2013 Financing of the Year Nominee: Calico

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

Across the pharma industry, companies are developing symptomatic treatments, therapies that attack the root causes of diseases, prophylactic vaccines, and occasionally, holy-grail cures that eliminate diseases from patients entirely. But Calico, a new company launched in September by Google founder Larry Page, aims for an even bigger kahuna: it’s trying to “solve death.”

That’s the way Time put it when it introduced Calico in a splashy cover story. And while some prefer the softer terms “anti-aging” and “life extension” to describe Calico’s aims, make no mistake: It’s the latest well-funded effort to discover treatments that slow down, arrest or reverse the gradual process of atrophy that makes us all older and more vulnerable to disease. If its ambitions seem outsized, its creator has company in Silicon Valley, where audacious goals occasionally take form as hundred-billion-dollar companies just a few years after they’re dreamt up.

Google employs futurist/inventor Ray Kurzweil, who has written a couple of books about life extension. PayPal founder and Founders Fund partner Peter Thiel has voiced a desire to be a supercentenarian, and has contributed funds to related projects. And a group including Facebook founder Mark Zuckerberg, his wife Priscilla Chan, 23andMe founder Anne Wojcicki (Page’s soon-to-be-ex-wife) and Russian billionaire/Valley investor Yuri Milner has launched the Breakthrough Prize in Life Sciences, which awards grants to scientists “curing intractable diseases and extending human life.”

If that just seems like a bunch of techies trying to become more like the robots they like to create, well, Calico has brought in one seasoned biotech veteran to steer the ship toward realistic outcomes. Longtime Genentech CEO Art Levinson – still Genentech’s chairman, a Roche director, and Apple’s chairman – is Calico’s chief executive. In a Google+ post at the time of the company’s launch, Levinson wrote that Page and Google Ventures partner Bill Maris approached him about a project “that would take the long-term view on aging and illness”; Page’s own post described the project as “a long-term bet” that might tackle decreased mobility, loss of mental acuity, and life-threatening diseases that afflict the elderly. (Page said Google itself had invested in the project; the Google Ventures web site doesn’t list Calico as a portfolio company. The venture arm has its own data-driven ambitions, as we discussed in this Start-Up profile.)

Calico – short for “California Life Company” – hasn’t revealed much more since its September launch, but it hired a few more industry vets and academic figures during the fall. Former Roche EVP of global product development and chief medical officer Hal Barron will lead Calico’s R&D. Ex-Princeton prof David Botstein, who ran the university’s Lewis-Sigler Institute for Integrative Genomics and won one of those Breakthrough Prizes, signed on as Calico’s chief scientific officer. Both are Genentech veterans. Also, former Genentech Senior Oncology Fellow Bob Cohen was named a Calico Fellow, while UCSF professor and researcher Cynthia Kenyon signed on as a Calico scientific advisor.

It wouldn’t kill you to consider Calico for this year’s Roger in the financing category, now, would it? (Though it remains to be seen if Calico can repay the favor with a little life extension.)

Thanks to Flickr user UlfBodin for the photo of a sun-kissed kitty, reproduced here under Creative Commons license.

Financings of the Fortnight Ponders Neurodegenerative Death And Taxes

The big funding news this fortnight doesn’t come from public or private investors, it comes from taxpayers. As "The Pink Sheet" DAILY reported May 15, the Obama administration formally rolled out its national Alzheimer’s plan, which has been in the works for more than a year.

Alzheimer’s and other dementia-related diseases were already slated to get $450 million in National Institutes of Health funding in 2012, with the same amount proposed by the White House for 2013, but the new plan adds extra money: $50 million right away this year and $80 million proposed for next year, with another $20 million for caregiver support, education, data collection and other services.

Intriguing, then, that in a field where clinical trial costs are often cited as a major barrier to an already-skittish industry getting more deeply involved, nearly half of the extra $50 million for 2012 is earmarked for clinical trials. It won't help struggling biotechs push promising treatments, mind you; $16 million is going toward a prevention trial using the Roche/Genentech-sponsored antibody crenezumab to test still-healthy members of extended families in and around Medellin, Colombia, who share a rare genetic mutation that almost assures them of early-onset Alzheimer’s. The study, which the sponsors consider to be a Phase II adaptive trial, will cost an estimated $100 million. A private research group, the Banner Alzheimer’s Institute of Phoenix, is in charge, and chose crenezumab as the agent last December because it has demonstrated a better safety profile so far in early Alzheimer’s trials conducted by Genentech.

In addition to the NIH’s $16 million, Banner is putting up $15 million. Genentech will pay the remaining costs, but it’s unclear who will pay if the cost runs beyond $100 million. (Genentech spokeswoman Robin Snyder declined to speculate on additional costs but said the company doesn’t expect funding to be an issue.)

However it plays out, the fact of mighty Roche getting subsidies for as much as one-third of a major trial is, at the least, a sign of the importance of making progress – any progress at all – in Alzheimer’s R&D. We’re not complaining; if $16 million of our national treasure brings about an Alzheimer’s breakthrough, or simply speeds the progress toward one, it’s money well spent and a pittance compared to the costly burden of the disease now and a generation from now.

But to be clear: Neither Banner nor NIH accrue any rights to crenezumab, which Genentech licensed from Swiss biotech AC Immune in 2006, so if the trial points toward crenezumab as a viable treatment, Genentech/Roche could be sitting on a gold mine. The trial is expected to run five years, with an interim analysis after two. At that point the investigators would evaluate continuation of the trial to support an application for approval, said Snyder. “We are hopeful that the trial will support an indication, the specifics of which are yet to be discussed with regulatory authorities,” she wrote in an email. “If it works we would like crenezumab to be as broadly available to patients who may be eligible.”

The Banner Institute plans at some point to test the same antibody in people at higher risk for the more common form of Alzheimer’s.

A side note: Steering millions of federal dollars toward potentially groundbreaking Alzheimer’s trials hasn’t yet provoked the same skepticism as the millions being steered toward other drug discovery and development efforts under the new translational center known as NCATS.

Funding crucial Alzheimer’s trials is of course a different proposition than, say, repurposing drugs that have sat on industry shelves or fallen out of use, one of the mandates of NCATS, which had a $575 million budget this year. But both efforts are dollars spent that, in a parallel universe, perhaps, might have gone toward basic biomedical research, a common refrain from critics. (Our START-UP colleagues, who profile a different source of funding for biotech innovation every month in the “Capital Matters” column, wrote about one of the NCATS programs, the Therapeutics for Rare and Neglected Diseases, or TRND, a few months ago. You can read it here.)

Our friends at Pink Sheet are all over the NCATS story, and we suggest you follow along. It will require a subscription, but to paraphrase the late Donna Summer, they work hard for the money. So hard for it, honey. Rest in peace, disco queen, and same to you, go-go king. No one loves to love you, baby, more than…

Arena Pharmaceuticals: Wasting little time, Arena announced May 16 it priced a secondary stock offering and grossed $60.5 million just six days after an FDA advisory committee voted 18-4 in favor of Arena’s weight-loss drug lorcaserin. Arena sold 11 million shares at $5.50 per share, although shares reached as high as $7.02 on May 11, the day of the committee vote. Shares closed May 16 at $5.67. The vote doesn’t guarantee approval of lorcaserin, but it’s a notable reversal. The panel voted down the drug in September 2010, largely due to data that showed an increase in tumors in rat studies. A reassessment of that data, plus new information on the tumors’ causes, reassured the panel this time around that the cancer risk is negligible. Obesity drugs need to meet only one of two criteria set out in FDA’s draft guidance on weight management products: they either must provide a 5% weight loss in 35% of patients on-treatment and twice as many patients on-treatment as on-placebo; or there must be at least a 5% difference between weight loss in the active-product and placebo groups. Lorcaserin met the former standard, but not the latter. (More details about the panel’s decision is here, courtesy of our Pink Sheet colleagues.) Lorcaserin’s PDUFA date is June 27, so Arena’s new cash reserves give it a boost for commercialization, although in a deal expanded just before the committee vote, Eisai owns commercial rights to the drug in the US, Mexico, Canada and Brazil. Underwriters Jeffries & Co. and Piper Jaffray & Co., with help from BMO Capital Markets, have the option to sell up to 1.65 million additional shares. Two other sponsors of obesity are vying for FDA approval. Qnexa from Vivus has a PDUFA date of July 17, and Orexigen Therapeutics, which agreed to conduct a cardiovascular outcomes trial, hopes to re-file Contrave for approval in 2014. -- Cathy Dombrowski and Alex Lash

OncoMed Pharmceuticals: One of the first cancer stem cell companies, OncoMed is now hoping to cash in on the cancer stem cell hype (which just happens to be the subject of a forthcoming feature in Start-Up magazine). After all, OncoMed, founded in 2004, is a relative graybeard of the field, with a couple of alliances under its belt and three programs in the clinic. Tiny Verastem notched a $63 million IPO in late January without anything yet in the clinic, and another company, Stemline Therapeutics, filed its IPO papers in April. OncoMed hasn’t set terms yet, but it won’t be a surprise if it aims sky-high. Venture backers have put at least $170 million into the company since its founding, most of it coming in a massive Series B in 2008. There are seven venture funds and one strategic investor with stakes of 5% or more in OncoMed, led by U.S. Venture Partners (17%), Latterell Venture Partners (12%), and GlaxoSmithKline (12%), which also owns options for worldwide rights to two OncoMed antibodies. GSK can exercise the options at either the end of Phase I or Phase II proof of concept trials. OncoMed owns exclusive rights to its lead compound, the antibody demcizumab, and is currently testing it in two Phase Ib trials, both in combination with chemotherapy agents.  -- A.L.

