Milk..Check, Eggs...Check, Corevalve...Check

Let the bidding begin.

You just 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 with 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., but battles aren't won with the biggest strike, no matter how impressive.

Consider the opportunities in the aortic market alone. Industry data suggests the cases of aortic stenosis will hit 4.6 million in the year 2030, almost double the cases in 2000. But the real growth comes in treating the roughly one-third or one-half of patients who currently couldn't survive an open-heart procedure.

It's that potential that's pulling Edwards Lifesciences, St. Jude, and now, most vigorously, Medtronic into building armamentariums of devices to tackle both percutaneous valve replacement markets. This was fantastic news for CoreValve and Ventor investors as the folks at Dow Jones Venture Capital Dispatch can attest.

For Medtronic, these deals represent not just an investment in technology building because in CoreValve, it is getting 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.

But just as we saw in the atrial fibrillation market recently, additional acquisitions are the sincerest form of flattery. (Medtronic, once again, aggressively snapped up two of the more promising business, CryoCath and Ablation Frontiers.)

So we turned to our colleagues at Medtech Insight for the goods on what percutaneous aortic valve companies might be the target of future acquisitions and topic of future headlines. For the full story on these aortic players, please check out the January issue of Medtech Insight for the technical and operational challenges facing the percutanous aortic valve replacement field. (And for those eager to understand the potential in the percutaneous MITRAL valve replacement industry, feel free to check out Medtech Insight's cover story in the current issue here.)


And here's the field of potential acquisition targets...

Direct Flow Medical Inc. Direct Flow Medical's Aortic Valve Prosthesis expects to initiate first-in-human trials by May of this year and obtain a CE Mark by the end of this year, enabling it to possibly have a device on the market by 2010. The Aortic Valve Prosthesis consists of a trileaflet bovin pericardium valve encased in a tapered, conformable polyester fabric cuff. It contains no metal, making it unique among the offerings.
CAPITAL RAISED: $35 million
EXTREMELY HAPPY INVESTORS (EHIs): Foundation Medical Partners, EDF Venturers, New Leaf Venture Partners, Spray Venture Partners, Vantage Point Partners and ePlanet Ventures. Oh, and a little company called Johnson & Johnson Development Corp.

Sadra Medical Inc. Sadra recently completed first-in-human studies in Europe on its Lotus valve system., a repositionable, retrievable, self-expanding transcatheter aortic valve. The company expects to begin a European feasibility study in the second half of this year.
RAISED: $20 million since 2003.
EHIs: Oakwood Medical, Onset Ventures, Pequot Ventures, SV Life Sciences. Boston Scientific invested in 2006.

JenaValve Technology Gmbh JenaValve hopes to have a CE Mark for its foldable porcine valve by the end of this year.
RAISED: $20 million since the start of 2006.
EHIs: Atlas Venture, Edmond de Rothschild Investment Partners and NeoMed.

That's just a sampling, but keep an eye out for AorTech International, Heart Leaflet Technologies Inc., Cormove, and Advanced Bio Prosthetic Surfaces Ltd.

Image courtesy of flickr user lonelysandwich through a creative commons license.

DotW: The Hype Machine

It's J.P. Morgan time. And as the immortal James Brown sang (or did he shout): "Get on up, Get on up. Stay on the scene, like a hype machine."

Okay, so the lyrics were a tad different. But you get the point. The impending JPM meeting is THE industry confab, and if ever our industry needed a little boost of hype--kind of like Botox--it's now.

A report in Friday's VentureWire confirms what START-UP readers already knew: venture capital needs a plan B. Meanwhile, companies such as Wyeth and Merck are ramping up their diversification spin, in part because of the continued troubles associated with bringing traditional pharmaceuticals to market.

Perhaps it was the holiday break...or perhaps companies felt the need to generate their own buzz ahead of JPM, but IVB couldn't help but notice a torrent of deal-making news this week. (Maybe folks want to get an early start on IVB's 2009 Deal of the Year Award.) Not to toot our own horn, but we weren't just ahead of the news, we made news with the signing of Pharmalot blogger, Ed Silverman. Consider this your official welcome, Ed.

Moving on... at least four companies emerged from stealth mode this week: Anaphore, FORMA Therapeutics, Kolltan Therapeutics, and Satori, and its likely these companies and their backers will find their dance cards full in San Francisco.

We suspect the JPM presentations of Wyeth, Genentech and Roche will also be packed. Genentech and Roche because people are still itching to know if the biggest potential deal of 2008 will actually come to fruition in 2009. Wyeth because of news leaked earlier this week indicating its interest in vaccine maker Crucell.

