Deals Of The Week: Icahn And Co. Traverse The Forest Again

Late spring has meant another foray by activist investor Carl Icahn into the forest of biotech board manipulation - literally this time, as Icahn's High River Limited Partnership filed a 13D with the SEC on May 30 announcing an intent to propose a minority slate of new members to the board of Forest Laboratories.

Last year, Icahn unsuccessfully nominated a slate of new board members for the specialty pharma, which staved off the attack and instead obtained enough votes to add three new independent board members of its own liking to the board.

But now, despite Forest's claims that business is going well in the face of patent-cliff woes, Icahn is back for another round. Once again, Icahn is proposing that his associate, Dr. Eric Ende, join Forest's board. Otherwise, his SEC filing does not state how many new board members he wants to nominate, other than clarifying that his would be a minority slate.

Forest CEO and Chairman Howard Solomon, in a May 30 release, said he always welcomes "constructive input" from shareholders but added that he was "puzzled and disappointed" that Icahn chose the threat of a proxy contest for the second consecutive year. Despite the loss this year of patent protection for antidepressant Lexapro (escitalopram oxalate) and the anticipated LOE for Alzheimer's disease drug Namenda (memantine HCl) in 2015, Forest has been offsetting expected revenue losses with new product launches.

“Forest Laboratories is strong and performing well," Solomon asserted. "We are executing on the plan outlined last year. We have continued to advance our late stage R&D pipeline through the FDA, successfully launched Daliresp and Viibryd – our two most recent primary care products – and reported solid financial performance for fiscal 2012 as we managed expected patent expirations. We are optimistic about our future prospects and believe we are well positioned to build on our strong track record of success, while continuing to deliver groundbreaking therapies to the patients and communities we serve.”

During its most recent quarterly earnings call April 17, Forest reported net sales had declined 8.7% to $997 million, which might play into Icahn's pitch to shareholders to back his board slate. With the March 14, 2012, patent expiry of Lexapro, sales of the SSRI already were in steep decline, down to $356 million from $595 million in the quarter one year earlier. Meanwhile, chronic obstructive pulmonary disease drug Daliresp (roflumilast) had posted quarterly sales of $13.1 million, the new SSRI Viibryd (vilazodone HCl) brought in $24.9 million, and another recent launch, broad-spectrum antibiotic Teflaro (ceftaroline fosamil) tallied $7.9 million in net sales.

To offset Icahn's potential arguments about earnings potential and management and board governance issues, Solomon also talked up the value of the three new board members elected last year – Christopher Coughlin, a former CFO at Tyco International and Pharmacia, Gerald Lieberman, the former chief operating officer at Alliance Bernstein, and Brenton Saunders, president and CEO of Bausch & Lomb. "These additions have enhanced our board through their operational skills, financial acumen, investor perspective, compliance expertise, and corporate governance experience," he said.

Whatever his rationale, though, it seems likely that Solomon and his team will have to familiarize themselves with Icahn's relentless brand of activism. Icahn apparently believes in the bromide "try, try again," as former Genzyme CEO Henri Termeer and once and former big names across the biotechnology landscape could well tell him.

In the meantime, Forest is continuing with its own business development strategy, looking to enhance its existing portfolio of hospital-based antibiotics through a June 1 option agreement with Austria's Nabriva Therapeutics. Forest is paying Nabriva $25 million upfront and will co-fund and co-develop the novel antibiotic candidate BC-3781, a pleuromutilin, that produced positive Phase IIb data in acute bacterial skin and skin structure infections in 2011. A pivotal Phase III program is planned for next year. Over the next 12 months as the two companies advance '3781, Forest will hold an option, not just on the antibiotic, but to acquire all of Nabriva, dependent on certain (but of course unspecified) contingences.

Well, as the Icahn/Forest and Forest/Nabriva stories heat up, along with the weather as we head into June, get ready for a seasonally steamy edition of ...

