Deals Of The Week Ponders Project Financing

GlaxoSmithKline has been out ahead of other big pharmas when it comes to investing in venture funds. Its deal with Avalon Ventures represents another flavor of the relationship – investing as a partner rather than as an LP and creating companies around a single drug. But in the rush to mint single-asset companies, are the stakeholders giving short shrift to innovation?

On April 22, GSK joined with Avalon Ventures to form up to 10 start-ups in one San Diego-area facility. Avalon will contribute up to $30 million from its Fund X, and GSK will provide up to $465 million in seed funding, based on development milestones, while retaining an option to swoop in and acquire a company if and when it produces a clinical candidate. Avalon will pick the early-stage prospects, and both companies jointly will approve the formation of new companies.

We’ve seen these deals before, motivated by the neediness of the two parties: big pharma needs low-risk access to external innovation as its own internal labs sputter; VCs need access to funding as their traditional sources dry up. GSK has been particularly active in teaming up with VCs, and seems to be trying out different flavors of collaboration. It invested last January in Sanderling Venture’s Fund VII; and in March 2012, it joined with Johnson & Johnson to invest in Index Ventures’ Index Life VI fund.

The Avalon deal is a new twist, however. GSK is not an LP in the venerable San Diego firm’s Fund X, which closed last year with $200 million in commitments. Rather, it is an investment partner, with the two sides forming syndicates of two for each company they create. They will not look to bring in more investors, officials from GSK and Avalon said this week.  And although GSK’s relationship to Index is as a limited partner, not a roll-up-the-sleeves, company-creation partner, it’s similar to the Avalon deal in one respect: the focus is on single-asset companies.

That’s also DOTW’s focus this week: project financing. Not from the perspective of the VCs who popularized the model and are investing in it like lemmings, but rather from the perspective of the scientists who do the daily work of inventing drugs. From the scientists’ point of view, the asset-centric model isn’t about lower risk and better returns. (After all, it’s an ongoing experiment whose benefits we won’t know for some time yet.) Scientists are asking a different question: is it the best route to innovation?

A single-asset company refers to a virtual start-up formed around a single drug. All staff, funding, planning and operations are geared to advancing that drug to an exit, whether it be the sale of the asset or the company that houses it. The leanness of the operation, and the need to outsource R&D, is thought to lead to capital efficiency. The exclusive focus on a single project is thought to offer operational efficiency and speed to proof-of-concept. The single-asset vehicle can make a clean, attractive package for a buyer, unencumbered with staff, infrastructure and overhead.

Here’s where the contrarian view comes in. Everything is outsourced these days, including synthesis and chemistry, in vitro and in vivo tox, ADME, pharmacokinetics, etc. But not so much target selection or lead optimization. Also, the outsourcing of R&D requires staff to oversee the tasks and manage the relationship – initiating the work, measuring performance and assuring quality, reviewing interpreted data, etc. Depending on the amount and complexity of the work, this can add bloat and cost.

Opinions about the capabilities and quality of CROs vary among scientists. Hermann Mucke PhD, founder of HM Pharma Consultancy, says he “would not trust a CRO's claims of its ability to identify any target, or optimize any lead structure.” He allows that a platform company with a sideline business could do specific target-related tasks quite well, likely better than most companies. But he adds that it’s sometimes difficult to achieve that narrow match. And it also requires more teamwork between internal staff and service provider than classical outsourcing.

Mucke’s last point about teamwork raises another potential problem with the virtual model. In his 1974 book “Lives of a Cell,” Lewis Thomas described the phenomenon of groups of ants, bees, fish, termites or people behaving like a thinking organism. It happens, like magic, when the group reaches critical mass. But does it happen in a virtual company with a handful of employees working from home, sometimes at a considerable remove from the operations? Thomas, who died in 1993, was the former Dean of Yale School of Medicine and New York University School of Medicine, and President of Memorial Sloan-Kettering Cancer Center. He knew something about scientists working in teams.

The short horizon to an exit  also could make it hard to attract top scientific talent. Scientists tend to like to dig deep into a project and are open to following leads thrown up by serendipity. Pfizer’s Xalkori (crizotinib) is a good example. The molecule was discovered at Sugen and came into Pfizer’s portfolio when it acquired Pharmacia, Sugen’s parent. Pfizer scientists at La Jolla, Calif., several of whom started at Sugen, spent seven years hitting crizotinib’s c-MET target before a chance publication in Nature magazine clued them into ALK and set them set them on the right path. Xalkori launched four years later.

Now, getting back to GSK – in siding with VCs, is the pharma seeking speed and cost-cutting advantages or is it hoping to get an innovative drug out of the investment? Are GSK’s interests aligned with its partners?

Beats us. We just thought the question needed to be aired. - Mike Goodman

We also think the following deals merit your patient attention:

Merck/Cerecor: In its second deal with Merck in the past month, on April 19 neuroscience specialist Cerecor acquired exclusive worldwide rights to develop and commercialize MK-0657, Merck’s NMDA (N-methyl-D-aspartate) receptor subunit 2B antagonist for all indications including depression.  The molecule was originally developed by Merck for Parkinson’s disease, but failed to show efficacy in an early study. However it did show a promising signal of antidepressant activity.  Dr. James Vornov, Cerecor’s SVP of clinical development, said his team was particularly interested in the oral drug’s “potential to rapidly reduce depressive symptoms, including suicidal ideation” in patients refractory to available therapies. Terms of the deal were not disclosed. Cerecor will immediately assume full development and commercialization responsibilities. The agreement includes milestone payments and royalties “consistent with clinical stage licenses in neuroscience.” Deals in the psychiatric space tend to feature low upfronts and moderate-large downstream payments, in keeping with the high-risk nature of neuropsychiatric drug development. In March, Cerecor received exclusive worldwide rights to develop and sell Merck’s catechol-O-methyltransferase (COMT) inhibitors, with potential applications in Parkinson’s disease, schizophrenia, and addictive behaviors. Financial terms were not disclosed. Founded in 2011, the start-up specializes in translating early stage neuroscience therapies into early human trials, and developing them for market. Merck’s mid and late-stage neuroscience pipeline shows no candidates for disorders of mood or behavior; but there are two for insomnia, two for neurodegenerative diseases, and one for neuromuscular blockade. - M.G.

AstraZeneca/Alchemia: In its ambition to transform the company through deal-making, AstraZeneca has signed yet another early-stage collaboration, this time a multi-target drug discovery deal with Australian oncology drug developer Alchemia. The agreement, announced April 23, gives AstraZeneca access to Alchemia’s Diversity Scanning Array (DSA) and associated Versatile Assembly on Stable Templates (VAST) chemistry platform to discover novel small-molecule drugs in a multitude of therapeutic areas, including oncology, respiratory and cardiovascular disease. Alchemia will receive an undisclosed upfront payment and is eligible for preclinical, clinical and commercial milestone payments of up to $240 million. The Alchemia’s DSA is a suite of 14,000 novel compounds that scan three dimensional molecular shapes and peptidomimetic functionality. It forms the basis of the VAST discovery platform which can identify the shape and binding elements required for target modulation. The deal is the fifth AstraZeneca has signed since unveiling its turnaround strategy to investors in March; the most recent was with Bind Therapeutics. - Jessica Merrill

Opko Health/Prolor Biotech: Opko Health announced April 24 that it will acquire Israel’s Prolor Biotech in an all-stock transaction valued at roughly $480 million. The stock-swap deal, expected to close during the second half of this year, is structured so that Prolor’s management and personnel will remain in place, serving as the biologics subsidiary of Opko, which already produces small-molecule drugs, vaccines and diagnostics. Prolor’s business focus is on developing longer-acting formulations of approved protein products, with a lead product for growth hormone deficiency, the Phase III human growth hormone hGH-CTP. Prolor intends to begin a Phase III trial in adults later this year, with a plan to position hGH-CTP as a weekly injectable more convenient for both adult and pediatric patients than the current daily-injection therapies. Opko Executive VP Steve Rubin said his firm placed a lot of value on acquiring the GHD product, which has orphan drug designation in both the U.S. and Europe in both adult and pediatric populations. The EU designation would protect the product, if approved, from direct competition for 10 years, he added. “This is the way we’re building Opko,” he said. “This gives us four products that will be in Phase III, which is very important to us. They’ll come on to the market at different times.” During an investor call, Prolor President Shai Novik spoke of how the deal structure – in which Prolor shareholders will receive 0.9951 shares of Opko stock for every full share in Prolor – will give his company’s investors the opportunity for lasting value by participating in Opko as long-term investors. The deal values shares in Opko at $7.03 a piece and Prolor shares at $7.00, a 20% premium over the Israeli firm’s closing price on April 23. - Joseph Haas