Egalet: In its second incarnation, Danish pain management firm Egalet Ltd. has raised $14.3 million in Series B financing. The firm restructured and recapitalized in 2010, shedding its cardiovascular program to focus on its abuse-resistant Egalet technology for the development of opioid and non-opioid pain medications.  The company is preparing to advance lead candidate EGP066, an extended-release form of morphine, into Phase III studies. The Egalet platform creates tablets that erode at a controlled rate to produce prolonged- or delayed-release delivery. It also prevents the drug ingredient from being easily extracted, which deters drug abusers from chewing, snorting, or injecting it. First-time investor CLS Capital joined returning shareholders Atlas Venture, Omega Funds, Sunstone Capital, and Index Ventures, which committed to a two-tranched €2 million ($2.6 million) Series A round in August 2010.  Prior to the recap, Egalet A/S had raised at least $60mm in venture financing. In December 2009, it out-licensed its CV compound, the beta blocker EGP042, to RedHill Biopharma. The firm has a second formulation technology, Parvulet, that creates a soft pudding-like substance that can be eaten with a spoon. Farther down its pipeline are extended-release versions of oxycodone, hydrocodone, and hydromorphone. -- Amanda Micklus

Dynavax Technologies: Like Arena, Dynavax is a veteran biotech hoping to soon celebrate its first product launch, with the hepatitis B vaccine Heplisav now before the FDA for review. Dynavax tapped the public markets, raising $74.4 million on May 9 before deductions and expenses. It sold 17.5 million shares at $4.25 apiece, adding more than 10% of its share count to the outstanding base. If that’s not enough dilution, underwriters have the option to sell another 2.6 million shares. What’s more, Dynavax also announced just before the share sale that longtime CEO Dino Dina will step aside for a more commercially experienced successor. He’ll remain CEO until the search is complete, and he’ll also keep his board seat, Dynavax said. Investors didn’t take kindly to the CEO news or the offering, which was priced 17% below the previous day’s close of $5.09. Shares have continued to decline, closing May 17 at $3.76. But Dynavax needs the cash, as it owns full rights to Heplisav, for now at least, and says it intends to launch it independently in the US. Historically, biotechs that keep worldwide or at least US rights to their first commercial products fare better in the long term, but a successful launch is no guarantee. Dendreon’s prostate cancer treatment Provenge (sipuleucel-T) and Human Genome Sciences’ breakthrough lupus drug Benlysta (belimumab), both hailed as welcome additions in under-served indications, have faltered badly out of the gate. That's led to new management for Dendreon and, for HGS, a hostile takeover bid from marketing partner GSK. -- A.L.

Image courtesy of flickr user brain_blogger. How appropriate.

2011 Alliance of the Year Nominee: Forma/Genentech

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half 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™.

For years now, acquisitions of private biotech companies have more often than not resembled alliances, with their upfront-and-milestone deal structures. Isn't it about time alliances borrowed some characteristics of acquisition -- like liquidity for investors?

In fact, in 2011 we saw just that. And though it's not the first, the licensing agreement between private Forma Therapeutics and Roche's Genentech unit, announced in late June, is at least for now, the best specimen of the rare but intriguing species.

Forma's a drug discovery company. The kind of drug discovery company that goes after tough targets. The biotech's focus is on oncology, using its platform to generate compounds against targets in epigenetics and tumor metabolism. And its early progress -- the biotech emerged from stealth in early 2009 and had pulled in nearly $50 million in funding from Lilly Ventures, Bio*One, Cubist Pharmaceuticals and Novartis Option Fund -- attracted Genentech to take a look at the start-up's technology.

Though the large company has only licensed worldwide rights around Forma compounds targeting a single tumor metabolism target, the deal -- structured as an option-to-buy -- could provide Forma's backers with an exit, CEO Steven Tregay told START-UP this year. All while keeping the rest of Forma, and the additional value it may generate for investors, intact.

Genentech will pay the biotech an undisclosed up-front fee plus research funding and can acquire Forma's program against that undisclosed target, at a predetermined point for a predetermined sum. In the long run, the deal allows Forma to do what most biotechs cannot: build value by maintaining a focus on a potentially extremely lucrative platform while at the same time driving a solid exit for investors by pushing a single, promising program forward on someone else's dime.

And not just anyone else's. "Genentech is one of the best in the world in patient stratification and rapid clinical trials. There is no one better to do a deal with," said Tregay at the time. Meantime, Forma can stay centered on "what it's good at, without taking on the risk, cost, and burden of building a clinically focused organization," he said.

Forma's alliance with Genentech is more than a rare bird. It's a new, and potentially replicable, way to sustain a thriving, discovery-focused biotech company. And that's a rare opportunity --and worthy of a Deal of the Year nomination -- indeed. -- Chris Morrison & Ellen Licking

DOTW: There's No Escaping The Stock Market

Deficit reduction/reconciliation may be the real thorn in the biopharma industry’s side right now, but if you were a CEO of a major pharmaco or biotech this week – or, for that matter, an employee, individual investor, or anyone associated with any of the above -- you couldn’t help but worry about the stock market.

Standard & Poor’s announcement late on Friday August 5 that it is downgrading the U.S. credit ranking a notch (from AAA to AA+), may not substantially push up the government’s borrowing costs. Combined with weeks of political haggling over federal government debt, the news subsequently led to a week of wild volatility.

As it is, the week ended with the Dow Jones effectively flat, providing a little respite, but not before sending tremors through much of America, anywhere much of America was vacationing. One only had to look at the chaotic destructive mobs in Britain to get a sense of how bad things in our part of the industrial world could get.

Overall, the DRG index, which tracks pharmaceutical stocks, was down 1.7% for the week--not bad, given the alternative scenarios, and not far off the S&P 500 and the Dow. Traditionally a defensive sector, pharma has behaved much like the rest of the stock market in the past two years, however – and it got sideswiped as much as (or more) than other more cyclical sectors in last week’s rout.

That’s for a variety of reasons, including profit taking from an earlier run up, and worries that coming U.S. budget cuts will dig further into pharma’s pockets. The concern exists regardless of whether the Congressional Joint Committee comes up with nearly $1.2 trillion in proposed budget reductions by November 23, or, if it does not, automatic mandatory across the board cuts go into effect.

In reality, as Sanford Bernstein points out in an August 8 report, there is currently “no clarity on what is going to happen to drug spending,” following Congress’ deficit reduction deal, and “neither side of the political spectrum has yet credibly advocated anything that looks terrible for the drug industry.” Likewise, ISI Group, in presentations to investors, ran through different scenarios, without coming out in favor of one over the others, noting that areas most likely up for grabs could be Medicare Part D (likely to hit pharma more), Medicare Part B (the expensive biotech infused drugs), and/ or Medicare/Medicaid dual-eligibles. But there's a caveat: everything's on the table.

By week’s end, investors in pharma could take a breath, as stocks such as Bristol-Myers Squibb, Eli Lilly & Co., and Pfizer closed the week roughly where they started. Biotech stocks have been a different matter, trading near their year-to-date lows, hammered down by a mix of macroeconomic trends and industry specifics. ISI’s technical analysts believe a little more downside is to come. Dendreon’s surprise setbacks, which the high-profile company announced last week, were still reverberating through the sector, even as the wave of macro-trend jitters hit.

Whatever one thinks of Dendreon’s missteps, its predicament and the market reaction to it serve as a reminder of just how high-pressure the current environment is for launches.

Biopharma has had what is perhaps the industry’s best spate of new drug approvals in years – but many of those drugs, while addressing unmet medical needs, are high priced and complex to administer and launch.