But until the full assault on your liver begins--we know you really go to JPM for the presentations (wink wink)--we bring you this interlude. Our own analysis of the week's hype, pulled together by an able team of writers from "The Pink Sheet" DAILY, PharmAsia News, and the greater IN VIVO Blog team.

UCB/Wilex: In a deal structure that might best be described as double-jointed, Belgian pharma UCB and German oncology-focused biotech Wilex have entered a risk-sharing partnership in which Wilex will develop UCB’s preclinical oncology pipeline with UCB holding repurchase rights for each program. Under the terms, UCB has granted the rights to five preclinical oncology programs to a new legal entity wholly owned by UCB and funded with €10 million. Wilex, in turn, will acquire the entity in a process that involves issuing about 1.8 million new shares. As a result of the deal, UCB will own 13 percent of Wilex. UCB can buy back the programs after first clinical feasibility studies finish, and take over development and commercialization, in which case Wilex would get milestone payments and royalties. If UCB opts not to re-purchase, Wilex keeps rights and pays milestones plus royalties to UCB.
The shrewd risk-and-cost-sharing arrangement helps UCB handle its delay of the rheumatoid arthritis drug Cimzia, stalled earlier this month by a complete response letter from FDA. UCB said the collaboration will enable it to focus on its own R&D priorities, especially central nervous system and immunology therapies. Reminiscent of prior deals between Genentech and Xoma and Lilly’s risk- and reward-sharing deal with India’s Nicholas Piramal, the UCB/Wilex tie-up may provide a template for future deal-making in the industry--Joseph Haas.

Johnson & Johnson/Vanderbilt: Dealing with last year’s loss of exclusivity for its schizophrenia drug Risperdal, Johnson & Johnson is turning to an academic partner in an effort to develop novel therapies for that disease. What’s unique, though, is that Vanderbilt University’s Program in Drug Discovery will advance the collaboration’s compounds to the IND stage before J&J affiliate Janssen will step in to continue development. As reported by Reuters and the Wall Street Journal, Vanderbilt gets $10 million upfront from J&J in exchange for exclusive worldwide license to compounds university researchers have developed to target a neurotransmitter receptor. J&J will fund research for three years, during which time it will have the option to license new discoveries produced by the effort. Per the agreement, Vanderbilt could realize up to $100 million in milestones through the collaboration. J&J, which has launched its own generic version of Risperdal along with a long-acting formulation of the drug, may be especially desperate to find new schizophrenia candidates, since its own candidate, paliperidone palmitate, has been stalled at FDA due to a “complete response” letter--Joseph Haas.

Alnylam/Cubist: We can only assume that having won our 2008 Deal of the Year award for their tie-up with Takeda, execs at Alnylam are addicted to the rush. The RNAi licensor extraordinaire starts the year with more news: a co-development and profit-sharing collaboration for its respiratory syncytial virus program, including Phase II candidate ALN-RSV01. In a Jan. 9 note, Rodman & Renshaw lauded the deal, noting its similarity to the Alnylam/Takeda deal. Cubist, which has launched its once-daily anti-bacterial Cubicin with seven commercialization partners worldwide, will pay Alnylam $20 million upfront for worldwide commercialization rights to the RSV program, excluding Asia, where Kyowa Hakko Kirin holds rights. Alnylam also could receive development and sales milestones up to $82.5 million along with double-digit royalties. Alnylam is currentlyinvestigating ‘RSV01 in adult lung-transplant patients, but the larger opportunity is children and high-risk adults. AstraZeneca’s Synagis, an RSV prophylactic, is nearing blockbuster status--Joseph Haas.

Merck/Galapagos: Belgium’s Galapagos, already partnered with Lilly in osteoporosis and Boehringer-Ingelheim in autoimmune disease has struck a target discovery platform deal with Merck to seek novel therapies for obesity and diabetes. Merck, which has been aggressive in lifecycle management efforts for top diabetes products Januvia and Janumet, will pay Galapagos €1.5 million upfront ($2.01 million) along with discovery, development and regulatory milestones that could pass €170 million ($228.3 million) for multiple products. For any product that reaches market, Galapagos will also be eligible for unspecified sales milestones and royalties. Using its proprietary SilenceSelect platform, Galapagos will perform preclinical research on targets selected by a joint screening committee. Merck then will have the option to take candidates produced by this process into development, although Galapagos may perform some Phase I clinical studies and will retain development and commercialization rights to any compounds Merck does not pick up. The back-end loaded nature of the deal shows the power Big Pharma partners have to set deal terms in the current environment. However, we aren't surprised to see Galapagos in the news since it's one of Europe's star biotech companies--Joseph Haas.

