Provigil Generics Saga Is Certainly Stimulating

And we thought the launch of Lipitor generics involved some complicated issues…

When Teva Pharmaceutical Co. Ltd. announced on March 30 the launch of an authorized generic of its Cephalon subsidiary’s wakefulness drug Provigil (modafinil), we were surprised.

We, like most of the free world, believed that modafinil generics would not be primed to enter the U.S. market until April 6 – the entry date that several companies (including Teva USA, Mylan Pharmaceuticals, and Ranbaxy Laboratories) had agreed to under years-ago patent settlements with Cephalon. Plus, we knew Par Pharmaceutical would be a player as well, thanks to the Federal Trade Commission’s requirement that Teva supply Par with generic modafinil tablets for at least one year, with market entry no later than April 6.

Teva Ltd.’s authorized generic announcement seemed to be an attempt to capitalize on its new ownership of Cephalon, giving it a one-week jump on other modafinil generics. We figured that the other ANDA filers, who were expected to share in 180-day marketing exclusivity, were probably none too pleased with Teva’s move. Probably neither was the FTC, which already had concerns about Teva/Cephalon having too much control over the modafinil marketplace.

But our surprise then was nothing compared to the reaction when we heard that Teva USA alone had been awarded 180-day marketing exclusivity on modafinil.

Huh?

FDA’s determination that Teva, as the first ANDA filer to certify against each of two Cephalon patents, was the sole holder of 180-day rights left us befuddled. Others, apparently, were just mad.

Case in point: Mylan – which promptly sued FDA challenging the exclusivity decision.

Also hopping mad was FTC. In an amicus brief filed in Mylan’s lawsuit, FTC said that had it known at the time Teva Ltd. bought Cephalon last year that Teva USA would have sole exclusivity rights for modafinil, it would have sought stronger remedies beyond merely requiring the generic manufacturer to enter into a supply agreement with Par.

FTC was quick to say that it takes no position on FDA’s interpretation and application of the Hatch-Waxman Amendments and governing regulations. Nevertheless, FTC’s assertion that FDA’s exclusivity decision “eviscerates the competitive incentives” in Hatch-Waxman is a pretty clear indication of what the commission thinks about its sister agency’s decision.

We’re looking forward to some interesting oral arguments Wednesday in a D.C. federal court on Mylan’s request for a preliminary injunction. In the interim, however, we’ve been mulling the whole Provigil mess and have come up with more questions than answers (that is, after all, what we do best).

So, lump these into the category of “Things We’d Like To Know”:

1. When did Teva USA realize it was the first to file on both Cephalon patents?

In a filing in its own lawsuit against FDA (subsequently dismissed), Teva USA said it was unaware that it was the first filer against both patents “until recently, after Teva Limited acquired Cephalon and corporate affiliates Teva USA and Cephalon were able to share the relevant regulatory information.” So, then, does that mean this interesting little factoid didn’t come out during the due diligence process before the acquisition was completed? We would have thought it would, given the commercial importance of Provigil, a billion dollar product, to Cephalon.

Or was it, in fact, knowledge that was out there but not seized upon without the help of some clever Hatch-Waxman lawyering? After all, Teva USA already had to have known it filed on the first day possible against both patents. Did that not at least raise the possibility that maybe Mylan and Ranbaxy (who were in on the first day against the first patent) didn’t file immediately on the second patent?

The details about the timing of the Paragraph IV certification filings leads us to our next question…

2. What Did FTC Know And What Did It Think?

In announcing a proposed consent order clearing Teva Ltd.’s acquisition of Cephalon on Oct. 7, 2011, FTC said that Teva USA, Ranbaxy, Mylan and Barr Laboratories (bought by Teva in 2008) all filed ANDAs on the first day possible, “making them all eligible for the 180-day marketing exclusivity period under the Hatch-Waxman Act.”

(FTC’s documents about the consent order did not reference Watson Pharmaceuticals, which some analysts also expected to launch April 6 with a share of 180-day exclusivity because of its certification against Cephalon’s second patent on the day it was listed. The commission and Watson previously had tussled over requiring CEO Paul Bisaro to testify under subpoena about whether Watson’s settlement agreement with Cephalon restricted the former’s ability to relinquish any marketing exclusivity rights it may have with regard to modafinil).

Did FTC receive information about, and review, the specific dates on which Paragraph IV certifications were filed against the second Cephalon patent as part of its clearance process for the Teva/Cephalon acquisition? Did this information not raise a red flag, since it seemed to be common knowledge that a slew of companies would be able to enter the market on April 6?

Clearly, if the commission had any worries about the potential for Teva to win sole exclusivity for modafinil, it could have demanded relinquishment or selective waiver of exclusivity as part of the proposed consent order. (Expect this to be a consideration in any future consent order approving a generic firm’s acquisition of a branded company, or vice versa. Call it the “Provigil clause.”)

When we asked FTC whether it reviewed the timing of the Paragraph IV certifications and whether this information raised any concerns, the agency said it could not comment because the information was non-public.

However, it seems that such information would have been important to the commission’s review of the acquisition. Besides, the Cephalon acquisition was not the first time FTC had examined some of these issues. In 2008, the commission sued Cephalon, alleging that the branded company sought to maintain its monopoly on Provigil by paying four ANDA filers (Teva, Ranbaxy, Mylan and Barr) more than $200 million to keep their modafinil generics off the market. That lawsuit is pending in Pennsylvania federal court.

Given that FTC would already have been on high alert for any concerns related to modafinil generic entry, it seems all the more likely there was a fundamental disconnect between FTC’s assumption of what the market would look like come April 6, and FDA’s final decision. Which leads us to our next question:

3. Would FDA really be all that upset if a court overturned its exclusivity decision?

We suspect not. Reading various documents filed in connection with the court case, one can’t help but feel a sense of reluctance by FDA in reaching its final decision on modafinil exclusivity.

We note with interest the Office of Generic Drugs’ April 4 letter in which it delivered the happy news to Teva that the company received sole generic exclusivity. The letter feels the need to point out that “the parties familiar with modafinil ANDAs appear to have operated under the assumption that there are multiple ANDAs that qualify for the 180-day exclusivity for modafinil.” These “parties” included FTC, the letter said.

In deciding that Teva’s exclusivity was triggered by the March 30 authorized generic launch, OGD writes:

“With control of the marketing of PROVIGIL, and of an authorized generic, Teva has every reason not to pursue final approval of ANDA 076596 and not to market a ‘true’ generic under that application.”

In a footnote, OGD talks about how it considered a harsher penalty for Teva and what effect this novel situation (whereby an ANDA first-filer’s parent company bought, and now controls, the branded product sponsor) might have on FDA policy moving forward:

“We have considered finding that Teva’s marketing of PROVIGIL upon its acquisition of Cephalon triggered its 180-day exclusivity, and believe that there is a strong argument for finding so. We have refrained from adopting that interpretation in this case, however, because that exclusivity, if it were triggered by Teva’s acquisition of Cephalon, would expire on April 11, 2012 and, given the multiple uncertainties in this case, Teva had no notice that FDA considered it to be running. Because of the potential for collusion between NDA holders and captive first generics, and the subversion of the statutory scheme that could result, the agency may in the future provide guidance on the effect of such a relationship between NDA holder and first applicant upon any claim for 180-day exclusivity.”

In a brief opposing Mylan’s request for a preliminary injunction, FDA nevertheless offers sympathy for Mylan’s cause:

“FDA understands Mylan’s concerns. … Granting exclusivity to a generic manufacturer that is owned by the innovator manufacturer appears to thwart the Hatch-Waxman Amendments’ goal of bringing more generic drugs to market faster (i.e., because the generic manufacturer would have no incentive to compete against its related innovator manufacturer, or the generic could sit on its exclusivity indefinitely by not commencing commercial marketing of its product – which would trigger the start of the 180-day exclusivity period – thereby blocking any other generics from coming to market). … Nonetheless, final approval of Mylan’s ANDA hinges only on whether a previous ANDA was submitted containing a paragraph IV certification and the 180-day exclusivity period had run.”