The industry has seen some almost certain wins: Bristol’s Yervoy (ipilimumab) for metastatic melanoma and Vertex Incivek (telaprevir) for chronic hepatitis C, have so far both exceeded analysts’ expectations, with sales in the second quarter of $95 million and $75 million, respectively. Some others, while in their early days, look to be on target, such as Merck's Victrelis, and Johnson & Johnson’s Zytiga while the jury is out on Benlysta, the lupus drug from Human Genome Sciences and GlaxoSmithKline, and Endo Pharmaceutical’s Fortesta.

How these downstream events will affect upstream dealmaking remains to be seen. Obviously, slower launch trajectories, tougher reimbursement hurdles and political uncertainties weigh into companies’ business development strategies. But let’s not forget that the successful launches of today were built on deals struck several years ago, notably Bristol’s link up with, then acquisition of Medarex in 2009, GSK’s deal with HGSI, and J&J’s acquisition of Cougar Biotechnology in 2009.

And while this week has been quiet on the deal front, some ongoing relationships produced news: Abbott Laboratories and Biogen announced impressive top-line Phase IIb efficacy results of their drug daclizumab for multiple sclerosis, GSK and Xenoport, and Takeda Pharmaceuticals paid biotech Affymax Inc. a $10 million milestone upon the submission of an NDA for the companies’ erythropoietin stimulating agent peginesatide.

Which is why, even in a week of stock market jitters, deficit inundation, and vacations, deal details deserve our attention:

Array/Genentech: Boulder, Colo.-based Array Biopharma already has a long history with Genentech, with oncology partnerships dating back to 2004. On Aug. 8, the two companies forged a new agreement around Array’s pre-clinical compound ARRY-575 that yields Array $28 million in up-front cash, plus potential milestone payments of $685 million and double-digit sales royalties, if the drug is approved and marketed. ARRY-575 inhibits the checkpoint kinase 1, or ChK-1, which is thought to prevent tumor cells from repairing DNA damaged by chemotherapy drugs, and thus enhance the performance of those drugs. Genentech already has its own ChK-1 inhibitor, the Phase I candidate GDC-0245; it may advance one or both drugs through the clinic. Array had been preparing to file an IND and begin a Phase I trial for ’575, but will now leave those steps to Genentech, which will foot the bill for all further development of the drug. Array said it had pursued a partnership since January, and had multiple suitors negotiating for rights to ’575.– Paul Bonanos

Vectura/Sandoz: U.K. biotech Vectura Group set up two additional partnerships for its asthma/chronic obstructive pulmonary disorder candidate VR-315 this month, one of them with Sandoz, which in-licensed EU rights to the compound in 2006, expanded its rights later that year to include the U.S., and then returned the U.S. rights to Vectura in 2010. On Aug. 3, Vectura announced a new partnership for U.S. co-development and commercialization rights with the “U.S. division of an undisclosed leading international pharmaceutical company.” Unlike its previous deal with Sandoz, which including a co-commercialization option, Vectura will not be involved in marketing VR-315, thought to be a generic version of GSK blockbuster Advair (fluticasone and formeterol), but will receive $10 million upfront, $35 million in development milestones and undisclosed royalties on sales.

Sandoz, which has retained its EU rights to VR-315, then obtained rest-of-world development and marketing rights to the candidate on Aug. 5. Under this arrangement, Vectura could receive $8 million in milestones and advance pre-launch royalties, of which 2.5 million is expected by Sept. 30, 2011, along with royalties on net sales. Vectura estimates asthma/ COPD is the largest and fastest-growing segment in the respiratory therapy sector, with annual sales exceeding $11 billion worldwide, including $2.5 billion outside the U.S. and EU.—Joseph Haas

AMAG/MSMB: AMAG Pharmaceuticals Inc. told shareholders earlier this week that its Board unanimously voted against the hostile bid offered by one of its hedge fund investors, citing the inferiority of the deal to its prior merger plans. MSMB Capital Management LLC, which has a 5% stake in the Massachusetts-based maker of anemia drug Feraheme (ferumoxytol), made an unsolicited offer on Aug. 2 to acquire AMAG for $18 per share, or approximately $381 million. The takeover offer was an effort to oust current management and block the recently proposed all-stock merger between AMAG and Allos.

The companies believe the merger could help each company overcome the fallout from what many perceive to be disappointing launches of their first products, AMAG's Feraheme and Allos' oncology drug Folotyn. AMAG and Allos told shareholders that the combined company would be able to capitalize on overlapping sales teams and produce cost synergies. Yet, investors have not taken kindly to the deal; AMAG’s stock has lost 22% of its value since the merger announcement, and 47% of its worth over the last year. Allos’ stock has dropped 60% since August 2010—Lisa LaMotta

Deals Of The Week: CATT Fight

Well, the cat (er catt) is out of the bag – and, n,o we aren’t talking about Kate Middleton’s decision to wear a long-sleeved ivory confection with flower appliqué details when she tied the Windsor knot.

While fashionistas, pundits, and the British nation had their eyes trained on Westminister Abbey, the biopharma industry was focused on the release of data comparing the utility of the high priced Lucentis versus the much cheaper Avastin to treat wet age-related macular degeneration. And as everyone now knows, the data from the 1200-patients trial sponsored by NIH suggest that in this particular setting, there seems to be little reason—based on overall outcomes—to spend thousands of dollars on Lucentis when Avastin works just as well for a fraction of a cost.

Dr. Phillip Rosenfeld, an ophthalmologist at the University of Miami Miller School of Medicine, was particularly blunt in his assessment in a NEJM editorial that accompanied the data’s publication: "Healthcare providers and payers worldwide will now have to justify the cost of using ranibizumab [Lucentis]," he said.

That’s not to say Genentech and Novartis aren’t channeling their inner Churchill (or perhaps, more appropriately, their inner John Paul Jones). Already the companies are highlighting potential unanswered safety questions, including discrepancies in dosing and a slight increase in the incidence of non-specific serious adverse events, mostly hospitalizations. Expect the drug companies to play up whether the controlled conditions of the NIH trial can adequately be replicated in a real world setting too.

Given we are talking about people’s sight, those questions may provide a persuasive argument for docs and patients wary of not using the formulation that has FDA’s stamp of approval. Provided payers play along, of course.

And that's why Medicare’s decision is so critical. Avastin vs. Lucentis has become the poster child for the comparative effectiveness debate; thus, you can bet industry will be watching closely to see whether or not CMS initiates a coverage review that would limit Lucentis’ use. Such a decision would certainly give private payers more license to limit the medicine as a first-line treatment option.

The ripples of CATT will almost certainly be felt outside the walls of Novartis and Roche/Genentech as well. Ophthalmology – particular treating diseases that blind—has become an area of interest for big pharma because of the unmet medical need for new therapies. Because back of the eye diseases are treated by a highly trained and technically savvy group of specialists, the sector has long been a favorite of the venture community as well.

What does this mean for new AMD drugs coming down the pike like the complement inhibitors developed by Optherion or the anti-PDGF inhibitor developed by Opthotech? Given such medicines work by a different mechanism of action than the anti-VEGF inihibitors Lucentis and Avastin, their value proposition is still a little bit easier to explain. But whether potential partners will bite without superiority data is another question.

Certainly the CATT data seem to make life much tougher for Bayer and Regeneron, who now face some thorny questions about their VEGF Trap-Eye medicine, aflibercept. Phase III data released last fall showed the drug to be non-inferior to Lucentis, with fewer doses required. But with data from CATT suggesting drugs like Lucentis and Avastin can be given at less frequent intervals, a dosing advantage alone seems unlikely to be enough to ensure Regeneron and Bayer coverage and commercial uptake of their medicine – especially when data showing a much cheaper alternative can do the job.

Whether you think the CATT results are the cat’s meow or worth nothing more than a cat call, it’s time for another edition of deals of the week…

Johnson & Johnson/Synthes: The deal garnering the lion’s share of the PR this week is Johnson & Johnson’s $21.3 billion tie-up of orthopedic trauma device maker Synthes, announced April 27. Under the terms of the deal, J&J will pay $181.75 per share for Synthes in cash and stock, an 8.5% premium over Synthes’ stock price close on April 26 and a 21.7% premium over its close on April 14, when rumors about a possible tie-up first surfaced. It’s the largest deal in J&J’s history, coming half a decade after the diversified giant passed on upping its $25 billion bid for Guidant. Strategically the Synthes buy-out makes a lot of sense: it gives J&J the pole position in orthopedics boosting sector revenues from around $5.6 billion to more than $9 billion, and deepens its expertise in trauma fixation devices, an arena less prone to payer oversight and the vagaries of a slowing economy. (Fixing the damage arising from a major accident ain’t exactly elective.) At the time of the Guidant bidding war, analysts noted J&J’s interest in that company and the size of the deal said a lot about the health care company’s view on the relative merits of investing in med-tech versus pharma. Given the Synthes acquisition, the question of J&J’s dedication to Rx is sure to resurface, though the early approval of Zytiga may help the balance.

