcing staff increases rather than layoffs. In the last 20 months, Ambrx raked in $60 million thanks to the recent equity deal and milestone payments from its alliance partners, which also include Merck and Eli Lilly. Thanks to these resources, CEO Steve Kaldor says, conservatively speaking, his firm should be able to get through late 2011 or early 2012 with no need for new financing or equity deals. "We continue to sustain a multi-year runway while growing our biologics product portfolio and innovative platform" he said. Of course, it helps that Ambrx's RECODE (reconstituted chemically orthogonal directed engineering) technology allows the company to endow native proteins with new therapeutic propertis. And readers you know what that means. Even if the company is devoting much of its efforts to creating first-in-class molecules, there is the potential to use RECODE to create follow-on biologics, be they true generics or copy cat molecules with a twist. It's an area of intense interest to Big Pharma these days, especially given the Obama Administration's willingness to include FOB legislation in the most recent Congressional budget. (Teva and Merck dominate the Big Pharma FOB horse race currently thanks to their deal making in recent months, a topic highlighted in the February issue of IN VIVO.) As for the MS compound that was central to the Merck Serono/Ambrx deal, there are few details on the exact nature of the protein in question. "It may be a pioneering target or a follow-on biologic. We are not divulging what class it is," Kaldor told our sister publication "The Pink Sheet" DAILY. Whatever class it is, it's IVB's bet that Ambrx will not long remain an independent company. Merck Serono is our pick to buy it.

CSL/Xencor: Any doubts about interest in next generation technology that provides souped-up antibodies, look no further than news that Aussie biopharma company CSL signed an R&D alliance with Xencor to gain access to the privately-held biotech's Xmab technology, which allows the optimization of antibodies to create molecules with increased potency and longer half-lives. Details of the agreement--from its apparent breadth to the size of the upfront payment and downstream milestones--were lacking. It's the second such alliance Xencor has signed this month. Earlier in February, the biotech announced it was teaming up with Human Genome Sciences to use Xmab to create better versions of the Rockville, Maryland-based company's antibodies. Details of that transaction weren't disclosed, either. For the privately-held Xencor the two transactions--even if modest in size--likely provide much needed non-dilutive funding. The company, which has raised $130 million since its 1997 founding, last raised money in Oct. 2007 when it tacked an additional $15 million onto a 2006 $45 million Series E, which was led by MedImmune Ventures with additional backing by Novo Nordisk and HealthCare Ventures. (New investors in the Series E extension included Oxford Bioscience Partners and Merlin Nexus.) It's hard to tell how long Xencor's backers are willing to subsidize the company, but despite numerous partnerships--including deals with Centocor, Genentech, and Boehringer Ingelheim, no suitors have been sufficiently impressed with the technology to want to acquire the Monrovia, CA-based company despite pharma's 2007 land-grab for next generation antibody technologies. It could be that companies are still waiting for validation that the technology works as advertised: molecules in Xencor's internal pipeline are still at a very early stage. The biotech's lead product, an anti-CD30 for Hodgkin lymphoma and other T-cell lymphomas, is only in Phase I development.

Actelion/GeneraMedix: In a continuing bid to strengthen its position in the pulmonary arterial hypertension market, Switzerland's Actelion announced Monday that it would pay an undisclosed amount for worldwide development and commercialization rights to an IV formulation of epoprostenol from the injectable generics group GeneraMedix. Approved by FDA in June last year, this improved formulation of GlaxoSmithKline's (now generic) Flolan offers more convenient storage options than epoprostenol alternatives, including another generic from Teva approved last year. While not likely to be a large deal, the tie-up makes sense. It allows Actelion to leverage its existing infrastructure and expertise in this specialist field, where it already sells the lead drug Tracleer (bosentan). But there is no way epoprostenol will come anywhere close to replacing Tracleer, which sold CHF 1,294 million in 2008, and is under increasing pressure from contenders marketed by Gilead and United Therapeutics. (A generic version will also be available come 2015 for those keeping track.) According to analysts at Piper Jaffray, who estimate total worldwide sales of IV PAH therapies are worth about $200 million to $300 million, epoprostenol may add $30 million to $50 million in sales before 2014. To make up the revenue gap from potential lost Tracleer sales, look for Actelion, which has a sizeable war chest--approximately CHF 1.1 billion in cash at the end of 2008--to sign additional deals in the coming months.