Stiefel/Welichem – With novel dermatitis candidates a rarity, GlaxoSmithKline's Stiefel Laboratories division has agreed to in-license a mid-stage, non-steroidal, anti-inflammatory compound from low-profile Canadian firm Welichem Biotech. Announced May 30, Stiefel will pay Welichem C$35 million ($33.9 million) for worldwide development and commercialization rights to WBI-1001, a topical compound currently in Phase II studies in psoriasis and atopic dermatitis. The agreement, subject to approval by Welichem’s board, excludes rights to the compound in China, Taiwan, Macao and Hong Kong, although Stiefel also can obtain a license those rights at a future date if certain undisclosed conditions are met. Those rights would carry an additional price tag of C$15 million. The deal structure also positions Welichem to collect milestones for clinical development and commercial accomplishments related to WBI-1001. Little is known publicly about the compound, called a potential first-line topical therapy for psoriasis and atopic dermatitis by the companies. Welichem discovered ‘1001 using its proprietary Symbiochem technology platform and has run the compound through four clinical trials total in the two indications. Welichem’s website says the compound inhibits the expression of pro-inflammatory cytokines, and that creams at 0.5% and 1.0% strength have proven safe and well-tolerated in psoriasis and atopic dermatitis patients. – Joseph Haas

Bayer/Covance – Bayer and contract research organization Covance have had a business relationship for years, but the two now are formally partners. The German drug developer announced May 30 that Princeton, N.J.-based Covance will provide research and development services related to clinical studies of mid-to-late stage drugs in Phases II through IV in a “long-term” deal. Covance will work alongside Bayer’s HealthCare unit, a subgroup that includes its Consumer Care, Medical Care, Animal Health and Pharmaceuticals division. Specific details and financial terms of the arrangement weren’t disclosed, although Bayer’s announcement suggested that the deal will bring “significant financial benefits” to both organizations while “reducing the overall time and cost of drug development.” Bayer said in 2010 that it would cut 4,500 jobs worldwide, including some in R&D. Also on May 30, Eli Lilly said it had partnered with Covance to discover diabetes treatments at its Lilly China Research and Development Center. – Paul Bonanos
  
Ensemble/Genentech – Ensemble Therapeutics now has scored its third large partner in as many years; announcing May 29 that it is teaming up with Roche’s Genentech Inc. in what it deemed its most attractive deal yet, trumping earlier deals with Bristol-Myers Squibb and Pfizer. Ensemble and Genentech will work together to develop macrocyclic drugs against a variety of targets supplied by Genentech. Using its proprietary DNA-Programmed Chemistry platform, Ensemble produces thousands of what it has dubbed Ensemblins – oral, small molecule macrocyclic compounds that interact with substrates through difficult extended binding motifs to reach targets not adequately reached by small molecules or biologics. While Genentech and Ensemble would not disclose the financial terms of the deal, Ensemble CEO Michael Taylor said that it includes milestones both early and late in the partnership, as well as milestones related to multiple targets. The agreement has no set timeframe, but Taylor said that these collaborations typically last for a couple of years, depending on when the partner wants to internalize the research. Ensemble typically develops molecules against a target until preclinical development and then transfers the drug over to its partner for further development. In 2009, Ensemble received $5 million upfront plus $7.5 million in R&D funding from Bristol to develop Ensemblin candidates against eight undisclosed targets. The biotech can earn up to $29.5 million in clinical development and commercialization milestones plus global sales royalties for each of the eight programs. It also signed a deal with Pfizer in January 2010 to develop Ensemblins for an undisclosed number of targets. Financial details of the deal were not disclosed, but Pfizer provided an upfront payment, research funding and potentially could pay out development milestones and sales royalties. – Lisa LaMotta

