Deals of the Week Takes Stock in M&A

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

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

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

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

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gained more than $600 million in value before it was even announced, since its stock component was based on an already-outdated five-day average of Facebook’s share price.)

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

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

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

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

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

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

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

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

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

Deals Of The Weeks Wonders If A Biopharma Super Bowl Is Imminent

Deals of the Week is torn as the Super Bowl approaches – you see, most of this feature’s contributors live either in 49ers country near San Francisco or in the case of this author, a short drive from the home field of the Baltimore Ravens. With our loyalties clearly divided, rest assured DOTW will take a non-partisan approach toward the big game.

But the Super Bowl’s attendant hype puts us in mind of the biopharmaceutical industry’s closest equivalent, the mega-merger, such as those that combined Pfizer and Wyeth and then Merck and Schering-Plough in 2009. A month into 2013, we wonder, what are the chances of a mega-merger in 2013?

Industry sentiment seems inclined against one. In recent earnings calls, CEOs of major companies have disavowed their interest in disruptive deals that require multi-year, complicated integration.

Raghuram Selveraju, the head of health care equity research at Aegis Capital, recently finished up a deep-dive into the mid- and late-stage pipelines of 12 big pharmas. And while he sees companies among the big 12 that badly need a course correction, he does not think a deal the size of Pfizer/Wyeth is likely near-term.

“Some pharmas have out-performed, some are in the middle of the pack and some are absolutely abysmal,” Selveraju said. “If we look at the ones that are performing abysmally, we find clues as to who might do a mega-merger. If a company is doing well on its own, it’s very unlikely that it’s going to do a mega-merger. A company only resorts to a mega-merger only if it feels it cannot go on sustainably in a standalone manner or feels that it doesn’t have sufficient critical mass to continue performing earnings-wise with its existing panoply of products and its existing pipeline.”

At present, Selveraju views Sanofi, Novartis and to a somewhat lesser extent Roche as the top performers in the sector. The middle of the pack consists of GlaxoSmithKline, Bristol-Myers Squibb and AbbVie. But he reserves the “abysmal” label for AstraZeneca and Eli Lilly.

“I think AstraZeneca should find someone to dance with, and Lilly definitely should,” he said. “But both are run by CEOs, especially Lilly, who believe they can just grow organically and discover and develop products internally to justify being a standalone entity. I don’t agree with either – I think AstraZeneca’s approach has been very patchwork.”

One obvious solution might be for AstraZeneca and Lilly to merge, which certainly would qualify as a mega-merger. But Selveraju is unsure they would complement each other in the way that Pfizer and Wyeth did. Of the two 2009 major deals, Selveraju contends that Pfizer made out far better than did Merck.

“Merck’s decision to buy Schering-Plough, on the face of it today, looks like an unmitigated disaster,” he said. “Virtually all of Schering’s once-vaunted late-stage pipeline has fallen flat. Boceprevir (Victrelis) is a commercial failure more or less and probably never will be a success … Merck hasn’t been able to put together a successor for Vytorin (ezetimibe/simvastatin) or expand its usage. It’s been a litany of failures. Now, Merck has resorted to falling back on two other drug candidates that didn’t come from Schering: odanacatib for osteoporosis and suvorexant for insomnia.”

The other possibility for a mega-merger, Selveraju said, would occur if AstraZeneca or Lilly tried to buy out AbbVie, which he thinks could bring one of those companies some of the same benefits Pfizer derived in acquiring Wyeth. “AbbVie is a lot like Wyeth was – it has Humira (adalimumab), just like Wyeth had Enbrel (etanercept), it’s got an interesting set of late-stage candidates in clinical development, none of which are super-great but any one of which potentially could prop up earnings. And we know Humira is going to be very resistant to generic erosion.”

Buying AbbVie seems more feasible for AstraZeneca, the analyst added, as AstraZeneca has a market cap of about $60 billion, compared with AbbVie in the $40 billion range. “It’s not outside the realm of possibility that AstraZeneca could find a way to swallow AbbVie,” Selveraju said. “There’s a lot of synergy there in terms of focus – AstraZeneca likes inflammation and autoimmune disease. AbbVie also has a lot of stuff, just like Wyeth did, that would be easy to divest.”

But Selveraju thinks more focus these days is on the 2011 Sanofi buyout of Genzyme, which he sees as a much better model than either of the 2009 mega-deals,

“That deal is a major reason why Sanofi’s share price has performed so well,” he noted. “And now we’re looking at Lemtrada (alemtuzumab) potentially being approved in multiple sclerosis later this year or early next year – that could be another value-driver because it’s a biologic with an advantageous dosing schedule. Things just keep getting better and better for Sanofi.”

So Selveraju thinks big pharma should look for deals that will increase their exposure to therapies for rare diseases and bring in more “biotech-like stuff.” Two companies to watch as potential targets in the year ahead, he said, are Alexion  and BioMarin. But in the meantime, smaller but nonetheless important deals are being finalized each week in the biopharma arena. Now, let’s check in on the latest survey of …

Idenix/Janssen: Looking to advance its hepatitis C program while its nucleoside polymerase inhibitors are being reviewed for cardiovascular safety concerns by FDA, Idenix Jan. 28 announced a non-exclusive collaboration with Janssen Pharmaceuticals to test two- and three-drug combinations in the virus. FDA placed “nucs” IDX184 and IDX368 on clinical hold last year after a Bristol nuc (BMS094) was shut down due to cardiovascular adverse events that included one death and eight hospitalizations. No financial terms were disclosed for the Idenix/Janssen collaboration. It will involve testing Idenix’s Phase II pan-genotypic NS5A inhibitor IDX719 with Janssen’s protease inhibitor TMC435 (simeprevir) and non-nucleoside polymerase inhibitor TMC647055. The firms will conduct a drug-drug interaction study beginning this quarter, to be followed by a Phase II study of ‘719 and simeprevir dosed with current therapeutic standard ribavirin over 12 weeks in treatment-naïve HCV patients. After that, the two firms plan to try a three-drug combo of ‘719, simeprevir and ‘055, dosed with and without ribavirin. Idenix will conduct the trials and each company will retain all rights to their respective compounds. “This [agreement] will allow us to achieve a key goal of ours for 2013, which is to advance the development of IDX719 as part of all-oral HCV combinations in two- and three-drug regiment,” Idenix CEO Ron Renaud said in a release. - Joseph Haas