Bristol-Myers Squibb/Merck: Confident that its daclatasvir will prove the best-in-class NS5A replication complex inhibitor for hepatitis C, Bristol-Myers Squibb on April 22 signed its second non-exclusive partnership this month to test the compound in tandem with another company’s HCV candidate. The agreement to test Phase III daclatasvir in a Phase II combination trial with Merck’s MK-5172 follows on a similar arrangement signed with Vertex April 5 to test the NS5A inhibitor with nucleotide analog VX-135. The deal includes no financial considerations; Merck will fund the trial, with Bristol only contributing the volume of study drug needed, Doug Manion, Bristol’s senior VP of development, neuroscience, virology and Japan, said. The arrangement is open-ended, like other combo trial collaborations Bristol has entered – if the two companies want to move on to Phase III work with the combination being studied, they need to work out a new agreement. Manion said NS5A inhibition is a compelling pathway for treating HCV, in part because the exact function of the NS5A gene product in HCV is not fully understood. “It’s very complicated,” he said. “It does a large number of things and the virus can’t survive without it, we know that for sure. We were the first company to actually ‘crack the nut’ in terms of how to drug it.” Bristol plans to file the combination of daclatasvir and its proprietary Phase III protease inhibitor asunaprevir for Japanese approval later this year, specifically to treat genotype 1b of the virus, the version most prevalent in Japan. - J.A.H.

Achaogen/BARDA: The private anti-infectives company Achaogen secured $60 million from the Biomedical Advanced Research and Development Authority, a division of the U.S. Department of Health and Human Services, to advance its lead program. Disclosed on April 24, the funding is an extension of a 2010 contract with BARDA that brings the total to $103 million. The latest funding will go to conduct a global Phase III superiority study of plazomicin (ACHN-490) to treat patients with serious gram-negative bacterial infections due to carbapenem-resistant Enterobacteriaceae (CRE) infections. The trial is slated to start in the fourth quarter. Plazomicin is a next-generation aminoglycoside antibiotic; it’s also being developed against biothreat agents such as Yersinia pestis, which causes plague, and Francisella tularensis, which causes tularemia. Plazomicin is engineered to overcome known aminoglycoside resistance mechanisms. - Stacy Lawrence

Deals Of The Week: Has BioCryst Struck Out?

As baseball executives gathered at the Opryland Hotel in Nashville during the week of Dec. 3 for the trade and free agency frenzy known as the winter meetings, the deal-making also continued in the biopharma corner. But just as executives from many major league teams were waiting for the strategies of big spenders like the Texas Rangers and Los Angeles Dodgers to materialize so they could make their corresponding moves, it was a week of frustration at BioCryst and Presidio as a planned merger that might have created a new significant player in the hepatitis C space crumbled under the weight of three rapid clinical setbacks.

In the aftermath of a third setback, FDA placing a clinical hold on oral hereditary angioedema compound BCX4161 the week of Nov. 26, the two companies announced Nov. 30 that they mutually had decided against a planned all-stock merger announced on Oct. 18 that would have created a new company with a wholly owned portfolio of three oral antiviral candidates for hepatitis C.

During an investor call Dec. 7, BioCryst announced that it will cut its staff by 50% while reducing planned cash-burn for 2013 by as much as 45% while it narrows its focus on the HAE and HCV programs, as well as preclinical broad-spectrum antiviral BCX4430. CEO Jon Stonehouse explained that the three clinical setbacks - the delay of a clinical trial for NS5B inhibitor BCX5191 in HCV because of toxicity concerns and the likely clinical failure of flu candidate peramivir - had eroded the North Carolina biotech's stock price.

"Despite these setbacks, we have a path forward for BioCryst to rebuild shareholder value because of our promising compounds," the exec said. "Following the review of BioCryst's assets, resources and cost structure, we concluded that restructuring and a highly focused approach to our development programs was required. This will preserve cash and enable BioCryst to reach near-term milestones that will give us greater insight regarding the opportunity and risk associated with our three core programs."

The planned merger with privately held Presidio not only would have combined HCV assets, but also would have brought BioCryst a needed injection of cash. The deal valued Presidio at $101 million and would have involved 24.5 million new shares in BioCryst being issued to Presidio's investors. At the same time, Presidio shareholders would commit to providing $25 million of a planned $60 capital raise for the new company.

Now, the retrenched BioCryst will cut down from 75 positions to a headcount of 37, which Stonehouse said reflected reductions evenly spread throughout the organization. Instead of spending $40 million in R&D and associated costs in 2013, the company now anticipates a cash-burn of $22 million to $25 million, excluding deal-related and restructuring costs. BioCryst will record a restructuring charge of between $2 million and $4 million during fourth quarter 2012.

The revised R&D plan is to study low doses of '5191 in HCV-infected chimpanzees in an attempt to demonstrate meaningful antiviral activity at lower doses than previously used in clinical trials. In November, BioCryst withdrew an IND for '5191 due to safety concerns regarding renal toxicity at the dosage thought needed to benefit human patients. BioCryst expects go-or-no-go data from the chimpanzee studies in early 2013, Stonehouse told the investor call.

The company also hopes to begin a Phase I study of '4161 in January 2013 to demonstrate the safety, level of drug exposure with oral administration and pharmacodynamic effects of the kallikrein inhibitor. BioCryst, which hopes to position '4161 as an oral prophylactic against HAE attacks, thinks such a product would be a game-changer in the rare disorder space. For now, however, the drug is stalled as FDA implemented a clinical hold on '4161 due to concerns about compounding of the drug at trial sites.

BioCryst also plans to seek medical journal publication of a manuscript describing the activity of '4430 in certain filoviruses. That candidate's prospects loom crucially because peramivir is considered virtually dead after a Phase III trial was ended due to poor efficacy findings.

While BioCryst and Presidio were mired in a "No-Deal," however, other biopharma companies were proactive just like the executives in the baseball world during the past week. Now, it is time to "play ball" with ...

Baxter/Gambro: In an effort to extend its global footprint to areas like Latin America, Europe and the Asia Pacific, Baxter International has agreed to pay $4 billion including the assumption of debt to acquire Swedish dialysis company Gambro, which reported revenues of $1.6 billion annually. Baxter is using its cash held overseas to pay for the transaction and the deal is expected to close in the first half of 2013. “With Baxter generating more than two-thirds of its cash overseas, we view the Gambro acquisition as a smart way to put that money to work,” wrote Leerink Swann analyst Danielle Antalffy in a note to investors. The acquisition rounds out Baxter’s kidney dialysis business, adding Gambro’s suite of hemodialysis products to its own peritoneal dialysis offerings. Gambro’s products typically are used in the hospital setting, while Baxter’s products usually are used in the home. Baxter expects to see $300 million in cost synergies by 2017 and add approximately 7% to sales over the next five years. The company currently brings in revenues of $13.8 billion. “Over the last three years, Gambro’s growth has been roughly flat, and Baxter's renal business has grown about 4%,” wrote Morgan Stanley analyst David Lewis. “Pro forma for the deal, Baxter believes it can accelerate growth to [about] 6% by investing to relieve Gambro capacity constraints, leveraging Baxter’s global selling infrastructure, using Gambro to accelerate the home HD launch, and using the new breadth of the business to pursue public/private partnerships.” - Lisa LaMotta