Cephalon/Arana: Arana's mystery buyer has a name: Cephalon. On Feb. 26, Aussie biotech Arana announced that it was involved in take-over discussions. Trading on the Australian Stock Exchange was halted in anticipation of a buy-out. One day later Cephalon revealed that it intends to offer A$1.40-a-share for the biotech, a 69% premium to Arana's closing stock price on Feb. 25. If the offer goes through at the current price--and it does have the support of Arana's independent directors absent a superior proposal from another party--it will be worth approximately A$318 million ($207 million USD). In support of its bid, Cephalon took steps to secure nearly 20% of Arana's issued shares from the Aussie outfit's two largest shareholders, Start-Up Australia Ventures and Rockwell Securities Ltd., before launching the formal offer. The deal represents a slight shift in Cephalon's deal-making strategy in recent months in that it is not tied to any contingent value rights. Recall that Cephalon's recent $100 million tie-up with Ception was an option-based deal that gave the Frazer, PA-based company the right to buy the smaller biotech for an additional $250 million plus milestones and earn-outs if a Phase IIb/III trial of Ception's antibody reslizumab for eosinophilic asthma panned out. But the recent deal is certainly in-line with Cephalon's stated desire to build a larger presence in both biologics and inflammatory disease. Together with the ImmuPharma compounds Cephalon recently locked up and Ception's reslizumab, Arana's portfolio of tumor necrosis factor (TNF) alpha blockers, gives Cephalon a tidy pipeline of drugs aimed at diseases such as lupus, rheumatoid arthritis, and psoriasis. Indeed, Arana's Phase II novel anti-TNF domain antibody for psoriasis, ART621, was the primary driver of the deal. Of course, it helps that in addition to a novel pipeline of products, Arana also comes with a guaranteed revenue stream: thanks to strong IP in the anti-TNF space, the biotech receives royalties from Abbott Laboratories and Johnson & Johnson on Humira and Remicade.

Medtronic/CoreValve: As we wrote earlier this week, you know Medtronic's $1.03 billion buying spree is only the beginning, not the end, of the long-anticipated land grab around the percutaneous valve replacement field and its two major sub-markets--aortic and mitral valve devices. There has been a lag of several years since Edwards Lifesciences did the first major deal in the space, acquiring aortic player Percutaneous Valve Technology (PVT) in late 2003. But the promise of the market has continued to grow as investment remained active, technology improved, and the competition increaed. Give Medtronic credit for the executing the old "shock and awe" routine with perfection, by picking up a pair of percutaneous players in quick succession: CoreValve Inc. and Ventor Technologies Ltd. For Medtronic, these deals represent not just an investment in technology building. In CoreValve, the device behemoth gets a company that is already competing aggressively in the European aortic market, where CoreValve's smaller-sized system is running neck-and-neck with long-time leader Edwards. The deal could spark a torrent of additional partnering, especially as Edwards Lifesciences and St. Jude looked to build armamentariums competitive with Medtronic's.

Interested in future deals-of-the-week candidates? Check out the the January issue of Medtech Insight for the full story on percutaneous aortic valve players, and the technical and operational challenges facing the field.

(Photo courtesy of flickr user tsevis through a creative commons license.)

Deals of the Year Nominee: GSK/Actelion

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

Actelion’s worldwide licensing deal with GlaxoSmithKline for Phase III sleep drug almorexant isn't in this competition because of the alluring multi-billion biodollars associated with it. We know that potential regulatory and commercial milestones equal, for the most part, non-existent ones.

