Deals Of The Week: The Sushi Edition

The biggest deal of the week, Daiichi’s purchase of the California biotech Plexxikon for $805 million upfront, prompted headlines elsewhere about the rise of Japanese dealmakers. Faithful readers of IN VIVO Blog won't be surprised by such pronouncements. It’s a trend that has been gathering steam since Eisai’s take-out of MGI Pharma and Takeda’s land-grab of Millennium Pharmaceuticals. (And yes, that's about 3.5 years longer than Kyowa Hakko's bid for ProStrakan.)

Indeed, as we wrote in a May 2010 IN VIVO feature, Japanese pharmas are now serious contenders for partnerships outside their home country as domestic factors –including consolidation in the home market, slowing growth, and a strong yen – have become powerful forces of change.

And as the Plexxikon deal shows (see below) that’s very good news for biotechs of a certain profile –especially neurology and oncology players close to commercialization. Given the merger mania of the past several years, the pool of potential acquirers for biotech assets has diminished, meaning any new buyers willing to pay top dollar are welcome news. In addition, Japanese players like Takeda( or Astellas or Daiichi) seem amenable to terms that allow the smaller party a great deal of autonomy, whether it’s running a biotech as a stand-alone within the parent pharma or establishing co-promotion/co-development options as part of an alliance.

The continued activity of players like Daiichi means biotech execs should brush up on their Japanese and learn to love sushi. (What’s not to love about sushi?) As always, domo arigato for reading…

Daiichi Sankyo/Plexxikon: Kaaa-ching! Bidding by multiple companies and strong data for a late-stage, targeted melanoma drug helped drive Daiichi Sankyo’s eye-popping acquisition of privately-held Plexxikon this week. The deal is one of the priciest acquisitions of a private biotech since 2006, according to Elsevier's Strategic Transactions and in-line with J&J's take-out of abiraterone developer Cougar Biotechnology. Equally notable is Daiichi's down-payment. At a time when bigger and smaller pharmaceutical players are trying to hedge their risk by structuring earn-out heavy deals, the Japanese pharma is shelling out $805 million, a deposit that approximates 86% of the deal's potential value. Even without the additional milestones, this sum provides an impressive return for the nine venture capital firms who have staked 10-year-old Plexxikon, which has made a name for itself with its targeted melanoma drug PLX4032. But the deal's price tag is only a piece of the story; the advent of a dark horse buyer is another important consideration. Back in 2006, Plexxikon partnered the drug to Roche for $40 million upfront, retaining an option to co-promote the product in the U.S. market. In early January 2011, Plexxikon exercised this option, agreeing to reimburse Genentech, which is responsible for ongoing development of the medicine, for certain marketing and promotion costs. With the planned acquisition, this option - and the resulting enhanced royalties on product sales owed to Plexxikon - now transfers to Daiichi. That the Japanese pharma would spend so much to obtain only a piece of a potentially lucrative molecule illustrates both the scarcity of late-stage oncology assets and just how much Big Pharmas are willing to pay to get drugs with validated mechanisms of action in this competitive therapeutic area. (For more, see our 2006 feature "The $100 Million IND.") It also brings Daiichi in line with the other big three Japanese pharmas - Astellas, Takeda Pharmaceutical and Eisai - all of whom have used acquisition to bolster their U.S. oncology offerings. --EFL

Takeda/Intra-Cellular Therapies: Daiichi wasn’t the only Japanese pharma wheeling and dealing this week. Takeda also announced its decision to license Intra-Cellular Therapies’ preclinical, orally available phosphodiesterase type 1 (PDE1) inhibitors for treatment of the cognitive impairment associated with schizophrenia in what appears to be a heavily back-end loaded deal. Disclosed terms were pretty vanilla: Takeda makes an undisclosed upfront in exchange for exclusive worldwide rights, and will pay development milestones of up to $500 million, with another $250 million owed if the product(s) hit certain sales objectives. Takeda will be solely responsible for the development, manufacturing, and commercialization of the compounds. In addition to schizophrenia, Takeda also has rights to develop the inhibitors for other neurological indications, potentially including dementia, Parkinson’s disease, and Alzheimer’s disease. Privately-held ITI is built around scientific findings discovered in the lab of Rockefeller University’s Paul Greengard; in 2005 it also inlicensed a basket of preclinical compounds from Bristol-Myers Squibb. According to sister publication “The Pink Sheet” Daily, ITI hadn’t planned on partnering its PDE1 program quite so soon, but pharma’s level of interest in the compounds, which are very selective for the PDE1 subfamily and thus, presumably, won’t cause off target side-effects, was so high the company changed its mind. Neither company would discuss timelines or details on the clinical development program, but ITI's CEO Sharon Mates did say there were clearly defined endpoints for positive symptoms associated with schizophrenia, as well as standard cognition measurements. –EFL

