Deals of the Week Takes Stock in M&A

Here at Deals of the Week, we don’t often take note explicitly of buyouts outside the biopharma sphere. But one well-publicized tech deal last month piqued our interest – and it parallels another recent pharma deal in a way we found curious.

As you may have heard, social networking giant Facebook wowed the tech field with its February takeout of smartphone communications app developer WhatsApp for a jaw-dropping $16 billion plus an additional $3 billion in employee-retention bonuses, reportedly the largest-ever acquisition price for a private, venture-backed company. (We’ll note in passing that one of the deal’s biggest winners, venture firm Sequoia Capital, is also a life sciences investor.)

Now, $19 billion is a lot of scratch – it’s a bigger pile of cash than the gross domestic product of Jamaica, and it’s in the ballpark of the price Sanofi paid for Genzyme in 2011. But a closer look at the WhatsApp deal’s terms reveals that Facebook paid just $4 billion in cash – a quarter of the deal’s baseline value – and the balance, including the retention bonuses, in its somewhat volatile stock. It’s a common formula in tech, a sector in which speculative value far outpaces revenue in many cases.

In the biopharma world, such arrangements traditionally are unheard of – but that might be changing. While many pharma mega-deals include both cash and stock components, most feature bigger cash portions than paper value. Just over a third of the $68 billion Pfizer spent to acquire Wyeth in 2009 was in stock, with the rest coming in cash; Johnson & Johnson’s $21.7 billion deal for Synthes in 2011 was in the same league, weighted roughly 65%-35% in favor of cash.

That’s why Actavis’ pending $25 billion deal to acquire Forest Laboratories last month was so unusual. Actavis paid just $26.04 per share, or 29% of the total $89.48-per-share purchase price, in cash, and swapped its stock for the rest. So there’s financial risk involved: If Actavis shares fluctuate, the deal’s total value could go up or down rapidly, perhaps before it even closes. (We note that the Facebook/WhatsApp deal technically gained more than $600 million in value before it was even announced, since its stock component was based on an already-outdated five-day average of Facebook’s share price.)

It’s not the first mega-buyout to favor equity over the hard stuff; Merck’s $42 billion buyout of Schering-Plough was tilted slightly in favor of stock over cash, with 56% of the price paid in equity. But rarely are large pharma deals ever consummated with paper value vastly outweighing cash money; it’s even less likely with smaller deals. A search of our Strategic Transactions database of reveals that only about one in 10 biopharma deals since 2008 falling into the “bolt-on” range – those ranging from a few hundred million dollars to a few billion – had a stock component.

Some life sciences companies, particularly those living off their sunny growth prospects rather than established, dividend-paying, cash-rich ones, soon could find that their stock is becoming a valuable deal-making currency. And with biotechs soaring in the public markets, some of them look like good candidates for stock-heavy deals. Like Actavis’ stock price, the Nasdaq Biotechnology Index has doubled since November 2012. Emilio Ragosa, a partner with Morgan Lewis & Bockius’ mergers-and-acquisitions practice, said mid-cap biotechs – those valued around $1 billion – are in the sweet-spot. “They tend to have less cash, but their stock is appreciating more rapidly,” he said.

Big biotechs and specialty pharmas, responsible for most of the M&A deal-making action in 2013, are enjoying exceptionally high valuations, but don’t always have big pharma-like cash flow. They’re good candidates to use their strong stock prices to beef up their businesses without denting their cash piles severely.

It’s unlikely that big pharmas will change this aspect of their deal-making strategies much; as Ragosa notes, “They have enough cash on their balance sheets.” Ever sensitive to their quarterly earnings, most large pharmas will continue to avoid using stock to take out biotechs. Seven of the top 50 cash holdings among U.S. companies belonged to pharmas, according to a 2013 Moody’s report; six were sitting on double-digit billions, led by Pfizer. - Paul Bonanos

Transactional activity has been as slow as a snowy Interstate lately, but we’re still taking stock of the latest alliances in...

Biogen/Eisai: Biogen Idec teamed up with Japanese pharma Eisai on March 5 to potentially co-develop and co-commercialize four compounds for the treatment of Alzheimer’s disease. While specific financial details weren’t released, Biogen will pay Eisai an upfront payment of undisclosed size, as well as a fixed number of milestones based on development, regulatory and commercial events. The team also will split worldwide profits on the drugs should they reach the market. Eisai will take the lead on the first two compounds, which it will provide. The first is a beta-site amyloid precursor protein cleaving enzyme (BACE) inhibitor dubbed E2609; Eisai discovered the compound in-house, and is about to begin its Phase II trials. The second monoclonal antibody, BAN-2401, is already in Phase II trials; it’s an immunotherapy designed to break down beta amyloid plaques after they develop. Eisai also has the option to jointly develop and commercialize Biogen’s two in-house Alzheimer’s candidates, the anti-amyloid beta antibody BIIB037 and an anti-tau monoclonal antibody, both of which are in very early stages. The BACE inhibitor space has been heating up as Merck pushes its candidate into Phase III and AstraZeneca follows closely on its heels. Both Roche and Lilly have ended programs in the space after safety signals cropped up in clinical trials. There hasn’t been any proof so far that the safety issues are class-wide, but the industry is keeping a close watch for any signs. - Lisa LaMotta

Genocea/Harvard/Dana-Farber: Fresh from its initial public offering last month, vaccine specialist Genocea Biosciences struck a research deal with Dana-Farber Cancer Institute and Harvard Medical School to study cancer immunology. Under the March 5 alliance, researchers will use Genocea’s proprietary T cell antigen discovery platform to find antigens that correlate with an anti-tumor immune response in melanoma patients. Charitable scientific network Ludwig Trust will sponsor the research; terms weren’t released. The research will play off existing work by Dana-Farber’s Stephen Hodi and Glenn Dranoff in anti-CTLA-4 therapies such as Bristol-Myers Squibb’s Yervoy (ipilimumab). Harvard microbiology and immunobiology professor Darren Higgins will lead the development of a cancer antigen protein library, which will be screened against patient-derived cells using Genocea’s platform in order to seek a correlative immune response. After an initial lukewarm reception, Cambridge, Mass.-based Genocea shares have rebounded, rising more than 50% since the company’s February 5 debut. The company is best known for its clinical pipeline of anti-infective vaccines, including therapies and preventive treatments for herpes simplex virus-2, pneumococcus, chlamydia and malaria. Its most advanced program is GEN-003, a Phase II therapy for HSV-2. - P.B.