Endo/Indevus: Endo’s $370 million acquisition of Indevus will enable the former to move into new therapeutic areas while helping the latter get its hypogonadism injectable, Nebido, to the finish line at FDA. Nebido, a long-acting testosterone product, has been held up at FDA due to safety concerns about injection-related cough. Endo's purchase involves more than half of the $632.9 million it had on hand as of Sept. 30, and also calls for $267 million in milestones. The goal of the combined company is to create a specialty powerhouse, with sales force teams dominating in three areas: urology, enodcrinology, and pain. Currently Endo markets overactive bladder therapies Sanctura and Sanctura XM, advanced prostate cancer drug Vantas, central precocious puberty drug Supprelin LA, and hypogonadism product Delatestryl. Indevus plans to resubmit its NDA for Nebido by the end of this quarter and says FDA ultimately will be comfortable with the drug’s risk-reward profile--Randall Osborne.

Roche/Plexxikon: In its second major deal with Roche, Plexxikon gets $60 million upfront and the opportunity for $275 million in milestones plus double-digit royalties in exchange for worldwide exclusive rights to PLX5568, an Raf kinase inhibitor in Phase I for polycystic kidney disease. Plexxikon expects to begin Phase II study of ‘5568 this year and notes about $100 million in milestones is tied to development markers. The biotech also gets U.S. co-promotion rights for the compound in indications other than PKD. The high-value deal shows that Big Pharma remain willing to pay handsomely for early-stage assets--a phenomenon we first discussed in this 2006 feature. As "The Pink Sheet" DAILY noted, privately-held Plexxikon, which was founded in 2001, has done an amazing job of raising non-dilutive financing. Still, we can't help but wonder if the firm's venture backers, which include Pappas Ventures, Alta Partners, and Advanced Technology Ventures, are hankering for an exit. If so, it will be interesting to see if the most recent tie-up with Roche limits the biotech's options. In a better financial climate, Plexxikon would have been a perfect IPO candidate. But with the IPO window firmly shut, exit by acquisition is the only game in town. Roche has a history of trying before it buys--GlycArt, anyone--but if it doesn't bite, other Big Pharma might be hesitant to pay big bucks for a company whose major programs are already off the table--Emily Hayes.

Onyx/S*BIO: This week Onyx Pharmaceuticals inked a potential $550 million deal with Singapore’s S*BIO to co-develop two Janus kinase inhibitors. S*BIO gets $25 million upfront and can receive up to $525 million in equity purchase, options and license fees over the life of the deal, which covers Phase I candidate SB1518 and preclinical SB1578. Onyx gets rights to develop and commercialize the JAK inhibitors for any indication in the U.S., EU and Canada, while S*BIO, which would receive double-digit royalties on Onyx’s product sales from the partnership, is still free to develop and partner the compounds elsewhere. SB1518 is in Phase I for myelofibrosis, with data expected mid-year, and Phase II expected to begin later in 2009. SB1578 is expected to reach the clinic in 2010--Tamra Sami.

Boston Scientific/Labcoat: UPDATED. Information was missing from the previous edition due to an editing error. Bonus device deal of the week! (Who says we only cover biopharma?) If you are impressed with the sharp color images or photo resolution you get from your printer, imagine using the same technology to paint coronary stents with a thin coating--think less than one micron--of a biodegradable polymer and drug formulation. That's the technology Boston Scientific acquired when it bought Galway-based Labcoat this week. With this deal, BSC is looking to maintain its current market leadership position in drug-eluting stents by employing Labcoat's novel coating technology for its next-generation devices. Boston currently has more than 50% of the US DES market through its unique two-drug strategy that employs both paclitaxel and everolimus on its current Taxus and Promus stents. Concerns raised in recent years regarding the risk of late stent thrombosis from DES have caused companies to look back to the good old days of bare-metal stents. Efforts are now underway to minimize the amounts of drug and polymer necessary to prevent restenosis in such stents. The Labcoat deal represents Boston's first efforts with a bioerodable polymer, which the company plans to employ on its next generation Element stent platform. Labcoat's approach applies the polymer and drug--and only small quantities of both--to the outside of the stent, thereby minimizing the amount of both substances on the stent's inner surface where endothelial cell growth is required for healing. Moreover, as the polymer degrades, the end result is a bare-metal stent--Steve Levin.