Merck/Lycera: Privately held, autoimmune-focused Lycera signed a collaboration with Merck March 3 under which the two companies will discover, develop and commercialize small molecule candidates that orchestrate the differentiation of T-helper 17 cells. Diseases targeted by the partnership may include rheumatoid arthritis, psoriasis, inflammatory bowel disease and multiple sclerosis. The deal calls for Merck to pay Michigan-based Lycera a $12 million upfront payment, undisclosed research funding, as well as research, development and regulatory milestones of up to $295 million. (There are also potential low-double-digit tiered royalties on any products that reach the market.) The companies will collaborate on discovery and preclinical work, with Merck responsible for clinical development of any resulting candidates. The pharma also will hold worldwide marketing and commercialization rights to such candidates. Lycera, profiled in this 2009 Start-Up article, is backed by InterWest Partners, ARCH Venture Partners, Clarus Ventures and EDF Ventures. It brought in $11 million last April in the second tranche of a Series A financing announced in April 2009.—Joseph Haas

GlaxoSmithKline/Targacept: In a “No-Deal” that was not unexpected, GlaxoSmithKline, which announced plans to exit the central nervous system arena a year ago, terminated its partnership with Targacept March 3 to co-develop neuronal nicotinic receptor modulators in five therapeutic areas – pain, smoking cessation, addiction, obesity and Parkinson’s disease. GSK paid $35 million upfront to initiate the partnership in 2007, including a $15 million equity investment in the North Carolina biotech. Its resulting exit leaves Targacept in full control of all programs subject to the alliance, each of which is still in preclinical stages. Targacept, which still has a potential $1.2 billion, multi-program collaboration in place with AstraZeneca, said it made $45 million over the life of its deal with GSK. In a March 4 note, analyst Robyn Karnauskas of Deutsche Bank said AstraZeneca is Targacept’s key partner, as the companies await Phase III data for TC-5214 in adjuvant treatment of refractory depression in the fourth quarter of this year. Targacept, which had about $252 million in cash on hand at the end of 2010, also is awaiting AstraZeneca’s decision on whether it will opt in on the Phase II schizophrenia and ADHD candidate TC-5619 – top-line data in ADHD are expected by the end of this quarter, with AstraZeneca expected to makes its call by mid-year.--JAH

Ipsen/GTx: GTx can’t seem to catch a break. When its Ostarine-focused alliance with Merck blew up last year, GTx at least had the committed support of Ipsen. The two have been partners since 2006 when they aligned to develop the biotech’s selective estrogen receptor modulator (SERM) toremifene to treat the side-effects of androgen deprivation therapy in prostate cancer patients. And Ipsen remained true even though toremifene’s clinical development path has been strewn with obstacles, including a 2009 complete response letter requiring an additional Phase III clinical trial. That’s not to say the alliance didn’t change; after the CRL, the two parties revised their 2006 deal, releasing Ipsen from milestone payments in exchange for in bankrolling up to $58 million to support the additional clinical trial. This week comes news that Ipsen is calling it quits on toremifene after all. Apparently the projected costs associated with the needed clinical trial exceed the $58 million sum the two brokered in 2010. “We spent significant time analyzing the business case for toremifene 80 mg and have concluded that the most appropriate course is to terminate our collaboration,” GTx’s CEO Mitchell Steiner said in a statement. Ouch. Investors hammered GTx’s stock, which slid 9% on the news to $2.35. The troubles with toremifene could mean some hard choices for GTx, which ended 2010 with $58.6 million in cash and cash equivalents. The company will likely need to find another partner for at least one of its Phase III programs, whether it is toremifene or Ostarine, currently in development for the treatment of muscle wasting in patients with non-small cell lung cancer. --EFL

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

Ipsen CEO Leaves...Coz of Too Many Deals?