NeoStem/Massachusetts Eye & Ear/Schepens: Cell therapy developer NeoStem also inked a deal with some of Harvard Medical School’s tentacles, entering a research collaboration March 6 with Massachusetts Eye & Ear and the Schepens Eye Research Institute. The publicly traded, New York-based stem cell company will sponsor research by Michael Young, director of Mass. Eye & Ear’s ocular regenerative medicine institute, into various eye disorders; financial terms were not revealed. The deal will fund Young’s research using NeoStem’s proprietary very small embryonic-like stem cells, or VSELs. The scientist will perform preclinical work to find uses of NeoStem’s VSEL products to combat degenerative disorders such as retinitis pigmentosa and macular degeneration. Both Mass. Eye & Ear and Schepens are Harvard Medical School affiliates. NeoStem previously has used its VSELs clinically as wound-healing therapy and to treat periodontitis; the company also has targeted cardiovascular diseases and autoimmune disorders. The eye also has been a popular target for gene therapies, thanks to its closed system and immune-privileged status. That has led to several recent fundings of companies with preclinical and clinical-stage programs. - P.B.

Thanks to Flickr user ProAeroPhoto for his photo of a different way to trade cash for stock, reproduced here under Creative Commons license.

DOTW Keeps Tabs As Tax Trimming Fuels Deals

As an industry, biopharma actually fares pretty well when it comes to taxes. Among profitable companies, biotech and pharma have some of the lowest effective U.S. tax rates compared to companies in other sectors. But that doesn’t mean they have stopped working to push their tax rates even lower.

Along with a recent ramp-up of the usual strategies, such as buying companies or assets based in low-tax locales or moving intellectual property there, the industry also is starting to take advantage of the newest twist on tax inversions – in which two companies in high tax locales, only one of them the U.S., merge and create a new company based in a low-tax country.

The specialty pharma consolidation frenzy is driven in part by tax benefits derived from buying companies in lower tax jurisdictions like Ireland. The spec pharma with the lowest tax rate wins – or at the very least earns the right to leverage all that cash on their books to gobble up higher tax rate competitors, thereby making higher margins on the same products.

Valeant is the obvious winner on this front; it will have an astonishing 2% tax rate in 2014, according to data from RBC Capital. But most recently, taxes were also a factor in the Actavis purchase of Forest Laboratories Inc. Actavis had already lowered its tax rate with the acquisition of Irish-headquartered company Warner Chilcott that completed last fall. Now Actavis can apply that reduced tax rate to a product portfolio that will encompass Forest. Prior to the deal announcement, RBC expected Forest would have a 24% effective tax rate in 2014 and that Actavis’ would be 17%.

And, of course, Perrigo is also a newly Irish company, with its purchase last year of the floundering Elan. But there aren’t a lot of direct routes left to Ireland. The largest independent, public Irish therapeutics company is drug delivery company Alkermes; it’s only one of six remaining that also include another drug delivery play Merrion Pharmaceuticals as well as antibody company Prothena, according to the Strategic Transactions database.

(In Ireland, all roads lead back to Elan. Alkermes garnered its Irish locale after a 2011 merger with the drug delivery unit of Elan, while Prothena is the 2012 spin-out of Elan’s drug discovery business. Merrion is also based on IP purchased from Elan.)

Most biopharmas count themselves lucky to have an effective tax rate in the teens – or even the low 20s. The big biotechs with the highest anticipated 2014 effective tax rates are Biogen Idec Inc. at 27% and Gilead Sciences Inc. at 25%, according to RBC. Between them they’ve had two of the most successful launches in recent years for Biogen’s Tecfidera (dimethyl fumarate) and Gilead’s Sovaldi (sofosbuvir).

Intellectual property for each of these products is domiciled in Ireland in an effort to curb tax expenditures. But that’s a long-term solution that could take years to work. Biogen had a 28.8% non-GAAP tax rate in the fourth quarter. Due to a larger percentage of its profits coming from the U.S. with the Tecfidera launch, the biotech expects the rate to remain at this level through 2014 but for it to subsequently decline in the following two years.

Alexion beefed up its Irish and Singapore operations last year and in January bought an Irish vialing facility for its Soliris (eculizumab). These efforts resulted in tax benefits that are expected to give it a 2014 non-GAAP tax rate of 11% to 12% (GAAP tax rate of 20% to 25%). That’s down from a whopping 51.9% effective tax rate in 2013, which translated into an income tax provision of $273 million. Alexion’s non-GAAP rate is expected to rise to 13% to 14% in 2015 and 16% to 18% in 2016 and beyond, since some benefits are only short-term tax credits.

The most creative tax tactic in the sector is the recent Endo-Paladin deal. The usual approach to tax inversion is for a U.S. company to become the subsidiary of a foreign company. The latest twist on this long-standing move, the third deal of its kind according to RBC, is exemplified by the Endo-Paladin merger, in which a U.S. and Canadian company are merging to form a new entity – in this case, an Irish company.

One risk of being overly imaginative with corporate tax strategy is always bad publicity, as it can trigger allegations of being a ‘tax avoider’ or, even worse, attract the tender attentions of the IRS. Those issues make it difficult for the big multinationals to be very aggressive on the tax front, although becoming enormous hasn't slowed Valeant’s efforts on this front.

The highest corporate income tax rate in the United States is around 40%, including federal, state and local taxes. But at $242 billion in 2012, corporate income taxes are a small percentage of U.S. federal receipts compared to the $1.1 trillion in individual income taxes and $845 billion in social insurance taxes during that year, according to a recent Government Accounting Office report. Since the 1980s, corporate taxes have ranged from roughly 6% to 15% of federal revenue.

Ireland isn’t the only useful tax locality – the top four are the UK, Ireland, the Netherlands and Switzerland, according to RBC. These countries had a 2013 corporate tax rate of 23%, 12.5%, 25%, and 18%, respectively, according to data from KPMG.

Ernst & Young’s Mitchell Cohen, the life sciences global tax leader at Ernst & Young, also includes Belgium (35%, with substantial patent and R&D related deductions and credits), Singapore (17%) and Puerto Rico (20% to 30%) among the ranks of countries with a significant life sciences presence that provide tax benefits.

Among profitable companies overall, the average effective tax rate is 26.6%, according to a current dataset from Aswath Damodaran, a professor of finance at the Stern School of Business at New York University. The profitable pharma companies in his dataset had a 22% average effective tax rate, while the money-making biotechs were at an average of 17.4% That puts both groups in the bottom one-third of corporate tax paying sectors.

And while DOTW can't promise that you'll personally enjoy an effective tax rate of 2% this season, we do want to send you off with this week's deal news. Please read on to discuva the latest, including a pair of preclinical deals and another two that were called off in this week's edition of. . . .