Optimer Pharmaceuticals/AstraZeneca: Building on its regional partnering strategy for Dificid (fidaxomicin), Optimer Pharmaceuticals has signed AstraZeneca to market the antibiotic in South America, including in Brazil, Central America, Mexico and the Caribbean in a deal announced Dec. 3. AstraZeneca has a “major market position in three key Latin American markets, Brazil, Mexico and Columbia, according to Optimer CEO Pedro Litchtinger. AstraZeneca will pay Optimer $1 million upfront, up to $3 million in milestones upon first commercial sale in certain countries, and up to $19 million in other milestones contingent on the achievement of sales-related targets in the region. In a related supply agreement, Optimer also stands to receive payments from AstraZeneca that amount to a double-digit percentage of net sales in the territory. One of a few big pharmas still investing in antibiotic drug development, AstraZeneca is Optimer’s fourth commercial partner. The company already has signed a co-commercialization deal with Cubist Pharmaceuticals in the U.S., and deals with Astellas Pharma in Japan and Europe and Specialised Therapeutics in Australia. It’s all part of a strategy Optimer says is focused on finding commercial leaders in key regions of the world while focusing its own attention and resources on North America, where it is building a commercial organization. The company still expects to sign at least one more partner to bring its Clostridium difficile infection treatment to China. - Jessica Merrill

Ironwood/Protagonist: Constipation drug seller Ironwood Pharmaceuticals and peptide discovery platform company Protagonist Therapeutics said Dec. 6 that they have expanded an existing partnership. The parties did not disclose terms or specifically differentiate the expanded partnership from its two-year-old predecessor, but expressed that both sides are pleased with the progress of the existing deal to discover new therapeutics addressing unmet needs, based on Protagonist’s Disulfide Rich Peptide (DRP) platform. Like the January 2011 deal, the new arrangement includes an upfront payment by Ironwood, along with milestones and royalties if a product advances through the clinic and is approved and marketed; Ironwood will continue to fund full-time staff within Ironwood’s walls in order to evaluate and develop potential products. The companies did not identify which therapeutic areas are covered under the existing or new partnership, and they have not announced any product candidates from the original collaboration yet. Ironwood says it has discovered most of its pipeline on its own thus far; it currently markets Linzess (linaclotide) for irritable bowel syndrome with constipation and chronic idiopathic constipation. Protagonist established a separate discovery collaboration with Zealand Pharma in June 2012. - Paul Bonanos

MD Anderson Cancer Center/GlaxoSmithKline – University of Texas’ MD Anderson Cancer Center has tapped GlaxoSmithKline to help it develop and commercialize an antibody discovered by scientists at the center. Anderson will handle preclinical activities, while GSK will be responsible for clinical development and commercialization. Under the deal announced Dec. 7, the cancer center will receive an undisclosed upfront payment as well as research funding and development milestones. Anderson indicated that the deal could result in $335 million in payments for the center, as well as royalties on any commercial products that are developed. The antibodies activate OX40, a protein that stimulates the immune response in T-cells against cancer. "This agreement is not only a testament to the vision shared by GSK and MD Anderson that successful clinical development of oncology drugs requires seamless integration of drug development expertise and deep biological knowledge," said Giulio Draetta, director of the Institute of Applied Cancer Science at Anderson, in a statement. - L.L.

Mediolanum/Genovax: Eporgen Venture, one of Italy’s first suppliers of seed capital to life science companies from a network of private, non-institutional Italian investors, reported on Dec. 4 the first major transaction by one of its portfolio companies, Genovax, which has sold its Phase II-ready potential therapeutic cancer vaccine, GX-301, to the Italian pharma company Mediolanum Farmaceutici. Eporgen President Konstantinos Efthymiopoulos expects several other transactions involving Eporgen-supported companies to complete in the next few months, and is aiming to raise up to €10 million ($13 million) in additional financing to develop other assets to proof-of-concept in its portfolio companies, which ideally but not necessarily would be clinical proof-of-concept. Italian research and science is as good as in other European countries, Efthymiopoulos said, although he acknowledged that life science entrepreneurship and the network of academic technology transfer offices is not as highly developed. It is only a question of time before the country catches up with its neighbors, he asserted. GX301 will boost its research interests in oncology, Mediolanum said; it will take over all future development and commercialization activities for GX301. A Phase II study in patients with prostate cancer is expected to start in the first half of 2013. - John Davis

StemBANCC: One of the largest European “open innovation” projects to date will see Switzerland’s Roche and the U.K.’s Oxford University coordinate the work of nine other pharmaceutical companies and 22 other academic institutions in Europe on creating more than 1,500 human-induced pluripotent stem cell lines to use as disease models to discover new therapies. This and other new EU projects announced Dec. 5 echo themes for TransCelerate BioPharma, an initiative announced Sept. 18 involving 10 international drug companies which also seeks to identify and solve common drug-development challenges, although focused more on regulatory than research issues. The EU’s StemBANCC project, a public-private partnership formed as part of the EU’s Innovative Medicines Initiative (IMI) will have a budget of €55.6 million ($73 million). The funding will include €26 million from IMI’s EU funds and “in-kind” funding of €21 million from the participating drug companies. The in-kind funding includes company employees and their costs, access to research equipment, facilities and database access. The cell lines, of which 500 will be derived from patients, will be used to set up models of disease, like diabetes or dementia, in order to accelerate the drug-development process. - J.D.

Photo credit: Wikimedia Commons

Deals Of The Week: Living With The Constancy Of Change In HCV Drug Development

One of the frequent thematic tropes found in the music of Canadian prog-rock trio Rush is the constancy of change, that change is constant, and constantly changing, etc. Anyone trying to follow hepatitis C drug development probably understands that message.

Just when it appeared that nucleoside polymerase inhibitors were the way to go in the effort to develop a paradigm-changing combination of all-oral, direct-acting antiviral drugs for the virus, a pair of recent setbacks in the “nuc” arena have made other classes of drugs and the companies developing them more relevant, and potentially more valuable.

Hence, the reported increased interest in Achillion Pharmaceuticals, which expects to produce early data for a proprietary combination of a protease inhibitor and an NS5A inhibitor during the first quarter of 2013. Once thought in danger of being left behind as the M&A mavens at big pharma circled Pharmasset, then Inhibitex, and continued to kick the tires on Idenix Pharmaceuticals, Achillion now is considered by many Wall Street analysts to be on the radar screen of HCV players such as Merck & Co., Bristol-Myers Squibb, Roche and possibly others.

Achillion raised $41.7 million in a registered direct offering just before Labor Day, placing 6.4 million new shares with QVT Financial LP at $6.57 per unit, its closing price on Aug. 31. That marked the New Haven, Conn.-based biotech’s third significant fund raise since August 2010, as it brought in $60.9 million through a follow-on public offering in June 2011, and $49.1 million under a PIPE (private investment in public equity) deal in August 2010.

But Wall Street widely expects that Achillion will have some big pharma R&D machinery behind its HCV efforts soon, maybe even before the Phase II combo data for protease inhibitor ACH-1625 (sovaprevir) and NS5A inhibitor ACH-3102 are unveiled.  (The firm also will disclose Phase I proof-of-concept data for ‘3102 this fall.)

Dismissed as barely relevant in the combo race as recently as earlier this year, Achillion may get a second chance thanks to the disastrous safety issues encountered by Bristol’s expensive nuc prospect, BMS-986094. The pharma paid $2.5 billion to buy that drug’s developer, Inhibitex, only months before shutting development of the drug down entirely in mid-August due to cardiotoxicity that killed one patient and hospitalized eight others.

The news then got worse or better, depending on your perspective, when FDA placed Idenix’s nuc, IDX184, and second-generation compound, IDX19368, on clinical hold because of concerns about their similarity in chemical structure to the Bristol nuc. It’s important to note that the “nuc” class is by no means dead – Gilead Sciences is still viewed as the leader in the HCV combo race thanks to the eye-opening data its nuc, GS-7977, is producing. And Vertex Pharmaceuticals is bringing a nuc licensed last year from Alios BioPharma into the clinic, as well.

Achillion has an analyst day presentation slated for Sept. 27, and with the expectation for POC data with ‘3102 and drug-drug interaction data for the ‘1625/‘3102 combination expected this quarter, Robert W. Baird & Co. analyst Thomas Russo thinks a partnership prior to the combo trial would make sense. “While lack of visibility makes this timing impossible to predict, generally speaking we’d view [a] non-exclusive collaboration positively because it would add shots on goal, external validation, and perhaps regimens that would augment investor excitement and conviction,” he wrote in an Aug. 8 note.

He added that Bristol and Abbott Laboratories have been demonstrating in the lab that high sustained virologic response (SVR) rates can be attained by antiviral combos not including a nuc. “Achillion’s pipeline features PIs and NS5A inhibitors that look best-in-class, complementary, and reasonably likely to succeed in interferon-free combos – all under its roof and/or via external collaboration,” Russo said. “We believe big players will fight on for some period longer, with some looking to fill gaps in their HCV pipelines and others perhaps looking for a complete solution.”