Finally, we pose the question that we (naively?) thought would be the primary focus on the day modafinil generics entered the market:

4. What About Ranbaxy?

Under its recently finalized consent decree with FDA, Ranbaxy faced the loss, or potential loss, of exclusivity on up to eight ANDAs. The company has not publicly identified the ANDAs at issue. However, modafinil appeared to be the first product launch since the decree’s entry in January where Ranbaxy held a claim to 180-day exclusivity. With the generic Provigil story playing out the way it has, we may never know if modafinil was one of the eight.

Perhaps Wednesday’s oral arguments will shine some light on these and other questions we have. We anticipate having no trouble staying awake for that hearing.

-- Sue Sutter (s.sutter@elsevier.com)

image by flickr user oberazzi via creative commons

Cephalon Joins The Corporate Venture Party

For the start-up community --and increasingly certain distressed VCs -- the birth of a new fund devoted to early stage biopharma investing is an event to be celebrated. And, as we've noted before, pharma, through so-called corporate venture divisions, is increasingly the cause for the celebration.

With deep-pocketed parents to ensure available follow-on funding, these groups can invest where traditional VCs have curtailed their efforts, while simultaneously giving pharmas an inside track on pipeline programs of interest as the competition for outside innovation increases. It's the perfect alignment of strategic intent and financial return, and the impetus for a wave of new CVC starts from the likes of Shire to Merck Serono to Abbott (though that's mostly device-oriented.)

The latest pharma to join the corporate venture party appears to be Cephalon, a one-time specialist in neurodegenerative diseases that’s diversified considerably over the years. In a regulatory document filed last month, Cephalon announced the retirement of executive vice president of technical operations Peter Grebow, but indicated he would continue to work for the specialty pharma as a consultant, during which time he would “assist with the establishment of Cephalon Ventures.” (Bolding courtesy of IN VIVO Blog.)

Grebow's "retirement" -- hey, it's kind of like a staged acquisition-- kicked off yesterday. And, according to the SEC docs, his consulting career -- with the ability to bill $750 per hour, with a maximum of 1,000 hours over the course of a year! – began today. (Like many contractors, he doesn't get benefits--and healthcare is expensive.)

This is the first concrete reference to Cephalon Ventures, but it's likely the division has been in existence for for several months. Grebow’s online bio lists him as EVP of Cephalon Ventures, although a previous reference to the organization’s existence beginning in April 2010 in an older bio has been stricken from the official version. An attachment to the filing adds that Grebow “shall make himself available to the Company to assist with respect to Cephalon Ventures, including advice with respect to the formation of N-Versx Pharmaceuticals and the review and selection of Cephalon and third party compounds for licensing.”

Cephalon’s 10-K, also released last month, doesn’t mention N-Versx, and an afternoon of intrepid reporting (including the requisite Google search) turns up nothing linked to the start-up beyond the filing.

Adding to the intrigue, Cephalon is also listed (pdf) as one of the lead investors in SymBio Pharmaceuticals' new $24 million Series E funding, although nothing in SymBio's announcement suggests that the investment came from Cephalon Ventures versus the corporate parent. Moreover, the company already held a stake in SymBio based on an existing licensing agreement for oncology drug bendamustine hydrochloride.

We’ve reached out to Cephalon for clarification, seeking not just confirmation of the venture group's existence but additional information regarding important details like the size of the fund, its investment thesis (a strategic imperative or a financial return--or both?), and whether the unit will also be creating newcos with existing Cephalon assets. We haven't yet received a definitive response, but we promise to report back when we do.

In the interim, it seems like a bit of good news for early stage biotechs --especially those developing therapies in areas of strategic interest to Cephalon. It's also potentially good news for Cephalon, a company that's logged a strong 2010 with $2.8 billion in sales, but nevertheless faces challenges.

CEO Frank Baldino passed away in December, leading to a management transition, and the company is set to lose patent protection for sleep disorder drug Provigil (modafinil), its top seller. Since the beginning of 2010, Cephalon has inked a number of acquisitions and alliances, giving it rights to branded generics (Mepha), a stem cell therapeutics program (Mesoblast) , and pipeline drugs for leukemia, asthma and back pain.

At the risk of being a bit premature, IVB offers its official welcome to Cephalon Ventures. May your party be just beginning.

Image courtesy of flickrer calsidyrose via a creative commons license.

A Deals Of The Week Valentine

The most anticipated deal of the week – Sanofi Aventis’ multi-billion take-out of Genzyme – has yet to come to fruition. That’s not to say the deal is a no go (wouldn't the aftermath of THAT be fun to watch). Indeed, public statements by the French pharma’s Viehbacher suggest Sanofi still desires the big biotech, but is being measured in its diligence.

The months long saga has been more “he said/he said” than SEC-leaked endearments; still for journos avidly covering the “news” the nothings have been sweet. In advance of Monday's Hallmark holiday, perhaps its time for Viehbacher to dial up the Canadian charm, and send a love letter (containing the desired contingent value rights to Campath/Lemtrada, of course) to Termeer and company. (If the deal goes through, does this makeTermeer Viehbacher's work spouse?)

IN VIVO Blog suggests borrowing a line or two from Robert Browning's famous missive to one lovely Elizabeth Barrett. You know, the one that spawned Sonnets From The Portuguese and the immortal question "How do I love thee?" Perhaps something like this..

I love your verses drugs with all my heart, dear Miss Barrett Henri, -- and this is no off-hand complimentary letter that I shall write, --whatever else, no prompt matter-of-course recognition of your genius and there a graceful and natural end of the thing: since the day last week summer when I first read your poems realized the worth of Cerezyme and Fabrazyme despite the manufacturing snafus, I quite laugh to remember how I have been turning again in my mind what I should be able to tell you of their effect upon me (especially after this recent earnings report) ... Perhaps even, as a loyal fellow-craftsman (and CEO honor-bound to return shareholder value) should, try and find fault and do you some little good to be proud of herafter!

Of course, said fault-finding comes with its own ulterior motives, but whether Sanofi's shareholders will be proud of the outcome depends on the deal's final price tag. In the spirit of reciprocity, we suggest Termeer start counting the ways he loves Sanofi, not least because of the exit package he stands to receive if the deal goes through.

In the interim, if you can't say it with contingent value rights, at least remember to say it with flowers. Oh, and make sure to read another edition of...


Cephalon/Alba Therapeutics: Hours before reporting full-year results on Feb. 10, Cephalon said it signed an option agreement for Alba's treatment of the autoimmune disorder celiac disease. Cephalon will pay $7 million upfront and extend a credit line to Alba to fund a Phase IIb trial of the drug, larazotide acetate. After completion of the study, the Frazier, Pa.-based Cephalon will review results with the option to purchase assets related to the drug for $15 million. Beyond the $22 million in upfront and option fees, Alba is eligible to receive unspecified regulatory and sales milestones should Cephalon bring the drug to market. Celiac disease, also known as sprue, is caused by an autoimmune reaction to the ingestion of gluten, found in certain grain-based products such as bread and pasta. It affects more than 2 million people in the US. Cephalon said on a conference call that is sees significant revenue opportunities for larazotide. The deal is Cephalon's first since founder and CEO Frank Baldino passed away late last year after a four-month medical leave of absence. New CEO Kevin Buchi was previously Cephalon CFO and COO and a longtime colleague of Baldino. -- Lisa LaMotta