Celgene/Abide: Celgene likes to keep all its options open – to acquire companies, to acquire programs and to license programs. In its latest R&D deal with the preclinical Abide Therapeutics, disclosed on Feb. 28, it included an option to purchase its biotech partner as well as an option to license the rest-of-the-world rights on the first two programs to reach the clinic. Abide’s most advanced compound, AB101131, is expected to enter the clinic in 2015. The biotech expects to get three or four additional candidates into the clinic under the collaboration.  Its technology selectively targets serine hydrolases to develop new treatments for inflammation and immunological disorders. Founded in 2011, Abide was seeded by venture firm Cardinal Partners. Celgene and Cardinal Partners both participated in an undisclosed equity financing concurrent with the deal. Other terms of the deal, including the upfront, also remain undisclosed. Abide is headed by Alan Ezekowitz, an entrepreneur-in-residence at Cardinal Partners who became the biotech’s president, CEO and co-founder. Prior to that, he was at Merck Research Laboratories, the research division of Merck & Co. Inc., as SVP and franchise head of bone, respiratory, immunology and endocrine. Abide’s platform is based on work by Professors Ben Cravatt and Dale Boger of the Scripps Research Institute. The biotech secured its first big biopharma deal last May; it partnered with Ezekowitz’ former employer, Merck. In that deal, it garnered an undisclosed upfront and milestones of up to $430 million to discover, develop and commercialize small molecules against three novel targets to treat metabolic diseases with a focus on type II diabetes. In the last few years, Celgene has done at least three prior deals that included an option to purchase the company: an October 2013 deal with cancer and fibrotic disease company PharmAkea Therapeutics, a July 2013 partnership with toll-like receptor agonist developer VentiRx Pharmaceuticals, and an October 2012 deal with selective small molecule histone deacetylase (HDAC) inhibitor developer Acetylon Pharmaceuticals. - Stacy Lawrence

Roche/ Discuva: Roche and U.K. biotech Discuva are collaborating on the discovery and development of new antibiotics to treat multi-drug resistant gram-negative infections using Discuva’s Selective Antibiotic Target Identification technology platform. SATI uses next-generation sequencing and bioinformatics to identify bacterial targets and select from among them promising drug development candidates. The deal, announced on Feb. 28, fits well with Roche’s revamped research strategy in infectious diseases, a field its R&D organization exited more than 20 years ago, but recently has re-entered. The new, narrower focus is on multi-drug resistant, pathogen-specific, hospital-directed therapies, rather than broad spectrum antibiotics that were Roche’s original focus. Companion diagnostics, an area of strength due to Roche’s long experience in molecular diagnostics, will be important in identifying pathogens. In an October 2013 meeting in New York, Roche’s head of research and early-stage development John Reed outlined his organization’s priorities, noting that the antibiotics field is attractive now in part because “the animal models are good in the clinical context” and the regulatory path is clearer, particularly for safety requirements, thanks to recent FDA guidance.” Discuva will receive an upfront payment of $16 million, as well as research fees and payments on multiple programs of up to $175 million per product upon achievement of certain development, commercial and sales milestones. It will also receive potentially double-digit royalties on product sales. Discuva uses proprietary methods built from recent genomic discoveries to identify targets that affect bacterial growth and viability, as well as related genes potentially associated with development of downstream resistance. The problem of multi-drug resistance to gram-negative infections is growing but has not received as much attention as gram-positive infections. Gram negative pathogens addressed by Discuva include Pseudomonas aeruginosa, Acinetobacter baumannii, Klebsiella pneumonia, Escherichia coli, and Neisseria gonorrhoeae. The company was founded in early 2012, with backing from New Wave Ventures. New Wave’s co-founder Tim Bullock is chairman of Discuva’s board; the amount his firm contributed to the start-up is not public. David Williams is an entrepreneur who founded Sareum, a U.K. oncology biotech that went public on AIM, and previously worked at Millennium Pharmaceuticals, Acambis, and Medivir. - Wendy Diller

Merck/Ariad: The fate of Ariad Pharmaceuticals’ mTOR inhibitor ridaforolimus is uncertain now that pharma partner Merck & Co. has decided to return rights to the cancer drug. Ariad revealed in its year-end financial release Feb. 25 that Merck is terminating a licensing agreement for the development and commercialization of ridaforolimus effective in November. The move creates “a new clinical and business opportunity for Ariad,” the company said in a statement, but management didn’t even mention ridaforolimus during a same-day conference call. Ariad is focused on the re-launch of Iclusig (ponatinib), which re-entered the U.S. market in January for the treatment of leukemia after sales were temporarily halted last year due to safety concerns. The company is also running clinical trials to meet FDA’s post-marketing commitments for Iclusig and to expand its label to new indications. Merck’s decision to end the agreement shouldn’t surprise investors, especially now that the big pharma’s oncology focus has shifted to its PD-1 immunotherapy program. Ridaforolimus was rejected by FDA in 2012 as a maintenance treatment for sarcoma after it failed to demonstrate a benefit on survival in a Phase III trial and only a limited two-week progression-free survival advantage. Under the original 2007 collaboration between the two companies, Merck paid $75 million upfront for development and commercialization rights to ridaforolimus and agreed to pay up to $452 million in development milestones and $200 million in R&D payments; the deal was revised in 2010 to give Merck global rights rather than a U.S. profit split. Merck paid out some $222.5 million in upfront and milestone payments during the life of the deal, according to the Strategic Transactions database. - Jessica Merrill

Teva/Andromeda: In a case of a “No-Deal” possibly leading to another deal – Andromeda Biotech reacquired rights to type 1 diabetes candidate DiaPep277, along with equity, from fellow Israeli company Teva. To undo the firms’ 2007 partnership around the human heat shock protein 60 (Hsp-60)-derived peptide, Andromeda will pay Teva total consideration of approximately $72 million in future installments based upon revenues or proceeds payable to its shareholders.That unraveling of a deal on Feb. 24 was followed by media reports Feb. 26 that Clal Biotechnology, another Israeli company which owns 96% of Andromeda, was working on selling Andromeda and the DiaPep277 program to an undisclosed U.S. biopharma for a price that might number in the hundreds of millions of dollars. At press time, however, a second transaction could not be confirmed. Andromeda said it will continue a 475-patient confirmatory Phase III trial for the candidate. The 24-month, double-blind, placebo-controlled trial is being conducted at more than 100 locations in North America, Europe, Israel and Argentina. Patient recruitment was completed in September 2012 and the trial is expected to produce data by the end of this year. The trial is studying DiaPep277’s ability to preserve the patient’s insulin secretion by the pancreas, with a primary endpoint of maintenance of glycemic control. - Joseph Haas

Thanks to 401(K) 2013 from Flickr for the use of the image, which we find both alarming and strangely beautiful.