It’s in there because the July deal is one of those rare (and post-crisis, even rarer) partnerships where the biotech calls the shots. And where Big Pharma is very happy for biotech to call the shots because a) it keeps risk under control and b)—here’s the good bit--it’s picking up a tip or two on the way about how to run R&D.

Actelion remains fully in charge of the clinical program (unusual, not unique) and gets to further its own ends of creating a sales force by borrowing an appropriate GSK drug for a short time. Now sure, 'biotech hanging onto control' equals 'Pharma hedging its bets'. Small wonder: as we reported here, this compound is a novel mechanism, primary care pill for a non-life-threatening disorder. No wonder GSK is only funding 40% of the development costs. It won’t book sales, just 50% of profits. And while the $148 million upfront money for the Phase III candidate isn’t bad, it’s not blowaway. Nor are the slightly-less-blue-sky pre-commercial milestones of CHF 415 million associated with the drug’s first indication, primary insomnia. (Remember, this deal was signed pre-meltdown, just.)

But in a sense Actelion wanted GSK to hedge its bets because the biotech wants its own bets to hedge too. It reckons it's the one that can make a success out of a compound that it knows best, and, as a spokesperson claims, it's a “long-term deal" based on industrial logic, "not market logic” (thank goodness for that, then). The Swiss group can afford that luxury, with a market cap of CHF 7.1 billion ($5.9 billion) and CHF 1 billion in cash. This in itself makes Actelion a beast as rare as the novel-mechanism PC pill it's touting.

And it’s a company that GSK’s management apparently wants to learn a thing or two from. According to Actelion, its chief Jean-Paul Clozel was invited to speak to GSK R&D heads while the deal was being negotiated (see this post). That's significant: GSK is acknowledging that it might need to learn a few things about how Actelion does R&D, 'so please, biotech, come in and show us. And that means we can’t squash you or take you over, we need to watch you flourish and invite you to share your secrets.' Which explains why Actelion can boast about the wide-open, smiling communication channels right to GSK's boss Andrew Witty, and the origins of an anecdote about an email Witty sent to senior management in both companies essentially declaring that Actelion is in charge of the co-development program and for anyone who's got a problem to take it up with GSK's R&D chief Moncef Slaoui.

This deal also points to the alleged bureaucracy-slashing, crap-cutting going on under Witty’s watch at GSK. “This is a CEO willing to get his hands dirty,” notes one analyst.

Is the pharma leopard finally changing its spots? Who knows, but this deal might point to tantalizing evidence that it is. That’s why its one of our deals of the year. (And if Long-Awaited Change within Big Pharma doesn’t float your boat as a once-in-a-lifetime thing, how about this: a European biotech with sights set on building its own primary care sales force and with sufficient fuel to think about long-term investment in the pipeline. A rare sight.)

image from flickr user lu lu used under a creative commons license.

Deals of the Week: All Star Break

In a week when the AL (again) defeated the NL 4-3 in a marathon 15-inning All-Star game at Yankee Stadium (thanks, Billy Wagner, for blowing the save and losing home field advantage for the World Series-bound Phightin' Phils), there were a few all-stars in the pharmaceutical world as well.

The buzz word this week was diversification, with health-care behemoths Johnson & Johnson and Abbott Labs posting better-than-expected quarterly results. J&J was buoyed by its consumer products business and Abbott had both stents and Humira to thank for its performance. On the other hand Novartis--an increasingly diversified company--grew in spite of its non-branded Rx divisions: its consumer medicines and Sandoz generics business enjoyed only moderate success thanks to tough times in the key US market, but that didn't stop the Swiss company from posting solid second quarter numbers. (We'll have more to say on Big Pharma business models and the yin and yang of focus and diversification in an upcoming IN VIVO piece.)