Takes a Saint

Lost in the news that Boston Scientific is continuing to sell off pieces of itself was the creation of a new venture capital fund affiliated with secondary buyer Saints Capital.

Saints raised $165 million for new fund, Saints Everest. It paid $100 million for 54 companies from Boston Scientific's venture portfolio. Its investors include Adams Capital Management and Harbourvest Partners LLC, according to Scott Halsted, the firms' new managing director.

In a separate deal, Boston Scientific agreed to sell another portfolio of venture funds and companies to Paul Capital Partners for roughly $40 million. The proceeds of both rounds would go toward paying down Boston Scientific's debt.

We've reported extensively on Boston Scientific's disassembling of itself by selling off unwanted divisions such as its cardiac and vascular businesses as well as its endovascular business.

Halsted--who left Morgan Stanley Venture Partners last fall as it stopped making new investments in health care companies--will lead the new Saints Everest effort, which will manage former Boston Scientific properties--including companies like Asthmatx Inc. and Broncus Technologies Inc.--and make some new investments as well.

He plans on bringing aboard additional staff to manage current and future investments.

Halsted said closing the fund--as well as his hiring--is contingent upon the closing of the deal for Boston Scientific to sell the 54 companies to Saints Capital. Halsted said other parties were interested in acquiring Boston Scientific's stakes in more than four dozen life sciences start-ups.

The $100 million price tag gives Saints Everest $65 million to invest in follow-on rounds for the BSX portfolio. It's a relatively modest amount, but Halsted said Saints would be able to participate in any attractive follow-on rounds. Halsted suggested some companies in the portfolio--which he couldn't identify per an agreement with Boston Scientific--might not need additional capital.

But he also anticipates making new investments in medical device, health care IT and health care services companies through the new Saints fund. It's unclear whether a second Saints Everest will be raised or if future investments would come from other of the firm's funds.

We'll have more on Saints/BSX in the upcoming START-UP.

***

Yesterday's VentureWire Lifescience reported the Fischell family is up to its old tricks again. Colleague Mary Stuart profiled the prolific clan in our April START-UP magazine:

Four members of one family are collectively responsible for filing more than 200 patents in the medical device field, founding more than 14 device companies, including NeuroPace, Neuralieve, Angel Medical, Svelte Medical and GlucoTec, and
inventing the world's most widely-used implantable medical device in the history of the industry, the stent design sold by Johnson & Johnson as the Bx Velocity.

The article also included a short snippet on Svelte Medical Inc., the subject of the VentureWire article which reports Svelte raising a $6 million Series A from a syndicate of interesting investors including "Burpee Materials Technology LLC, a medical device manufacturing company based in Eatontown, N.J.; Via Biomedical Inc., a medical device developer based in Maple Grove, Minn.; SMS Ventures; the Fischell family; and other individual investors."

David Fischell, one of three sons of Robert Fischell, says the round will be used to get into first-in-man trials in the fall. At that time the company will look to raise a larger round. Tim Fischell, another son, gave Mary some interesting details on the company's stent technology including the origins of its technology and its new delivery system. "I think it has the potential to be viewed as the next-generation advance in stent delivery," Tim Fischell is quoted in the START-UP article.

As always, we welcome your comments. If you have any private suggestions, comments or care to compliment me on my first second-place Fantasy baseball team email me here.

Deals of the Week: Kicking Off ASCO

This weekend marks the kick-off of that other highly anticipated biotech event: the big ASCO meeting in Chicago. Appropriately, this week's deal activity in biopharmaland involved several oncology-driven pacts, which we highlight below.

Elsewhere during a short week, the US lost to England 0-2 in a football soccer 'friendly' (the corner kick captured above was among several easily cleared by the English defense) which after a spirited first thirty minutes or so seemed like a foregone conclusion. A lot like if ASCO had released all the abstracts waaaay before the meeting. Wait, they did?

Nevermind, it's time for ...