Genentech/Afraxis: Genentech has bought a full license to the entire kinase-inhibitor discovery program of Afraxis for an undisclosed upfront fee and up to $187.5 million in milestones. Although not described as a sale, the Jan. 29 deal effectively is the end of the road for Afraxis, which was founded in 2007 by Avalon Ventures. Avalon remains its sole shareholder. Avalon managing partner Jay Lichter, also Afraxis’ CEO and president, tells DOTW that his preference would have been a sale, but the licensing structure still affords Avalon an exit. Lichter declined to say how much Avalon put into the company, but SEC filings show the total could be as high as $11 million. Afraxis originally derived from research in the Massachusetts Institute of Technology lab of Susumu Tonegawa that pointed toward a cure for Fragile X Syndrome, a severe form of autism, by inhibiting P21-activated kinase (PAK) through genetic manipulation of mice, work that gained some attention at the time. Afraxis received funding from the National Institutes of Health’s TRND program to push forward a small-molecule Fragile X compound, but Genentech’s parent Roche has a Fragile X drug in advanced clinical trials. Genentech is likely to use Afraxis’ library of kinase inhibitors to pursue other indications. “Our initial goal was PAK, but we have a variety of compounds selective for other kinases, and I don’t know what indications they’ll move forward in,” Lichter said. - Alex Lash

Immunomedics/Algeta: Norwegian oncology company Algeta agreed to collaborate on an antibody-drug conjugate with New Jersey-based antibody specialist Immunomedics. Under the Jan. 28 deal, Algeta would join its thorium-227 alpha emitter with Immunomedics’ epratuzumab, an anti-CD22 antibody already being studied in both hematological cancers and autoimmune disorders. Specific terms of the deal weren’t released, but Algeta will issue an upfront payment to Immunomedics, and will owe an antibody-delivery milestone and manufacturing payments. The companies said Algeta will fund preclinical and clinical work on the compound through Phase I, after which the parties will negotiate a license for Algeta based on certain pre-existing but undisclosed parameters. Immunomedics previously partnered epratuzumab with UCB, but re-negotiated that deal in late 2011 to recover full worldwide oncology rights to the drug. UCB returned its buy-in option in cancer, and continues to hold worldwide rights in autoimmune diseases; it is conducting Phase III trials of the antibody in lupus. The compound has shown promise in leukemia and non-Hodgkin’s lymphoma, both on its own and in an yttrium-90 labeled form. Immunomedics has two other antibody-drug conjugates in the clinic: the Phase I milatuzumab-doxorubicin in relapsed multiple myeloma and labetuzumab-SN-38 in colorectal cancer. - Paul Bonanos

Bristol/Lilly: In the first of two “No-Deals” of the week, Eli Lilly during its fourth-quarter call on Jan. 29 revealed to investors that its collaboration with Bristol regarding Phase III oncology asset necitumumab has been terminated in North America and Japan. Bristol pulled out of the three-year partnership for the squamous non-small cell lung cancer treatment, leaving Lilly with sole worldwide development and commercialization rights. A Phase III non-small cell lung cancer trial was dropped two years ago due to safety concerns. “The decision to provide notice of termination for necitumumab was based on a careful review and prioritization of our entire development portfolio, which the company regularly undertakes,” said a spokesperson from Bristol in an e-mail. Lilly assured investors that it intends to continue the development of necitumumab and that data from the late-stage SQUIRE trial are expected in late-2013/early-2014. The company plans to make the therapy part of a comprehensive treatment continuum for lung cancer that also includes Alimta (pemetrexed) and clinical-stage drug ramucirumab. Oncology is one of the main therapeutic areas driving Lilly’s pipeline beyond its so-called “YZ” years that are plagued by patent expirations of blockbuster drugs. - Lisa LaMotta

Teva/CureTech: As part of a pipeline review initiated by new top management, CEO Jeremy Levin and CSO Michael Hayden, Teva has terminated its collaboration with oncology biotech CureTech. CureTech’s lead compound is CT-011, a humanized monoclonal antibody that interacts with PD-1, a B7 receptor family associated protein. It has been assessed in Phase I and Phase II clinical trials for hematological malignancies and solid tumors, including large B-cell lymphoma, colon cancer, metastatic melanoma and other indications. Teva did not say much about the trial results to date, but Hayden, in a statement, noted, “As we looked closely at CT-011 and the most recent clinical and biochemical data, we have made the strategic decision to invest our resources elsewhere, where we can have the most impact for patients.” In the mid-2000s, Teva began dipping its toes into innovative oncology R&D with a few small in-licensing deals, but Levin and Hayden have made it clear that while the company will not completely jettison oncology, it is no longer a priority for Teva’s innovative R&D program, largely because the field is so crowded and also because Teva’s strengths lay elsewhere. The deal revolved around a 2006 agreement that Teva drove, under which it paid $6 million upfront and took an option to invest another $23 million if CureTech met certain development milestones, as well as to buy the rest of the company if CT-011 were approved. At the time, CT-011 had completed Phase I testing. Unlike many other in-licensed assets under review, this one originated at the Israeli drug maker, not one of the companies Teva has acquired. Indicative of the homegrown nature of the deal, CureTech also is based in Israel, where Teva is headquartered, and for a long time, one of Teva’s top executives, Aaron Schwartz, sat on CureTech’s board. Teva is taking a $109 million noncash charge as a result of the impairment cost of the termination. - Wendy Diller

Photo credit: Wikimedia Commons

Financings of the Fortnight Says It's Not Ova Til It's Ova

A two-year-old biotech trying to get listed on the over-the-counter exchanges wouldn’t normally qualify for much notice. But OvaScience is different. First, its founders include Christoph Westphal, who has co-founded and either sold or taken public several companies. The OvaScience CEO is Michelle Dipp, also a co-founder, as well as a partner with Westphal in Longwood Fund. Working together, their biggest coup was the sale of Sirtris Pharmaceuticals to GlaxoSmithKline for $720 million in 2008, and they also raised a few eyebrows while still at GSK for their side project selling dietary supplements related to Sirtris’s compounds.