JPM Survival Guide: DOTW Keeps the Party Going

The last few years have been quite a bash for biotech. Astoundingly, the NASDAQ Biotechnology Index (NBI) has added more now than it did during the genomics bubble.

Since the current biotech rally started around August 2011, the NBI has increased about 1,500 points. Around the turn-of-the-millennium, the NBI rose around 1,200 points in a year and a half. Then over the following roughly two years, the NBI proceeded to give back all but about 200 points of that gain by mid-2002.

That makes the ongoing, almost two-and-a-half year upswing the longest, highest biotech rally to date. 

Does this make anyone else nervous? Apparently not, at least not yet.  (In December, Mark Schoenebaum of ISI Group circulated a succinct, hypothetical argument for the bear case in biotech. But this is not his view on the sector.)

Going into the 32nd Annual J.P. Morgan Healthcare Conference, optimism in the sector is continuing unabated. The NBI is up over 5% already this year, by market close on Jan. 10.

That doesn’t even include the phenomenal, two-day 516% climb for Intercept Pharmaceuticals after its Data Safety Monitoring Board recommended stopping early for efficacy at an interim analysis of a Phase II trial of its obeticholic acid to treat the liver disease nonalcoholic steatohepatitis. Intercept isn’t an NBI component. In one week, the biotech has leapt from mid-cap into large-cap territory; it now has a market cap of $8.6 billion, up from $1.4 billion ahead of the news.

On the news front at JPM, Wall Street expects Celgene and Acorda will pre-announce 2014 guidance at JPM. Celgene has hinted it may also update its long-term guidance for 2015 and 2017. Exceeding even the very early JPM curve, Eli Lilly and Bristol-Myers Squibb have already pre-announced their 2014 guidance.

Other likely highlights include various details from big biopharmas with recent management changes. We could get hints from Teva about the direction it plans under newly appointed President and CEO Erez Vigodman, as well as some color from Amgen on why CFO Jonathan Peacock is departing.

The above should give you a few talking points, as will the deals discussed below. That’s essential when you run into industry colleagues you are just meeting or seeing for the first time in years.

A list of all the JPM parties is also indispensable. Last year was the first time we saw a spreadsheet of all these events. Despite the fact that the Excel document ran a couple of pages, shockingly there were still a few omissions discovered by us and a hedge fund manager who shall remain anonymous.

One of this year’s versions of the JPM party list, linked to above, has been upgraded to a PDF and carefully annotated to note invitation-only parties. Although we wonder, isn’t this list specifically designed for party crashers? Or, maybe it’s just so we’ll know all the fabulous parties we weren’t invited to? The most prosperous entities at any given time always seem to commandeer the penthouse at the pricey Clift Hotel, but of course no spot is cheap at the height of the conference.

Another JPM must is a lot of hand-washing – someone at the last JPM gave DOTW a horrible case of the stomach flu that felled us by Wednesday afternoon. Not to alarm anyone, but the number of flu cases in the U.S. is peaking right now, with a heavy concentration in the Western states. And a San Jose hospital reportedly set up an over-flow tent because of all the flu patients. So, avoid shaking hands with all those Silicon Valley VCs, unless you really need their money.

And for the ladies: no high heels, please. Unless you’re a former model trained to stand the fourteen hours of pain or you are powerful enough to have a suite where everyone is coming to you. Although JPM has promised it’s working to cut back on some (non-paying) attendees this year, so perhaps there will be ample seating at every major session and the hallway traffic will flow freely. Or not.

Most importantly, remember to 'slip' at least once and call the conference H&Q. So, everyone will know you’ve been coming to the conference for a long, long time.

As promised, we continue below to give you ample party-chatter fodder with the latest on biopharma wheeling and dealing in this week’s missive of  . . .

Forest/Aptalis: Forest Laboratories continues to build on the business development strategy of new CEO Brent Saunders with its $2.9 billion buy of privately-held Aptalis on Jan. 8. The specialty pharma has been trying to flesh out its key therapeutic areas – CNS, CV, GI, respiratory, and anti-infectives – since Saunders took over the top slot in October. This strategy began with Forest’s $240 million purchase of the antipsychotic Saphris (asenapine) from Merck & Co. in December; building on the company’s central nervous system franchise, which includes the antidepressants Viibryd (vilazodone) and Fetzima (levomilnacipran). Aptalis will give Forest multiple products in the GI space – Carafate (sucralfate) for duodenal ulcer disease and Canasa (mesalamine) for ulcerative proctitis, as well as others. The privately held company also has a strong presence in the cystic fibrosis space in Europe, where it owns three of the five approved drugs for pancreatic enzyme insufficiency: Zenpep, Ultrase and Viokase (pancrelipase, in three formulations). Forest sees this as a way of bolstering its Colobreathe (colistimethate sodium) business. The drug was approved in February 2012 in Europe for the treatment of cystic fibrosis patients aged 6 years and older with chronic lung infection caused by P. aeruginosa. The spec pharma hopes eventually to bring those products to the U.S. market. Forest is acquiring all outstanding shares of the TPG Capital-backed Aptalis with a mixture of cash and debt. The company has secured a $1.9 billion bridge loan to close the deal within the first half of the year, pending regulatory review. The acquisition is expected to add $700 million to 2015 revenues and be immediately accretive to earnings. -- Lisa LaMotta

Royalty Pharma/Fumapharm investors: Royalty Pharma – the investment firm that buys up royalty streams on marketed drugs – is doubling down on its investment in Biogen Idec’s multiple sclerosis drug Tecfidera (dimethyl fumarate), the stand out drug launch of 2013. The firm announced Jan. 6 it would acquire more interest in the earn-outs payable to the former shareholders of Fumapharm for $510 million. Biogen Idec gained dimethyl fumarate with the acquisition of Fumapharm in 2006. Royalty Pharma already owns an interest in Tecfidera from a deal inked with Fumapharm investors in 2012, when it paid $761 million for some rights, back before the drug was approved by FDA. Now it’s obvious why Royalty has come back for more. Tecfidera, which launched in April, appears on pace to generate more than $1 billion in its first 12 months on the market. The royalty company won’t say how much of the sales it stands to receive. Fumapharm investors still own rights to a “substantial portion” of the earn-outs, Royalty said. Under a complicated payout scheme laid out in Biogen Idec’s SEC filings it appears the entire earn-out is worth about 10% of Tecfidera sales annually if the drug reaches $3 billion in sales, which it now seems likely to do. -- Jessica Merrill