Takeda/Alnylam: Those groggy from a long Memorial Day weekend woke up to Alnylam's latest non-exclusive technology deal, a $100 million up-front alliance with Takeda Pharmaceuticals in oncology and metabolic disease. Alnylam will also get $50 million in near-term technology transfer payments. Takeda once again illustrates its willingness to spend on new technologies--we took a closer look at the deal and Takeda's recent spate of business development activity, here--and Alnylam once again manages to pull down massive upfront payments for technology it can turn around and license again tomorrow. Takeda also gets first right of negotiation on Alnylam RNAi programs in Asia (excluding ALN-RSV01) should Alnylam look for a partner there. Alnylam gets a reciprocal first right of negotiation on any project Takeda decides to shop in the US and more importantly, gets opt-in rights for 50/50 co-dev/co-commercialization deals in the US on up to four Takeda programs of its choosing (exercisable all the way through the start of Phase III), plus the usual gajillion biobucks in development and commercial milestone payments.

BMS/Kosan: Not all observers were overwhelmed by the 230% premium BMS shelled out to acquire Kosan yesterday. After all, the biotech boasted a handful of clinical-stage compounds, including the Phase III Hsp90 inhibitor tanespimycin. As we argued here, however, Bristol probably didn't attach much value to Kosan's lead project--and we should note that Kosan itself had put partnering efforts for tanespimycin on the back burner while it looked for a deal for its Phase II epothilone program, not exactly a vote of confidence. The acquisition values Kosan at $190 million, net of its cash pile, not a bad result for a company trading at a valuation on par with the value of its liquid assets. BMS is more likely interested in Kosan's epothilone programs, which also have potential in neurodegenerative disease and were the subject of an insurance policy in the event the acquisition doesn't close. If the deal falls through BMS will license Kosan's epothilone programs and IP for $25 million upfront plus milestones and royalties. BMS has pioneered this class of drug, with its Ixempra franchise, approved last October for monotherapy and combination therapy in cancer settings.

OncoGenex/Sonus: After a seven month struggle to find strategic alternatives, Bothell, WA-based Sonus Pharmaceuticals announced it had found a solution: it would merge with the Canadian drug developer OncoGenex Technologies. The combined company will be called OncoGenex Pharmaceuticals and will be run by OncoGenex CEO Scott McCormack, with bases of operations in Vancouver and Bothell. The combined entity will have have three products in clinical trials, including Sonus’ only remaining clinical candidate SN-2310. Sonus’s share price had been in a tailspin since September 2007, when it became apparent that its lead candidate, the Phase III breast cancer drug Tocosol Paclitaxel, was associated with a greater number of side-effects than the existing breast cancer regimen it was supposed to improve upon. Partner Bayer Schering promptly cut ties with Sonus, and the biotech was forced to lay-off half of its workforce in the aftermath. But the company did have two valuable bargaining chips: its Nasdaq listing and a $29 million cash reserve. Those certainly captured OncoGenex’s interest. The Canadian company had hoped to go public last year, but axed those plans due to poor market conditions. And with just $4 million in cash to support its lead product, OGX-011, currently in Phase II clinical trials for refractory prostate cancer, OncoGenex certainly needed a cash infusion.

Boston Scientific/Cryocor: Well, we’ve been down this path before haven’t we? We go on to suggest that Boston Scientific won’t be acquiring any new companies and then—just to spite us—Boston Scientific goes ahead and makes a deal. So we’re not going to point to the closing of BSX’s acquisition of CyroCor Inc. as anything more significant than it is: a $17.6 million bet on the potentially large atrial fibrillation ablation market. To be sure, Boston Scientific’s recent weight loss efforts have garnered nearly as much attention as Oprah’s. Over the past year, it’s sold off divisions, products or sizable equity stakes related to aortic aneurysm, brain monitoring, cardiac, vascular, drug pump, and hearing loss businesses. But the acquisition of CryoCor pits it against others—including St. Jude Medical—in the atrial fibrillation market. Read more on the area here. A group of CryoCor shareholders were resisting the deal and threatening a law suit, but the deal closed officially this week. Boston Scientific had entered into a collaboration with CyroCor last year to work jointly on cryoablation products. Boston Scientific already had a cryo-therapy balloon catheter while Crycor had the means to deliver the freezing agent, nitrous oxide. Together, the product would ablate or kill tissue near the pulmonary vein, which is seen as a likely initiation site of the electrical misfires that bring on atrial fibrillation. In April, St. Jude paid $92 million to acquire publicly traded EP Medsystems Inc., maker of workstations used in atrial fibrillation procedures.

blurry picture by invivoblogger chris morrison used under a creative commons license

TriVascular2: A Superior Sequel?

At first glance, the news that Boston Scientific Corp. is selling off its endovascular assets for $65 million seemed straight-forward. After all the struggling device giant, which is still reeling from the Guidant purchase, has spent the past six months tossing unwanted or "non-core" assets overboard in an effort to right its ship.