Sovaprevir, in triple-combination testing with existing standards ribavirin and pegylated interferon, has demonstrated effective inhibition of viral replication without generating “meaningful resistance,” an unending concern in the protease inhibitor class, wrote Brean Murray Carret & Co. analyst Brian Skorney on Aug. 9. “Although not a clear home run … [this is] a characteristic we believe is unique to only handful of antivirals in development for hep C,” he added.

Now, on to our weekly roundup of:

Merck KGaA/Symphogen – Danish biotech Symphogen AS has licensed its lead oncology product, Sym004, a mixture combining two antibodies targeting the epidermal growth factor receptor (EGFR) on tumor cells, to Merck KGaA for an upfront payment of €20 million ($25 million). Symphogen was evaluating Sym004 in two Phase I/II studies, which have shown initial signs of the drug’s clinical benefit and have been transferred into Merck’s control. The deal underlines the growing interest in combination therapies for cancer, as well as Merck’s desire to build on its marketed EGFR-targeted anticancer, Erbitux (cetuximab), which is its second largest-selling product, garnering sales of €855 million ($1.13 billion) in 2011. Merck receives exclusive development and commercialization rights for Sym004 worldwide, and now will fund all further development of the compound. In return, Symphogen receives the upfront and potentially could earn €225 million in clinical development and regulatory milestones, as well as €250 million in combined sales performance milestones and royalties on net worldwide sales, bringing the total potential value of the deal to €495 million. Merck is much in need of clinical-stage products that it can advance quickly following a string of late-stage product failures, which have prompted a management reorganization and the start of a cost-saving program including job losses at its R&D facilities in Switzerland, and across functions in Germany. – John Davis

Valeant/Medicis – In a move to become a leader in dermatology, Valeant Pharmaceuticals announced Sept. 3 that it has agreed to pay $44 per share, or $2.6 billion, for Scottsdale, Ariz.-based Medicis Pharmaceutical – representing a 39% premium to Medicis’ closing price of $31.56 on Aug. 31, the last trading day before the deal was announced. The Medicis acquisition, which will be funded entirely with debt, adding to the company’s $7.6 billion debt (as of the end of 2011), will make Valeant the largest dermatology player in the U.S. and second only to Galderma SA in the rest of the world. While Valeant has interests in several specialty pharma areas including dentistry and branded generics, the largest part of the business belongs to dermatologics with a focus on acne, eczema, and topical antivirals. Medicis brings a handful of products that will be complementary to Valeant’s current portfolio including the oral acne product Solodyne (minocycline oral), which will fit in with the company’s topical acne offerings. The company also makes aesthetic injectables like Restylane, Perlane and Dysport – which fit in with Valeant’s collagen stimulator Sculptra. Valeant expects $225 million in synergies – an estimate the company considers conservative and does not take into account any revenue upside or further upside from anything that may come out of the Medicis pipeline. According to Wells Fargo analyst Michael Tong, the deal will nearly double Valeant’s dermatology business, which was expected to produce revenues of $958.7 million in 2012 (analysts estimated Medicis would bring in approximately $820 million in revenues in 2012). – Lisa LaMotta

Medivir/Novadex – Achillion is not the only player in the HCV space looking to take advantage of recent stumbles by Bristol and Idenix. Medivir AB, which is developing Phase III protease inhibitor simprevir (TMC435) in tandem with Johnson & Johnson unit Janssen Pharmaceuticals for hepatitis C, announced a deal with Novadex Pharmaceuticals Sept. 6 in which it acquired a package of preclinical HCV assets, including novel nucleoside polymerase inhibitors. A release said the deal will include an upfront payment and potential milestones, but did not disclose specific terms. Medivir said the deal will include intellectual property and prodrug technologies that will further strengthen its HCV platform and know-how. The prodrug technologies could be applied to both protease inhibitors and nucleoside analogues to enhance their overall pharmacokinetic profiles, the company added. TMC435 also is being tested in combination with Bristol’s NS5A inhibitor daclatasvir (BMS790052) under a collaboration between Janssen and Bristol that was extended in April. – Joseph Haas

ImaginAb/MacroGenics – Two privately held companies in the antibody development space agreed Sept. 5 to collaborate on a pair of imaging products that could support ongoing development of new therapies. Los Angeles-based imaging specialist ImaginAb said it would develop a clinical imaging product for inhibition of the CD3 T-cell receptor based on an anti-CD3 therapy belonging to MacroGenics of Rockville, Md. The companies did not specifically name teplizumab as the therapy, but that is MacroGenics’ most advanced anti-CD3 program.ImaginAb also will develop a companion imaging agent for an immune-regulating B7-H3 target; MacroGenics’ Phase I clinical candidate, MGA271, addresses B7-H3. ImaginAb’s agents typically are used by partners to select patients and monitor responses to clinical treatments. The two companies share at least one investor, the oncology-focused Nextech Venture of Zurich. MacroGenics has raised more than $125 million from a long roster of venture investors since it was founded in 2000; five-year-old ImaginAb announced its $12.5 million Series A round in March 2012, and already has forged partnerships with drug companies such as Astellas Pharma and Oxford BioMedica, as well as a variety of cancer research organizations. Last month, ImaginAb named Eleven Biotherapeutics CEO Abbie Celniker as chair of its board of directors. – Paul Bonanos

Pfizer/SFJ Pharmaceuticals – Pfizer and SFJ Pharmaceuticals announced a collaborative development agreement Sept. 7 to conduct a Phase III trial for dacomitinib (PF-00299804), a pan-human epidermal growth factor receptor (pan-HER) inhibitor in advanced lung cancer. To be conducted at multiple sites in Asia and Europe, the Phase III trial will test the agent in patients with locally advanced or metastatic non-small cell lung cancer with activating mutations of epidermal growth factor receptor. SFJ will fund the trial and provide clinical development supervision as needed to prepare dacomitinib, an oral, once-daily, small molecule inhibitor of the HER-1, HER-2 and HER-4 tyrosine kinases, for regulatory filings as a first-line treatment in advanced NSCLC. If the compound obtains regulatory approval, SFJ will be in line to earn milestone and other earn-out payments. No other financial details were disclosed. This is the second collaboration between the world’s largest pharma and San Francisco-based SFJ, founded in 2009 a co-development partner for pharma and biotech. Earlier this year, the two partnered to run a Phase III trial in Asia of Inlyta (axitinib) for adjuvant treatment of patients at high risk of recurrent renal cell carcinoma following nephrectomy. – JAH

Photo credit: Wikimedia Commons

Financings Of The Fortnight: Idenix To Forge Ahead On HCV Combo After Novartis' Departure

Idenix Pharmaceuticals has been quite busy of late, on the fundraising front and elsewhere. A clinical-stage biotech with a market cap of nearly $900 million and no marketed products, the virology-focused firm has just exited a long-term collaboration with Novartis, raised $191 million in a registered direct offering, and previewed preclinical data for a hepatitis C candidate that it says appears to offer greater antiviral activity than any other clinical compound in its class.

Also of note, with IDX184, Idenix owns one of four nucleoside polymerase inhibitors still in clinical development for HCV, and that class widely is seen as the backbone for future combinations of all-oral, direct-acting antivirals that could transform a burgeoning market highlighted by millions of warehoused and potentially tens of millions of undiagnosed patients. The peak annual market for HCV drugs has been estimated as high as $20 billion worldwide, and Idenix, while trailing clear leader Gilead Sciences, is positioned as well or better than many more established and deep-pocketed companies racing to grab a significant chunk of that market.

Notably, Idenix might be in an enviable position compared with big pharma rival Bristol-Myers Squibb, which may have flushed $2.5 billion down the drain in January when it bought Inhibitex and its promising mid-stage “nuc,” INX-189. On Aug. 1, Bristol announced it suspended dosing in a Phase II trial of that compound after one patient in the study suffered heart failure – and many Wall Street analysts subsequently have written off that compound (BMS-986094) as a failure.