Biogen Idec/Sangamo: In a move that could help validate its proprietary genome-editing technology and further strengthen its balance sheet, Sangamo BioSciences signed a worldwide collaboration and licensing agreement with Biogen Idec on Jan. 9 to co-develop potentially curative stem cell therapies for sickle cell disease (SCD) and beta-thalassemia. During a same-day conference call, Sangamo President and CEO Edward Lanphier noted that those two hemoglobinopathies are serious diseases with sub-optimal current treatment options. There are a number of symptomatic approaches to treating the two conditions that do not address the underlying cause of the disease. And while a bone marrow transplant of hematopoietic stem cells can be curative, such procedures are rare due to a lack of ideal matching donors and the risk of graft versus host disease. Biogen is paying $20 million upfront for worldwide license to both Sangamo’s zinc finger nuclease technology platform and its preclinical intellectual property for treating the two diseases. Richmond, Calif.-based Sangamo also can earn up to $300 million in development, regulatory, commercialization and sales milestones under the agreement with Biogen, along with double-digit royalties on any product sales. In addition, the biotech has an option to co-promote for either indication in the U.S., a decision which the company will not need to make for some time, Lanphier said. Sangamo will continue to perform all R&D activities through the first clinical proof-of-concept trial in beta-thalassemia, while the companies will work together on the IND-enabling work for the program in SCD. Biogen will be responsible for all subsequent clinical development and commercialization of both programs, and will reimburse Sangamo for its internal and external R&D costs related to both programs. -- Joseph Haas

Johnson & Johnson: To bolster its network of innovation centers, the global health care company said this week it has helped establish a new incubator in Israel and has signed early stage collaborations or made investments with eight biotech and academic groups. Johnson & Johnson is teaming with the Israeli government, Takeda, and venture firm OrbiMed Advisors to open the facility in early 2014, adding to incubators J&J has opened with partners in Montreal, Toronto, San Francisco, and Boston. J&J’s Janssen group also runs an incubator in San Diego. The collaborations or licenses are with Cambridge, Mass. biotech Scholar Rock, to pursue new biologics that target TGF-beta 1 for immune-mediated disease; Intrexon, to develop new consumer hair and skin products; University of Texas's MD Anderson Cancer Center, to develop a translational program for cancer immunotherapy; diagnostic firm Nodality, to hone J&J’s immunology R&D, particularly in rheumatoid arthritis and inflammatory bowel disease; and Dutch firm Bioceros, for exclusive rights to develop a monoclonal antibody against an immune checkpoint modulator. Through its venture arm Johnson & Johnson Development Corp., the J&J Innovation group also announced investments in Assembly Therapeutics, which is developing allosteric modulators to treat Hepatitis B and other viral infections; TopiVert, which is working on topical medicine for inflammatory diseases; and SutroVax, a new entity spun out from antibody platform company Sutro Biopharma to pursue vaccines. -- Alex Lash

Deals of the Week: GSK's Stealth Move To The Coasts

GlaxoSmithKline is following some of its big pharma peers to key innovation hubs in the U.S. by opening satellite R&D centers in San Diego and Cambridge, MA.

When Johnson & Johnson opened its innovation center in Boston earlier this year, the company made a big to-do about the move and announced plans to fund two startups there. Pfizer, meanwhile, announced a significant $100 million investment through a collaboration with local hospitals and academic institutions when it anointed the Boston area the headquarters for its academic deal engine, the Centers for Therapeutic Innovation.

GSK, on the other hand, went in a different direction with its announcement, unveiling the move … via blog post. We couldn’t help but notice the difference in tactics and wonder if GSK’s decision to downplay the announcement reflects its ambitions for the satellite offices.  Whatever the reason, GSK clearly views the expansion as an evolution of its business development strategy, not a seismic shift in the way it approaches R&D.

GSK’s Damien McDevitt, VP Business Development, R&D Therapy Areas, will run the California center. He confirmed details in an interview Dec. 10. "These are both small virtual offices,” he said. “They are not large R&D centers by any stretch of the imagination.” The San Diego office will host about five to 10 scientists and the Boston office will have about 10 to 12, with a heavy emphasis on business development, he said.

"We have always had collaboration activities in these two locations, but what we haven’t had, at least on the West Coast, is a satellite office to be able to work more closely with all the groups we work with, including academia, venture and biotech,” he said. The company’s main U.S. R&D offices are located in Research Triangle Park, NC, and Philadelphia. GSK’s venture group, SR One, has offices in San Francisco and Boston. And its most recent venture effort, Action Potential Venture Capital, is headed by Imran Eba, who recently relocated to Cambridge to open up that shop.

GSK views its California and Boston R&D outposts as bridges to strengthen its existing relationships and forge new ones. A big focus, at least for the West Coast, will be on its partnership with VC firm Avalon Ventures. Earlier this year, the partners announced plans to fund 10 new single-molecule drug companies. Their first biotech, celiac disease drug developer Sitari Pharmaceuticals, was hatched with a $10 million Series A in November.

McDevitt said GSK and Avalon are aiming to establish at least three or four new companies by the end of 2014. But the new R&D centers won’t be solely focused on venture funding opportunities. They will be scouting new partnerships with academia and biotech, while also strengthening ties to existing partners. GSK has collaborations with some 22 West Coast partners, McDevitt pointed out.

GSK will be agnostic about therapy areas when it comes to new projects, and will consider both platform technologies and new products, with an emphasis on preclinical programs. Mostly, he said, the point is “keeping an open mind” and looking for breakthrough science. - Jessica Merrill

Our minds are always open, but we’re here to tell you when the deals are closed. With that in mind, here’s this week’s edition of...

Roche/Prothena: Prothena's new deal with Roche, worth $45 million in upfront payments and near-term clinical milestones and potentially up to $600 million to the biotech in the long run, gives it a major pharma partner that recently cited central nervous system diseases as a core R&D priority. In turn, Roche gets access to a synuclein antibody program that is ready for the clinic and has been guided by scientists who are world-class drug developers. The Dec. 10 deal revolves around PRX002, a Phase I-ready antibody that targets alpha-synuclein, believed to play a role in Parkinson’s and other neurodegenerative diseases. But it also gives the partners opportunities to collaborate on related conditions. Prothena is receiving most of the first tranche of $45 million from Roche up front, but a small portion of that amount will be a milestone payment when Prothena moves the drug into Phase I, an event that it expects will happen in the first half of 2014, said CEO Dale Schenk.  Prothena also has a no-cost option, which it can exercise prior to approval, to co-promote PRX002 in the U.S. Costs, revenues and profits will be divided 70-30 between the partners, with Roche assuming the larger burden and reaping the larger bounty. Prothena has been looking to out-license PRX002 in order to concentrate on some of the compounds it is targeting for diseases in smaller populations. Roche traditionally has been strong in central nervous system diseases, but, as with other parts of its business, it has moved away from large-population conditions treated largely by primary care doctors, such as depression, to more complex CNS disorders, treated by specialists.- Wendy Diller