OvaScience, which aims to start a pivotal trial by the end of this year for its fertility enhancement product, Augment, has gone public via a route normally traveled by shell companies to attract reverse mergers, using the SEC’s Form 10. Touted by some as a new alternative to burdensome and uncertain IPOs, the route hasn’t attracted many operating companies to date. If approved via Form 10, a company has the same disclosure rules as those that undertake an initial public offering, but its shareholders don’t have anywhere to trade until it can get listed somewhere.

That’s OvaScience’s situation.  In its latest SEC filing, the company says it’s shooting for an over-the-counter listing, but makes no guarantee of attaining it. It’s contractually obligated to try; its shareholders signed on with the expectation of liquidity at some point in the not too distant future. The list of shareholders includes OvaScience’s largest institutional investors, Bessemer Venture Partners, Longwood Fund, Fidelity Investments, and General Catalyst Group, but also dozens of individuals, some of whom are biotech boldface names. For example, Skyline Ventures’ John Freund and his wife Linda Grais, a former InterWest partner and currently CEO of Ocera Therapeutics, hold more than 5,000 shares in a trust; Dicerna CEO Doug Fambrough, also a former VC, owns 1,000 shares; Alnylam Pharmaceuticals top dogs John Maraganore and Barry Greene each have 3,636 shares. (Alnylam is one Westphal’s babies, which he helped take public in 2004.) The full list is here.

Westphal and Dipp were among the cofounders of Verastem, which managed to go public in January in a risk-averse market despite its cutting-edge science targeting cancer stem cells and early-stage pipeline (nothing even in the clinic). This time, however, they’ve eschewed the IPO process for a route that proponents say makes a lot more sense. “The beauty of the Form 10 strategy is that you’re custom-building the public company in a more rational way,” says William Hicks, an attorney at Mintz Levin Cohn Ferris Glovsky and Popeo in New York. “You’re not going through the SEC review process hoping to raise the money. You’ve already raised it.”

One limitation of the Form 10 process is having enough crossover investors – those who usually invest in public companies but have the capacity to make private investments – to support a deal. One such crossover is RA Capital in Boston. “It’s nice for a company when it has enough support from investors willing to do a deal before the company has a stock symbol,” says Peter Kolchinsky, managing partner of RA Capital, which owns 3.1% of OvaScience stock. “They know it will file the paperwork and get liquid, but they don’t need to get liquid right away."

Given the friends-and-family flavor of the investor list, it's no surprise to see RA on it. It was founded by and sports the initials of Rich Aldrich, now one of Westphal and Dipp’s partners at the Longwood Fund. RA crossed over to buy into OvaScience’s $35 million Series B round, and bought again in a small private placement OvaScience offered in August 2012 after it had become public. The placement, which raised only $4 million, was mainly a way to build a shareholder base and reach toward the minimum requirement needed to list on a major exchange. For now, however, OvaScience hopes to list over the counter, which should afford its investors some measure of liquidity if they’re inclined to sell. Seeing how the investor base is handpicked, it’s unlikely shareholders will rush for the exits. The firm is gearing up to test its lead product and, because it uses autologous material -- a woman’s own mitochondria extracted from her egg precursor cells and inserted into her eggs during in vitro fertilization (IVF), to potentially boost the odds of conception -- the company claims it won’t need FDA approval. The same won’t be true of a second product OvaTure that hasn’t yet begun preclinical development.

It remains to be seen if the Form 10 route becomes fertile ground for biotechs seeking wider capital access. OvaScience looks like it's on its way, but how many others can scramble through the side door with the help of dozens of friends in high places?

Had your fill of bad puns? You'll only egg us on by reading the latest edition of...

StemCells Inc: The San Francisco Bay Area company has been awarded a second $20 million grant from the California Institute for Regenerative Medicine (CIRM) under its Disease Team Therapy Development Award program. As reported in “The Pink Sheet” DAILY, the money will support pre-IND development of adult neural stem cell technology for the treatment of Alzheimer’s disease. HuCNS-SC, which consists of purified neural stem cells derived from human brain cells, is an allogeneic treatment, administered as a direct transplant to the hippocampus, the spinal cord, or the eye during a single procedure. The grant, announced September 6, comes a few months after CIRM awarded StemCells $20 million to support the pre-IND activities of its HuCNS-SC cells in patients with cervical spinal cord injuries. Both grants are based on the expectation that StemCells will file INDs for both indications within four years. The grants will help the company move the programs forward; currently, StemCells has about $18 million in cash on hand and expects to burn cash at a rate of $18 million to $20 million annually. Data in Alzheimer’s were presented in mid-July at the Alzheimer’s Association International Conference in Vancouver, but the grant has been delayed as the company needed to prove to CIRM that the treatment does in fact migrate deep into the brain. Data showed that treated mice had significantly improved memory and recognition of their surroundings compared to untreated mice. According to StemCells, the money will start coming the next few months after its financials have been properly vetted by CIRM and terms of the grant have been negotiated. – Lisa LaMotta