Idenix CEO Ron Renaud isn’t declaring victory in the frequently changing HCV space, but it’s hard not to view the Cambridge, Mass., firm as being well-positioned, having just reclaimed full rights to ‘184 as the scarcity of such compounds worsens. After nearly a decade of working together on HCV candidates, Novartis and Idenix agreed to end their collaboration on July 31, a decision that Renaud told “Financings of the Fortnight” was a mutual recognition by both companies that a termination would put Idenix on the best footing to advance its HCV program in terms of both clinical and business development.

“Novartis understood that Idenix needed the flexibility to move forward with our pipeline and to have as many possibilities to combine our assets with other assets at various stages of development that the former agreement that we had with Novartis just would not allow,” he said. “There were too many onerous rights – both corporate governance rights and clinical pipeline rights – that prevented us from having fulsome discussions with potential partners about how to move forward together.” Novartis held an option for ‘184, but declined.

Novartis remains the largest shareholder in Idenix and it still stands to benefit significantly if Idenix is one of the winners in the HCV race, Renaud added. All Idenix owners had their ownership stakes diluted through a registered public offering that placed 23.5 million new shares at $8 apiece, including an over-allotment for offering managers JP Morgan and Leerink Swann. The RPO netted Idenix about $191 million, giving the firm runway through the first quarter of 2014, CFO Daniella Beckman said.

Idenix had $79.1 million cash on hand as of June 30, thanks in part to a pair of follow-on offerings in 2011 that netted a combined $105.4 million. Its shares had been trading in the $10 range in the weeks just prior to the offering’s pricing on Aug. 2, but closed trading on Aug. 8 down 4% to a palindromic $8.08 a share. Beckman and Renaud conceded that dilution always will be an issue for a clinical-stage biotech, but said their priority had to be gathering enough cash to see Idenix through a crucial Phase II trial testing ‘184 in combination with IDX719, the firm’s Phase II NS5A inhibitor for HCV.

“On the heels of our restructured deal with Novartis, we wanted to make sure we got any balance-sheet concerns behind us as well, and we wanted to be able to execute the business plan,” explained Renaud. That plan includes not just the combo study but also bringing a second-generation nuc, IDX368, into clinical development next year, with other nucs to follow. “This is going to take some considerable financial resources as well as human resources, and this capital raise will enable us to do that now,” he said.

Idenix intends to start both the Phase II combination study – expected to be an all-comers trial of about 200 HCV patients who will receive 100 mg of ‘184 once-daily and likely 100 mg of ‘719 once-daily, in a set of treatment groups some of which also will receive ribavirin – and the first Phase I trial for ‘368 before the end of 2012. The latter compound is the product of a project that has yielded 1,900 new compounds over the past 18 months in search of nucs superior to those in clinical development now (at Idenix, Gilead (GS-7977) and Vertex Pharmaceuticals (ALS-2200)).

“Right now, ‘368 appears to generate more triphosphate, which is what actually kills the HCV virus, than any other nuc that we’ve ever seen in clinical development,” Renaud asserted. “We suspect this a drug that we can start dosing at very low doses once a day and it appears at least preclinically to be very combinable with other classes of DAAs.”

And the HCV race goes on, as do other biopharmaceutical companies’ fundraising plans, which we now review in this installment of …

Mersana Therapeutics: A March collaboration with Endo Health Solutions to create next-generation antibody-drug conjugate therapeutics for cancer was a key turning point for Mersana Therapeutics, a new beginning signified by a $27 million recapitalization announced July 31. Under the financing, which Mersana called a Series A-1, the biotech will receive backing from New Enterprise Associates and Pfizer Venture Investments as well as a group of returning investors. Using its Fleximer conjugation technology to bind a wide variety of novel linkers with anti-tumor payloads, Mersana says it can create ADCs offering a wider variety of payloads, the ability to increase drug loading per antibody significantly while maintaining pharmacokinetic and physiochemical properties, and the capability to use antibody fragments as well as full antibodies. NEA’s participation in the round marks the first biopharma investment under its $2.6 billion NEA 14 fund. With its investment, NEA also will bring General Partner David Mott to Mersana as chairman of the board, while NEA principal Sara Nayeem will take a board seat. “NEA brings enormous financing capability plus tremendous intellectual resources,” said Mersana CEO Nicholas Bacopoulos. “Pfizer also adds to this validation.” Existing investors Fidelity Biosciences, ProQuest Investments, Rho Capital Partners and Harris & Harris Group also backed the round. Mersana raised $21 million through its Series A in 2005, augmenting that most recently with two sales of debt totaling $10 million in 2011 and 2012. – Joseph Haas

Hyperion Therapeutics: In the lone biotech IPO of this fortnight, Hyperion Therapeutics netted $53.5 million on July 31 by selling 5.75 million shares (including the 750,000-share overallotment) at $10, falling short of its $11-13 range. Hyperion, which has raised at least $100 million in venture capital, is awaiting an October PDUFA date on its lead compound Ravicti (glycerol phenylbutyrate) for urea cycle disorders (UCD), a group of rare genetic diseases caused by an enzyme or protein transporter deficiency in the urea cycle that leads to elevated ammonia levels in the blood. In March 2012, Hyperion acquired a global license to the drug from Ucyclyd Pharma, after initially receiving only limited rights in 2007. The only other branded FDA-approved therapeutic for UCD is Ucyclyd’s Buphenyl (sodium phenylbutyrate), and Hyperion holds U.S. co-promotion rights to that drug, plus an option on worldwide rights. Hyperion is the fifth rare disease company to go public in the last five years, according to Elsevier’s Strategic Transactions, and it’s the second-highest netting IPO behind MolMed SPA’s $82 million offering in February 2008. (MolMed’s orphan candidates include Phase III Arenegyr (NGR-hTNF alpha), a vascular targeting agent for malignant pleural mesothelioma.) Only two weeks out from its IPO, Hyperion has been trading in the black, closing at $10.35 on Aug. 8. Other rare disease players that have fared well include Aegerion Pharmaceuticals (which tried to go public twice before succeeding in October 2010): the lomitapide developer closed at $13.54 on Aug. 8, 42% higher than its $9.50 IPO price. That, however, was still lower than the bottom-end of its anticipated $14-16 IPO range. Novagali Pharma, which is developing a vernal keratoconjunctivitis candidate and debuted on the NYSE Euronext Paris Exchange in July 2010, went a different route and last year sold 50.55% of the company to Japanese pharma Santen Pharmaceutical, which paid €6.15 per share, almost double Novagali’s IPO price. – Amanda Micklus

Atterocor: Besides ADC developer Mersana’s $27 million Series A-1 recap round, FOTF recently saw another private biotech in the cancer space raise funds: Atterocor completed a $16 million Series A financing backed by Frazier Healthcare Ventures and 5AM Ventures on Aug. 3. (The last time these two syndicated together was for Marcadia Biotech’s $15 million Series A, along with Twilight Venture Partners; Roche later acquired Marcadia for $292 million upfront). Atterocor is developing candidates for one of the most uncommon types of cancer: adrenal gland cancers, which include adrenocortical carcinoma, neuroblastoma and pheochromocytoma. Atterocor’s founder and CEO Julia Owens says the new funding will help move a lead medicine into clinical trials. Not much has been revealed about the company’s work, however scientific advisor Gary Hammer, the director of the endocrine oncology program at the University of Michigan’s Comprehensive Cancer Center, has been focused on the mechanisms of adrenal-specific growth and differentiation via growth-factor signaling and transcriptional programs. He is specifically addressing dysregulated growth of adrenocortical stem/progenitor cells. Atterocor was established earlier this year and previously raised $500,000 in debt financing from a single investor. There are only a handful of competitors developing treatments for adrenal cancers. One of the most advanced is Astellas Pharma/OSI Pharmaceuticals’s tyrosine kinase inhibitor linsitinib, in Phase II for locally advanced or metastatic adrenocortical carcinoma. The European Commission granted orphan drug status to the candidate this past April. – A.M.