Keeping with the baseball theme: we're not a blog to steal signs but we couldn't help but pick up on something earlier this week. On Tuesday we gave you all free access to the denosumab record from Elsevier's Inteleos database and noted that Amgen has suggested it would be open to licensing the project, at least for the primary care indication of post-menopausal osteoporosis (PMO).

The challenge? For all of you expert dealmakers out there to add your two cents regarding the value of the project and potential deal strategies for Amgen. We can only assume that the dearth of comments suggests that all of you are in preliminary or even final-stage negotiations with Amgen and therefore recuse yourselves from the prize-less competition. Wink wink, we get it. Slackers.

You know who hasn't been slacking off? Those intrepid dealmakers responsible for ...



GSK/Actelion: The week started off with a bang when on Monday Glaxo fronted CHF 150 million ($148 million) in a worldwide (ex-Japan) co-development and co-promotion pact with Actelion for the Phase III orexin receptor antagonist almorexant. The Big Pharma pledged an additional CHF 415 million in pre-commercial milestones for the drug’s first indication of primary insomnia and an absolutely filthy figure for total milestones in two additional indications. Reactions to this deal were varied, to say the least. One analyst called it "the largest-ever partnering deal in the history of the industry," while others pronounced themselves decidedly "underwhelmed." Certainly you can't please everyone. But allow us to be the voice of reason, the voice of moderation, the voice of baby bear, when we say that GSK's figure was probably "just right." Why's that? Well forgetting the non-insomnia terms and taking into consideration the fact that GSK will help Actelion get its primary care field force off the ground by paying it to promote an undisclosed GSK drug prior to almorexant, the upfront payment may have been low for a Phase III primary care drug circa 2000-2003, but not anymore. The few primary care drugs available for licensing in Phase III, with novel mechanisms of action designed to treat non-life-threatening diseases, come saddled with higher than ever clinical development hurdles and increased regulatory scrutiny. GSK’s ante for almorexant—though large enough to put the deal in the upper echelon when it comes to guaranteed money—might seem small were it not for those circumstances. The fact that the Big Pharma is only chipping in for a minority of almorexant’s pivotal development program (which aside from the ongoing RESTORA 1 study will include at least two more Phase III trials) is further evidence that GSK is hedging its bets here.

Genzyme/PTC: We'll spare you the "London buses" reference but suffice to say it's unusual to see one $100 million+ upfront licensing deal and to see two in a week--well, that's plain crazy. But score another one for the orphan drug seekers. On Thursday, Genzyme paid $100 million to PTC Therapeutics to enter into a global collaboration to develop and commercialize PTC124, PTC's novel oral therapy in late-stage development for the treatment of genetic disorders due to nonsense mutations. The drug is in Phase IIb trials for Duchenne muscular dystrophy and is scheduled to enter a Phase IIb in cystic fibrosis later this year. PTC will cover the cost of 124's remaining Phase II program--which is slated to include four trials--and from there the parties will split development costs 50/50. PTC is eligible for $165 million in development and approval milestones and $172 in sales milestones. PTC will commercialize in the US and Canada (where it is responsible for all commercialization costs) and Genzyme takes responsibility for marketing and associated costs for the RoW. In addition to Genzyme's up-front contribution PTC pulled in up to $25 million from the non-profit Cystic Fibrosis Foundation the day before the deal was announced to support development of '124 in CF.