Biogen Idec/Proteostasis: Already no stranger to Alzheimer’s disease treatments, Biogen Idec has licensed another program showing promise in neurodegenerative diseases including Alzheimer’s and Parkinson’s. In a Dec. 9 deal, the biopharma disclosed a new partnership with Proteostasis Therapeutics to study and develop therapeutics inhibiting the enzyme ubiquitin specific peptidase 14, or Usp14. It’s believed that blocking Usp14 modulates proteasome activity and thereby speeds up degradation of toxic proteins such as alpha-synuclein in Parkinson’s and tau in Alzheimer’s, potentially spelling a disease-modifying approach. The deal includes research funding and potential development and commercial milestones totaling $200 million, as well as tiered royalties. The partners will jointly pay for and conduct preclinical research to identify lead compounds for clinical development. At undisclosed, pre-specified development points, Proteostasis will have the option to receive milestones or exercise an option for global co-development and co-commercialization rights. In addition, Biogen Idec is making an equity investment in Protestasis of undisclosed size. Biogen Idec already has Phase Ib anti-beta amyloid antibody candidate BIIB037, which could be moved directly to Phase III as soon as 2015 if trial data are strong enough, SVP of Neurology Al Sandrock said at Deutsche Bank’s BioFEST Conference in early December.  Cambridge, MA-based, privately held Proteostasis is backed by HealthCare Ventures, Fidelity Biosciences, New Enterprise Associates, Novartis Option Fund and Genzyme Ventures. - Stacy Lawrence

Retrophin/Kyalin/Novartis: Retrophin is making good on its plan to expand beyond its initial focus on ultra-rare diseases. On Dec. 12, it announced an agreement to acquire San Diego-based Kyalin Biosciences for an undisclosed sum. Kyalin’s lead asset carbetocin, a synthetic, nasally administered formulation of the hormone oxytocin, is in Phase I for symptoms of autism. On the same day, Retrophin made good on an August announcement that it would license in a drug to treat autism and schizophrenia from an unnamed major pharmaceutical company. The mystery licensor is Novartis, and the asset is Syntocinon (oxytocin), another synthetic, nasally delivered form of the same drug. Retrophin paid $5 million upfront plus undisclosed milestones and royalties for an exclusive U.S. license. Novartis had marketed the drug in the U.S. to assist with initial postpartum milk ejection, but discontinued it in 1997 for commercial reasons. The proceeds from a $25 million PIPE financing in August helped pay for the transactions. The licensing of Syntocinon also gives Retrophin a market-ready prescription treatment addressing a lactation deficiency for which there are no current therapies. Retrophin plans to re-launch it for that indication in the second quarter of 2014, providing an immediate, if likely small, revenue stream. As for the decision to double down on oxytocin, CEO Martin Shkreli said while Syntocinon is FDA approved, carbetocin is far behind in the clinic. “It might never be approved,” he said, “but it has superior qualities [to Syntocinon]. For instance, it’s longer-acting. So, there is a rationale to replace one with the other over time.” He added that there is a considerable amount of applied research and clinical experience behind the use of oxytocin in autism and schizophrenia. - Michael Goodman

GlaxoSmithKline/Inserm Transfert: Continuing a busy year of collaborations, the French National Institute for Health (INSERM) signed a worldwide licensing agreement Dec. 11 with GlaxoSmithKline to investigate the use of immune-checkpoint molecules in cancer treatment. GSK will pay Inserm Transfert, the tech-transfer subsidiary of INSERM, an undisclosed upfront fee with the possibility of development milestones and sales royalties. The pharma gets rights to develop and commercialize monoclonal antibodies that modulate the inducible T-cell costimulator (ICOS) protein, which offers the potential to enhance anti-tumor immune response. The agreement is part of a larger, long-term strategic alliance between INSERM and GSK. The collaboration “is making progress and illustrates a shared vision by GSK and Inserm Transfert that successful development of new drugs requires proactive action and alignment from both sides,” Inserm Transfert Executive VP, Head of Business Unit Open Innovation Augustin Godard said in a release. - Joseph Haas

Crealta/Savient: Start-up Crealta Pharmaceuticals will buy the gout drug Krystexxa (pegloticase) and other assets of troubled Savient Pharmaceuticals following an auction in bankruptcy court, the firms announced Dec. 11. Crealta will pay $120.4 million for the assets, marking its first significant investment toward becoming a specialty pharmaceutical company. Private-equity firm GTCR formed Crealta in August in partnership with Crealta’s CEO, Ed Fiorentino, and said it would invest up to $200 million to support the company. It’s the second company launched by Fiorentino and the PE firm. The two established Actient Holdings LLC in March 2009 and developed it into a diversified specialty pharmaceutical company through a series of five acquisitions, with GTCR providing a similar initial $200 million investment. Urology specialist Auxilium Pharmaceuticals acquired Actient earlier this year for $585 million upfront plus contingency payments. Now GTCR appears to be following a similar playbook in hopes of another successful exit, though turning around Krystexxa will take some effort. The drug was approved in 2009, but never achieved its perceived potential, challenged by Savient’s poor commercial planning and a market dominated by low-cost generic allopurinol. Savient never regained its footing after failing to sign a marketing partner for Krystexxa, and despite several leadership changes and a cost-reduction program, sales of the drug never led Savient into the black.- J.M.

Thanks to Flickr user ah zut for the lovely shot of one of our favorite coastlines, reproduced under Creative Commons license.

2013 M&A Of The Year Nominee: Biogen Idec/Elan's Tysabri Royalties

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

Elan’s move to sell its share of the Tysabri (natalizumab) royalty to long-time partner Biogen Idec was the ball that set the Rube Goldberg device in motion, precipitating its endgame and landing it on the 2013 shortlist for M&A deal of the year. Ultimately, this sale gave Elan the thing it needed to become appealing to virtually any acquirer – lots of cash.

The sanity of Elan management has come into question on a number of occasions over the last year; industry, analysts, shareholders and media all wondered at some point what Elan CEO Kelly Martin could possibly be thinking when he began selling off the company’s most valuable assets and starting inking deals for royalty streams. What didn’t become entirely apparent until the former spec pharma darling was bought out by Perrigo for $8.6 billion in late-July was that Martin was (on purpose, probably) turning Elan into a shell company with lots of cash and an incredibly desirable tax rate.