Salix/Progenics: Progenics Pharmaceuticals this week found a new development partner in specialty player Salix Pharmaceuticals for its subcutaneous injection to treat opioid-induced constipation, Relistor, one of the casualties of the Pfizer/Wyeth deal. Recall that Wyeth, which initially licensed the compound in 2005, paid Progenics a $10 million break-up fee in 2009 to take back product rights. During an extended transition period, the world’s biggest pharma has continued to sell Relistor via a 1700-member sales force, but 2010 worldwide sales were an anemic $16 million. Thus, the entrance of new suitor Salix via a sweetheart of a deal is undeniably good news for Progenics. As part of the alliance announced February 7, Salix pays $60 million upfront plus milestones for worldwide rights (excluding Japan) to Relistor, and will assume all development, registration, and commercialization costs for the drug. Salix, which only intends to market the drug state side, will also pay Progenics 60% of the revenue earned by contractors on ex-US sales. Salix is confident its GI-focused sales force can fully monetize Relistor’s value, thanks in part to an oral product formulation currently in Phase III development. CEO Carolyn Logan told investors February 7, "Relistor just [did] not receive all the attention it would receive in an organization like ours." – Joseph Haas & Ellen Licking

Pfizer/Ferrosan: From Russia and Norway and Eastern Europe with love? Pfizer’s acquisition February 7 of Danish firm Ferrosan’s consumer health care unit shows diversification is alive and well within the world’s biggest pharma, even as the company pulls back on R&D. Exact financial terms of the deal weren’t disclosed, but sister publication "The Tan Sheet" reports executives from Ferrosan's owner, Altor Equity Partners, said the deal was larger than €100 million ($136 million according to same-day conversion rates); analysts with UBS Investment Research, meanwhile, assume a price around $600 million based on Ferrosan's recent yearly sales figures. The deal gives Pfizer some key brands -- including Multi-tabs multivitamins, Bifiform probiotics and the Imedeen skin care supplement line – in Nordic countries as well as the rapidly growing market of Russia. More importantly, it expands Pfizer’s global footprint, allowing for the expanded distribution of its own nutritional brands, such as Centrum multivitamins and Caltrate calcium and vitamin D supplements. – Elizabeth Crawford

Danaher/Beckman Coulter: The big deal of the week was diversified med-tech play Danaher’s $6.8 billion acquisition of Beckman Coulter, which has struggled to get its testing business back on track after an FDA-triggered withdrawal of its cardiac troponin test last spring. The sale isn’t unexpected; following the resignation of Beckman CEO Scott Garrett in September 2010 and ongoing quality issues, speculation about a possible deal has been rampant since December, when it was widely repored the firm had retained Goldman Sachs. Nor is it surprising that Danaher is the ultimate buyer; Beckman is not known as a particularly innovative company and has been very slow to move into the molecular diagnostics space. It therefore makes sense that its assets, heavily centered on consumables and services in clinical chemistry, would be of greater interest to a company like Danaher, a noted acquirer of established instrumentation plays. In addition to pushing forward with ongoing clinical trials supporting two 510(ks) required for the market reentry of Beckman’s AccuTn1 troponin test, Danaher’s other main priority as the testing firm’s new owner will be completing quality control fixes and cutting $250 million in costs. – Jon Dobson

Optimer/Astellas: Promising new Phase III data surrounding its antibiotic candidate fidaxomicin has Optimer Pharmaceuticals preparing for a possible summertime launch of the drug, pending approval and a PDUFA date of May 30. While Optimer intends to keep the drug in-house in the US, the San Diego biotech has partnered with Astellas to advance and commercialize the drug in Europe, selected Middle Eastern and African nations, and the Commonwealth of Independent States. (In addition to US rights, the biotech has for now also retained Asian rights, although it may partner those territories soon.) Astellas paid $68 million up-front for the rights to fidaxomicin, with a further $156 million in milestone payments and tiered sales royalties that range above 20%. Optimer is positioning fidaxomicin as a first-line treatment for patients at risk of recurrence of C. difficile infections, which cause severe diarrhea often in hospitalized patients and those who have received other antibiotic treatments that have disrupted the balance of flora living in the gut. Robert W. Baird analyst Thomas Russo pegged the market for the drug at nearly $250 million annually by 2018. – Paul Bonanos

Needy Candy Hearts image courtesy of flickrer piratejohnny

DOTW Senses Change In The Air

Fast away the old year passes. Hail the new ye lads and lasses.

As the last days of 2010 fast approach, already there is a sense that change is in the air (except perhaps in Washington D.C. but that's another matter.) In biopharma land, Dick Clark is packing up his office, making way for Ken Frazier, described by some Merckies as "visionary." Meantime the abrupt departure of Pfizer's Jeff Kindler has industry wags' tongues...well, wagging.

Kindler's hefty severance package suggests he may well have been pushed from the Pfizer nest. Regardless, it would appear that Ian Read, who takes over as the CEO of the world's biggest pharma (and no, that ain't necessarily an appellation to be proud of), may well find himself the agent of change--whether he wants to or not.

Less than a week after being installed in the top spot, Read already faces the task of sorting out the firm's emerging markets strategy in an increasingly competitive environment. On Dec. 9, Pfizer revealed that David Simmons, the president and general manager of the established products division, will assume duties vacated by retiring emerging markets chief Jean-Michel Halfon, who had led that unit since its formation in late 2008. In what can only be described as additional--and certainly unwelcome--news, media outlets reported that same day the pending departure of Steve Yang, who moves to AstraZeneca after leading efforts to develop Pfizer's Asia-based R&D strategy and playing a critical role in helping integrate Wyeth post-merger.

Pfizer clearly faces a potentially difficult 2011 as it seeks to replace revenue when the juggernaut Lipitor’s patent exclusivity ends. (Contrary to popular opinion that won’t mark the end of the world; 2012 is the year to watch for those of an apocalyptic bent.) To compensate, the drug maker appeared to be devising a strategy that would allow it to breathe extra life into its cholesterol-lowering drug via a bolstered presence in emerging markets such as Latin America and the all-important Asia-Pacific.

With Simmons now leading two of the five biopharmaceutical units, some speculate those divisions will be merged, possibly as part of a broader restructuring. Tim Anderson, the knowledgeable pharmaceuticals analyst with Sanford Bernstein, wrote in a research note Thursday Dec. 9 that his firm believes the emerging markets and established product divisions will be combined, potentially resulting in cost savings through the elimination of redundancies in separate units. (Anderson also speculates that Pfizer’s oncology business unit could be folded into the specialty biz; despite efforts to build strength in this particular arena, things haven’t exactly gone as planned.)

Certainly the union of the established products group and the emerging markets division makes a lot of sense for Pfizer. While innovative products account for the majority of the company's overall revenue, its off-patent products can essentially acquire a second life around the globe. Branded generics, baby!

The changes taking place at Pfizer are worth noting not because they provide an important, er, read on Read’s management style. No, as Pfizer continues to react to its own patent woes, the choices it makes could influence decisions at competitors (we aren’t saying in what direction). As such, it becomes if not an important bellwether, at least a means of benchmarking how industry continues to respond in the post health-care reform era.