ViroPharma/Lev: Specialty pharma outfit ViroPharma announced it was entering the hereditary angioedema (HAE) space with its $443 million acquisition of Lev Pharmaceuticals. The linchpin of the deal is Lev's C-1 esterase inhibitor Cinryze, a biologic that has been available in Europe for 35 years to treat this rare and life-threatening condition, which causes inflammation of the larynx, abdomen, face, and extremities. Lev filed a BLA for Cinryze in July 2007, seeking approval for both prophylaxis and acute treatment of HAE. The product faces competition from CSL Behring's C1 inhibitor Berinert and Jerini's Firazyr. Our sister publication Pink Sheet Daily has more on the HAE market and Cinryze's chances of success. For ViroPharma, the deal marks a shift away from the antiviral space, which has long been its focus, into the hospital/ transplant arena. And with the addition of a soon-to-be marketed product, it continues the company's trend of playing to an investor base attracted to fully-baked and largely derisked assets. Recall this is the company that made a tidy profit on Vancocin, a decades old product it inlicensed from Eli Lilly, to treat Clostridium difficile outbreaks. ViroPharma's timing on Vancocin was exquisite. It brought in the product just when very nasty strains of the bacterium were causing large scale hospital outbreaks of the disease; given the market forces, ViroPharma was able to raise prices of the drug considerably. It is currently working on a follow-on to Vancocin, NTCD. Meantime, there's little information available about ViroPharma's hepatitis C program: ViroPharma discontinued its HCV-796 program, partnered with Wyeth, earlier in the year. According to ViroPharma's website, the two companies continue to exlore follow-on molecules to treat the disease.--Ellen Foster Licking

MacroGenics/Raven: Raven Biotechnologies finally found a buyer in MacroGenics. Last November, Raven announced a tie-up with VaxGen worth about $39 million. But VaxGen's shareholders revolted and scuppered the deal this past spring. MacroGenics, in turn, has been working to build a fully integrated biopharmaceutical company (how quaint) around its Fc antibody engineering and dual affinity re-targeting (DART) programs. It has a large deal with Lilly to develop and commercialize its anti-CD3 mAB for use in the treatment of autoimmune diseases, icluding recent onset-type 1 diabetes. On July 17, MacroGenics and Raven announced their tie-up. Financial terms weren't disclosed but it seems unlikely that Raven got more than what VaxGen originally offered. For MacroGenics, the acquisition provides additional preclinical assets, including more than 1300 monoclonal antibodies that Scott Koenig, CEO of MacroGenics, claims can rapidly be developed using their optimization platforms. In addition, the deal gives MacroGenics access to a portfolio of proprietary cancer stem cells from many types of primary tumors that could be an important addition to MacroGenics R&D capabilities. --EFL

Teva/Barr: What's $7.6 billion buy these days? Maybe a top-five starting pitcher, but those are hard to come by. No, this week it was Barr Laboratories. This late-breaking deal of the week is the latest chapter in the ongoing consolidation of the generics sector, but the bigger story here is the combination of Teva and Barr's biologics programs. Teva also noted Barr's legal prowess and at-risk launch capabilities. Under the terms of the deal, each share of Barr common stock will be converted into $39.90 in cash and 0.6272 Teva ADRs and Teva will assume Barr's $1.5 billion in debt, to boot. In other generics news, Czech generics play Zentiva is now telling investors to reject Sanofi-Aventis' attempt to up its stake in the company, saying the $2 billion play is a lowball offer.

photo by flickr user mori claudia used under a creative commons license.

Deals of the Week: the Good, the Bad and the Ugly

We're usually bad-news-first kind of bloggers, but that's not how the old spaghetti western poster reads, so you'll just have to wait. It was a bit of a mixed bag this week for the industry, with a couple of solid slugs of clinical data from Novartis (its mTOR inhibitor everolimus impressed in a Phase III study) and Alnylam (Phase II data for ALN-RSV01 were positive). AZ even got approval for Nexium in kids aged 1-11 (at $164 for 30 capsules those kids are gonna have to sell a lot of lemonade). Bad news, typically, seemed easier to come by: Lilly's long-acting Zyprexa injection was deemed not approvable, Elan and Biogen's warned docs of Tysabri liver damage potential, FDA decided to scrap its anti-infectives panel meeting to the chagrin of Basilea and Theravance, and AZ's lung cancer drug Recentin failed its pivotal study. On top of all that, a few entire classes of drugs (antidepressants, EPOs) had pesky and problematic meta-analyses to contend with. Pfizer's pitchman Dr. Jarvik row, row, rowed gently down the stream (but not before Pharmagossip unearthed this hilarious 1986 Playboy article about the artificial heart pioneer). And then there's the ugly:

As we mentioned earlier this morning: the heparin story continues to get worse, and if we see any more pictures of pig intestines in China we are going to be sick. But lets forget all that for just a moment. Lets get to the point of this rambling post. Lets settle in.