Sanofi: When Sanofi bought Genzyme in early 2011 for $74 per share after a long pursuit, the book wasn’t quite closed. Part of the deal value included contingent value rights – one of a multitude of recent biotech buyouts that featured earn-outs – tied to the commercial prospects of Genzyme’s not-yet-approved multiple sclerosis therapy Lemtrada. Today, Sanofi is clearly less skeptical about that drug’s prospects than when it originally signed its $20 billion acquisition, and it said September 4 it wanted to buy back some of those CVRs while they’re still relatively cheap. The Genzyme CVRs were floated on the Nasdaq in late March 2011, and they trade under the words-with-friends friendly GCVRZ symbol. Sanofi wants to buy 86,766,040, or about 30% of them in a modified Dutch auction process that would value the biobucks somewhere between $1.50 and $1.75 per share.  A modified what? Essentially Sanofi will let holders tender their shares at any price in that 25-cent window. It will buy up to 86,766,040 of them, and price the offering at the lowest possible price that allows them to pull in that number of shares. (Once the process is complete, Sanofi will pay the same amount for each CVR, the price at which the 86,766,040th cheapest share was tendered.) Buying some of the CVRs now – there’s potentially $13 per CVR left to be paid out, but only a dollar of that is attached to pre-commercial Lemtrada milestones – could cost the French pharma from $130 million to $152 million, a 7% to 25% premium to the shares’ pre-announcement value. But the offer allows Sanofi to save a little cash in the longer term should Lemtrada win FDA approval and begin to rack up sales. Prior to the Sanofi announcement, the GCVRZ shares were trading at $1.40. They quickly shot up in value and are trading at $1.72 as of the end of September 6. The tender offer expires at 5pm Eastern on October 5. Dutch auctions in biotech sound familiar? Not too long ago WR Hambrecht & Co. was marketing its own version of the process under its OpenIPO brand, a path followed by companies like New River Pharmaceuticals and Avalon Pharmaceuticals. – Chris Morrison

Avalon Ventures: San Diego-based hybrid venture firm Avalon is attempting once again to close a fund $50 million larger than its previous vehicle. The firm disclosed in an August 30 SEC filing that it has raised the first $202 million of Avalon Ventures X, a proposed $250 million fund which would be its largest yet. It’s been just 20 months since Avalon closed its $200 million ninth fund in January 2011. That exceeded the firm’s $150 million goal, which would have matched its 2008-vintage eighth fund. The firm has enjoyed some lucrative exits lately: It had stakes in vaccine developer BioVex, sold to Amgen in 2011 for $425 million up-front, as well as Amira Pharmaceuticals, for which Bristol-Myers Squibb paid $325 million up-front later the same year. Avalon traditionally splits its funds 50-50 between life sciences and tech; the firm’s biggest recent exit arrived from the IPO of online game developer Zynga. The firm has been a holdout among hybrid firms as some other VCs have split their teams or funds in order to focus on either tech or life sciences individually. Avalon is also known for taking early stakes in life sciences start-ups and running them itself as virtual companies for a couple of years before bringing in senior management, a strategy we explored last year in START-UP’s Capital Matters column. Key partners Kevin Kinsella and Jay Lichter didn’t respond to a request for comment, so we’ll have to wait and see when the firm tops off the tank. – Paul Bonanos

Aerpio Therapeutics: This Cincinnati-based spinout of a spinout said August 30 it has raised $27 million in a Series A round to push forward a drug for diabetic macular edema, a disease characterized by leakage of blood proteins into tissues behind the macula of the eye, causing a thickening of that tissue. DME is the leading cause of vision loss in diabetics. The round was led by Novartis BioVentures and joined by Venture Investors LLC, Triathlon Medical Ventures, Kearny Venture Partners, Athenian Venture Partners and AgeChem Venture Fund LP. All were previously investors in Akebia Therapeutics, itself spun out from Procter & Gamble five years ago. Both companies are run virtually and share a CEO, Joseph Gardner, who told “The Pink Sheet” DAILY that the money will fund a Phase Ib/IIa trial of AKB-9778, a Tie-2 activator that works by inhibiting human protein tyrosine phosphatase beta, an enzyme which counteracts vascular leakage to restore Tie-2 signaling. The 28-day dose-escalation study will begin in September and will test the safety and tolerability of ‘9778 in 30 patients with DME. Gardner said the company also is hoping to see strong signs of efficacy including decreases in retinal thickness and improvements in visual acuity. Results from that study are expected next spring. Once the Phase Ib/IIa study has been concluded, the remainder of the funds raised will be used to fund a second Phase II study with 100 patients “that will get the attention of partners and make future financings a bit easier in this dry funding environment,” said Gardner. Results from this trial are expected in 2014. – L.L.

Eggcellent photo courtesy of flickr user Ecstatic Mark.

2011 M&A of the Year Nominee: Sanofi/Genzyme

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're 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 (half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

Sanofi’s drawn-out and complicated acquisition of Genzyme was the story that had it all – a hostile takeover attempt (which eventually morphed into friendly merger talks); more than a year’s news flow with well-timed leaks and opportunities to interpret cryptic “he said, he said” commentary from the two companies’ principals – Chris Viehbacher and Henri Termeer (neither a shrinking violet); a huge price tag ($20.1 billion); a relatively novel deal add-on in the form of a contingent value right pegged to sales performance of Lemtrada and manufacturing of Cerezyme and Fabrazyme; and, oh yes, regulatory controversy.

When Sanofi began “kicking the tires” of the Boston big biotech, Genzyme was digging out from a summer 2009 plant shutdown due to viral contamination in a bioreactor, a six-week interruption in production that plagues the availability of top-selling enzyme replacement therapies Cerezyme and Fabrazyme to this day. By the time Viehbacher and Co. completed their quest for diversification into biologics and ultra-rare diseases, Genzyme was operating under an FDA consent decree and constantly fielding complaints from patient advocacy groups about rationing of Cerezyme and Fabrazyme.

But Sanofi had good reason to go ahead with the acquisition – it was facing near-term loss of patent exclusivity for blockbusters like Plavix, Lovenox and Taxotere. Despite its manufacturing woes, Genzyme could add $4.05 billion in product sales to Sanofi’s top line and $422 million in profits to the bottom line. In addition, Genzyme’s portfolio of drugs for rare diseases offered Sanofi another growth platform, like the consumer health products and expertise it gained in its 2009 purchase of Chattem.