One interesting wrinkle is whether this big orthopedic deal could presage additional dealmaking in CV, since within J&J there’s historically been a school of thought linking opportunities in these two markets. As rumors about the possible J&J/Synthes tie-up coalesced, speculation ran the gamut. Thanks to the precipitous drop in market share of its drug-eluting stent biz, some predicted J&J would exit CV altogether, selling off its Cordis business; others said 'no,way,' opining this will spur J&J to re-up in CV, perhaps via acquiring percutaneous valve-leader Edwards Life Sciences.

Because J&J is paying for Synthes mostly in stock -- just 35% of the payment is cash -- the health care firm has plenty of ammunition for additional deal making. Given J&J's hefty balance sheet, its use of stock to ink the deal took some by surprise since it creates additional unwelcome earnings pressure. Even though the deal bolsters the struggling DePuy subsidiary, which like the consumer division, has seen major setbacks due to recalls, some claim J&J is simply putting a Band Aid (pun definitely intended) on its problems. Critics argue the company’s manufacturing problems are significant and that integrating Synthes will detract from the hard work required to fix a broken system. —The EBI Device team

Kadmon/Nano Terra: Sam Waksal’s Kadmon is at it again. After its deal-making bonanza last fall – recall the firm acquired Three Rivers and set up a strategic partnership with Valeant—Kadmon is teaming up with privately-held Nano Terra, a nanotech accelerator developing technologies with applications from biopharma to more industrial settings. Terms of the tie up weren’t disclosed but they do provide Kadmon with an exclusive license to three novel, clinical stage assets and access to Nano Terra’s proprietary Pharcomer Technology drug discovery platform. (FYI, the product candidates and the Pharcomer technology were originally developed by another private biotech, Surface Logix, and only recently acquired by Nano Terra, though no formal announcement about that deal appears to have been made.) Perhaps the most interesting asset for Kadmon is Slx-2119, a selective Rho-associated coiled-coiled kinase 2 (ROCK2) inhibitor that impacts cell shape and cell migration and may play a role in diseases as diverse as diabetes, cancer, and spinal cord injury. As part of the recent alliance, the assets and technology will be transferred to a new joint venture owned by Kadmon and Nano Terra called NT Life Sciences.—EFL

Sequella/Maxwell Biotech Venture Fund: Anti-infectives developer Sequella of Bethesda, Md., signed an unusual deal that gives Maxwell, a venture fund that specializes in Russian investments, rights to tuberculosis treatment SQ109 in Russia and the Commonwealth of Independent States, which includes Armenia, Kazakhstan, and Ukraine. Maxwell is taking an undisclosed equity stake in Sequella, but the parties do not consider the transaction a round of funding. Sequella could receive up to $50 million from Maxwell, the first tranche being an upfront payment and near-term milestones that the companies declined to disclose. Run by former Pfizer discovery executive and incubator chief Alex Polinsky, Maxwell has responsibility for development and approval of SQ109 in its licensed areas. Sequella has completed three Phase 1 studies of SQ109 in the U.S. and is currently running Phase 2 efficacy studies in TB patients in Africa. It is also testing the compound as a treatment for Helicobacter pylori infections and fungal infections. Sequella officials told the IN VIVO Blog that the company has not raised traditional rounds of venture capital, instead leaning on individual investors and hedge funds to supplement government grants. -- Alex Lash

Eli Lilly/Medtronic: While drug companies routinely team up with device makers to find better ways to deliver drugs, the April 26 deal between Eli Lilly and Medtronic, to research and develop a new treatment for Parkinson's disease is notable for two reasons. For starters, the collaboration involves two very early stage technologies. But the alliance also facilitates Lilly's move into a new area of CNS that heretofore hasn’t been a primary focus. If all goes according to plan, the alliance will result in a combination of Lilly's modified form of glial cell-derived neurotrophic factor (GDNF) and Medtronic's implantable drug infusion system. Because the large protein growth factor can't get past the blood brain barrier, and, on its own, isn't targeted, the Medtronic device would deliver it directly to the dopamine-producing neurons that degenerate as Parkinson’s disease advances. The companies aren't disclosing much about the terms of their alliance, except to note that it is a 50-50 split in both costs and revenues and spans clinical development, regulatory and ultimately commercial stages. The aim is to produce a combination product that can be submitted jointly for regulatory approval. The partners don't have a fixed time line for getting their therapy through development, but expect to move it into the clinical within five years, said Ros Smith, a senior research director of regenerative biology at Lilly.While the modified GDNF is most advanced, Lilly also has several compounds in pre-clinical development for Parkinson's disease. Medtronic, for its part, doesn't currently sell a device that delivers drugs directly to the brain, although it markets a deep brain neurostimulation technology for treating Parkinson's disease and sells implantable pumps and catheters for delivery to the spinal cord.--Wendy Diller

Image courtesy of flickrer privatenobby used with permission through a creative commons license.

Preparing for the CATT Study: Will Makena Controversy Have an Impact?

The first public presentation of data from the National Eye Institute’s head-to-head study of Lucentis vs. Avastin in macular degeneration will take place this weekend. The Comparison of Age-Related Macular Degeneration Treatments Trial (CATT) is sure to go down as an early landmark in the era of comparative effectiveness research—though exactly how it will be remembered is less clear.

We have written extensively about the unusual situation Genentech faces with the CATT trial—basically a government run study designed to prove that one Genentech product (Avastin) is just as good as another (Lucentis) at a vastly lower cost. The study was initiated and designed completely without Genentech’s help, prompted by outrage among providers who had been using Avastin off-label for AMD who experienced sticker shock when Lucentis was launched at a price of about $1,500 per dose, compared to $50 for the unapproved, microdose of Avastin.

It took a very long time to get the study off the ground, thanks in part to a series of administrative hurdles posed by the unusual circumstance of conducting a study in the Medicare population without the support of a willing sponsor. The planning for the trial began in 2005, but it didn’t really get going until 2008.

Now, at least, it is wrapping up—and in a juicy irony the study results will be reported right on the heels of a completely different controversy over an attempt by a sponsor to sell a product at $1,500 a dose to providers comfortably using an unapproved alternative that costs about $50 a dose. That, after all, describes the situation with KV Pharmaceuticals’ pre-term labor drug Makena.

The situations aren’t perfect parallels of course. KV launched Makena earlier this year, becoming the latest sponsor to pursue a strategy of obtaining FDA approval for a widely used unapproved medicine, in this case, the pharmacy-compounded ingredient 17P. Makena received an Orphan Drug designation, the only exclusivity KV can count on since the active ingredient is long off-patent. The application itself was an abbreviated one, referencing clinical studies conducted by the National Institutes of Health demonstrating a benefit in delaying pre-term labor in high risk women. (Though the NIH study wasn’t enough for a full approval; Makena received an accelerated approval with the sponsor committing to demonstrating a clinical benefit in the health of newborns.)

Lucentis feels very different. The active ingredient is a modified version of the monoclonal antibody known as Avastin, optimized (Genentech says) for use in the eye. Avastin itself is high science, the quintessential biotech breakthrough, an angiogensis inhibitor whose benefits were demonstrated at high cost and high risk by Genentech.

But the controversy around the two therapies is essentially the same: providers reacted to a de facto 3,000% price increase by complaining to anyone who would listen. Congress took note and pushed federal agencies to respond.

The nature of those responses has been very different. For ophthalmologists, use of Avastin is now common practice, especially for uninsured patients or in any circumstance where securing reimbursement for Lucentis may be in doubt. And the CATT study is supposed to help preserve the status quo by demonstrating non-inferiority between the two treatments.

For Makena, the key response came from FDA, which announced March 30 that it would not clamp down on compounders who continue to make 17P. (You can read more in “The Pink Sheet,” here.)

That simple action, coupled with CMS’ same day “reminder” to state Medicaid directors that they can continue to pay for compounded 17P if they choose, dramatically changes the commercial picture for KV, and the company reacted by slashing its price. The rest of the story has yet to be written, but we suspect KV will ultimately drive compounders out of the market and that will be that.

But the considerable attention generated by Makena should mean that the CATT study will garner even more interest than it already commands.

The question is, exactly what will that interest lead to?