Because you see, in this world there's two kinds of people, my friends ... those with loaded guns, and those who dig. You dig ...

Galderma/CollaGenex: Galderma’s $420 million tender offer on Tuesday for CollaGenex marks the third recent major acquisition of a specialty dermatology company, joining Nycomed/Bradley ($330 million, in October 2007) and Almirall/Hermal (July 2007, for $518 million) as part of a trend initiated in October 2006, when Steifel Laboratories bought Connetics for $640 million. The CollaGenex deal, at a 30% premium to its recent price and a 100% increase over the company’s stock price less than four months ago, was the result of a competitive bidding process, according to the company. “The price tag reflects how hungry the dermatology companies are for assets,” notes Leerink Swann analyst Gary Nachman. The merger will place two products often used in combination under the same roof: Galderma’s topical rosacea drug MetroGel, one of the privately held company’s key branded products, and Collagenex’s Oracea, the first systemic drug for treating rosacea. Approved in the US in July 2006, Oracea, a low-dose, delayed release formulation of doxycycline that works as an anti-inflammatory but not an anti-bacterial drug, will comprise $50-51 million of CollaGenex’s projected $61-62 million revenues for 2007. Galderma also gets an 80-person sales force, and with an existing US commercial presence, it should be able to experience some cost savings through the combination. (Medigene holds the EU rights to Oracea.) Galderma could further bolster its rosacea franchise down the road with CollaGenex’s COL-118, a formulation of the ophthalmology drug brimodine, expected to move into Phase III in mid-2008 as the first potential treatment for erythema, the skin redness associated with rosacea. Galderma also gets Collagenex’s early Phase II vitamin D analog becocalcidol, licensed from QuatRx Pharmaceuticals in May 2007, in development for mild/moderate psoriasis.

Actelion/Nippon Shinyaku: Terms of this (impending) licensing deal weren't disclosed, but nevertheless the agreement underscores the momentum in pulmonary arterial hypertension therapies--Just last week Pfizer announced it was buying Encysive, another PAH-driven deal. Today, Actelion has signed a "binding letter of intent" to license Nippon Shinyaku's novel PGI-2 receptor agonist NS-304, and is responsible for global development and commercialization of the candidate ex-Japan (in Japan, the two co's will co-develop and co-promote). The project is currently in Phase II development in Europe. Actelion, built on the back of the success of its own PAH therapy Tracleer, isn't likely taking much of a financial risk to add this orally available compound to its pipeline.

Cypress/Proprius: Cypress Bioscience said on Monday it was acquiring Proprius Pharmaceuticals, a privately held "specialty pharma company," for up to $75 million--half now, half later, based on milestones. Proprius bills itself as a personalized medicine play, with a focus on rheumatology diagnostics and therapeutics. Should those dx/rx candidates make it to market, Cypress aims to capitalize on the specialty rheumatology/pain sales force it will unleash to market its lead milnacipran fibromyalgia drug, which is being co-developed and co-promoted with Forest Labs, and is currently under FDA review. Proprius' investors didn't have to wait long for a return: the company's first venture round was last January, when it raised $11 million of a planned $17 million Series A.

And finally a bonus no-deal of the week: Wyeth has dumped its bifeprunox partner Solvay, citing commercial considerations. In a statement the jilter noted it was terminating the deal after "assessing the opportunity for bifeprunox and determining it would not have sufficient commercial value for the two companies to share." Solvay investors sent the company's shares down more than three percent. We noted Wyeth's pipeline troubles in a post last year.

soundtrack sample from Shobary's Spaghetti Westerns