Ultimately, the French pharma closed the deal in February 2011, buying out Genzyme for $74 a share, a decent premium and a bit up from its initial bid of $69 a share, but not in the range of the $87 a share or so that Termeer lobbied for in the press and behind the scenes. The uncertain future of Cerezyme and Fabrazyme, complicated by competition from new drugs from Shire and Pfizer partner Protalix, hamstrung Genzyme’s bargaining power, and ultimately one of the most-celebrated U.S. biotech success stories ended up just a subsidiary to a multinational Big Pharma.

The CVR continues to intrigue nearly a year after the deal closed – it brought shareholders the potential for up $14 per each Genzyme share tendered to Sanofi. Of that, $13 will be tied to future sales performance of Lemtrada, a pipeline candidate for multiple sclerosis. It’s anyone’s guess at this point how much, if any, of that return will be realized – Lemtrada remains in clinical development, but Genzyme announced promising data from the Phase III CARE-MS II trial in mid-November. The remainder, dependent on Genzyme meeting 2011 guidance for production of Cerezyme and Fabrazyme, already is a lost cause, as Fabrazyme in particular has met one production snag after another since the 2009 shutdown.

Other DOTY candidates in the M&A category may beg for votes – the oft-delayed Sanofi/Genzyme marriage simply does not need to. It was the story of the year in biopharmaceutical M&A.—Joseph Haas

image from flickr user f-oxymoron used under creative commons license

Deals of the Week Takes a Backseat to Non-Deal Newsiness

Not quite a goose-egg

Deals, Schmeals. What about Geron's stem-cell about-face? Denner's departure from Icahn's shop? And how about an IPO that wasn't underwater? Don't even get us started on MLB re-alignment or seeing Papelbon in a Phillies uniform. The news this week came thick and fast; it just didn't come for the most part in the form of alliances and M&A.

It has definitely been a big week for financings: Clovis Oncology took the prize when it took the rest of its Series A to the public markets, raising $130 million to fund its ambitions in tough-to-treat cancers. Staying private (for now) was Agios Pharmaceuticals, which raised a whopping $78 million in Series C funds to move beyond cancer metabolism (courtesy its existing venture backers and corporate partner Celgene, but also some shiny new-but-unidentified crossover types). And we haven't even mentioned molecular diagnosticians Biocartis' $100 million venture round, but at this point we'd better move on before FOTF smacks us over the back of the head with a shelf financing.

It's also been a big week for regulatory action: today's unsurprising surprise announcement from FDA Commissioner Hamburg revoking Avastin's metastatic breast cancer approval will not draw an appeal from Genentech even as it draws supporters' ire. But a couple nifty approvals for some niftily named new orphan drugs (Incyte's Jakafi and Erwinaze from EUSA Pharma) should dampen the enthusiasm of FDA-bashers. And of course there was the news that FDA may soon have some new approval mechanisms at its disposal, Progressive Approval and Exceptional Approval, as detailed in this piece from Monday's "The Pink Sheet".

Deals of the Week will take a break next week -- don't worry, you'll get your Alice's Restaurant -- as we gear up for our fourth annual Deals of the Year competition. But of course we've got a few nuggets to tide you over until December. Take a gander at...

Sanofi Pasteur/Curevac: The option-deal signed Nov. 15 between the private German biotech CureVac and Sanofi's vaccine division provides some measure of validation for the former's RNA-vaccine technology. It also gives the French drug maker rights to certain infectious disease programs, with R&D partially underwritten by Uncle Sam. On the same day Sanofi and CureVac said they were teaming up, the two companies also announced a $33.1 million, four-year R&D collaboration with further partners In-Cell-Art, a French nanotech company, and the US Department of Defense's Defense Advanced Research Projects Agency (DARPA). Because it has an option on the programs that in essence are being funded by the four-way collaboration (mainly by DARPA), Sanofi gets to kick the tires on CureVac's platform before committing significant cash. Its option rights -- based on pre-agreed license terms around vaccine programs against 'between five and ten' pre-defined pathogens -- are linked to the fulfillment of certain criteria within the DARPA-funded validation program. Pulling the trigger could cost Sanofi up to €101.5 million per pathogen in upfront and milestone payments for global marketing rights. That figure jumps to €150.5 million in the case where a prophylactic and therapeutic vaccine are developed. -- Melanie Senior

Shire/Shionogi: Shire has landed a Japanese market partner for undisclosed elements of its flagship ADHD franchise. The company said Nov. 18 it would team up with Shionogi & Co. to co-develop and co-commercialize ADHD meds in Japan, in exchange for an up-front fee and sharing future costs, though specific terms weren't released. Deal-wise, Shionogi has been more active in ex-Japanese markets this year (acquisitions in China and the US, for example) than at home, where it said earlier this year it would open a new R&D center. Compatriots like Daiichi and Ono Pharmaceuticals, which in recent months has licensed in Japanese rights to products from BMS, Merck-Serono, Servier, and KAI, have been more actively seeking out assets to sell in Japan. Shionogi has some experience in ADHD through its 2008 acquisition of Sciele Pharma, which sells Methylin for the condition. Hey, is that a goose in the back seat of an old Beamer?-- Chris Morrison

Genzyme/CFF: Genzyme (a Sanofi company) and the Cystic Fibrosis Foundation said Nov. 16 they would together work to identify "corrector" compounds that could fix malfunctioning CFTR proteins in patients with the disease's most common mutation, Delta F508. The collaboration will benefit from Genzyme's and Sanofi's extensive compound libraries, the companies said in a statement, and build not only upon past collaborations between the biotech and the CFF but also Genzyme's ongoing efforts in CF R&D. The company holds an option for global rights rights in all territories outside the US and Canada -- in all indications (except Duchenne/Becker muscular dystrophy) to PTC Therapeutics' ataluren (formerly PTC124), including CF, where the compound is in Phase III. The development of ataluren, which is being developed for a variety of genetic disorders involving nonsense mutations, was also partially funded by CFF grants. -- C.M. [Ed Note: the original version of the post misstated the territories/indications for which Genzyme has an option on PTC's ataluren. We regret the error.]