That is where another connection to Makena comes into play: the question of how safe it is to use unapproved alternatives to an FDA approved therapy. Roche/Genentech has stressed that issue as a key concern with off-label use of Avastin all along, and the company sponsored a review of Medicare claims data that suggests there are indeed more adverse outcomes associated with that use than with Lucentis.

And recent comments by Center for Drug Evaluation & Research Director Janet Woodcock about the Makena controversy may shed light on how FDA views the issue.

Woodcock spoke at the Food & Drug Law Institute annual meeting in early April, less than a week after FDA issued the public statement on compounding and Makena.

It was therefore inevitable that she would be asked about the issue. Inevitable, and also a bit unfair. The controversy over Makena is clearly a political issue, with Ohio Democratic Senator Sherrod Brown spearheading an all out campaign for federal agencies to do something to address what he (and plenty of provider groups) felt was an outrageously high price for the drug. So FDA’s announcement that it would not clamp down on compounding of Makena clearly began at a level much higher than the CDER director.

Moreover, any drug regulator is bound to feel strongly that an FDA-approved product is safer than a pharmacy compounded product. Woodcock, who has devoted considerable energy to upgrading quality control in (regulated) pharmaceutical manufacturing, probably has stronger feelings on that score than most.

But it is Woodcock’s job to defend agency policy, and defend it she did.

She began by stressing the importance of placing the issue in the context of conflicting societal pressures. In the case of Makena, Woodcock suggested, the agency’s decision aimed to find that balance. In its March 30 public statement, FDA stressed the “unique” circumstances surrounding Makena, underscored the importance of assuring sterility in the injectable product, and noted that FDA may revisit its enforcement discretion at any time.

“We want a lot of things as Americans,” Woodcock noted. “We want orphan incentives. We definitely want people to study drugs in pregnant women, which they don’t do. We want affordable drugs. We want high quality parentals that are not contaminated with bacteria and killing people.”

“Sometimes all these wants conflict with each other. The question is, with all these different societal desires, how do we define a balance amongst them?”

Moderator Daniel Kracov (Arnold & Porter) suggested that the issue is whether it is appropriate for FDA to “play that role” of arbitrating among those competing desires.

Woodcock responded by stressing the limits on FDA’s ability to regulate compounding—not just questions about the scope of its authority, but practical limitations on its resources.

“In general, our enforcement policy on compounding has been that we are taking a risk-based approach and we are going after compounders that are having contaminated drugs.” She cited a recent outbreak of septic meningitis associated with total parenteral nutrition compounded by a pharmacy in Alabama. (Coincidentally, FDA issued a safety alert tied to that outbreak on March 30, the same day it announced its Makena policy.)

In addition to focusing on cases of contamination, “we will also go after serious health fraud,” like if a pharmacy is offering some substance as a replacement for insulin. “We have the risk-based approach down from that, but those are the primary objectives right now in compounding, because we have many many tasks that we have to enforce against.”

Panelist Nancy Buc (who recently retired as a partner at Buc & Beardsley) pressed Woodcock, noting that her own priority lists highlights injectable products as a priority. “One of the things that Makena brings us is GMPs and presumably sterility. Are you going to inspect the people who are compounding more than one dose for sterility?”

“I would ask you are we going to inspect people who are compounding drugs that are injected directly into the epidural space, or into the cerebral spinal fluid,” Woodcock responded.

“There are many concerns here. There are many, many compounded drugs that are intravenous. That poses a higher risk than the intramuscular injection” that is used for Makena and 17P compounds. “If you start talking about risk, I think there is a hierarchy. The greatest concern to me would be drugs injected into the eye, or into the central nervous system. Next would be drugs that are injected intravenously…then would be drugs that are injected intramuscularly.”

That’s right: drugs injected into the eye are the highest risk in the CDER directors view.

Was the CATT study already on her mind? Not really. “I wasn't thinking of Avastin in particular,” Woodcock told us when we contacted her about her remarks.

In fact, “I believe the division of Avastin vials is considered repackaging not compounding.”

“However,” Woodcock stressed, “I believe injection in or near the CNS is one of the highest risk situations for sterility problems.”

When weighing the impact of the CATT study findings, it seems safe to say that whatever impact they have, it won’t result in FDA issuing a statement saying it has no problems with widespread off-label use of Avastin.

DOTW's 12 Deals Of Christmas

On the first day of Christmas, IN VIVO gives to you an earn-out in a pear tree
On the second day of Christmas, IN VIVO gives to you two consumer deals
On the third day of Christmas, IN VIVO gives to you regional alliances
On the fourth day of Christmas, IN VIVO gives to you hostile deals now friendly
On the fifth day of Christmas, IN VIVO gives to you ON-CO-LO-GY
On the sixth day of Christmas, IN VIVO gives to you biotech spin-offs
On the seventh day of Christmas, IN VIVO gives to you biobucks a plenty
On the eighth day of Christmas, IN VIVO gives to you eight pharma partners
On the ninth day of Christmas, IN VIVO gives to you platform biologics
On the tenth day of Christmas, IN VIVO gives to you billion dollar skin care
On the eleventh day of Christmas, IN VIVO gives to you a new eye care unit

On the twelfth day of Christmas, IN VIVO...needs a break. Please read (instead)...

MedImmune/Evotec: Big pharma’s love affair with primary care is on the wane, making cardiovascular deals as rare as partridges in pear trees. But it’s a different story for metabolic disease, where drug makers see large opportunity in growing waistlines. Think Merck’s take-out of SmartCells or Sanofi’s spate of alliances to build itself into an end-to-end solutions provider. Now comes news that AstraZeneca's biologics group MedImmune is aligning with Evotec in a broad R&D deal centering on regeneration of insulin-producing beta cells. As with most early stage alliances, the deal is heavy on the back-end payments, with the German biotech due €5 million upfront and up to €254 million in milestones down the road. But should Evotec deliver the goods, it would prove a nifty return on the biotech's acquisition of DeveloGen, a deal completed less than three months ago for up to €14 million in cash and stock, plus potential earn-outs. It's DeveloGen's metabolic target discovery platform that MedImmune is tapping into, and it adds a third alliance to the subsidiary's portfolio. Meanwhile, MedImmune and parent AstraZeneca are looking to fill a hole in their pipeline. -- Alex Lash

Reckitt Benckiser/Para Pharmaceuticals: Reckitt Benckiser Group pushed further into the consumer health business and India on Dec. 14 when the household cleaning products maker announced its £460 million ($727.3 million) acquisition of India’s Para Pharmaceuticals from private equity group Actis and minority shareholders. The acquisition, which is 31 times Para’s EBITDA, gives Reckitt access to one of India’s most popula cold-and flu-remedies, D’Cold. Still that’s a steep price to pay to boost exposure in an emerging market, where Reckitt already sells Dettol, Durex and Disprin. (At that price, IN VIVO blog thinks Para should throw in at least two turtle doves.) The company’s consumer healthcare unit now accounts for one-quarter of sales and will become increasingly more important since its household cleaning division faces pressure from competition like Procter & Gamble.—Lisa LaMotta

GlaxoSmithKline/Maxinutrition: As part of its pre-Christmas shopping spree, Glaxo says no to French Hens, but yes to muscle shakes, acquiring U.K. sports nutrition firm Maxinutrition Group Holdings for £162 million. The deal diversifies Glaxo’s Nutritional Healthcare business, adding the smaller player’s line of protein-rich body building, weight management, and endurance products onto the big drug maker’s carbohydrate business Lucozade and Horlicks (also known internally as a @calcium micronutrients business"). GSK's Nutritional Healthcare sales were already on a tear climbing 12% to $408.6 million for the third quarter of 2010. But with this new triumvirate, the pharma sees a recipe for growth. It can leverage the selling power of Horlicks while tapping into the sports nutrition business, a sector still growing strong in established markets that, globally, could be worth nearly $5 billion. – Dan Schiff

Ramius/Cypress: It took four calling birds, but Cypress Bioscience finally got a buyout offer from Ramius that was music to its ears. On Dec. 15, the San Diego biotech announced it had accepted a $255 million takeover offer from Ramius. The deal values Cypress at $6.50 per share, 63% more than Ramius’ $4-per-share offer in July. When Ramius launched its pursuit, it ripped Cypress management in an open letter, blasting the company’s decision to license a schizophrenia drug from Israel’s BioLineRx and declaring its 2008 acquisition of diagnostics company Proprius a failure. Since then, Ramius has incrementally increased its offer, including a $6.00 per share deal that Cypress’s board rejected. The parties finally agreed on the $6.50-a-share price, and agreed to extend the tender offer in order to complete the deal. Cypress garners most of its revenue from fibromyalgia drug Savella (milnacipran), and completed small-money deals in August to acquire rights to an autism drug from Marina Biotech and a smoking cessation product from Alexza Pharmaceuticals.—Paul Bonanos