The International Immuno-Onocology Network – Bristol-Myers Squibb has formed a collaboration with 10 of the leading cancer research centers in the world to help further research for their immune-oncology pipeline; the alliance has been dubbed the International Immuno-Oncology Network (II-ON). Memorial Sloan-Kettering in New York will be part of the collaboration, as well as Clinica Universidad Navarra in Pamplona, Spain; Dana-Farber Cancer Institute of Boston; Institut Gustave Roussey in Villejuif, France; The Earle A Chiles Research Institute of Portland, Oregon; Istituto Nazionale per lo Studio e la Cura dei Tumori “Fondazione G. Pascale” of Naples, Italy; Johns Hopkins Kimmel Cancer Center in Baltimore; The Royal Marsden NHS Foundation Trust and The Institute of Cancer Research of London; The Netherlands Cancer Institute; and University of Chicago Medical Center. The company is now looking into biomarkers that could indicate some sort of genetic profile that would tip off doctors to the patients who would benefit the most from the therapy. The II-ON will be looking at post-response data to determine a biomarker for Bristol’s recently approved Yervoy (ipilimumab), as well as biomarkers for other treatments that are studied from Bristol-Myers’ pipeline. – LL

Havas/Creative Lynx – No one in pharma needs to be reminded of the future potential of social media for all sorts of health education and digital marketing purposes, even if the initial performance of Facebook's shares post-IPO has disappointed investors. The Paris-based global advertising group, Havas, which includes the Euro RSCG global network of health care agencies, has boosted its resources in this area by acquiring Creative Lynx, one of the European leaders in creating digital and social media campaigns in the health and wellness sector. Creative Lynx is based in Manchester, U.K., has 50 staff and an annual turnover of more than £4 million ($6.2 million). Its digital offerings include producing e-detailing aids for sales reps and exhibition stands, and the design of websites. Clients have included Johnson & Johnson, Merck Serono, AstraZeneca and GlaxoSmithKline. Havas is a public company with a network of health care communication agencies around the world. It handles approximately 30 global brands, including Sanofi, Pfizer and Novartis. – John Davis

Photo credit: Wikimedia Commons

Deals of the Week: We're Back

Didja miss us? Not even a little?

Expect posting to return to its normal erratic schedule as of next week, and enjoy this dog days of summer deals-of-the-week post as you gear up to watch what is sure to be an unintentionally psychedelic opening ceremony for the 2008 Summer Games in Beijing.

We may have missed a few interesting tidbits over the past couple weeks--such as CytoChroma's alliance with Mitsubishi-Tanabe, GSK's layoffs, and probably a whole lot more (the logical conclusion to the BMS/Imclone saga trundles along though, so i'm sure we'll have a chance to chime in later).

And we'll make it up to you: be sure to check in next week for a complimentary PDF of our coverage (to date) of the Roche/Genentech situation ... for now you'll have to make due with:



Lilly/Covance: Read our earlier post on Lilly's leadership in creative financing of R&D, here (or just scroll down).

The Medicines Co./Curacyte: In a play to get its hands on Curacyte Discovery's lead CU-2010 serine protease inhibitor, The Medicines Co. has acquired the German biotech for €14.5 million up front plus a potential €10.5 million milestone should the drug move into Phase II (a royalty and commercial milestone payment enter the mix should 2010 hit the market). The move is unusually early-stage for MDCO, and as our colleagues at The Pink Sheet DAILY point out, driven by the uncertain fate of the patent situation around the company's Angiomax franchise.

Roche/Metabasis: Liver specialist Metabasis announced on Thursday a deal with Roche to give the Big Pharma's HCV nucleoside drugs better liver-targeting properties. The tweaking will cost Roche $10 million up-front for the two-year research collaboration and up to $193 million in milestones plus a royalty should a development candidate be selected. Though it might seem like the liver is the organ most drugs will find even if blindfolded and spun around three times, Metabasis' technology is designed to allow for lower dosing of drug, and therefore better side-effect profiles--a welcome scenario in a space where nucleoside HCV polymerase inhibitors have failed thanks to more problematic risk/benefit ratios than expected.


Celgene/GPC: It has been a rough road for GPC ever since the next-generation oral platinum chemotherapy satraplatin hit the skids last October. On Wednesday, the biotech's European commercial partner, Celgene, which inherited the deal from Pharmion, pulled the plug on the firms' collaboration and approval anywhere seems unlikely without a new clinical program. Celgene had yanked the drug's European MAA last week, and the writing was on the wall. GPC continues to evaluate M&A opportunities.