Medicis/Graceway: Medicis is buying the U.S. and Canadian pharmaceutical assets of bankrupt Graceway Pharmaceuticals for $455 million, subject to approval by Graceway’s board of directors. Graceway was founded in 2006 by private equity firm GTRC Golder Rauner and Jefferson Gregory, a co-founder and former chairman of King Pharmaceuticals. It filed for bankruptcy in September 2011. Details about the bankruptcy and other aspects of Graceway’s business are sketchy but the deal gives Medicis, a specialty pharma with projected 2011 sales of more than $730 million, a commercial portfolio with six key drugs with combined revenues of more than $125 million. The Graceway products complement Medicis’ focus on dermatology and aesthetics; they include Aldara (imiquimod) cream for basal cell carcinoma, Atopiclair for dermatoses, Maxair Autohaler (pirbuterol acetate inhalation aerosol) for bronchospasm, and Estrasorb (estradiol topical emulsion) for menopause. The deal also gives Medicis a small R&D program, including an undisclosed Phase II dermatology compound and a women’s health compound in Phase II. At the time it formed Graceway, GTRC said it would put up to $200 million into the company. Later, Graceway acquired the branded pharmaceutical business of 3M for $875 million, and rolled in with it another GTRC portfolio company focused on dermatology drugs, Chester Valley Pharmaceuticals. GTRC had formed that company in 2004 with an investment of $75 million. -- Wendy Diller


image by flickr user smohundro used under creative commons license.

Deals of the Week Hopes Its Labors Aren’t Lost

When bidding for a union contract, it’s essential that one’s proposals wind up in the right hands. That’s one lesson that can be taken from Shakespeare’s Love’s Labour’s Lost, which draws much of its comedy from a series of letters whose private content ends up in more public hands. As the characters’ secrets are revealed in a sort of 16^th Century version of a botched reply-to-all, hilarity ensues. All’s well that ends well in this one, because everyone wants to get together as the curtain falls.

But unwanted and misdirected proposals are a lot less funny. In matters of love, they break hearts. In other realms, the results can be disastrous as well – like, say, the realm of biopharma deals. (Ham-fisted a transition as that may be, you knew I’d get there somehow, didn’t you?) For example, if you’re Canada’s Paladin Labs – last spotted in another recent literary-minded installment of this column, complete with dusty Brit – you’ve laid down a glove for cold medicine maker Afexa Life Sciences, only to witness the gallant entry of a white knight from stage left, Valeant Pharmaceuticals, ready to exeunt with its prize. (More on that later.)

Sometimes, though, all it takes a little persistence to be appreciated. Pfizer, for example, has been courting pain drug developer Icagen for years – their partnership was initiated in 2007 – but only recently expressed a desire to put a ring on it and acquire the company outright. But although its $6-per-share offer for the portion of the company it does not already own has garnered the support of Icagen’s board, it hasn’t yet won over all the necessary shareholders, some of whom are holding out for what they perceive as fair value for the company’s assets.

As of this writing on Friday morning, the deal is very close to being done, with just a few thousand shares standing between rejection and betrothal. Pfizer has extended its tender (trap) offer twice, with Icagen’s decision expected by late Friday afternoon.

With that in mind, perhaps we’ve got a rarity for this Labor Day weekend: a cliffhanger episode of…


Valeant/Afexa: With two highly acquisitive companies bidding for Afexa Life Sciences, the maker of Cold-FX flu medicines, only one could win its heart. Already in the midst of a buying spree, Canada’s Valeant Pharmaceuticals proposed a sweeter -- and friendlier -- deal than rival bidder Paladin Labs for Afexa, swooping in with a white-knight offer on Aug. 30. Valeant’s cash bid is worth 71 cents per share, or about $76 million, a 29% premium to Paladin’s hostile bid of 55 cents per share, or $56.7 million. The new offer from Valeant will give Afexa another 30 days to weigh any other better offers. Valeant has the option to match any higher offers or opt for a $3.75 million termination fee. Valeant has made several acquisitions this year, largely adding to its dermatology business. Afexa, however, is destined to be slotted in with Valeant's over-the-counter products portfolio, according to CEO Michael Pearson. Paladin, meanwhile, has been on a spree of its own, most recently acquiring drug formulator Labopharm last month; it hasn't yet decided whether it will improve its offer. – Lisa LaMotta

Merck/ZymeWorks: Privately-held ZymeWorks of Canada inked its first Big Pharma partnership this week, worth an undisclosed upfront plus research, development, and regulatory milestones totalling up to $187 million (that’s US dollars). As early stage research collaborations go, the Merk/ZymeWorks deal is pretty standard. There’s no yearly R&D support in addition to the upfront; the relationship is also target specific, meaning it doesn’t preclude the start-up from partnering its technology, which creates so-called bi-specific antibodies, with other interested parties. Because it raises the 8 year-old company’s profile far higher than the biotech’s prior deals (which in terms of industry have been limited to Xoma) and therefore could be the springboard to larger, more lucrative alliances, the Merck tie-up is an important landmark. That’s undoubtedly what CTI Life Sciences, ZymeWorks’ main backer is hoping. Whether an acquisition eventually transpires will likely depend on how well molecules derived from the biotech’s proprietary Azymetric platform perform in the clinic. Back in the 2006 to 2007 time frame, biopharma rushed to lock up next-generation antibody capabilities, as companies like Bristol-Myers Squibb (Adnexus), GlaxoSmithKline (Domantis) and Merck (GlycoFi) tried to bolster their in-house biologics expertise while accessing validated targets locked up by first generation technologies. That trend has largely switched to licensing – most next-gen antibody players are still so early that risk averse pharma doesn’t want to spend the money acquiring platforms that may only be useful in the creation of specific compounds. – Ellen Licking