It's always fun to read between the lines--and put in a few calls--when CEOs depart over 'strategic differences' with their boards. Such was the wording in a release issued by mid-sized Ipsen yesterday, announcing the departure of CEO and Chairman Jean-Luc Belingard.

After nine years at the helm, during which he oversaw the group's IPO in December 2005 and undertook some bold and interesting transactions including a cross-licensing and step-wise acquisition of Tercica beginning in July 2006 and a similar tie-up earlier this year with hemophilia-focused Inspiration, Belingard apparently agreed to step aside to make way for Amgen veteran Marc de Garidel.

We don't know precisely what the 'strategic differences' were, but they were almost certainly something do to with the speed and nature of Ipsen's internationalization. Garidel takes over "to lead the group's strategy in this new [deeply changing] market environment, in particular to strengthen its US and emerging markets operations," says the PR.

Belingard can't be accused of sitting still and doing nothing, though. As well as steering the group away from primary care drugs towards specialist, biotech products, he enlarged its footprint beyond France's borders: in 2002 almost half of Ipsen's sales came from France, now that figure's less than a third. Nor did he ignore the US: Tercica provided the first foothold, the 2008 acquisition of Vernalis' US operations another, and, although the US still accounted for less than 5% of Ipsen's overall sales in 2009, the Inspiration tie-up will increase that.

No, deals (or lack of) aren't the problem. Indeed, if our well-placed source is anything to go by, it's the opposite: too many deals, too little post-deal integration, not enough organic growth. (After all, Amgen's hardly the dealmaker of the century, is it?)"It was a divergence over the frequency of dealmaking," the source revealed.

Belingard, it seems, was poised for his next move, but the Board decided it was time to digest what had already been swallowed before forking out some more millions (albeit, usually these days, risk- and cost-mitigated millions). With less room to maneuver, Belingard decided it was time to go--apparently with no hard feelings. Indeed, he was involved in choosing his successor.

Garidel--another Frenchman, was this a criterion for this 68% family-owned, Paris-based group?--joins Ipsen from his position as VP International for Amgen's South region, which includes Southern Europe plus MEA and Latin America. So he ticks the emerging market box, and having spent about a third of his career in the US (first at Lilly, then at Amgen's HQ as chief accounting officer), he ticks the US box, too. (And the very fact that Garidel's Amgen background is considered so relevant must, at least, validate Ipsen's transformation biotech-wards.)

Now Garidel is hardly going to come in and tread water, either. (And anyway, imagine luring an upwardly-mobile executive into a job, even one based in Paris, where you want to slow things down.) He was apparently involved in Amgen's significant growth in Europe and beyond--though, perhaps tellingly, this has mostly been organic, rather than deal-driven. We likely won't know what he'll do--or be told to do--until the group's annual results announcement next Spring.

Our reading between the lines suggests that we may not be seeing any more Inspiration-al deals for a while (even though Ipsen's BD head Sean McKercher said last week in London that "many companies are now approaching Ipsen, wanting an Inspiration-like deal"...perhaps that's the problem? They're too sweet?). Chances are, if the source is to be trusted, that Garidel's tenure, at least initially, will be more about building on what's there than buying more.




image by flickr user oncle tom used under a creative commons license

DotW: Extraordinary Measures

The biopharma industry got glamorous this week with the debut of Extraordinary Measures, a ripped-from-the-headlines biopic based on John Crowley, now CEO of Amicus Therapeutics, and his attempts to develop a life-saving medicine for his two children suffering from the rare, inheritable enzyme deficiency called Pompe disease. New York Times film critic A.O. Scott didn't pan the flick, noting it rises above some of its made-for-TV trappings. (He wasn't quite so kind for the other science-focused pic of the week, Creation, about the life and times of Charles Darwin.)