Where else is change afoot? At expert network cos. where doing biz has gotten a lot harder. Not, however, at Genzyme. At this point in the year, only those who have been hanging out on exotic islands with absolutely no mobile, "sat" phone, or internet access could possibly be unaware that Sanofi’s hostile take-over for Genzyme expires today. In the absence of a white knight, the French pharma has no compelling reason to raise its bid (investors certainly haven’t been impressed with the biotech’s PR efforts to boost share price.) Analysts like Mark Schoenebaum at ISI Group, believe Sanofi will let Genzyme execs sweat it out for the rest of the year. Unfortunately for the biotech, last we checked deodorant wasn’t considered a legitimate reimburseable health care expense. (Botox on the other hand…)

Finally, a remonstrance to vote early and often for this year’s DOTY nominees and support the change you believe in. Meantime, while reviewing your favorite transactions, don’t forget to take a gander at this week’s round-up of the industry’s deal making. Change may be in the air, but it’s also true some things never change. Thus, we bring you another edition of…

Cephalon/Mesoblast: This week’s tie-up between Cephalon and Mesoblast shows stem cell technologies can garner hefty upfront dollars. Cephalon is spending $130 million upfront to develop and commercialize the Australian biotech Mesoblast's adult mesenchymal precursor stem cell therapies for multiple indications, the companies announced late Dec.7. In addition, Cephalon has agreed to pay regulatory milestones of up to $1.7 billion, with a hefty percentage of that amount deliverable upon U.S. regulatory approval of selected products. In exchange, Cephalon is getting exclusive worldwide rights to co-develop and commercialize products in several indications: congestive heart failure, acute myocardial infarction, Parkinson's disease, Alzheimer's disease, and, furthest along, products for augmenting hematopoetic stem cell transplantation in cancer patients. The large upfront is striking given the early stage of Mesoblast’s technology; also striking is the equity component — Cephalon is buying a 19.9% stake in the Aussie firm for $220 million. It certainly demonstrates Cephalon’s commitment to the technology. A spot check of Elsevier's Strategic Transactions database indicates big stem cell deals are still the rarity: the 2008 Genzyme/Osiris alliance, which gave the smaller biotech $75 million in upfront money, is the only one that comes close. For Cephalon, the Mesoblast alliance is part of its ongoing strategy to amass biologics capabilities via the deal table. Other examples: Ception, Bioassets, and Arana Therapeutics.--Wendy Diller

GlaxoSmithKline/MeiRui: Rumors that GlaxoSmithKline was pursuing MeiRui have become a reality. On December 8, the Big Pharma announced it was acquiring the Chinese urology firm from stakeholders Pagoda Pharmaceuticals and Allergon for approximately $70 million, as it further deepens its commitment to this important emerging market. Among MeiRui's leading products: Prostat for benign prostatic hyperplasia and Sheniting for overactive bladder syndrome. As part of the transactionGSK, the maker of Avodart, gets not just products but also MeiRui's established sales and marketing platform and a manufacturing facility in Nanjing City, Jiangsu Province, China. Completion of the transaction is expected by the end of 2010, subject to regulatory approval. Ahead of the deal's announcement, consultants told sister publication PharmAsia News just why a GSK/MeiRui marriage made sense. GSK already has four urology products registered in China: Fortum, Augmentin, Zinacef and Timentin. But deeper relationships with Chinese KOLS would undoubtedly help its commercial efforts in the Middle Kingdom, especially as it looks to launch its most important urology product, Avodart. MeiRui certainly helps with that ambition, given its ties to the China Urology Association. MeiRui stands to benefit as well. It has been trying to take Prostat over-the-counter, so Glaxo's considerable OTC expertise should be attractive. Building an emerging markets presence is an important piece of GSK's evolving strategy--and most every other big pharma, for that matter. The MeiRui take-out shows the firm's preference for bite-size acquisitions that can be bolted on to existing businesses isn't waning any time soon.--EFL

Geron/Angiochem: Geron will pay $35 million upfront to license Angiochem’s novel peptide technology that helps transfer oncology drugs across the blood brain barrier. The deal, which consists of a $7.5 million cash payment and a $27.5 million stock issue due to occur on January 5, 2011, gives Geron worldwide rights to Angiochem’s technology linking peptides. These molecules target the LRP-1 receptor with tubulin disassembly inhibitors, disrupting mitosis in tumors. More specifically, Geron gets rights to a drug now known as GRN1005, a derivative of the common chemotherapy paclitaxel, which is slated to enter Phase II trials to treat brain metastases by the second half of 2012. Furthermore, Geron and Angiochem will collaborate on projects that conjugate the same peptide technology with telomerase inhibitors, which inhibit an enzyme crucial to cell division, in an effort to transport those compounds into the central nervous system. Geron already has several telomerase inhibitors under investigation. Unspecified milestone payments, royalties, and a share of any sublicensing revenues will also be due to Angiochem as the projects advance toward commercialization. Angiochem may be due additional cash up front if fluctuations in the price of Geron’s stock drive the equity component’s value below $27.5 million.--Paul Bonanos

Pfizer/Morphosys: Partner-driven bonanza for MorphoSys today! Not only did the German antibody player secure a technology transfer deal with Pfizer via its newly-acquired Sloning BioTechnology unit, but it also announced three other partners have filed to begin Phase I clinical trials with MorphoSys-designed antibodies. That means lots of milestone payments, and triple-validation of the HuCAL technology. It seems those partners believe MorphoSys' rhetoric that HuCAL is "one of the most powerful methods available for generating fully-human antibodies". The German group now boasts 13 partnered HuCAL programs in the clinic, declaring the associated milestone payments as "an important source of revenue." Eat your heart out, Genmab! That humbled Danish antibody group is also upping its partner-generated revenue with a new 'networked' strategy; question is, whether its technology (much of it licensed originally from Medarex) will prove as popular. The Pfizer/Morphosys deal isn't that sexy, certainly not in terms of what was disclosed (nothing, financially, we mean). Sloning's Slonomics (?!) technology platform for making highly-diverse gene and protein libraries will be installed at Pfizer's Rinat subsidiary; MorphoSys gets an up-front payment and annual license fees. Check out MorphoSys' same-day ad hoc announcement for some clues on the size of those payments: it's increasing its 2010 financial guidance ("mainly as a result of the achievement of revenues from additional commercial activities, resulting from the acquisition of Sloning") to anticipate FY revenues of €91-94 million (up by €4-5 million) and operating profit of €13-16 million (rather than €7-9m).--Melanie Senior

Image courtesy of flickrer barney_holmes via a creative commons license.

DotW: IPO Medicine

The big news this week for early stage biotechs and their VC backers: The IPO Window is Officially Open!

Or maybe not.

As my colleague Alex Lash describes in this week's issue of "The Pink Sheet", Ironwood Pharmaceuticals' $188 million IPO is the proverbial elephant among the blind men. How you perceived it, depended upon where you touched it.

Let's start with the good news. Ironwood raised more money with this offering than any U.S. biotech in the past 10 years, nabbing a $1 billion post money valuation. (Only Eyetech Pharmaceuticals' 2004 $150 million raise comes close.) The company's stock price has even increased, albeit only modestly since the debut.

But for investors and would be IPO candidates, the offering was a lesson in caution. Several weeks prior to Wednesday's debut, Ironwood made the gutsy move of actually increasing its offer price 28%, confident that investor appetite for its shares would be robust based on the pre-come-out road show.

Let's just say things didn't exactly go as forecast. On Feb. 3, the company sold 16.7million shares at $11.25, significantly below its revised target range of $14 to $16 a share, and modestly below the $11.75 target predicted in SEC filings in November 2009. Moreover, nearly half the offer went to Morgan Stanley, one of Ironwood's top private investors and a banker on the deal. "There were unorthodox methods used to place shares," Cabot Brown, of San Francisco boutique bank Seven Hills, which had no connection to the deal, told our sister pub "The Pink Sheet" DAILY. "This was half a public offering."

Indeed, taken together, Ironwood's close shave and the apparent lack of widespread interest in the offering suggest investors pushed back hard or Ironwood's attempts to hit a grand slam instead of a home run.

And that could be a problem for IPO wannabees in the queue. After all few venture-backed, pre-commercial biotechs can match Ironwood's profile. The 10-year-old company's Phase III compound, linaclotide, is backed by strong clinical data and partnered on three different continents. It faces only two competitors, one in the U.S. (Amitiza from Sucampo and Takeda) and one in Europe (Resolor from Belgian firm Movetis, which incidentally managed a lucrative IPO last December).