Adimab/Novo Nordisk and Adimab/Biogen Idec: Adimab, a purveyor of yeast-based antibody discovery technology, this week announced separate two-program discovery deals with Novo Nordisk and Biogen Idec (pdf), and said it was on pace to double its number of partnered candidate programs for the second straight year. Adimab CEO Tillman Gerngross said the privately held company now has 24 partnered programs and is aiming to finish the year with 35 - five in 2009, 10 in 2010, and 20 this year. Two programs might not sound like a lot, but unless either of those companies -- or any of Adimab’s eight other biotech or Big Pharma partners – wants to ante up some serious cash to bring Adimab’s technology in-house, that’s all they’ll get. Currently, explained Gerngross, Adimab limits partners to two programs apiece. Biogen and Novo, for example, each have selected two undisclosed targets against which Adimab will deliver fully human antibodies. The big biotechs get options to commercialize antibodies generated through their collaborations and Adimab gets upfront payments and preclinical and clinical milestone payments and royalties. Those and other existing deals are structured as project-based research licenses and companies later can opt for a commercial license around a program (so far only Merrimack Pharmaceuticals has done so, around MM-151, a three- antibody cocktail designed to bind three distinct epitopes of the epidermal growth factor receptor). Gerngross says the company typically commands $10 million to $20 million in total pre-commercial milestones and a mid-single-digit royalty per program, a price he describes as "in-line with competing technologies." Adimab's involvement in the programs begins and ends with antibody discovery, a process that typically takes eight weeks. So far Adimab has built a successful business on discovery, on the cusp of positive cash flow and no need to raise additional cash. Time will tell if it can sign the kind of big-money partnerships that would give its venture investors a successful return. - Chris Morrison

Teva/Sinclair IS Pharma: As part of its gradual transformation from a generic drug company to a full-fledged pharma with its own branded products, Teva Pharmaceutical Industries Ltd. licensed commercialization rights in specified EU markets to oncology supportive product Episil from Sinclair IS Pharma on Aug. 31. Terms of the licensing deal were not disclosed. Teva obtains commercial rights to the drug in Germany, Spain, Poland, Switzerland and the Czech Republic, while Sinclair IS Pharma, a U.K. specialty firm formed by the April 2011 merger of Sinclair Pharma PLC and IS Pharma PCL, will retain rights to co-market the product in Spain and Germany, where it has an existing sales force. Episil is an oral spray to treat pain associated with oral mucositis, a side effect of chemotherapy and radiotherapy during cancer treatment. Sinclair IS Pharma was created through a stock-for-stock transaction valued at €53.2 million ($85.3 million) with the intention of establishing a specialty pharma with pan-European exposure. In a statement, the firm’s CEO Chris Spooner said the rationale behind the merger was to broaden the sales reach of IS’ portfolio through Sinclair’s commercialization operations. “This is the first in what we expect to be a number of marketing and co-marketing partnerships,” he said. — Joseph Haas



Merck/Addex: Addex Pharmaceuticals said on Sept. 2 that Merck was returning rights to the companies’ programs targeting metabotropic glutamate receptor 4 (mGluR4). Addex pledges to push forward with development of the small molecule positive allosteric modulators in CNS diseases, namely Parkinson’s disease. The companies have been working together on mGLuR4 programs since the research collaboration began in 2007. Merck took sole responsibility for the programs about a year ago, and now returns the rights just about the time it would be expected to pick a clinical candidate (Addex’s pipeline chart shows the programs nearing the end of the lead-optimization stage); not only would that likely trigger a milestone to Addex, but it also represents a point when development costs increase. The mGluR4 deal may be a delayed casualty of the Merck/Schering-Plough megamerger which added Schering’s now-Phase III preladenant (MK 3814, nee SCH420814) to the mix in 2009. That adenosine 2A receptor antagonist is jockeying with a similarly late-stage molecule from Kyowa Hakko for the lead in the class. But the mGluR4 space has seen its share of attention too – albeit earlier stage – with investments from the likes of the Michael J. Fox Foundation, Novartis and Merck-Serono, the last of which is teamed up with Domain Therapeutics. With CHF 50 million in the bank as of the last quarterly statement but later-stage fish to fry, Addex is likely to look for a new partner to fund development of the program, sooner rather than later. – C.M.

Genzyme/PTC Therapeutics – As part of its portfolio review following its acquisition earlier this year by Sanofi SA, Genzyme has decided to restructure its partnership with PTC Therapeutics around ataluren, a small molecule in development for genetic disorders caused by nonsense mutations. In 2008, Genzyme paid $100 million upfront, with potential for as much as $337 million in development, approval and sales milestones, for commercial rights to the protein restoration therapy in all territories outside the U.S. and Canada. In 2010, however, ataluren failed to demonstrate a statistically significant effect, as measured by distance improvement in the six-minute walk test, in nonsense mutation Duchenne/Becker muscular dystrophy. On Sept. 2, PTC announced that Genzyme had returned its commercial rights to ataluren in that indication, but would retain an option to commercialize the drug outside the U.S. and Canada in other indications. PTC said it would continue development of the compound in both nmDBMD and nonsense mutation cystic fibrosis. Citing its portfolio assessment, Genzyme Chief Operating Officer David Meeker said, “our option to reengage the collaboration reflects our belief in the potential of this approach for the treatment of nonsense mutation genetic disorders.—J.H.

Image courtesy of Flickr user UMTAD, the University of Minnesota's Theatre Arts & Dance program, reproduced under Creative Commons license.

Deals of the Week's Dead Presidents Edition

As many Americans prepare for their three-day weekend celebrating the birthdays of two great Presidents, Deals of the Week cynically notes that a lot of Americans don’t really love their Presidents until after they’re dead – specifically, the ones whose visages have been enshrined on legal tender. Little Walter sang an amusing blues number about a nation’s love for currency and the commanders-in-chief who adorn it, conveniently glossing over the presence of several non-Presidents, including Alexander Hamilton and Benjamin Franklin, on commonly circulated bills.

It takes far more than even a rarely-seen Salmon P. Chase to get a pharma deal done, but sometimes it also takes more than mere dollars – or euros, pounds, or whatever you like – to keep everyone satisfied. Witness Sanofi-Aventis SA’s bid for Genzyme Corp., a once-hostile overture sweetened with contingent value rights, or CVRs – in this case, options for further payments based on regulatory and manufacturing milestones on Genzyme drugs – that could account for nearly a sixth of the deal’s value. The CVRs primarily relate to pipeline considerations, and a new study shows just how crucial they are to Sanofi and its peers.