Exelixis: Small-molecule cancer therapeutics biotech Exelixis  has completed concurrent financings, which are expected to result in aggregate net proceeds of $361.9 million. For the $127.5 million common stock offering of 30 million shares (up from the 20 million originally proposed) at $4.25, Goldman Sachs and Cowen & Co. are jointly managing with Piper Jaffray, Stifel Nicolaus Weisel and William Blair & Co. co-managing. After the FOPO, the second-largest of its six follow-ons to date, Exelixis’ valuation is up to about $760 million, a steady decrease from the company’s last two FOPOs, first in March 2011 when the valuation was $1.4 billion and then in February 2012 when the market cap dipped down to $815 million. In the second part of the current fundraise and marking its first public debt financing to date, the biotech is offering $250 million worth of seven-year, 4.25% convertible senior subordinated notes (with an option to purchase additional notes up to an aggregate principal amount of $37.5 million). The notes are redeemable at a price of about $5.31 apiece (with a conversion rate of 188.2353 shares per $1,000 principal), which represents about a 13% discount to Exelixis’ 10-day pre-announcement average, yet a 25% premium to the FOPO share price. The company closed at $4.28 on Aug. 8, a 13% decrease from the Aug. 6 closing price. The debt offering is jointly led by Goldman, Sachs and Cowen; co-managers are Citigroup, Credit Suisse Group and Morgan Stanley. Exelixis will put the proceeds toward its extensive pipeline of oncology candidates, many of which are partnered with big pharma including GlaxoSmithKline, Sanofi, Bristol and Roche. In particular it needs the cash to advance its lead candidate cabozantinib (formerly XL184) – a dual inhibitor of MET and VEGF pathways – in Phase III for medullary thyroid cancer, and also in multiple clinical trials for other cancers including castration-resistant prostate, lung and ovarian. In 2008, BMS licensed exclusive worldwide rights to ‘184, paying a hefty $195 million upfront, but in 2010 returned those rights to Exelixis, which went on to develop the candidate on its own. In 2011, cabozantinib gained orphan status in the medullary and other thyroid cancer indications and FDA just granted a priority review, with a decision expected by late November. If accepted, this would be Exelixis’ first approval. – Maureen Riordan

Photo credit: Wikimedia Commons

2011 M&A of the Year Nominee: Gilead/Pharmasset

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™.

We're not sure we've got to sell this one, folks. Why vote for Gilead's acquisition of Pharmasset for IVB's M&A of the year?  We've got eleven billion reasons for you.

If the sheer enormity of Pharmasset's $11 billion price tag doesn't sway you -- and as a reminder it was by far the largest price paid for a clinical stage biotech, nearly four times the value of the previous record -- you mightn't have a pulse. But to be fair, bigger isn't always better, but in this case we've got more than just dollar signs to convince you.

Ask around, and you'll hear a range of responses from industry business development people. They range from the conspiratorial to the astounded to the unintelligible to the silent, wide-eyed, mouth-agape, frozen-faced and slightly head-bobbing look that you see on sitcoms that kind of says "holy crap, right?" The kind of silent, wide-eyed, mouth-agape, frozen-faced and slightly head-bobbing look that translates into DOTY votes.

Mostly, non-Gilead people think Gilead overpaid. The safety signal in a Phase IIb trial of PSI-938 that emerged last week would seem to support that view, but in reality the value attached to anything outside of PSI-7977, another of Pharmasset's hepatitis C polymerase inhibitors and the hottest drug candidate in the clinic, is probably minimal.

What's not up for argument is that Gilead now wholly owns the hottest molecule in the hottest clinical space around. Nevermind that they'll need to get it to market quickly and make it a blockbuster several times over without taking their sweet time about it to make the deal pay off.

Vote Gilead/Pharmasset for the size, sure. Vote for the deal because it demonstrates that even in today's troubled times, there's seemingly no ceiling on the value of a top asset -- even a Phase II one -- in the right hands. Vote for it because HCV will continue to be one of the most rapidly-evolving and intriguing development and commercial spaces to come along for some time. Or just because of that face people make when you ask them what they think of it.  That face is priceless.

2011 Alliance of the Year Nominee: Merck/Roche

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™.

The May 2011 approvals of the first two direct-acting antiviral drugs against hepatitis C virus provided us with an unusual opportunity to watch a head-to-head marketing battle in a reinvigorated blockbuster market. Merck & Co. hit the market first with Victrelis, its HCV protease inhibitor, which was approved May 16. And before rival Vertex could launch Incivek only a week later, Merck had already called in the cavalry.

On May 17 Merck said it had partnered with Roche -- a longtime rival (of Schering-Plough, anyway) that bested it in the first big HCV marketing battle over long-acting interferon therapy -- to both promote Victrelis and to examine future HCV drug combinations.

It wasn't quite "dogs and cats living together, mass hysteria!" Gatekeeper-Keymaster action, but for folks in pharmaland, it was pretty close. Then again, the deal makes perfect sense. And when marketing enemies become friends, underscoring the emerging trend of pharma-pharma collaboration, the importance of a strong start in a rapidly evolving HCV market, and pre-market drug combo testing, DOTY gets all tingly.

The financials of the deal were not disclosed, but a Merck spokesperson confirmed that the Roche partnership does not "alter the economics of Victrelis for Merck." In exchange for its marketing muscle, Roche gets to hedge against the probable decline of its Pegasys interferon franchise while its reps gear up for the eventual launch of Roche's own direct anti-virals (Roche's latest-stage compounds, the protease inhibitor danoprevir and the polymerase inhibitor RG7128 -- the latter partnered with Pharmasset -- are in Phase II).

More importantly to pique DOTY's interest, Merck and Roche are working together to test combinations of not-yet-approved HCV drugs. There are dozens of molecules in the clinic whose developers hope to hit on combinations that avoid the need to use interferon and cure HCV patients more quickly and efficiently than standard therapy. That regimen now typically involves an interferon, ribavirin, and either Merck or Vertex's pioneering PIs (more probably Vertex's, which thus far holds a commanding lead in the second massive HCV commercial battle).

That Merck and Roche realize the benefits of teamwork as a substitute for an entirely home-grown or acquired compound portfolio isn't surprising, but this kind of deal remains all too rare.  That this kind of peer dealmaking remains an exception to the rule -- even in the exciting but increasingly crowded worlds of HCV or, say, oncology -- suggests the companies that embrace it most quickly will have a lingering edge.

And so we offer the alliance DOTY nod to two old foes. Their detente is unlikely to last forever, but in the fast-paced world of HCV drug development, where Phase II assets can command billions, it might just save each company from obscurity.

kreg.steppe photo via flickr, used under creative commons license

Deals Of The Week Presents Last Week's Deals

Not to go all eschatological on you, but this blogger owes the IVB readership a confession. Religious broadcaster Harold Camping's exhortations (and innumerable billboards and emails) announcing May 21, 2011 as the onset of the Rapture and the ensuing end-of-days offered this blogger an excuse to book out early to enjoy a last supper with friends and family. (At which there was much speculation about the soon-to-be revealed identities of the four horsemen.)

In the blogger's defense, the signs were all there. (And no, we aren't talking about cataclysmic earthquakes, the rise of either false prophets (Beck or Trump?) or the Mississippi River, or the sky-rocketing home prices in the Bay Area tied to LinkedIn's IPO.) How can you deny it's not the end of the world, when the Cleveland Indians are leading their division, Oprah's pulling the plug on her daily tv show, and reality stars like Jersey Shore's Snooki command speaking fees higher than Nobel prize winning writers?

Thus, in the hopes of cramming celebratory fun into the final hours of May 20 (we had until 11pm PT by dear Harold's calculations), DOTW seemed a wee bit, well, unnecessary.

In the face of Armageddon, who really cares about Shire's decision to diversify into regenerative medicine with its non earn-out purchase of Advanced BioHealing? (Dermagraft, after all, can't be used to treat the gnashing of teeth.) And, really, with the world absolutely ending on Oct. 21, it's not like Takeda needs Nycomed to bridge its 2012 Actos patent cliff. (Now if Nycomed sold an OTC product to repair the rending of hair, we might pay attention given its apocalyptic best-seller potential.)

Oh wait, it's Monday May 23-- and we're still here (and so is everyone else). Damn. That means we'll be writing this column until at least December 21, 2012, which REALLY, TRULY is the end of days. With apologies for our tardiness, it's time for another edition of...