Elan’s transformation into the pile of cash in Ireland that Perrigo eventually bought was driven by the previous year's clinical failure. In 2012, its highly-anticipated Alzheimer’s drug bapineuzumab failed spectacularly in Phase III – showing no signs of efficacy over placebo. After the bombshell, Elan had little in any of its other programs that would make it worthwhile to an acquirer; reimagining the company would be the only way to return value to shareholders. (Had that drug succeeded, perhaps we'd be writing about another deal -- the acquisition of the company by one of its Big Pharma partners, Pfizer or -- 2009 DOTY nominee --  Johnson & Johnson?)

So Martin set out to make Elan worth something to anyone by selling off its tangible assets for lots of cash. The company quickly divested its 25% stake in Alkermes for $550 million and spun-out its drug discovery unit into an independent biotech, dubbed Prothena. But it was the Tysabri deal with Biogen that really gave Elan its flexibility.

In early-February, Elan announced that it was selling the majority piece of its 50% stake in the blockbuster multiple sclerosis drug, which brought in $1.6 billion in 2012 and is expected by the companies to grow by 15% in 2013. Biogen agreed to pay Elan $3.25 billion upfront, as well as royalties on all future sales of Tysabri – effectively ending the decade-long partnership.

The Irish company (now Perrigo) will receive 12% of sales for the first year; then, its royalty rate jumps to 18% on all sales under $2 billion and 25% on sales over $2 billion. Royalties will continue for the life of the product and will include all indications – the drug is currently approved in relapsing/remitting MS, but it is also being studied in secondary-progressive MS, and Biogen has indicated it may look into the drug as a treatment for stroke. The SPMS trial is expected to report out in 2015.

Some people questioned the wisdom of selling off the bulk of the Tysabri royalty, but for Elan to reach its goal of getting acquired it made the most sense. While the Tysabri royalty is lucrative, the 50% ownership of the drug meant that Elan played a major part in how the lifecycle of the drug was managed; this could be particularly unappealing to any company that doesn’t have a stake in the MS space, therefore limiting the number of companies that would be interested in acquiring Elan. Once Tysabri became simply a big chunk of cash and potential for more cash in the future with no strings attached, it became appealing to any company, whether they were a player in the MS market or not.

For Biogen, this deal was a no-brainer – the company has long been hoping to be the majority owner of one of its best-selling products. Tysabri fits right into the biotech’s sweet spot; it also owns the MS drugs Avonex (interferon beta-1a) and Tecfidera (dimethyl fumerate), which all together represent about 40% of the total MS market.

Deals of the Week: Prime Time For Parkinson's

Parkinson’s disease is about to receive plenty of media attention. Most of that will come as NBC’s The Michael J. Fox Show makes its debut Sept. 26, returning its star to center stage in a sitcom that deals with neurodegenerative disease. But here at Deals of the Week, we’re pointing our camera at a small but potentially influential Big Pharma bet on a company whose early progress in Parkinson’s is funded by the foundation that bears Fox’s name.

Biogen Idec and Amicus Therapeutics revealed a tie-up this week that will fund continued research on the link between the glucocerebrosidase, or GCase, enzyme and Parkinson’s. Known primarily for its research in rare lysosomal disorders such as Fabry disease and Pompe disease, Amicus specializes in repairing lysosomal enzyme function related to protein instability and misfolding. There’s a connection between those disorders and Parkinson’s: Scientists have known since the late 1990s about a connection between Gaucher disease, another lysosomal storage disorder, and Parkinson’s; mutations in the GBA1 gene cause Gaucher, and are a known risk factor for Parkinson’s. And indeed, Amicus’s continued research on a first-generation Gaucher product showed early promise in treating Parkinson’s as well.

The Michael J. Fox Foundation, one of the best-known Parkinson’s charities, has funded preclinical research on Amicus’s AT3375 since 2006. Beginning with a predecessor compound, AT2101, Cranbury, N.J.-based Amicus learned that pharmacological chaperones could be used to stimulate GCase activity, prevent buildup of alpha-synuclein – a protein associated with Parkinson’s – in mice’s brains, and improve motor function. That led to the development of AT3375, a more potent and selective next-generation product, and a series of MJFF grants.

The Biogen Idec deal includes discovery, development and commercialization of new molecules that address GCase activity. The companies didn’t disclose specific terms, but said Biogen Idec will own the candidates, fund the projects, and reimburse Amicus for its employees’ time, while Amicus can receive milestone payments and “modest” royalties if a product succeeds in the clinic and is commercialized.

It’s the latest among several Parkinson’s deals for Biogen Idec, including its 2010 purchase of an alpha-synuclein-targeting compound from Neurimmune Holdings. The pharma has also invested in neurodegeneration start-up Knopp Biosciences, most recently in November 2012.

Overall, the Parkinson’s field is still dominated by generic drugs. In light of some recent discoveries, it's possible that both symptomatic and disease-modifying treatments could reach the market within several years, though none will imminently. The clinical failure of Merck’s Phase III candidate preladenant in May raised some doubts about one class, adenosine A2A agonists.

But if the Biogen/Amicus deal is a modest step forward, it’s still another sign that a pharma will commit capital to an early-stage Parkinson’s project with a lot yet to prove. Other recent alliances include a couple of university deals. AstraZeneca partnered with Tufts University in a broader neuroscience pact in July. And last year, Bristol-Myers Squibb licensed a group of metabotropic glutamate receptor 4 modulators from Vanderbilt Center for Neuroscience Drug Discovery. Plus, watch for coverage of Civitas Therapeutics’s latest venture funding, another bet on Parkinson’s disease that’s likely to be featured in Deals of the Week’s cousin, Financings of the Fortnight, next week. --Paul Bonanos

Which other deals are ready for prime time? We'll do our best Don Pardo voice to introduce...

Biogen Idec/Isis: Biogen has been an active dealmaker lately, and struck another partnership with a familiar ally. In a move that capitalizes on the already-existing relationship, Biogen teamed with Isis Pharmaceuticals for a fourth partnership – one that broadens their discovery work in antisense technology and raises the stakes financially. The two companies announced what Isis refers to as ‘Biogen 4’ on Sept. 9. The broad, six-year strategic research collaboration will use Isis’s antisense technology to discover and advance compounds that treat neurological conditions. Biogen will pay $100 million upfront – the payment will be reflected in its third quarter R&D expenses – and Isis is eligible to receive as much $220 million in milestone payments, as well as royalties and clinical trial expenses. Once targets are validated the team can choose to utilize Isis’ antisense technology or opt to develop a small molecule or biologic. Should antisense be chosen, Isis will receive an additional $10 million milestone payment and have the opportunity to earn an additional $250 million in pre-commercial milestone payments. If not, Isis still will receive a $5 million milestone and have the potential for another $85 million in milestones. The strategic relationship builds on three earlier collaborations inked in the last two years, including one around a Phase II program to develop a treatment for spinal muscular atrophy. –Lisa LaMotta 