However, the buyers of the assets make this a particularly interesting deal. Rather than sell the business to a private equity firm or a corporate player like it has done previously, the Natick, Mass. company sold the new venture--TriVascular2--back to some of the venture firms that it had acquired it from in the first place.

Chief Executive Michael Chobotov reportedly has been working to get the band back together since 2006 when Boston Scientific opted to shut down the operation, only a year after exercising its right to acquire it (ironically for $65 million up front). Boston Scientific officials apparently decided developing TriVascular's Enovus AAA endograft, a potential repair method for abdominal aortic aneurysms, would be too expensive to pursue.

It's hard to say what took so long. It's worth noting that Boston Scientific, in its annual report released in February, reported receiving a warning letter in August 2007 regarding "the conduct of clinical investigations associated with our abdominal aortic aneurysm (AAA) program acquired from TriVascular, Inc." The company said it was taking corrective actions but also noted in the report that it had terminated the program.

This might have diminished interest from outside investors until the matter was resolved.

Under the new investors, Chobotov will assume--or resume--the post of president and chief executive, the role he held before Boston Scientific acquired the company in 2005. Two other key founders of the original TriVascular, Robert G. Whirley, Ph.D. and Joseph W. Humprhey, rejoin the company as vice presidents of research and development and manufacturing technologies, respectively.

Meanwhile, Delphi Ventures and Kearny Street Partners (a firm founded by former TriVascular investors ABS Ventures) rounded out the syndicate led by venture giants MPM Capital and New Enterprise Associates.

(We'd be remiss if we missed the opportunity for shameless self-promotion. Readers of Medtech Insight were told in the current issue that a deal was happening.)

No doubt, this will be dubbed one of the larger Series A device deals in history. But let's get real folks. This isn't a Series A venture investment. It's a spinout led by venture/private equity hybrids and backed by smaller venture firms that had backed TriVascular through predecessor funds. It's worth noting that the release made a point of saying all previous investors were invited to participate. But De Novo Ventures, a prior investor in TriVascular, apparently did not take part in the new round.

Now TriVascular2 executives have what they couldn't get from Boston Scientific--money. A portion of the Series A money will go back to BSX, which also retains a minority stake (10% by our reckoning). But, according to the release, the "remaining funds have been earmarked to finance the continued clinical development of the company’s novel endovascular repair devices over a two- to three-year time frame. In addition the investors have reserved $30 million in subsequent funding intended to finance the company through the filing of a PMA."

With close to $100 million to this project, it's difficult to see how Trivascular's investors can repeat the ROI from the original purchase--a sequel is only rarely as good as the original. But it can happen. For example, MPM General Partner Jim Scopa feels Terminator 2 was superior to the original. So he's quite confident Trivascular2 faces a large enough market opportunity to warrant such a commitment.

While You Were Staying Put

It's always sunny in ... London?

Lets kick off the weekend wrap-up by highlighting a trio of stories from The Times about incoming GlaxoSmithKline CEO Andrew Witty. The paper calls Witty a "survivor" and notes that he'll need all of those Bear Grylls skills in the tough year ahead. It also points out that Witty might be immune to the many charms of Philadelphia and will be running the show from west London. We guess he opts for fish 'n' chips over Philly cheesesteak, Lord's over Citizen's Bank Park, Twickenham over The Linc. (That said, GSK's dual-HQ model remains.) Interesting sure, but we don't know why it took them three articles to establish all this.

In other news ...

• Has Idenix's refocusing on its early stage virology pipeline begun to pay off? At least one analyst thinks so.


• The Financial Times rounds up some analyst comment suggesting that despite an incredible week for drug stocks like GSK and AstraZeneca, pharmaceuticals, long a haven for investors in tough economic times, may no longer be able to satisfy investors looking for a defensive stance.


• Researchers at the University of Minnesota have grown a functioning rat heart in the laboratory. Reuters, via WSJ.


• The Boston Globe writes that Boston Scientific Corp. execs insist the company is on the verge of rebounding from two years of post-Guidant woe.


• Drug development is hard. Drug discovery, dealmaking, getting a drug approved, growing rat hearts in some tricked-out ehrlenmeyer flask: all tough, worthy jobs. But they all pale in comparison to catching a swordfish with your bare hands. Have a good week, and try to keep it in perspective, people.