DotW: Tea Leaves

Bad news on Wall Street this week as the Dow Jones industrial average lost more than 250 points on Thursday and consumer confidence waned. Rising gas and food prices--and the incessant stagflation drumbeat--have prompted a certain proclivity for prognostication stateside. The IN VIVO Blog takes time out to read the industry's tea leaves in this edition of Deals of the Week.

The IN VIVO Blog learned of a major departure this week: Abbie Celniker, head of Novartis's recently launched Biologics division, has left for parts unknown. We aren't really sure what her departure means for Novartis, which announced a major reorganization last October, including the promotion of former Heinz exec Joe Jimenez to run the pharma's drug unit.

News of another major departure surfaced Thursday: David Mott, MedImmune's wunderkind CEO, will be leaving the AZ subsidiary at the end of July for "personal reasons" -- which undoubtedly include too many hours spent burning the candle at both ends within the much more bureaucratic environment of Big Pharma, all the while sitting on a ton of acquisition-related personal cash. And as the clock ran out on what was likely a one-year employment agreement, it's almost certain Mott heard a continuous stream of interesting new investment and management opportunities.

Mott, of course, isn't the only MedImmune executive to announce an exit. CSO Jim Young has also left the company--apparently for a familial and culinary year in France. We suspect biz dev and MediVentures boss Ed Mathers is also considering the next stage of his professional life.

Wholly-owned standalones, à la MedImmune, Sirtris and Millennium, have become common these days as pharmas attempt to transform their business models by purchasing innovative biotechs and ring-fencing them. Mott's departure is almost certain to provoke discussion about the practicalities of the strategy versus, say, Roche's riskier but certainly successful experience with its majority-owned, independently traded Genentech affiliate.

And that, in turn, could promote additional discussion about the need for a diversified business model, particularly as it relates to generics, championed by Novartis and Daiichi and eschewed by Takeda and BMS. Pharmalot's Ed Silverman wonders if J&J is mulling a possible move into generics based on this Wharton interview with CEO William Weldon. Asked about the recent Daiichi/Ranbaxy wedding, Weldon gave this response:

There is a big opportunity in the generic field because of large products going off patent... Each company has its own choices that it has to make. Personally, I think that if you have good research, if you understand the needs of patients and if you can deliver good products into the market, that is the most important thing to be doing and that is where we've committed ourselves so far. But that is not to say that we wouldn't go into generics or other companies. I think that there is a big market emerging and big opportunities in the future.

Meantime, at a forum led by the Institute of Medicine earlier in the week, another approach to drug development emerged, one that Genzyme and Shire (among others)have championed: the orphan drug as blockbuster. For more, check out this post from our own Mike McCaughan. The sludge at the bottom of this blogger's mug is particularly muddy. That means it must be time for...

Genzyme/Isis: Ah, the topsy-turvy ride that is mipomersen. A quick recap: back in January, Genzyme and Isis inked the $325 million up-front alliance on the cholesterol candidate, only to get backfooted by the kerfuffle surrounding Merck and Schering-Plough's Vytorin study, Enhance, shortly thereafter. As we predicted, the regulatory storm in the wake of Enhance (which we've covered extensively--see here) rocked the boat for Genzyme and Isis, which hadn't yet finalized the terms of the mipomersen deal. The companies said in late April that the drug's development timeframe would be reworked in response to an FDA request for more data. For the narrow indication of homozygous familial hypercholesterolemia, that means about a one year delay in filing, from 2009 to 2010. For broader indications including heterozygous FH, a cardiovascular outcomes study will be necessary. So where did that leave Isis and it's truckload of up-front cash and zillions in milestone payments? It took until this week to find out, but the upshot wasn't too bad for the antisense specialist, all things considered. Isis will contribute an additional $50 million to mipomersen's development, reflecting the added cost of the necessary expanded clinical program, and will be eligible for accelerated milestone payments potentially worth $75 million (related to commercial milestones associated with US sales under the heterozygous indication).