Sanofi-Aventis/Merck Serono: ON-CO-LO-GY! In the drug world, viable cancer drugs are definitely as valuable as five golden rings. But as the recent U.S. regulatory decision around Avastin in metastatic breast cancer shows, incremental efficacy against an unmet medical need ain’t enough any more. Some companies are trying to overcome wily tumor cells by combining targeted therapies that work via different mechanisms into a single agent. And as the Dec. 17 alliance between Sanofi-Aventis and Merck Serono shows, they are willing to forge ties with competitors (excuse me, external parties) if that’s what it takes. According to the deal’s terms, Sanofi contributes two novel small molecule kinase inhibitors (both incidentally inlicensed from Exelixis in 2009): a PI3 kinase/ mTOR inhibitor SAR245409, and a class I PI3K inhibitor, SAR245408. Merck Serono, meanwhile, supplies its MEK inhibitor, MSC1936369B. (All three molecules are currently being studied in independent Phase I trials.) Here’s how the sharing works: Sanofi will conduct trials combining Merck’s MEK with its PI3K/mTOR inhibitor, while Merck will study the other PI3K blocker in combination with its medicine, and both drug companies will fund their own studies. Beyond breathy prose about “personalizing and stratifying cancer care” and maximizing the portfolio, details about the collaboration were vague, meaning what happens after Phase I, and importantly how the financials will be sorted, remain mysteries. Structurally – and therapeutically – the deal is almost an exact duplicate of the 2009 tie-up between Merck & Co. Inc. and AstraZeneca. (No word if an overly long airport security queue also played a role in this most recent alliance, however.) -- EFL

Xention/Provesica: Rather than divide its focus between two largely unrelated programs, UK-based Xention and its investors have elected to divide and conquer, spinning out the biotech's overactive bladder program into a new, separate company called Provesica. Two of Xention’s stakeholders, Forbion Capital Partners and Seroba Kernal, have supplied not six geese-a-laying but something much more important: cold hard cash to the tune of £4 million ($6.2 million). Beyond setting up an independent Provesica, the money will support Phase II trials of its lead compound, a vanilloid TRP (transient receptor potential) receptor antagonist, which affects the detrusor muscle in the bladder. Xention, which recently raised £8 million in Series D funding, will continue to advance its atrial fibrillation program, aimed at developing inhibitors to selectively block ion channels in the heart’s atria but not its ventricles. In conjunction with the spin-off, Xention has restructured, with holding company Xention Pharma Ltd. operating an R&D subsidiary.—PB

GlaxoSmithKline/Impax: GlaxoSmithKline, which now faces generic competition for its only Parkinson’s disease drug, Requip, swam back into that space Dec. 16, inking a co-development and commercialization deal with Impax Pharmaceuticals for the smaller firm’s lead program, IPX066. (Seven swans were apparently optional.) GSK will pay $11.5 million upfront along with up to $175 million in potential milestones and tiered, double-digit royalties on sales of IPX066, an extended-release combination of levodopa and carbidopa now in Phase III, in exchange for worldwide rights outside the U.S. and Taiwan. Impax, the CNS-focused, branded drugs division of generic player Impax Laboratories, will continue to make and supply the medicine to GSK. Impax completed a Phase III trial (APEX-PD) in early-stage Parkinson’s earlier this year with strong results and expects data from a second Phase III study (ADVANCE-PD) in patients with advanced Parkinson’s in the second quarter of next year. An NDA filing could come as soon as end of 2011.—Joseph Haas

Adimab/Lilly, Adimab/Genentech, Adimab/HGSI: On the eighth day of Christmas Adimab dispensed with the 8 maids-a-milking (and drug development too) and focused on the cream of the crop: its platform. At a time when most biotechs can’t monetize their platforms through discovery stage deals, privately-held, yeast-based antibody discovery biotech Adimab (alongside DOTY nominee Ablexis) remains the rare bird. Adimab watchers shouldn’t be surprised the company has inked more deals – three of them actually, with the likes of Lilly, Genentech and Human Genome Sciences. Nor do these recent deals stray far from the company’s previous single-target antibody discovery alliances, which emphasize non-exclusivity around a target and pay the biotech undisclosed financials that include an upfront, plus milestones and royalty payments. Why is Adimab the belle of the antibody discovery ball? “Our technology platform is not only faster than conventional antibody technology but it yields more relevant therapeutic leads with a higher probability of success,” CEO Tillman Gerngross, PhD, told us for a piece we did earlier this week in “The Pink Sheet” DAILY. The upshot of all Adimab’s dealmaking is that the cash-flow positive biotech (it announced two milestone payments to go along with the three deals this week) is restructuring to an LLC to return cash to shareholders in a tax-efficient way. – Chris Morrison

Mitsubishi Tanabe/Anaphore: At least one lady (if not nine) is surely dancing on the news of Mitsubishi’s R&D tie-up with Anaphore, a San Diego-based biotech developing trimeric proteins called Atrimers. Anaphore’s CEO Katherine Bowdish tells sister publication “The Pink Sheet” DAILY, “this first partnership does a great job of validating our technology platform.” It’s certainly a nice first and Mitsubishi’s willingness to contribute research funding is a decided plus, but Anaphore isn’t going to win any DOTY nominations based on the deal terms – a $5 million upfront, $110 million in milestones, and tiered royalties on sales of any products resulting from the option-style collaboration, which could be expanded to up to three targets. Still the tie-up, focused in auto-immune disease, is a reminder that drug makers remain interested in accessing novel technologies, especially if said platforms can create medicines against intractable drug targets or are inaccessible because of preexisting IP. Anaphore is especially interested in creating novel proteins that bind receptors in the so-called TNF super-family. The biotech’s most advanced candidate, the still preclinical ATX3105, antagonizes the interleukin-23 receptor, which plays a role in autoimmune disorders. -- Shirley Haley & EFL

Galderma/Q-Med: Lords a leaping! Leading Swiss dermatology company Galderma’s $967 million bid for medical implant manufacturer Q-Med will roughly double the acquirer’s sales and substantially increase its presence in aesthetic dermatology, a sub-segment of dermatology that is growing worldwide. Galderma, a joint venture of Nestle and L’Oreal, sells prescription and non-prescription dermatology products worldwide and is the largest manufacturer of topical dermatology therapies in the U.S. Q-Med makes dermal fillers including Restylane, which competes against Allergan’s successful Botox. The deal is non-traditional in that it offers different terms for the majority shareholder, Lyftet, which owns 47.5% of Q-Med, and the remaining shareholders. Bengt Agerup, Lyftet’s CEO, has already agreed to accept an irrevocable offer of 58.94 SEK in upfront cash, with up to 16.02 SEK in additional payments if certain development and business milestones are met. The remaining Q-Med shareholders would receive a flat cash payment of 75 SEK per share. Q-Med investors will have between Jan. 4, 2011 and Jan. 25, 2011 to tender their shares.—Wendy Diller

Novartis/Alcon: On Dec. 15, Novartis AG finally acquired the remaining 23% of eye care company Alcon Inc. that the Swiss-pharma giant didn’t already own. Alas, the announcement, which requires Novartis to pay independent shareholders the same average share price it doled out to Nestle, came without much fanfare. (In what was surely an oversight given the months it took to finalize the transaction, there were no pipers piping or drummers drumming.) The deal, which is a stock swap, will cost Novartis another $12.9 billion, driving the total price of the Alcon acquisition to $51.6 billion. In dollar terms, that rivals the mega-mergers of Pfizer/ Wyeth, Merck/Schering and Roche/Genentech. Is an ophtho company worth that much? The beauty of a deal is always in the eye of its beholder, but this particular therapeutic sector is enjoying a renaissance. Ophthalmologists are a technically savvy bunch, so having a strong device presence will likely help Novartis leverage its existing ophthalmics medicine business, which along with consumer-focused CIBA Vision and Alcon will be folded into a new eye care unit run by Alcon CEO Kevin Buehler. – Lisa LaMotta & EFL

DotW Strategies

As 2010’s days grow shorter, the pharmaceutical industry’s larger players face fundamental challenges, both in how they invest in internal research and how they ensure continued growth commercially for their medicines in the face of increasing scrutiny from regulators and payers. An analysis of Elsevier’s Strategic Transactions database in the October IN VIVO shows that, to date, most companies have adapted with a three-pronged strategy that places an emphasis on externalization, emerging markets, and unmet medical need.

This week’s edition of deals of the week doesn’t stray far from these established themes. (Poison ivy was apparently considered optional.)