So if investors aren't lapping up Ironwood's offering, will they have greater interest in a company like Tengion or Trius Therapeutics or Anthera, or any of the other 7 biotechs that have declared their intent to go public? (On the same day as Ironwood's debut, Anthera priced its offering at $13 to $15 a share, for a total expected raise of slightly less than its original $70 million target. It's slated to debut the week of Feb. 22.)

And should these subsequent offerings fall flat--or worse--how will that, in turn, impact the IPO climate? According to Elsevier's Strategic Transactions database, there are at least 10 privately-held biopharmas with compounds in Phase II development or later who are--how can we put this delicately?--long in the tooth when it comes to fund raising. Indeed it wouldn't surprise IN VIVO blog at all to learn companies like Portola Therapeutics, Helicon Therapeutics, and Biolex were mulling potential IPOs.

Still, venture's inability to finance itself adequately means there could be a movement to push some of these fledgling biotechs out of the financing nest before they are ready to fly solo. And rest assured, a few lackluster offerings won't just close the IPO window for brave biotechs. It will slam shut faster than Washington D.C. in a snowstorm.

Big questions to ponder as the snow falls--#snOMG!--and you rate the ads from Careerbuilder.com, Budweiser, and Frito-Lay. (Wait, there's a game?) For now, it's on to Deals of the Week.


GlaxoSmithKline/Apeiron: GSK continues to access early stage innovative programs through small, back-end weighted licensing agreements. This week the big pharma inked a deal with privately-owned Apeiron worth $17.5 million in upfront cash and equity for full rights to the biotech’s Phase I biologic for acute respiratory distress syndrome (ARDS), an adverse event associated with sepsis, trauma, and post-operative complications that affects approximately 1 million people annually in emerged markets. Glaxo could be on the hook for another £207 milllion in development milestones as well as sales royalties should Aperion’s asset, APN01, a recombinant human Angiotensin Converting Enzyme-2, succeed in three indications. Although this is far from big money for GSK, the upfront payment exceeds the £10 million Apeiron has raised from Austrian and European grants and angel backers. (Apeiron is one of a growing number of companies eschewing VC.) GSK’s respiratory CEDD, one of the half-dozen semi-autonomous therapeutic areas focused units comprising GSK’s R&D operations, gets credit for the deal. But it may have its hands full when it comes to APN01’s development. As “The Pink Sheet” DAILY notes, the track records for drugs for similarly complex—and associated—conditions such as sepsis show why the unmet medical need remains high. (Xigris anyone?)—Melanie Senior

Cephalon/Mepha: Generics, that low margin, but inherently stable business, remains a sexy proposition. Any doubts look no further than Cephalon’s purchase this week of the private Swiss generics firm Mepha for $590 million. One year after it launched the option-to-acquire party with its $100 million bid for Ception, a privately held biotech developing the Phase IIb/Phase III reslizumab for the rare autoimmune condition eosinophilic esophagitis, Cephalon is now talking up diversification and internationalization. (Or is the internationalisation?) “This is about growing top-line and bottom line, and generating cash,” Cephalon CEO Frank Baldino said on a conference call announcing the deal. Like other drug makers (including Pfizer), Cephalon’s late stage pipeline is thin and the specialty pharma faces revenue pressure given the 2012 genericization of its juggernaut, Provigil. In addition to providing much needed near-term revenue, this deal is also about building a European commercial infrastructure. Thanks partly to Mepha, 30% of Cephalon’s global sales will now be ex-US. Bidding for Mepha, owned by Germany’s Merckle family and sister to ratiopharm, another generics firm on the auction block, was apparently competitive. Still the ultimate price tag for the deal was just 1.5 times Mepha’s 2009 sales.—Jessica Merrill and Ellen Licking

Medco/DNA Direct: On Feb. 2, the pharmacy benefits manager Medco announced the acquisition of privately-held DNA Direct, a decision support services outfit for payors, providers, and patients to help ensure the appropriate use of more than 2,000 available genetic and molecular diagnostic tests. Financial terms of the deal were not disclosed. Five-year-old DNA Direct, which had backing from Firefly Investment and Lehmi Ventures, will become a wholly-owned Medco subsidiary and its current prez, Ryan Phelan, will remain at the helm. The deal was apparently driven by Medco’s need to bolster its commercial side rather than its R&D capabilities, according to “The Pink Sheet” DAILY. DNA Direct charges fees only for its consulting services; it does not make money on the tests it recommends and supplies to individuals. The company started out focused on the consumer, but has shifted to a B2B model in which it helps health plans choose appropriate genetic tests for their physicians and members. Thus, it’s a good fit with Medco's personalized medicine program. The deal comes approximately three years after Medco reorganized the front end of its pharmacy operations into Therapeutic Resource Centers, a network of six sites each focused on one disease. Medco is not the only PBM to tap into the burgeoning genetic counseling market. In November, CVS Caremark announced a partnership with genetic benefits manager Generation Health.—Mark Ratner

Abbott/Pierre Fabre: Abbott continues to look for alliances or acquisitions in high growth therapeutics areas, this week inking a deal for Pierre Fabre’s preclinical antibody targeting the cMet receptor, h224G11. cMet’s definitely a target that’s caught Big Pharma’s attention. Late last year, Novartis ponied up $150 million (plus $60 million in near term milestones) to acquire Incyte’s Phase III JAK 1/JAK2 inhibitor and its Phase I oral cMet inhibitor. In that transaction, acquiring rights to the late stage JAK1/JAK2 inhibitor clearly drove the deal economics, so it’s a bit surprising to discover Abbott is paying $25 million upfront, plus two years of research expenses and undisclosed milestones to get its hands on Pierre Fabre’s not yet studied in humans mAB. (Who says you have to get to POC to make money on a deal?) Under the terms of the collaboration, Abbott will be responsible for all further development of h224G11, which has shown promising results in treating a range of solid tumors (including prostate, lung and gastric cancers), as well as the mediation of chemotherapy resistance. The addition of h224G11 bolsters the Big Pharma’s oncology pipeline, which also includes a PARP inhibitor and a monoclonal antibody targeting a unique epitope of the epidermal growth factor receptor. Beyond oncology, other priority therapeutic areas include cardiovascular disease, immunology, and pain. In November 2009 Abbott paid $170 million to acquire PanGenetics’ treatment for chronic pain, an antibody targeting nerve growth factor.--EFL

Qiagen/Pfizer: Pfizer has enlisted Qiagen to develop a companion diagnostic for its experimental glioblastoma immunotherapy PF-04948568, which Pfizer licensed from Celldex Therapeutics in 2008. The diagnostic, a real-time PCR assay to detect the EGF receptor variant vIII RNA, was one of the programs underway at DxS, which Qiagen acquired in September and has now established as its Manchester, UK, Center of Excellence for Companion Diagnostics. Terms were not disclosed, but it’s always good news for the field of personalized medicine when a pharma company reaches out for development of a companion diagnostic – especially when it’s done early in clinical trials, in this case at Phase II. Qiagen is among the more interesting emerging players in molecular diagnostics. Historically a supplier of kits and reagents, not a developer of tests (at least that was the case prior to its acquisition of Digene), Qiagen’s emphasis has always been on simplicity of processes and procedures. It appears to be adopting the same philosophy with molecular diagnostics development: in the press release announcing the deal, it specifically noted that the new test was designed for a simple workflow.--MR

Image courtesy of flickrer higlu via a creative commons license.

Europe Matters, says Cephalon, with $590m Mepha Deal

"Europe hasn't been high-profile for a lot of you" [mostly US analysts], declared Cephalon's Chairman & CEO Frank Baldino, "but it should be." As a European-based (and minded) blogger, that was my favorite--whoops, should I say favourite--quote from the conference call today annoucing Cephalon's CHF 622 million ($590 million) cash acquisition of private Swiss generics firm Mepha.