Takeda/Nycomed: The Rapture may not have come to pass but Takeda/Nycomed did. On May 19, after a week of speculation and a press release warning journos not to get too hasty, Takeda announced its €9.6 billion ($13.6 billion) purchase of privately-held Nycomed. As IN VIVO Blog told you last week, the deal satisfies a number of strategic and financial imperatives for Japan's largest drugmaker, as it faces generic competition to best-selling diabetes drug Actos from 2012 and seeks to expand its footprint beyond Japan and the U.S. The deal doubles the Japanese firm's European sales, jump-starts its emerging markets presence and provide an immediate 30% revenue boost, increasing operating income by more than 40%, according to the company. Swiss-based Nycomed brings to Takeda not only the fruits of recently-launched chronic obstructive pulmonary disease drug Daxas, but also a more diversified product mix, including OTC and branded generics, regulatory expertise, and an entrepreneurial culture that Takeda President and CEO Yasuchika Hasegawa said he hoped could "vitalize" his firm. As such, the deal helps accelerate the 2011-2013 mid-range growth plan unveiled by Hasegawa earlier this month. The transaction – worth slightly more than initial reports suggested – values the Swiss-based Nycomed at about 3.4 times its 2010 revenues, excluding its U.S dermatology business, which is not part of the deal. The higher price tag means Takeda will take a ¥600-700 billion ($7.33 billion to $8.55 billion) loan to finance the deal, which is the largest yet in the Japanese firm's aggressive ongoing bid to expand its presence and pipeline through M&A. --Melanie Senior

Shire/Advanced BioHealing: Shire/Advanced BioHealing marks the return of the IPO as a stalking horse, a private M&A deal with NO earn-outs, and an ROI greater than 10x for certain investors. True venture like returns --it must be the end of days!! Just before its planned debut on the New York Stock Exchange, Advanced BioHealing instead agreed to a $750 million all cash offer from the specialty pharma Shire, which has a history of using acquisitions to jump quickly into new lines of business. With ABH, Shire dives into regenerative medicine, grabbing the commercial product Dermagraft, a patch that uses natural cells called fibroblasts to heal diabetic foot ulcers. (Dermagraft has a long and painful history, which you can read about in greater detail here.) The current deal builds on Shire's willingness to pay healthy premiums for companies that it sees as cornerstones to new lines of business. The most striking example is Shire's 2005 purchase of Transkaroytic Therapeutics for $1.6 billion, an acquisition that gave the pharma access to enzyme-replacement drugs for rare diseases and a technology platform for further growth. As part of Shire, ABH will be run as a semi-autonomous unit, with retention of top management one of the hoped for outcomes post-integration. The all-cash offer was a 25.6% premium to the amount ABH was expected to raise had it debuted at $15-a-share, the midpoint of its expected range. Since the IPO was reportedly oversubscribed and pricing was on the upswing, a public debut might have resulted in a larger return to investors -- eventually. Still, ABH's backers, which included Canaan Partners and Safeguard Scientific had to be more than satisfied with the terms-- and certainty of exit --offered by the Shire take-out. Canaan apparently reaped a 15x return on the deal, while Safeguard's ROI was a not too shabby 13x. -- Alex Lash and EL

Roche/Merck:The two current heavyweights in hepatitis C therapy got together May 17 with a plan to co-promote Merck’s newly approved protease inhibitor Victrelis , in what was widely viewed as an effort to squeeze upstart Vertex Pharmaceuticals out of the HCV market despite superior efficacy data for its protease inhibitor, Incivek. Boceprevir was approved by FDA on May 13; telaprevir's PDUFA date is today, May 23. Under the non-exclusive agreement, Roche reps will include boceprevir as part of their promotion to health care providers on the use of Pegasys in triple combination therapy for HCV. Pegasys, part of the current two-drug backbone of HCV therapy, commands about 80% of the peg-interferon market in HCV, far ahead of Merck’s competing product, PEG-Intron. Roche will not bundle boceprevir with Pegasys, however, and the deal does not preclude Merck from marketing its HCV drugs in a discounted bundle. (Nor does it preclude Roche from inking a deal with Vertex though analysts think that's unlikely.) The two peg-interferon products will continue to be marketed separately, both companies said, and Merck added that the collaboration will not affect the pharma’s economics for its new product. Merck and Roche, each of which has other HCV compounds in clinical development, also will test their compounds together in combination therapy trials.--Joseph Haas

Stryker/Orthovita: Yes, dear readers, a device deal, which means the rapture must be coming (even though Harold Camping's calculations this time around were off). In 2010 IN VIVO wondered if Orthovita, hit hard by scientific debate about the merits of vertebral compression fracture treatment and allegations of fraud, was giving up its grand dreams. Thanks to Stryker’s $316 million acquisition last week, its independent efforts at becoming the specialty spine player are over. But with a take-out price tag that included a 41% premium, did Orthovita's investors win? The deal allows Stryker to pair its existing hardware with Orthovita’s Vitoss bone graft and Cortoss bone filler. The former can be used along with Stryker’s spinal implants while the latter might serve as a hook to help sell Stryker’s new vertebral augmentation products, giving the med-tech giant another way to differentiate itself from Medtronic’s line of Kyphoplasty products, which use traditional bone cement polymethylmethacrylate (PMMA.)If Orthovita’s products live on, it's fair to say the company never recovered from a series of er, crushing (compressing?) blows. First, in 2009, New England Journal of Medicine published two studies suggesting vertebroplasty – the filling of fractured vertebra with cement (or Cortoss) – wasn’t an effective method of relieving pain from vertebral compression fractures. The studies were published just two months after the company received FDA approval for Cortoss. Then a Medicare fraud investigation by Department of Justice forced vertebral compression procedures to move from in-patient – where Orthovita’s Vitoss and other materials are currently used -- to outpatient settings. The shift caused problems with pricing and, analysts say, distracted Vitoss sales reps. In the end, economic pressures that have been a drag on the entire orthopedics sector also weighed heavily on Orthovita, which had high hopes that Cortoss sales would quickly ramp total sales to $300 million annually. -- Tom Salemi

ThermoFisher/Phadia: The European private equity firm, Cinven, is to exit ownership of the Swedish in vitro diagnostics company, Phadia, after four years by selling it to Thermo Fisher Scientific, reportedly more than trebling its investment in the process. US laboratory equipment manufacturer Thermo Fisher Scientific Inc. aims to strengthen its allergy and autoimmune disease diagnostics business by acquiring Phadia for a hefty €2.47 billion ($3.5 billion) in cash, announced May 19. (In case you are keeping track, Phadia was spun out of Pharmacia in 2004 when Pfizer acquired the parent company, and was acquired by Cinven in 2007 in a deal that valued the company at €1.285 billion.) Phadia markets complete blood test systems to support the clinical diagnosis and monitoring of allergy and autoimmune diseases and chalked up 2010 revenues totaling €367 million thanks to strong sales in Europe and emerging markets. Thermo Fisher is using a mixture of debt financing from Barclays Capital and cash to fund the Phadia acquisition, which is expected to complete in the fourth quarter, and be immediately accretive to Thermo Fisher's adjusted earnings per share. The deal completes a busy week for Thermo Fisher, which completed its $2.1 billion acquisition of Dionex on May 17 and one day later announced the $35 million purchase of UK player Sterilin.--John Davis

Image courtesy of flickrer WarmSleepy via a creative commons license.

Navigating The FDA Advisory Committee Road To Success … Or Not

On the eve of FDA’s Antiviral Drugs Advisory Committee reviews of the first protease inhibitors for hepatitis C, the drugs’ sponsors – Merck (boceprevir) and Vertex Pharmaceuticals (telaprevir) – are no doubt scrambling to make sure everything is in order.

Presumably, the companies have already locked down their slide decks, put the finishing touches on their presentations, researched the backgrounds of the committee’s standing members and shipped their AdComm teams off to hotels near FDA’s White Oak headquarters, where the meetings will take place.

Boceprevir and telaprevir are viewed as therapeutic breakthroughs in the treatment of HCV, both having shown improved cure rates when added to the current standard of care. However, the drugs have complicated and differing dosing regimens, which are likely to be an area of AdComm discussion.

Merck, which will present its case on April 27, is an old hand at the AdComm process, having most recently gone before a panel in December when it unsuccessfully sought to add prostate cancer risk reduction language to the label of its BPH drug Proscar. Vertex, on the other hand, is making its maiden voyage on the USS AdComm. The company will present its case on April 28 and should benefit from hearing panelists’ questions and concerns in their review of boceprevir the day before.

No matter how well prepared the sponsors think they might be, the AdComm road is littered with landmines. That, in a nutshell, was the message conveyed by AdComm meeting veterans at the Center for Business Intelligence’s Second Annual Forum on Effective Preparation for FDA Advisory Committees in Washington, D.C. last month.