Deals of the Week: Beyond Biogen

Most of the chatter over the past few days has been about you-know-who and the deal that wasn't. Or the Novartis pink slips. Or the letter written to Schering-Plough and Merck by a couple of Michigan congressmen. But plenty of ink dried elsewhere this week, and we know that you know that we know that you've grown to expect Deals of the Week to talk about deals, not so much the deals that didn't happen, the layoffs, or the House Committee on Energy and Commerce. And damnit, we're not going to let you down.

• Eisai/MGI Pharma: We wrote a bit about this acquisition on Monday, and look for more in the January issue of IN VIVO. The short of it is this: the price tag, at $3.9 billion, suggests more than a little competition for the oncology/acute care specialist, and following on the heels of Celgene's $2.9 billion acquisition of Pharmion only a few weeks ago, reinforces our view that consolidation in the specialty pharma space will continue. And although the deal is by far the largest acqisition of a non-Japanese company by a Japanese pharma, perhaps it is not predictive of a wave of similar deals. Eisai boasts more of a US base, and we're told therefore, more of a dealmaking culture than its compatriots.



• Boston Scientific/Avista Capital Partners: Consider this the other shoe. Boston Scientific officials promised during their round of conference presentations last month that they’d be announcing the sale of its fluid management and venous access business sometime this month, and they did just that. The Natick, Mass. company agreed to sell the business to private equity firm Avista Capital Partners, $425 million in cash. This sale is be the last significant piece of their wholesale restructuring that would cut costs by $500 million and trim its headcount by 12% to 13%, and it’s a nicely matching bookend to last month’s sale of its cardiac and vascular divisions to the Getinge Group for $750 million. Analysts covering the company say the restructuring should help Boston Scientific go forward with its cardiovascular and cardiac rhythm management businesses. The cash also could come in handy to pay the $1.15 million Boston Scientific will pay to Advanced Bionics Corp. for its pain management program, a result of the nasty break up between the neurostim company and its one-time acquirer. Read more in the upcoming IN VIVO magazine.
  


• GSK/Oncomed: GSK's external development CEEDD and Oncomed inked a strategic alliance to discover and develop up to four antibody therapeutics against cancer stem cells, emerging oncology targets discussed in depth in this 2006 START-UP feature. The potential biobucks deal value is enormous, but the upfront payment, which is a mix of licensing fees and an equity stake, is undisclosed. Oncomed will handle development through clinical proof-of-concept, at which GSK has an option to license the MAb. The most advanced candidate, OMP-21M18, should enter the clinic next year. Bonus GSK: The pharma also teamed up with Belgian biotech Galapagos this week, paying €3.5 million in technology access fees plus milestones and 'double-digit' royalties to tap Galapagos' natural product discovery platform in the anti-infectives space.
  


• Shire/Alba: Prolific dealmaker Shire strikes again, landing ex-US, ex-Japan rights to Alba Therapeutics' AT-1001, an inhibitor of barrier dysfunction in GI disorders. The peptide is in Phase II for Celiac disease and Shire will have a look-see at Crohn's disease and other potential indications as well. Alba scored solid terms: $25 million in up-front payments plus milestones and royalties. In other Shire news, in the understated press release "Board Changes," the company said CEO Matt Emmens is stepping down, er, up, to the chairman's role, replacing retiring chairman James Cavanaugh. CFO Angus Russell will succeed Emmens next June. Somehow we doubt this is Emmens' last deal in the drivers' seat.

REVA's a Keeper

Perhaps the most interesting part of Reva Medical Inc.'s announcement that it raised $42 million isn't who joined the company as an investor. Rather it's who has remained an investor--Boston Scientific.

The struggling company has been busy divesting itself of most of its portfolio--up to 100 public and private companies--as part of its restructuring. (See the upcoming issue of IN VIVO magazine for a small report on Boston Scientific's weight loss program.)

New CFO Sam Leon told investors at one conference that the company's portfolio looked more like a venture capital firm's portfolio than a business development important so it's shedding those investment that aren't in line with its core focus and "building a wall" around those that are.

It appears that REVA hasn't been kicked off the Natick, Mass. compound. No reason to wonder why, the company is working a bioresorbable stent, and Boston Scientific has the exclusive option for global distribution for both the corornary and periperal products.

Think Boston Scientific would be interested in one of those? Yeah, IN VIVO Blog thinks so too.

In Our Face

Take THAT, IN VIVO Blog.

Boston Scientific Corp., in an obvious thumbing of the nose to our suggestion that it wouldn’t be acquiring new companies any time soon, did just that.
The Natick, Mass. company reached an agreement to buy Remon Medical Technologies Inc., a privately held and venture-backed company based in Caesarea, Israel.