Stiefel/Barrier: On Monday came news that privately owned dermatology player Stiefel Laboratories bought all outstanding shares of Barrier Therapeutics for $148 million, or $4.15 a share. The deal price represents a 57.6% premium over Barrier's closing share price on Friday June 20 of $1.76. Stiefel, which makes a variety of over-the counter and prescription medicines, likely saw Barrier as a solid way into the pediatric realm. Two of Barrier's major products include Vusion, an ointment designed to heal pesky diaper rash combined with a yeast infection, and Xolegel, which treats a flaky skin condition called seborrheic dermatitis. Certainly, Stiefel acted opportunistically. As we wrote in this START-UP article, Barrier is one of a number of newly public companies in financial trouble. With less than one year of operating cash remaining, it has seen its share price tumble--back in April, Barrier's stock price was down nearly 78% from its 2004 IPO and in the ensuiing weeks slid even further. Susquehanna Financial analyst Angela Maria Larson told Forbes the deal was "a solid, good offer" but that's likely to be cold comfort to Barrier's VC backers, which include New Leaf Ventures, MPM BioVentures, and TL Ventures. But at least as it pertains to Barrier, these VCs are no longer marooned in the public market.

Novo/Emisphere: As we’ve written elsewhere, Emisphere has had a tough 20 years or so, failing to deliver (no pun intended) on a variety of drug-delivery projects, most spectacularly oral insulin (didn’t work any better than placebo). Now, a little more than a year into the tenure of CEO Michael Novinski, Emisphere has moved from oral insulin, for which needle-less delivery was relatively unimportant, to drugs for which injection is a problem: GLP-1 analogs. To auslanders like us, the different GLP-1’s don’t seem all that clinically differentiated. But Novo’s still unapproved once-a-day liraglutide looks like it will have a delivery advantage over Amylin/Lilly’s marketed twice-a-day Byetta – until, that is, the partners launch once-weekly Byetta LAR. At that point, liraglutide will need extra help – like an oral version. Having worked with Emisphere for at least a year on preclinical studies (with interest significantly heightened by nicely positive clinical studies with Emisphere-designed oral GLP-1), Novo was willing to experiment, modestly. It’s paying a guaranteed $10 million in the first year (modest good news relative to the world of NME drugs, but great for the smaller drug-delivery players like Emisphere – this is its biggest 1st year payment) and, potentially, another $77 million or more in clinical and sales milestones. Emisphere’s stock was, naturally, up on the news – but hardly into champagne territory. The company’s long record of unfulfilled promises is going to keep a lid on the share price until a pivotal trial proves the skeptics wrong.

WuXi PharmaTech/Covance: Although details of the deal still need to be finalized, WuXi and Covance are set to create a 50/50 JV to provide preclinical testing services in China. Covance will contribute $30 million to the project, while WuXi will provide a 323,450 square-foot facility in Suzhou, China. This state-of-the-art facility, expected to be completed in 2009, is designed to meet the US FDA and worldwide regulatory standards. WuXi is one of the leading CROs in China and its success has sparked a wave of interest among VCs and other investors looking to tap into the rapidly growing pharmaceutical business in China. Already, the company has dozens of partnerships with top tier pharmaceutical companies who are looking to off-shore their medicinal chemistry capabilities to China to take advantage of cheaper labor costs. Back in January, WuXi acquired the US biologics firm AppTec Laboratory Services, a move that gave the Chinese firm a US beachhead and greater access to critically important large molecules expertise. This latest deal with Covance, one of the leaders in worldwide clinical testing services, shows that WuXi is interested in extending its offerings beyond chemistry to include GLP tox, drug metabolism, and bioanalytical chemistry services. Although the two companies have yet to team up on clinical trials, that's likely to be another area of interest. For Covance, a tie-up would ease its entry into a lucrative and still largely untapped market. For WuXi, it seems the Chinese giant is positioning itself to become "a truly integrated one-stop shop for offshore and low-cost drug R&D outsourcing in China," says Jinsong Du, an analyst with Credit Suisse in Hong Kong, told our sister publication PharmAsia News.

(Photo courtesy of Flickr user soaleha via a creative commons license.)