According to a report issued Thursday by Bernstein Research’s Tim Anderson, Sanofi’s pipeline was expected to contribute less than 3% of its overall revenues by 2015, the smallest share among nine Big Pharmas studied – at least, prior to the Genzyme deal, which includes a potential blockbuster in multiple sclerosis. Bristol-Myers Squibb, by contrast, can expect nearly 18% to come from its pipeline by 2015, thanks to R&D spending approaching $4 billion annually in the coming years as well as a relatively small revenue base, according to Bernstein’s report. Meanwhile, Eli Lilly & Co. is expected to be among the biggest R&D spenders relative to revenue, though it can expect the fewest returns in total Benjamins from drugs currently in its pipeline, and only a middle-of-the-pack performance as a percentage of overall 2015 sales.

Where do exciting pipeline drugs come from when they're not homegrown? Why of course, it's...


Sanofi/Genzyme: Preliminary conversations between Sanofi and Genzyme last summer gave way to a publicly announced bid to shareholders in August, then a hostile overture in October, protracted negotiations in the following months, and finally a deal in February. The French pharma will pay $74 per share for Cambridge, Mass.-based Genzyme, along with CVRs entitling each shareholder to payouts based on drug development milestones for pipeline drug Lemtrada (alemtuzumab) for multiple sclerosis and production volumes for approved orphan drugs Cerezyme (imiglucerase) and Fabrazyme (agalsidase). While the $74 per share bid exceeded Sanofi’s rejected bid by $5, the CVRs are thought to have been the key to completing the deal, potentially adding $14 per share – $13 from Lemtrada milestones – to its value. Sanofi, whose massive diabetes franchise is balanced by diverse offerings including vaccines and soon-to-be-off-patent anticoagulant Lovenox (enoxaparin), gets Genzyme’s expertise in rare diseases, as well as its manufacturing capabilities. Though some believe it may have overpaid, the aggressive milestone timeline will bear out the deal’s true value – suggesting that the real work, including a potentially tricky integration process, is yet to be done. – P.B.

Astellas/AVEO: In one of the richest oncology deals in the past few years, Japan’s second-largest pharma placed a big bet on AVEO Pharmaceuticals Inc.’s most advanced compound, the Phase III drug tivozanib. Astellas Pharma Inc. paid $125 million up front, while committing to a milestone schedule that could add more than $1.3 billion to the deal, to license tivozanib worldwide, save for Asian territories already licensed to Kyowa Hakko Kirin under an existing agreement. The deal includes $575 million for clinical and regulatory milestones and $780 million in commercial payments, and covers all indications of the drug, currently farthest along in studies for renal cell carcinoma. The two companies will split profits 50/50 in North America and Europe, where they will also share development costs and sales forces, although Astellas is expected to lead commercialization in Europe while AVEO does so domestically. Phase III results are due in mid-2011 for tivozanib, a blocker of vascular endothelial growth factor (VEGF), although an NDA isn’t expected until 2012, pending a favorable clinical outcome. The agreement extends Astellas’ ongoing commitment to oncology beyond its $4 billion acquisition of OSI Pharmaceuticals last year. – P.B.

AdventRx/SynthRx - About two years ago, AdventRx Pharmaceuticals had placed its lead clinical programs on hold and cut staff twice, to a headcount of five. Now, the San Diego-based firm has an FDA action date for its lead program, chemotherapy drug Exelbine (vinorelbine injectable emulsion), and is acquiring privately held SynthRx in an all-stock deal to move into the sickle cell disease (SCD) space. AdventRx, focused on a growth-by-acquisition strategy, will acquire Texas-based SynthRx through an equity deal in which more than 75% of merger consideration is based on NDA acceptance and approval of SynthRx’s lead program and more than 95% is based on milestone achievement. In exchange for an upfront consideration giving SynthRx’s shareholders a 4% interest in AdventRx, SynthRx becomes a wholly owned subsidiary of AdventRx, giving the latter firm ownership of the Phase III poloxamer 188 program. Initially advanced into Phase III in myocardial infarction by CytRx, 188 is a purified form of a rheologic and antithrombotic agent to be studied first in pediatric SCD and thought to have potential in other illnesses involving microvascular flow abnormalities, such as heart attack, stroke and hemorrhagic shock. During an investor call Feb. 14, CEO Brian Culley explained that if every milestone in the deal is paid out fully, SynthRx shareholders would end up with a 40% stake in AdventRx. “If the NDA is accepted and approved, [that is] something I think we would be happy to make these equity payments for,” he added. – Joseph Haas

Bayer/Philogen: The crumbling of one European deal led to the cancellation of a potential bellwether IPO. Swiss-Italian biotech Philogen SpA might be searching for an aspirin after its oncology deal with Bayer AG came apart, prompting Philogen to cancel its anticipated IPO. Bayer abruptly walked away from its licensing arrangement for Philogen’s L19 therapies, vascular-targeting immunocytokine drugs that are being investigated for several different cancers. The two companies’ association dates to 1999, when Schering AG took an option on Philogen’s research into antibodies that inhibit angiogenesis, leading to a formal worldwide license in 2003. Despite the extended relationship, Bayer gave no specific reason for unraveling the deal. Philogen, which says it has six clinical antibodies targeting cancer as well as a rheumatoid arthritis drug and a preclinical ophthalmology program for age-related macular degeneration, was expected to list on the Milan exchange February 18, but instead scuttled what was expected to be Europe’s first IPO of 2011. In the offering, thought to be a signal of a warming climate for biotech listings, Philogen had anticipated raising as much as €65.3 million ($89.3 million) by floating 23% of its shares. The failed listing is Philogen’s second IPO cancellation; it withdrew a planned offering in 2008 as well, citing unfavorable market conditions. – P.B.

Mt. Rushmore image courtesy of Flickr user dclamster, used under Creative Commons license.