Merck/AstraZeneca: AstraZeneca’s in-licensing of Merck's MK-1775 for study in certain types of ovarian cancer is the UK drug maker’s latest move to build a dynamic oncology portfolio and highlights its keen focus on the DNA damage response area and efforts to induce cancer cell death. Under the Sept. 11 deal, Merck will receive $50 million upfront, and will be eligible for undisclosed development and regulatory milestone payments, as well as tiered royalties. MK-1775 is currently in Phase IIa clinical studies in combination with standard of care therapies for treating patients with P53-deficient ovarian cancer. WEE1 helps to regulate the cell-division cycle and WEE1 inhibitor MK-1775 is designed to cause certain tumor cells to divide without undergoing the normal DNA repair processes, ultimately leading to cell death. For AstraZeneca, the addition of WEE1 inhibitor MK-1775 gives it yet another agent that targets tumor-specific DNA damage response dependencies, such PARP inhibitor olaparib and first-in-class AZD6738. Preclinical evidence suggests that MK-1775 can enhance anti-tumor properties in conjunction with DNA damage-inducing chemotherapy agents.  AstraZeneca intends to study the compound in a range of solid tumor cancer types as part of a concerted push in oncology, part of a larger turn-around plan. Merck will continue to focus on its later stage oncology candidates, MK-3475 and vintafolide. In the spring, FDA granted breakthrough status to MK-3475, or lambrolizumab, a PD-1 specific monoclonal antibody for the treatment of advanced malignancy. Vintafolide is a treatment for a variety of tumor types expressing folate receptors, including ovarian and lung cancers, which Merck licensed from Endocyte Inc. in April 2012. It is paired with a radio-labeled imagingn agent to identify high-responding patients whose tumors express folate receptors. – Sten Stovall

Roche/Inovio: Roche announced a deal Sept. 10 to license two preclinical assets, one of which will be used as a potential combination with other cancer immunotherapy candidates in the Swiss pharma’s pipeline. Its partner, Inovio Pharmaceuticals gets $10 million upfront in exchange for rights to INO-5150 for prostate cancer and INO-1800 for hepatitis B, as well rights to use an electroporation delivery technology for the two candidates. Both candidates are multi-antigen DNA immunotherapies well into preclinical work. Inovio CEO Joseph Kim said ‘5150, which targets both prostate-specific antigen and prostate-specific membrane antigen, could move into clinical development before the end of the year. In a release, Roche said it plans to use ‘5150 in combination with cancer immunotherapies in its pipeline in hopes of developing next-generation approaches to treating a variety of cancers. Roche also gets an option to license additional back-up vaccine candidates that Inovio will discover and develop, as well as an exclusive license for use of the biotech’s Cellectra electroporation technology in the development of ‘5150 and ‘1800. In addition to the upfront payment, Roche also will finance the remaining preclinical work for the two candidates. Inovio could earn development and commercial milestones up to $412.5 million for the two programs and up to double-digit tiered royalties on product sales. – Joseph Haas

Cellceutix/PolyMedix: One company’s loss may be another’s gain. In this case, Cellceutix is taking advantage of PolyMedix’s bankruptcy to acquire the company’s assets at an affordable price and strengthen its own portfolio. Cellceutix said Sept. 9 it will acquire the Phase II antibiotic brilacidin and eight other compounds previously in development at PolyMedix for $2.1 million in cash and 1.4 million shares of Cellceutix stock, in a deal orchestrated in bankruptcy court. Financially distressed PolyMedix filed for Chapter 7 bankruptcy protection April 1, after it ran into trouble in May 2012 while testing a different product, PMX-60056, in development for reversing the anticoagulant activity of unfractionated heparin in patients undergoing percutaneous coronary intervention procedures. Brilacidin will be Cellceutix’s latest-stage compound in clinical development, and the company said it is anxious to begin Phase III trials testing the first-in-class defensin mimetic. The question now for Cellceutix is if it will be able to succeed where PolyMedix failed and turn brilacidin and other molecules in the portfolio into valuable late-stage drugs. - Jessica Merrill

GSK/Suntory: By arranging the sale of its iconic drink brands Lucozade and Ribena to Suntory Beverage & Food of Japan for net proceeds of £1.3 billion ($2.11 billion), GlaxoSmithKline has disposed of two valuable non-core assets, freeing itself to focus on its late-stage drug and vaccine pipeline. The Sept. 9 divestment had been expected after GSK in April said it had put Lucozade and Ribena on the auction block. Introduced in 1927 and 1937 respectively, the two drinks deliver strong cash flow and together generate annual sales of around £600 million ($915 million). Both drinks are well-loved in Glaxo’s home country, but lack global reach, especially in the emerging markets that are now becoming the focus of the British drugmaker's consumer health business. Proceeds from the sale will be used to reduce GSK’s debt. SBF, the number 4 supplier of soft drinks globally in 2012, will get global rights to the two brands and GSK’s Coleford, UK, manufacturing site in the Forest of Dean. Most employees at the site and those working on Lucozade and Ribena in commercial and R&D functions will transfer to SBF. In Nigeria, GSK will continue to manufacture and distribute Lucozade and Ribena under license. The deal is part of a number of housekeeping moves set in motion early in 2013 by GSK’s chief executive Andrew Witty. They include hiving off some 50 medicines, including stomach acid treatment Zantac (ranitidine), migraine medication Imitrex (sumatriptan) and anti-nausea treatment Zofran (ondansetron), into a separate global established products portfolio. - S.S.

Bayer/Broad Institute: MIT and Harvard-backed cancer research center The Eli & Edythe L. Broad Institute turns 10 this year, and is solidifying its status as a key partner for pharmas. Its latest ally is Bayer: the German giant inked a five-year oncogenomics deal under which the pair will attempt to discover new drugs that target genomic alterations selectively. The two didn’t release financial terms of the Sept. 10 deal, but the early-stage collaboration gives Bayer an exclusive option to license the compounds discovered jointly, at the pre-clinical stage. Bayer and the Broad Institute will share their compound libraries, screening platforms, and expertise, and establish a joint steering committee to decide which candidates to pursue. Established in 2003 with a $200 million gift, the Broad Institute was enlarged in 2008 when its namesake benefactors donated another $400 million. The Cambridge, Mass.-based Institute struck a two-year antibiotics research deal with AstraZeneca in September 2012, and a multi-year agreement with Roche to explore repurposed drugs in December 2012. It also granted NanoString Technologies Inc. rights to a genetic signature implicated in liver disorders, invented by Broad Institute CSO Todd Golub, in April. – P.B.