The deal is all about diversification and internationalisation; "we want to embellish all three of our businesses--in brands, branded generics and generics--for more stability and less risk," declared Baldino on the call. "This is about growing top-line and bottom line, and generating cash." Sound familiar? Yes, well that's because you've heard it from most (well, many) Big Pharma CEOs recently, too. Don't put all your eggs in one basket. Especially when you're pipeline's looking a bit shaky; Cephalon's reslizumab (Cinquil) disappointed late last year in EE (we can't spell it out), and the rest, writes Baird analyst Thomas Russo is "lacking in visibility".

Talking of Big Pharma though: Should we then expect a big emerging markets push from Cephalon soon too? Well, this deal already expands their presence in Eastern Europe in particular, and some Eastern African markets. It's not China and India, but it's emerging.

Still, this deal is about Europe, and Europe's generics market which--given the big cost-cutting splurge among most governments and insurers--has been growing steadily. "Unlike businesses in the US, these European businesses are lower margin, but stable," explained Baldino, mentioning Mepha's five-year CAGR of about 13%.

Low margin, stable businesses weren't very sexy five years ago, but are right now, especially as uncertainty over the future of the US prescription drug market continues to build. "We will now have 30% of our global sales outside of the US," piped Baldino. "There's still a way to go" to achieve real geographic balance, "but this is a real step towards that," he said.

Add to this the tax benefits of buying a Swiss company ("we'll certainly take advantage of those [tax-related] opportunities for our shareholders...") and the price, which, at just over 1.5 times 2009 sales looks reasonable (compare Ebewe, which Sandoz bought for 4.4x sales, though that was specialist), and you can see why Baldino's on a roll.

But bidding was nevertheless highly competitive. Mepha, owned by Germany's Merckle family, was on the block for a while along with sister company ratiopharm as a result of patriarch Adolf Merckle's suicide a year ago during the financial crisis. Ratiopharm is likely to be snapped up very soon, most likely by Teva. Reuters reported half-a-dozen Mepha suitors in November 2009, and that the price target was about CHF700m.

"There were a number of bidders involved to the very end," revealed Baldino. "Our advantage," he continued, "was that the two businesses fit like a hand in a glove." That doesn't quite explain why the price didn't reach Merckle's alleged target--but who knows what, if any, non-financial concessions were granted (like commitments to retain staff, for instance, given the wonderful complementarity; we didn't get any comment back on that from Cephalon in time for this blog).

Baldino still hopes to realize plenty of synergies through supply-chain and distribution functions, though, as well as cutting various central functions.

Cephalon made its first significant step into Europe in 2001 buying France's Groupe Lafon, followed four years later by the $360 million acquisition of Zeneus Pharma. (If you're really into European spec pharma history and strategy, read this.) The US-based group has continued acquiring ever since in what Baldino describes as the group's "multiple strategies that we execute simultaneously", across high-margin biologicals, small molecules and generics (and biosimilars, where Mepha also apparently provides a foothold). Recent deals include options to buy allergy and inflammation company Ception and BioAssets Development (focused on biologicals for pain) and the acquisition of Australia's Arana Therapeutics in February 2009.

Mepha is the leading generics firm in Switzerland with a 38% share, and markets more than 120 products in 50 countries and has about 50 pipeline candidates. Baldino says this cash deal won't change Cephalon's debt position.

image by flikrer rockcohen used under a creative commons license

2009 Exits/Financings DOTY Nominee: Cephalon/Ception

It's time for the IN VIVO Blog's Second Annual Deal of the Year! competition. This year we're presenting awards in three categories--that's 300% more fake prizes than last year!--to highlight the most interesting and creative deal making solutions of the year. The categories are: Big Pharma Deal of the Year, M&A/Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (roughly half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


With all due respect to my colleagues, I insist that if you vote for one option-based deal, it must be the Cephalon/Ception transaction. As we've told you, option-based deals are in vogue and likely to remain so--unless something dramatic happens to the IPO market. And I completely agree that option-to-license deals are flexible, low-cost, risk-mitigating, pay-for-performance-oriented and, indeed clever. But they're also not really all that new. If you want novelty, it's the option-to-acquire, which despite all the hype (or handwringing from VCs) remains a relative rarity.

According to Elsevier's Strategic Transactions (a better source than the magic eight ball), there have been just six option-to-acquire deals in the past two years, including five in 2009 alone. Among them: Alcon/Potentia; Novartis/Proteon; Novartis/Elixir; and Cephalon/BioAssets. But the one that got the '09 party started, so to speak, was Cephalon's option to buy Ception for $100 million upfront and another $250 million in milestones, with the purchase tied to the clinical performance of the start-up's Phase IIb/Phase III anti-interleukin-5 antibody, reslizumab.

As we wrote at the time the deal was announced, the option-to-buy strategy is a clever way for Cephalon to acquire a potentially valuable large molecule platform while simultaneously capping the expenses it might owe down the road as it tries to build a pipeline of novel drugs to treat inflammatory diseases. It's fair to say the deal hasn't worked out exactly as planned: Cephalon and Ception renegotiated the option-to-buy in November after a trial of reslizumab in patients with eosinophilic esophagitis, a rare autoinflammatory disease, yielded disappointing results. Now the two companies will focus on results in another indication, eosinophilic asthma, with data expected sometime in the first quarter of 2010.

But the companies are still tightly linked--$100 million dollars has a way of doing that--despite the ups and downs of reslizumab's clinical development. Indeed, Cephalon appears even more enamored of the molecule than it did back in January, spending quite a bit of its recent R&D day highlighting the drug's potential.

And that level of engagement is critical in today's climate, where exits are still primarily via acquisition. Pharma is barraged by would be sellers--especially privately-held venture backed biotechs ala Ception. Contrary to popular opinion, the economic doldrums haven't sparked a rash of dealmaking just because assets are suddenly cheap (or cheaper), leaving VCs even hungrier for exits.

The question becomes how best to get a potential acquirer's attention? One answer: make sure the drug maker has some skin in the game. Give the company a financial reason to think seriously about wanting to own all of a particular start-up--even as the two parties get to know each other better as they work on furthering a common goal such as the development of a drug. In other words, the option-to-acquire.

We know--and recognize--that the option-to-acquire model necessitates trade-offs. Buyers are taking on some risk by ponying up money for an asset or platform that may require additional tweaking. Meantime, sellers must let go of the dream that a future deal will yield outsized returns, trading a highly theoretical fortune for the greater certainty of a profitable--albeit capped--exit. But as the Cephalon/Ception deal shows, there's increasing value to this kind of certainty, both for biotech execs and their VCs.

Don't you know a bird in the hand is worth two in the bush--or at least $100 million.

(Image by flickrer toyfoto used with permission through a creative commons license.)

Deals of the Week: Holiday Shopping

Having trouble this holiday season deciding what to get for the Big Biotech CEO in Your Life Who Has Everything? Join the bidding for Facet Biotech! The reserve may be quite high--higher than $17.50 per share, anyway--and it's not technically an auction (because Facet isn't necessarily going to sell, which would be sure to garner it some negative feedback on eBay). But is money really a problem when it comes to that special someone?

And don't worry about losing any of Facet's drug candidates if you're the winning bidder. "The Pink Sheet" DAILY noted this morning that while Facet's top compounds are tied up in partnerships, including Biogen Idec's co-ownership of its most advanced drug, daclizumab for rheumatoid arthritis, none of the agreements will be affected by a change-of-control.

"In each of our three collaborations, the non-acquired entity would not have a right to terminate the collaboration," Facet CEO Faheem Hasnain told "The Pink Sheet" DAILY. "In fact, the acquiring entity would step right into Facet's shoes."

Whatever you do, though, just don't materially undervalue those shoes while overstating their liabilities. That approach has gotten Biogen Idec nowhere. Respect the shoes!

Meanwhile the rest of you biopharma dealmakers have had a busy week (makin' AND breakin' deals), so we oughta get to it. The following companies won't be trawling the malls on Christmas Eve, they're ...