Sanofi-Aventis’s alliance with Harvard University illustrates the ongoing allure of academic relationships, as drugmakers look to identify innovative new medicines ever earlier in the development cycle. Meantime, Glaxo’s tie-up with two Italian foundations in the development of a gene therapy to treat a disorder affecting only a few hundred people worldwide shows that no disease is too rare to attract Big Pharma’s interest--as long as the unmet medical need is high. Finally Pfizer’s deal with Indian biotech Biocon, illustrates drugmakers’ growing interest in both diabetes AND emerging markets.

GlaxoSmithKline/Fondazione Telethon & Fondazione San Raffaele: Big Pharma’s interest in rare diseases shows no signs of waning. This week’s rare disease pact – it seems like one a week is now pro forma for DOTW – aligns GlaxoSmithKline and two Italian foundations. On October 18, GSK announced plants to pay Fondazione Telethon and Fondazione San Raffaele €10 million upfront (about $14 million) for worldwide rights to a Phase I/II stem cell-based gene therapy for ADA-SCID, also known as "bubble boy disease." ADA-SCID, a single-gene defect which prevents the body from producing the enzyme adenosine deaminase, afflicts about 350 children worldwide, with about 14 EU patients and 12 U.S. patients born each year. (Thus, this isn’t simply GSK investing in a rare disease; ADA-SCID counts as one of those “ultra” orphan indications, a valid term even if it makes industry and advocacy groups squeamish.) Beyond the ADA-SCID program, the two foundations will partner with GSK on clinical programs in Wiskott-Aldrich Syndrome and metachromatic leukodystrophy, as well as four additional programs, all currently in preclinical development. In addition to the upfront payment, the foundations could earn specified development milestone payments for each program. In a same day business presentation, GSK’s Global Head of Rare Diseases Marc Dunoyer offered additional color about the rare disease unit’s strategic intent. The pharma intends to address 200 rare diseases with a focus in four primary areas: metabolism and inherited disorders, central nervous system and muscle disorders, immuno-inflammation, and rare malignancies and hematology. It continues to build its portfolio via dealmaking, including ongoing collaborations with Isis, Prosensa, and JCR Pharmaceuticals.—Joe Haas

Genentech/Biogen Idec: The longtime Rituxan partners have amended their co-development terms for next-generation anti-CD20 compounds. Biogen now gets slightly higher royalties on sales of the still-experimental compounds ocrelizumab and GA101, and their introduction will not trigger lower Rituxan royalties, as was previously outlined in their agreement. The firms squabbled for years over rights to what comes after Rituxan, and an arbiter ruled last year that Biogen had the right to participate in all anti-CD20 program development decisions. Historically Biogen has received 30% of the first $50 million in US and Canadian operating profits, then 40% of everything over $50 million, a threshold passed by Rituxan in the first quarter in each of the last three years, according to ISI Research analyst Mark Schoenebaum. Commercialization of ocrelizumab will no longer reduce Biogen's share of Rituxan profits, but certain regulatory and sales milestones of GA101 will. Also, Genentech will pay for all ocrelizumab development in multiple sclerosis, with Biogen receiving between 13.5% and 24% of US sales. With GA101, which in 2008 Genentech licensed from Glycart -- itself wholly owned by Roche -- Biogen will now pay 35% instead of 30% of US development costs and receive between 35% and 39% of profits based on certain sales milestones. GA101 is in advanced development for CLL and NHL. Ocrelizumab is in Phase II for multiple sclerosis but is no longer being tested in rheumatois arthritis. -- Alex Lash

Pfizer/Biocon: Pfizer and India's biotechnology flag-bearer Biocon finally -- after months of speculation -- announced a comprehensive global commercialization pact to bring to market a range of insulins including analogs of medicines marketed by Sanofi-Aventis, Novo Nordisk and Eli Lilly. Pfizer is doling out $200 million in upfront payments to Biocon, with the Indian biotech eligible for further milestone payments of up to $150 million. Biocon will also be entitled to additional payments linked to Pfizer's sales of its four insulin biosimilar products across global markets. As part of the deal, Biocon will take up clinical development, manufacture and supply of the biosimilar insulin products and regulatory activities needed for approvals in various geographies. Pfizer has told analysts that the deal will be "incremental," not "instrumental" to its strategy in emerging markets, biosimilars, and established products. Pfizer will be responsible for commercializing the products, while Biocon will develop and manufacture them. "Pfizer's participation in this market does raise the bar for the major producers of insulin over the long term," Leerink analyst Seamus Fernandez wrote in a same-day note. But it won't have a near-term impact because Pfizer brings little to the table beyond marketing muscle and the biggest opportunity lies in developed markets, where some of the products are patent protected for several more years. Sanofi's Lantus, for example, doesn’t lose exclusivity until 2015. – Vikas Dandekar

Romark/Intercell: Romark Laboratories and Intercell said they will collaborate on their hepatitis C programs by conducting trials on a combination therapy that will include Romark’s anti-viral drug nitazoxanide and Intercell’s HCV vaccine, IC41. The combination will seek to improve on the standard of care by adding IC41’s immune-boosting properties to nitazoxanide’s ability to slow cell replication without inducing mutations. The drug pairing will be studied side-by-side with the currently used combination of Pegasys (peginterferon alfa-2a) and Copegus (ribavirin), as well as a three-way combo of nitazoxanide, IC41, and Pegasys in a European Phase II trial slated for the first half of 2011. Nitazoxanide, an anti-infective agent in the drug class known as thiazolides that appears to activate protein kinase R, is already marketed to treat diarrhea caused by viral infections. It has been studied in conjunction with peginterferon and ribavirin as well. Tampa, Fla.-based Romark and Vienna-based Intercell did not announce financial terms of the deal.—Paul Bonanos

Sanofi-Aventis/Harvard University: Technically the tie-up between Sanofi and Harvard is a deal of last week, but with so much industry activity--and playoff mania--IVB somehow overlooked a deal that ought to be seen as a sign of the times. On October 14, Sanofi and Harvard announced they were joining forces in a broad translational alliance that gives the French pharma an early look at cutting edge science that could be important future pipeline substrate. Deal terms were not disclosed, but the collaboration is designed as a grants program, with a joint steering committee from both entities awarding funding based on scientific merit and “the potential to generate translational insight and value to biomedical research.” The boon for Harvard: scientists get access to flexible and rapidly available funding without spending hours – it’s really more like weeks or months – writing up government grants. Sanofi, in turn, has the opportunity to develop diagnostic, therapeutic, and prognostic applications of any discoveries made under the collaboration. Partnerships with academia have shown a marked uptick in number in 2009 and 2010 compared to years prior. According to Elsevier’s Strategic Transactions, the number of industry-academia partnerships jumped from 6 in 2007 to well over a dozen thus far in 2010. Nor are these the typical outsourcing relationships of yore; most are structured as true partnerships that aim to share both risk and reward. Notable recent examples: AstraZeneca’s alliances with University College London and Cancer Research Technology to create stem cell therapies for ophthalmic diseases and novel cancer medicines, respectively.--EFL

GE/Clarient: With cancer diagnosis and characterization in the vanguard of molecular diagnostics development and investment, it’s no surprise that GE Healthcare chose the area for its first major external investment in molecular test content. On Friday it announced an approximately $580 million tender offer for Clarient, which provides laboratory tests using important clinically validated cancer molecular markers including BRAF, EGFr, and KRAS. The deal, at $5 per share, is roughly a 25 % premium over its closing price yesterday of $3.77. Clarient hit profitability earlier this year, taking in $28.7 million for its testing services in the second quarter ending June 30. It utilizes most of the standard cancer testing technologies including immunohistochemistry, flow cytometry, FISH, and imaging. GE, working through its subsidiary in the UK (the former Amersham, which it acquired in 2003), expects to combine Clarient’s chemistry and molecular platforms with its own diagnostic imaging expertise, which would give it a full suite of triage and cancer diagnostic capabilities. In a sense, the link to imaging brings Clarient full circle. It originated as ChromaVision, a developer of digital microscopes, then morphed from an equipment maker into a service provider. Safeguard Scientifics, a 26% owner of Clarient going back to its ChromaVision days, said it will net approximately $145 million in the deal.-- Mark Ratner

St. Jude Medical/AGA Medical: St. Jude Medical’s announcement on Monday that it would pay $1.3 billion ($20.80 per share, a 43% premium) for AGA Medical, which had sales in 2009 of just $199 million, likely caused jaws around the industry to drop. Pick your chins off the floor, people. The transaction makes sound strategic sense, driving growth in key areas where St. Jude has significant resources but slower growing products. Case in point: St. Jude’s atrial fibrillation business grew by only single digits in the past year in the US, and the cardiac rhythm management sector is forecast to grow on a global basis by only 3% in the coming year. In contrast, AGA, operating in structural heart disease--a product segment that includes heart valves and various closure devices--enjoys double digit growth thanks to its leading share of the $250 million market for PFO closure. AGA also offers a number of new product areas to drive growth for St. Jude, including a next-generation vascular plug technology to replace embolic coils and a proprietary mesh-braided nitinol platform that will enhance the big device maker's product pipeline. In the company’s recent third quarter conference call, St. Jude Chairman and CEO Daniel Starks described the acquisition as a bolt-on to its cardiovascular franchise; the company is keeping on AGA president and CEO John Barr as head of the 550-person division. St. Jude’s recent deal flow indicates the company is trying to enter new markets via the business development suite. In September, the cardiovascular giant invested $60 million in remote monitoring company CardioMEMS, developing an implantable sensor for AAA and congestive heart failure monitoring. Early this year St. Jude also acquired intravascular imaging company Light Lab Imaging Inc. for $90 million.--Mary Stuart

Image courtesy of flickrer Neil Boyd used with permission via a creative commons license.