At the two-day conference, battle-hardened veterans of the AdComm process – including pharma employees and consultants who make their living preparing drug companies for meetings – shared experiences from the trenches and offered some best practices to consider when tackling what has become a significant hurdle in drug development.

Some suggestions fall in the common sense category. It's imperative not only to have good communications with FDA leading up to an AdComm, but also to begin the meeting planning process early. Practicing presentations and Q&A is not surprisingly also considered good AdComm hygiene. But the CBI speakers voiced some additional pearls of wisdom that sponsors appearing before FDA committees might want to keep in mind, starting with…

Know Your AdComm
Pete Taft, founder and CEO of PharmApprove, a company that provides AdComm meeting preparation services, said sponsors should be ready to deal with four general types of personalities on FDA panels:

the expert – someone who knows a lot about your field and possibly your product, and is going to be well prepared for the meeting;

the judge – an individual who is swift to make judgments about your product or argument;

the thoughtful one – a quiet panel member; and,

the naysayer – the “Simon Cowell of AdComs” who you can either fight or forget about securing their vote.

PharmApprove has interviewed former AdComm members to find out how they prepare and what they expect from sponsors. At the top of their list is this nugget of wisdom...

Keep It Simple, And Don’t Be Irritating
The importance of clarity and simplicity in a sponsor’s presentation was echoed by FDA Director of Advisory Committee Oversight Michael Ortwerth, the lone agency presenter at the CBI conference. “That’s a really important thing, that the message is clear … and slides are very well put together,” Ortwerth said. “When you have slides that are so busy and so ladened and heavy, then you can’t focus on what the actual issue is.”

If AdComm members don’t like busy slides, they’re also not thrilled with sponsors or presenters who come off as cocky or overconfident. “I’ve always had this intuitive sense that if we press the committee or cause them to feel irritated, that some of that emotion will be transferred to their rational thinking,” said Taft, whose suspicion has now been confirmed. He noted the comments of a former AdComm chairman, who said: “You don’t want to make me angry about you, because then I transfer that from you onto the data and onto the drug.”

AdComm prep needs to be heavy on practice, planning and contingency planning, the speakers said. In the course of advance planning, it’s important that sponsors …

Don’t Let Belly Dancers Get In The Way
Don Cilla, vice president and product development team lead at AstraZeneca’s MedImmune division, led the company’s AdComm team for the June 2010 review of motavizumab for prophylaxis of respiratory syncytial virus. He recommends conducting AdComm team practice sessions and holding pre-meeting preparations in the same hotel ballroom that FDA will use for the meeting (when they’re not being held at White Oak). At the time of the motavizumab meeting “there was a convention of belly dancers that had that room booked for the three days leading up to it, so we couldn’t get in there to practice.”

If the company's AdComm team is all staying, and eating, together as a group for two or three days before a meeting, they should …

Avoid Eating The Mayonnaise
One of the speakers at the CBI conference recounted how a consultant, upon seeing open mayonnaise sitting at a buffet, banned all condiments at future meals so as to avoid the risk that team members would come down with a debilitating case of food poisoning on the day of the big meeting. “We had backups for everybody,” Cilla said of his team for the motavizumab meeting. “We didn’t know if they were going to get the bad mayonnaise or the Mexican food the night before or if they just couldn’t get there.”

While sponsors should plan for anything and everything to go wrong logistically, there are some factors they may have no control over. This includes the possibility that committee members will be suffering from …

An Avandia Hangover
Back-to-back scrutiny of different drugs on consecutive days can have a detrimental effect on those coming at the end of a multi-day meeting, suggested Alexander Fleming, president and CEO of the consulting firm Kinexum.

Case in point is Vivus’ obesity drug Qnexa. At a July 15 meeting, FDA's Endocrinologic and Metabolic Drugs Advisory Committee voted 10-6 against approval due to safety concerns. The negative vote took some FDA officials by surprise, but Fleming believes timing was a crucial factor. The Qnexa review marked the third consecutive day of work for the committee, its two previous days having been spent on an extensive and intensive review of the cardiovascular safety of GlaxoSmithKline’s diabetes drug Avandia.

“If nothing else, the advisors had to be exhausted” by the time they got to Qnexa, Fleming said. Calling the AdComm timing “pure bad luck” for Vivus, Fleming said the company knew “this was going to be a real disadvantage to them ... and only in retrospect do you see how it really had a major effect.”

Sponsors also may have no control over an AdComm’s walk down the path of …

Comparative Effectiveness And Cost
Disease background presentations by the sponsor are a hallmark of any product-specific AdComm. A good presentation will include a comparison of products that are on the market, including mechanism of action and limitations, said Mary Rofael, COO of scientific and regulatory communications at ProEd Communications, a firm that provides AdCom prep services.

“Many of you will say we’re here at an advisory committee, the committee should focus on evaluating the benefit/risk of a particular product,” Rofael said. “In this day and age you can’t stop people from thinking about comparing it to what they’re using currently or what’s on the market. It’s just a discussion that’s going to take place. Whether or not you engage in it, that’s a different story, but it’s important to anticipate it because these kinds of questions are being asked more and more today.

“It’s almost like the question of cost,” Rofael continued, venturing down a road that almost no sponsor wants to travel during an AdComm. “The advisory committee room is the only room where cost is not discussed … but eventually I think it’s going to make its way in. People are starting to ask about the cost of products and what the burden of cost is on the health care system.”

Aside from the detour down the cost path, what’s a sponsor to do when an AdComm’s discussion of the data starts …

Spiraling Out Of Control?
If the panel’s conversation has gone awry at some point after the sponsor’s presentation, the best a company can hope for is that the meeting agenda includes an upcoming break, said PharmApprove principal Martha Arnold. “If there’s a situation where things just are spiraling out of control, and … you think perhaps the committee is dealing with information that is just plain wrong, that there’s been a misinterpretation either of your data or FDA’s data, if there’s a break you have an opportunity to at least approach the chair” and express concern, she said.

If there are no further scheduled breaks, the sponsor could pass a note to the panel’s industry representative “or tap them on the shoulder and say, ‘Hey, can you help us out here,’” said Bruce Burlington of DB Burlington Consulting, who often serves as the industry rep on AdComms. “Alternatively, if it’s really outrageous, just stand up and say, ‘Mr. Chairman, I request your permission to insert a correction in the discussion at this point.’”
It may be more problematic, however, for sponsors to insert themselves into the process of …

Question-Morphing
Anyone who has sat through at least a handful of AdComms can confirm that panelist confusion over the wording of FDA’s questions is a fact of life, often leading to discussions as to whether and how the questions should be re-written on the fly. While these question-writing “audibles” can be disconcerting for sponsors, so can the initial questions themselves.

CBI conference attendees cited tremendous variability among review divisions in the types of questions posed at AdComs, ranging from straightforward questions on risk/benefit to queries that run multiple pages and “in essence make the FDA case in the form of a question,” one conference attendee said.

FDA’s Ortwerth acknowledged room for improvement in how review divisions ask questions. “It is important that there be consistency in the way we try to communicate. … There needs to be the right way to communicate something and a clear way to communicate something and not to drive the direction of the answer.”

Even if sponsors are able to navigate all the trouble spots outlined above, they need to keep in mind that they can …

Spend Big Money, But Still Lose Big
Preparing for an AdComm involves shelling out big bucks, all of which can be for naught if a drug is decimated when it comes to the panel’s vote. MedImmune’s Cilla said his company spent approximately $900,000 on AdCom preparations for motavazimub, which included the cost of consultants, meeting space and four mock panel meetings at approximately $60,000 each. The investment resulted in a 14-3 AdComm vote against approval, which was followed by an FDA “complete response” letter and the company’s decision to withdraw the BLA.

Sanofi-Aventis Associate Vice President of Global Regulatory Affairs Kevin Malobisky said his company spent about $1.3 million preparing for one meeting that resulted in a 14-0 vote against approval – an apparent reference to the unsuccessful June 2007 AdComm for the obesity drug Zimulti (rimonabant).

Were IN VIVO Blog writing an AdComms for Dummies manual, we might put it this way: it's expensive and a lot of work to prep for an AdComm, but you have to do it. Even so, there's no money-back guarantee.

Maybe we should start consulting--at least we've got a sense of humor.

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