GSK/Intercell: Not even Santa Claus himself could earn this much for delivery. This morning Austrian vaccines company Intercell said it licensed to GSK its patch vaccine delivery technology in a deal worth €33.6 million ($49.4 million) in up front cash. GSK also agreed to purchase up to €84 million worth of Intercell shares in a "staggered shareholding purchase option" that could reach a 5% holding in the biotech (€28 million u/f for 0.9mm shares at an 18% premium, other investments milestone-based). The development and commercialization deal will include Intercell's Phase III travelers' diarrhea vaccine, a Phase II pandemic flu vaccine, and future patch vaccines. Intercell will be eligible for a slew of milestone payments and profit sharing on the projects already in development, as well as milestones and royalties for future products that include its patch technology. GSK is now Intercell's second strategic investor--Novartis owns about 16% of the company through a 2006 deal for a Japanese encephalitis vaccine and a monster 2007 deal for the biotech's vaccines for bacterial infections. Intercell has a variety of other partners, including Merck, Sanofi-Pasteur, and Kyowa Hakko Kirin. For more on Intercell and the market for adult vaccines, check out this recent IN VIVO feature.--CM

Novo Nordisk/ZymoGenetics: This is Novo/Zymo IL-21, the Sequel. In a second deal around the IL-21 cytokine, these two companies' long, entwined history continued this week when Novo Nordisk licensed from ZymoGenetics a preclinical anti-IL21 antibody for auto-immune and inflammatory diseases. The terms look good for Zymo: $24 million up-front, reflecting the value of IP around the target that was included in the deal. As Novo EVP and CSO Mads Krogsgaard Thomsen told "The Pink Sheet" DAILY: "we're buying all IP surrounding [the blocking of] IL-21 as a concept, and its utility in different disease areas." That move should provide the Danish firm with "a good degree of exclusivity on this target," he says. "We now have global patent rights to block cytokine IL-21; no one else can do that." (Competitors could block the IL-21 receptor, however, just not the molecule itself.) ZymoGenetics is eligible to receive $157.5 million in potential milestones, up to and including the antibody's regulatory approval in major global markets, and royalties on net sales. ZymoGenetics may opt to co-promote the biologic in the U.S., for a $10 million fee and a 15% contribution to Phase III trial costs. In this scenario, US royalty payments would increase from single to double digits. Novo is familiar with ZymoGenetics efforts in the IL-21 space; until last year when it retrenched into diabetes and opted out of the alliance, it was the biotech's partner on its recombinant IL-21 cancer project. Novo is confident that blocking the cytokine has broad applicability in immune disorders. Hence why it's snapping up that IL-21 IP. --CM/Melanie Senior

Celgene/Gloucester Pharmaceuticals: In a move that adds to its hematological cancer franchise, Celgene purchased privately held Gloucester Pharmaceuticals and its recently approved Istodax (romedepsin) for $340 million in upfront payments, plus potential milestones that could total another $300 million. The deal secures a nice exit for Gloucester’s five venture capital investors – Novo A/S, Apple Tree Partners, ProQuest Investments, Prospect Venture Partners and Rho Ventures – who backed the biotech with a $29 million Series D round in August. Over Gloucester’s six years of operations, the investors kicked in a total of roughly $100 million. Celgene predicts the Gloucester purchase will be accretive to earnings by 2011, in part because it would not need to add to its marketing and sales infrastructure since it already sells hematological cancer drugs Revlimid, Thalomid and Vidaza.--Joseph Haas

BMS/Tranzyme: In its first alliance with a Big Pharma company, Tranzyme Pharma will receive $10 million upfront plus two years of research funding from Bristol-Myers Squibb in a collaboration to discover potential new macrocyclic compounds, which have potential in a wide range of therapeutic areas, including oncology and metabolic disease. Announced Dec. 7, the deal is not Bristol’s first foray into the macrocyclic space – in April, it paid $5 million upfront plus $7.5 million in research and development funding to Ensemble Discovery to develop macrocyclic compounds called Ensemblins against eight undisclosed targets. It’s likely Bristol is trying to get ahead of the curve on what Tranzyme calls an underdiscovered area – no other Big Pharma companies are doing deals in the space and Tranzyme has thus far not partnered any of its clinical or preclinical assets. The new deal centers on Tranzyme’s MATCH (Macrocyclic Template Chemistry) drug-discovery platform. The biotech will perform early lead discovery against a range of undisclosed targets specified by Bristol, which will then be responsible for lead-optimization, preclinical and clinical development, and commercialization. Tranzyme will receive two years of research funding ranging between $3 million and $6 million and could earn regulatory milestones up to $80 million for each target program, as well as sales milestones and royalties.--JH

Mylan/Pfizer: Details are scant on the authorized generic agreement around the Wyeth antidepressant Effexor XR. But Mylan said early this week it had reached an agreement with Pfizer to sell the long-acting capsule formulation as early as June 1, 2011. Doses equivalent to Mylan's planned generic venlafaxine capsules racked up $2.9 billion in sales in the year to September 30, the company said in its release. Legislation that would curtail or even ban brand/generic settlements is winding its way through Congress these days (it may even catch a ride on the behemoth of health care reform) and we know where the FTC stands on these deals.--CM


Lilly/Isis: Lilly and Isis called it quits this week on their 5-year collaboration on LY2275796, a second-gen antisense compound targeting eukaryotic initiation factor-4E that recently completed Phase I trials in oncology. Isis is paying an undisclosed amount to take back the product, arguing that ‘5796 got lost in the shuffle after the big drugmaker’s 2008 ImClone acquisition. Is this spin control or honest truth? Data related to ‘5796 are sparse, with Isis failing to provide an update at its recent R&D day, leading Joseph Schwartz, an analyst at Leerink, to write in an investor note: “it’s logical to conclude that lack of anticancer activity and/or toxicity may be the reason why LLY [Lilly] is not pursuing it.” As Isis CEO Stanley Crooke points out in “The Pink Sheet” DAILY, Lilly has right of first negotiation to opt back in to the molecule’s development when—or if—it enters Phase III studies. (The two companies are also still partners on a Phase II antisense prostate cancer drug.) So, maybe for Lilly this is about curbing risk: with critical drugs coming off patent near-term (including Zyprexa and Cymbalta), Lilly needs late-stage assets to bolster its flagging pipeline, not early stage, highly risky products that are going to be a drain on resources. Better to let Isis carry the risk—and cost—but keep a just-in-case door open. The central question for many investors becomes will another partner, Genzyme, reach the same conclusion? Recall Genzyme and Isis announced a lucrative tie-up in January ‘08 on the CV medicine mipomersen, with Isis garnering $175 million in upfront cash and another $150 million in equity. Six months later, the two revised the deal terms, with Isis having to pony up more development money after data from a competing trial highlighted the regulatory risks associated with cardiovascular studies. Mipomersen is much further along than the Lilly cancer drug, and recently scored good data at the American Heart Association meeting, giving partner Genzyme some positive news to tout after a string of manufacturing and regulatory gaffes. But the Phase III medicine has also been the subject of questions, especially related to adverse liver side-effects and high clinical trial drop-out rate.--Ellen Foster Licking

GSK/Cytokinetics: Cytokinetics continues to phase out its oncology R&D and on Thursday announced it had scrapped a third and final cancer program with GSK (GSK decided not to opt into two others late last year). GSK will complete an ongoing Phase I trial of the compound, GSK-923295, in advanced, refractory solid-tumor patients. Then rights will revert to Cytokinetics, which says it is de-emphasizing its oncology work in favor of its core muscle-related R&D (which includes the Amgen-partnered cardiac contractility program discussed here). The three GSK-partnered programs were the company's entire clinical oncology portfolio.--CM

Genentech A Wholly Owned Member of the Roche Group/Seattle Genetics: As the Roche Pipeline Purge rolls on, the latest casualty is SeaGen. Genentech paid $60 million up-front for access to SGN-40 (dacetuzumab) in 2007 and at least $8 million more in milestones since then. But this morning the companies said that Roche was giving back rights to the anti-CD40 antibody in development for non-Hodgkin's lymphoma and multiple myeloma. The end of the SeaGen alliance follows Roche's decision this past week to drop partnerships with Actelion and GenMab. But you can't just blame Roche's re-org. Earlier this year a trial of SGN-40 in diffuse large B-cell lymphoma was halted when an interim analysis suggested the trial would not reach its goals. In any case, hold onto your hats, Genentech partners! --CM

DotW: You Can Get Anything You Want At IN VIVO Blog

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why I called the post Deals of the Week.