DotW: Hard Truths

The feverish networking associated with BIO is but a distant memory this week as biopharma’s deal makers got back to work forging alliances or acquisitions that will provide the necessary substrate for future growth.

That this growth won’t come easily is a given. And the week’s news flow only reinforced the notion, illustrating hard truths about the commercial and regulatory complexities at work in the biopharma industry.

Who among us got bitten by reality? For starters, Takeda’s decision to cut nearly 1600 jobs illustrates the problem many Japanese pharma will be facing as their primary care drugs go generic in the coming years. Investors meanwhile pummelled NicOx, after an FDA advisory committee gave its osteoarthritis medicine naproxinod a thumb’s down. The company is pushing ahead as it awaits an official regulatory decision (the drug’s PDUFA date is July 24). Still it’s hard to believe a partner for the medicine will come anytime soon.

And Merck's quietly announced decision to call off development of MK-2578, its follow-on to Amgen’s erythropoietin stimulating agent Aranesp, showcases how difficult it can be to predict the potential market of a biosimilar. The ESA market has been under considerable pressure for some time as regulators have raised safety concerns about the products, first in the oncology setting, and now more recently in end stage renal disease. (See the May issue of The RPM Report for a Q&A with FDA’s Center for Drug Evaluation and Research Bob Temple for more on the subject.)

It’s a sure bet use of ESAs will go down, not only because of the emerging cardiovascular risks, but also because of the shift toward capitated care in end-stage renal disease that kicks in early next year. Under the new bundling guidelines, there’s pressure on physicians to use ESAs more judiciously, bolstering patients’ anemia via other mechanisms including intravenous iron use. With the commercial viability of ESAs a question, Merck must have run the numbers and determined the amount it would recoup from an Aranesp follow-on (which is expected to be priced at a slight discount to the innovator ESAs but still expensive) didn’t justify the expensive clinical trials it would have to conduct to demonstrate the medicine’s safety.

That big pharmas are wising up to such commercial hurdles ever earlier is a good thing; better to kill a product before you’ve sunk hundreds of millions of dollars into the expensive Phase III. That’s probably cold comfort to the Merck Bioventures group, which has ambitious launch goals for a spate of follow-on products by 2015.

As you contemplate other hard truths (a widening oil spill, the Greek debt crisis, the odds of Great Britain’s coalition government succeeding, the Cavs loss to that Boston team), take a brief respite into transactions land. (Reality may still bite the hand that feeds, but DotW is on its best behavior--for once.) It’s time for another edition of…

Genentech/Evotec: Evotec signed a broad multi-year discovery deal this week with Genentech to identify novel small molecule therapeutics. Further important details, including the financials as well as the therapeutic focus of the alliance, were lacking. Given Genentech’s focus on oncology, and increasingly Alzheimer’s disease and other CNS diseases, presumably Evotec’s technology will be used to develop small molecules in these arenas. Despite the dearth of specifics, the alliance is worth noting for a couple of reasons. First, Evotec’s business model seems to run counter to the collective belief that a biotech’s value is driven not by its technology but from the products derived from its platform. Indeed, as Evotec’s recent deals suggest—in addition to Genentech its signed discovery alliances with Vifor Pharma, Cubist Pharmaceuticals, Active Biotech, and Biogen Idec—management is clearly betting there is more near-term value to be gained from discovering drugs for other companies than in investing in its own pipeline. Second, how the deal proceeds will provide a window into dealmaking at Genentech, which only recently brought on a new head of business development, James Sabry, and continues to forge alliances independent of its Swiss parent. It’s interesting to note that Roche proper is well known to Evotec. The two companies have been collaborating in CNS since 2006, and Evotec is now conducting Phase II trials of EVT101 for treatment resistant depression, with Roche picking up the development costs.—Ellen Foster Licking

Abbott/Zydus Cadila: Abbott’s deal this week with India’s Zydus Cadila is a gift of DotW’s favoring buzz words, including branded generics, established products (a more diplomatic term for generic products), and emerging markets. The news is proof yet again that many big pharmas are following the lead of Sanofi-Aventis and GlaxoSmithKline, which have been the most aggressive in building a commercial presence in “pharmergent” economies such as Brazil, Russia, India and China via branded generics. As part of the recently announced alliance, Abbott will sell 24 Zydus drugs for pain, cancer, cardiovascular disease, respiratory ailments and neurological disorders in 15 emerging markets. Many, though not all, of the licensed drugs will be in complementary therapeutic areas to Abbott's existing branded generics portfolio, which came to the diversified health care giant via its Solvay and Knoll acquisitions. Specific financial terms of the deal were not disclosed, but should the collaboration be a success, Abbott has the option to license more than 40 additional products. In conjunction with the deal, Abbott also announced the creation of a stand-alone established products division with $5 billion in current pharmaceutical sales. The business unit will be led by Michael Warmuth, the former head of Abbott’s diagnostics division. Two years ago, Pfizer set up a similar stand-alone unit as a strategy to cope with flagging US drug sales, especially come 2011 when its cholesterol-lowering medicine Lipitor goes off patent. And that group was also a force at the dealmaking table this week, strengthening its ongoing collaboration with India-based Strides Arcolab (announced earlier this year) via the signing of two licensing and supply agreements. In part one, Strides has agreed to license and supply 38 generic oncology meds to Pfizer in various markets, including the EU, Canada, and Australia. Part two gives Pfizer access to niche sterile injectables for the US market.—Jessica Merrill and EFL

Pfizer/Ergonex: It’s not all about extending the life cycle of established products at Pfizer these days. This week the biggest big pharma’s specialty care business unit inked a deal with Ergonex Pharma for the biotech’s Phase II product terguride, which is in development as a treatment for pulmonary arterial hypertension (PAH). The agreement gives Pfizer world-wide rights (excluding Japan) to the product; in exchange Pfizer will support the ongoing mid-stage clinical trial, taking full control of the compound at the study’s completion. While Pfizer isn’t sharing specific financial details, it will pay Ergonex undisclosed milestones and sales royalties. Terguride, which has an orphan drug designation in the US and the EU, is an oral antagonist antagonist of the 5-HT2B and 5-HT2A serotonin receptors, shutting down signals triggering fibrosis and the narrowing of pulmonary arterial walls that over time results in PAH. The medicine is already approved in Japan for the treatment of hyperprolactinemia.—EFL

Genzyme/Tianjin International Joint Academy of Biotechnology and Medicine (TJAB): Another week, another biopharma looks to ink a discovery deal in China. This week it’s Genzyme’s turn to trumpet a strategic partnership with TJAB, which has an impressive list of co-founders, including China’s Ministry of Science and Technology, its Ministry of Commerce, its Ministry of Health, and the State Food and Drug Administration (China’s equivalent of the US FDA). The partnership was apparently celebrated with the requisite pomp and circumstance, including an official signing ceremony attended by top Chinese officials and senior R&D types from Genzyme. This isn’t the first time Genzyme has traveled east to ink a collaboration. Back in 2007 the biotech signed a deal with Sunway Biotech to develop and commercialize Genzyme’s most advanced gene therapy candidate, Ad2/HIF-1a, which is being tested as a treatment for various forms of peripheral arterial disease. The big biotech is also in the process of building a $100 million R&D center in Beijing, with construction scheduled for completion in 2011. In a small way, the agreement offers the beleaguered Cambridge-based Genzyme an opportunity to shift the news cycle away from the forthcoming annual shareholder meeting and Termeer’s ability to withstand pressures from activist shareholder Carl Icahn who is pushing for his removal.--EFL