(We know. This is Karl Rove, not Jim Tobin.)

The acquisition shouldn't be seen as a sign that Boston Scientific is out shopping again. The company inherited a business agreement between Remon and Guidant Corp. established in 2004, long before Boston Scientific acquired the latter for $27 billion last year. Boston Scientific presumably is still busy fixing Guidant and identifying potential business to divest.

Boston Scientific clearly is excited at the potential of remote monitoring. CEO Jim Tobin singled out the former Guidant’s Latitude monitoring system in past speeches. Fred Colen, executive vice president of operations and technology, CRM and Chief Technology officer, said in a statement, “This acquisition reflects our commitment to being a leader in the CRM market through the introduction of innovative products and services for the benefit of physicians and their patients."

Read a lot more about Remon and other remote monitoring companies here. To sum up, the company has a platform to develop miniature devices capable of using ultrasound for a multitude of reasons from monitoring to drug delivery to tissue stimulation.

We may have more on the acquisition in the next START-UP. For now, here’s a quick Q&A with CEO Hezi Himelfarb and Terry McGuire, general partner at Polaris Venture Partners, one of Remon’s earlier investors. (Terms weren't disclosed, btw, but McGuire seemed very happy with the outcome.)

IN VIVO Blog: So who approached whom about merging?
McGuire: We already had relationship with Guidant that was going on a couple of years. And that turned out to be a prosperous relationship in the sense that we really developed some important technology that Boston Scientific recognized would continue to be important. And through the [Guidant] acquisition we got to know Boston Scientific even better and the time seemed right to talk about merging the companies.

IVB: Were there other opportunities for an exit? Did CardioMEMS failed IPO make a sale more appealing?
McGuire: CardioMEMS has a very different business model. CardioMEMS never entered into our relationship in any way. This acquisition was based on a relationship that had been evolving over two years. It’s what I would describe is a perfect baton pass. Here is this really innovative company and Boston Scientific saw what they could do with this. It was based on a long-term relationship. It really wasn’t based on the fact CardioMEMS did XYZ. Remon had a very strong balance sheet. It wasn’t like we needed to do anything.

IVB: Were there other options for Remon?
Himelfarb: We’ve been actually working on evaluating other [partnership] opportunities with other companies and there was a lot of interest in our technology because our technology is actually the only one today that provides real intrabody communication in a totally wireless manner …But eventually you can do such a deal with one company and luckily Boston Scientific was the one.

IVB: Where do you fit into BSX?
Himelfarb: Right now we are continuing exactly as we were. We continue to be in our facility which is located in Israel with the same employees, same management team. Everything actually remains the same. Then, probably again after a short-period of training and education we will find out what are the objectives. For now we are staying the same as before the acquisition.

IVB: Any changes within the next 12 months?
Himelfarb: I believe after they learn more about our technology they may do some changes in the focus of the company

BSX's Big Bite

Medical device VCs have been waiting patiently for Boston Scientific to fully digest the $27 billion combo meal that was Guidant, so it could resume investing and acquiring their portfolio companies at a meaningful pace. Unfortunately for those investors (and those investors' LPs), they will likely need to wait even longer than they’d anticipated.

The Natick, Mass-based medical giant made a few significant announcements this week that will surely gum up the works. First, it said it was bidding adieu to CFO Larry Best, who managed the company’s corporate venturing program. Best is retiring to become a “private investor” (which will create another interesting storyline to follow). He’ll be replaced by Sam R. Leno, the outgoing finance chief at orthopedics leader Zimmer Holdings.

A day later COO Paul LaViolette told the crowd at the Morgan Stanley Health Care Conference that BSCI is undertaking an extensive “efficiency improvement program,” and is considering selling off some of its non-core businesses.

The Wall Street Journal first reported on the comments, and WSJ.com’s Health Blog correctly identifies stents and implantable defibrillator businesses as the most likely core businesses that won't be for sale. The $10.8 billion acquisition of Biomet by a syndicate of private equity investors shows there will be some interested buyers. No doubt, hedge funds and well heeled VCs will also be browsing the Boston Scientific store.

The implementation of the "efficienty improvement program" (or perhaps EIP for short) plus the potential sale of spare parts suggests that Boston Scientific's absorption of Guidant might not be going as smoothly as indicated by CEO Jim Tobin. But the company clearly has a plan to build on its sizable cardiovascular business. It's just that plans take time, so VCs hoping to see a step up in BSX's investing and buying will just have to wait.