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

Now it all started two Thanksgivings ago, two years ago on Thanksgiving, when Chris Morrison and I started writin' a blog about deals, but not every day, just once a week. And writin' about deals once a week, you know it's a lot of work. (Hint. Hint.) And there's a lot of garbage you gotta sift through, but we decided it would be a friendly gesture on behalf of readers.

So we trolled around the Internet with our shovels and rakes and other implements of destruction (aka Elsevier Business Intelligence's Strategic Transactions database) looking for deals to analyze. But then a big bad editor (also known as Officer Roger) said why are you doin' that? We are closed on Thanksgiving.

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

We didn't find one. So we wrote our post anyway, went back and had a Thanksgiving Day that couldn't be beat, went to sleep, and didn't get up until the next morning when we got a call from Officer Roger...

And it's been a recurring feature here at IVB ever since. (Fortunately, not another case of American blind justice since we always arrive at the truth of the matter and it doesn't even require 27 eight-by-ten color glossy pictures with circles and arrows and a paragraph on the back of each one.)

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

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

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

Remember Deals of the Week? (This is a post about Deals of the Week.) Without further ado, we bring you this week's installment inspired by Arlo Guthrie. Feel free to sing along in four-part harmony. With feeling. 'Cuz you can get anything you want at the IN VIVO Blog. (Excepting Roger.)

Clovis Oncology/Clavis Pharma: What's a letter of the alphabet between friends? Pat Mahaffy and his former Pharmionites at Clovis have started to spend the huge $145 million A round they announced in May. Their first deal is for intravenous CP-4126, what they hope to be an improved version of Eli Lilly's Gemzar, under development at Norwegian firm Clavis.

Clovis is paying $15 million upfront and up to $365 million in milestones to take over clinical trials in pancreatic cancer and other indications and develop a companion diagnostic. Clovis gets rights in the Americas and Europe and will double enrollment to 250 patients in a recently launched Phase 2 for newly-diagnosed advanced pancreatic cancer. Clavis's proprietary platform adds a lipid vector to existing drugs that, if early data bears out, will boost efficacy without adding safety concerns.

For CP-4126, the proposition is to boost uptake of gemcitabine in patients who fare poorly on the parent drug because they have low levels of a nucleoside transporter protein known as hENT1 required for entry into tumor cells. The lipid vector allows gemcitabine to bypass hENT1 and find another way into the cell, Clavis officials say. No doubt careful attention will be paid to the low-hENT1 population in Phase II studies. Pay careful attention, too, to Clovis, to see how far $145 million can take a specialty-focused cancer startup these days. Let's see, $15 million upfront, plus clinical trial costs (including the diagnostic development), plus milestones to Clavis, plus operations in three locations (Boulder, Colo., San Francisco, London), plus other deals the firm no doubt wants to do...it adds up fast. With its mid-recession A round, Clovis showed it could buck economic trends. Will we see a B round soon? As Clavis CEO Geir Christian Melen told "The Pink Sheet" DAILY this week, Clovis's Mahaffy has "strong shareholders with deep pockets." -- Alex Lash

Novartis/Incyte: To whet your appetite for the multi-layered yumminess of turducken, official Thanksgiving Beast of the IN VIVO Blog, check out the deal Incyte announced this week.
It's not just two drugs wrapped into one deal, it's two kinds of upfront cash! Novartis is paying a $150 million signing fee plus an immediate $60 million milestone for rights to two compounds, an oral JAK1/JAK2 inhibitor in Phase III for myelofibrosis, and an oral cMET inhibitor about to enter Phase 1 for multiple cancers. The $60 million is a reward for INCB18424, the JAK inhibitor, having started Phase 3 in July of this year. Novartis gets ex-U.S. marketing rights to the compound in all hematology-oncology indications and will pay tiered, double-digit royalties. Incyte keeps rights in the States as well as rights in the psoriasis indication. For the cMET inhibitor, INCB28060, Novartis takes over worldwide development after Phase 1 and also has worldwide commercial rights with royalties back to Incyte. Incyte also keeps a co-development and co-promotion option on the compound. Total biobucks for the deal could top $1 billion, though with the cMET inhibitor so early in development, chances of Novartis paying every last dollar are roughly the same as seeing a turducken in the wild. -- Alex Lash

Jubilant/University of Alabama/Southern Research Institute: These days drug makers are looking to trim their overly fat infrastructure even as they bulk up on much needed pipeline products. How best to do this while maintaining a lean budget? One increasingly popular approach is to leverage the lower cost innovation available in India and China. (FIPNets!) Another is to take advantage of the knowledge within the world's ivory towers--in other words, deals with academia. In an interesting twist on the virtual R&D model, Jubilant Organosys, one of the go-to India companies for major pharma players, is seeking out innovation by forging ties with the University of Alabama and Southern Research Institute to develop new meds in the oncology, metabolic disease, and infectious disease space. The press release calls it "a unique US-India arbitraged and leveraged partnership." So based on the trickle down economics theory of deal affordability, transactions with emerging-market players provide pharmas more generous terms than with US or European biotechs, but partnerships with academia are an even better bargain. (What about deals with Indian or Chinese universities?) This is the second academic partnership Jubilant has signed this month--it inked an agreement with Duke University on Nov.10 to translate Duke discoveries into new medicines. Specific financial details of the most recent tie-up with UAB/SRI weren't disclosed. But the three groups are definitely working together to identify and develop the most promising targets discovered at their various organizations with the goal of shepherding programs through Phase II before out-licensing to other drug makers. Should a partnership materialize, revenues stemming from these alliances--presumably milestones and royalty streams--will be distributed to the three investment participants in some fashion. -- Ellen Licking

Cephalon/Ception: Okay, it's not really a "no deal"; the Cephalon/Ception transaction is more accurately described as a "no deal yet." That's because Cephalon is extending (we'd say postponing) its option-to-acquire Ception Therapeutics after a Phase II/III study of the smaller co's lead compound, reslizumab, yielded disappointing results in treating the rare autoinflammatory disease eosinophilic esophagitis (EE). Recall that way back in January, Cephalon acquired the rights to buy Ception for $250 million on top of a healthy $100 million upfront pending a positive outcome in the EE trial. It's possible the deal may still come to fruition -- reslizumab isn't leftover turkey, yet -- but now Ception has to prove the drug has the goods (i.e. Phase II data) in a different indication, eosinophilic asthma, before Cephalon ponies up the money. Results from these asthma studies are expected to be revealed sometime in the first quarter of 2010.

There's no question reslizumab, an anti-interleukin 5 monoclonal antibody, is an important asset to Cephalon. It's one of the company’s only near-term pipeline opportunities given the pending genericization of Provigil. Indeed, Cephalon execs highlighted reslizumab and its expected mid-2010 BLA filing as a near-term growth driver during a recent R&D day. It's also clear Cephalon is hitching its wagon to therapeutics that treat inflammation. In addition to the Ception transaction, in the past year the company has inked three deals in the space, with ImmuPharma, Arana, and most recently BioAssets. -- Jessica Merrill and Ellen Licking