Genzyme, which developed a FAQ sheet related to its ties to Extraordinary Measures and its "Special Medicine," got a little sliver of spotlight, and not the kind that comes with PDUFA dates, Form-483s, and its aging Allston Landing manufacturing plant. Also basking a bit were the biotech execs who mingled with celebs at the film's January 21 red carpet premiere, according to back-and-forth reports from some of our favorite Twitterati.

Speaking of extraordinary measures, Alcon's minority shareholders seem ready to go the distance, even in a protracted legal battle, to wrest a better deal from Novartis. We're certain Merck and Inspire Pharmaceuticals both suffered extraordinary disappointment after the Phase III failures of their respective HIV and dry eye disease drugs. Meanwhile, Pfizer and Teva are rumored to be duking it out for ownership of RatioPharm.

Most extraordinary of all, though, was the crash-and-burn of health care reform. In an amazing turnabout, Democratic hopeful Martha Coakley lost the race for the late Ted Kennedy's Massachusetts Senate seat to Republican Scott Brown. The result: as our own Mike McCaughan notes, in a surreal twist that proves truth really is stranger than fiction, the unthinkable status quo -- leaving our health care system as-is -- suddenly became a very possible reality.

As we ponder who gets to play the movie versions of Brown (how about this guy from The Wire?) and Coakley (Susan Sarandon?), it's time to wrap up the news in another edition of...



Ipsen/Inspiration Biopharmaceuticals: Ipsen's decision to align itself with hemophilia player Inspiration Biopharmaceuticals was an interesting--if not also inspired--choice. It's the latest twist in the big sibling/little sibling concept dealmaking, only here we see concretely the value to the bigger party. Ipsen has agreed to pay $85 million for a 20% stake in Inspiration and gets an option tied to development milestones to acquire another 47% for $174 million. In exchange, Ipsen receives $50 million in convertible notes and offloads development of OBI-1, a recombinant porcine factor VIII compound currently in late Phase II trials that the French pharma in-licensed from long-term partner Octagon in 2008. (Ipsen also gets a 27.5% share of future OBI-1 sales--if it doesn't swallow up Inspiration first.) Ipsen is deviating from the strategy its management professed in 2008, where unlocking OBI-1's full value was clearly tied to the French group's "direct commercialization" of the medicine. Now Ipsen seems to think that marketing of OBI-1 is best left to a company with in-house hemophilia expertise and a portfolio of products. Many from Inspire's management team hail from Baxter, and the biotech has three other hemophilia programs built on recombinant protein manufacturing technology. But Ipsen's decision also parallels a tack it took in 2006 when it scooped up a partial stake in Tercica as part of a plan to become a global endocrinology player. Two years later Ipsen bought out its partner for an additional $400 million to deepen its footprint in the U.S. and Canada. One other interesting twist to the deal: project financier Celtic Pharma also won big in the process, garnering its first exit. Recall Celtic had an equity stake in Inspiration and a direct interest in that firm's lead compound, IB1001, a novel recombinant Factor IX drug. -- Carlene Olsen and EFL


Novartis/GenVec: Novartis's small deal with gene therapy developer GenVec in the hearing loss space is another example of its desire to diversify into areas of unmet medical need, says "The Pink Sheet" DAILY. The Swiss drugmaker pays a modest $5 million up-front and buys $2 million in GenVec common stock for the biotech's preclinical, gene-based "atonal therapy" program, which is designed to restore hearing loss and balance function by stimulating the regeneration of sensory hair cells in the ear. In addition to the up-front and the validation of a deal, GenVec stands to gain $214 million in milestone and royalty payments if products are commercialized. Novartis also picks up full development control--and cost--of the gene therapy program, and will manage the collaboration via its New Indications Discovery Unit, a group charged with exploring opportunities in diseases outside the drugmaker's current R&D strategy. Drugs aimed at stopping or reversing hearing loss certainly fit that description. Devices currently dominate the hearing loss/balance market and IN VIVO Blog is aware of only a few other companies attempting to play in this space: Quark Biotech, Auris Medical, and Otonomy. On a much smaller scale, one might see Novartis' move as reminiscent of its decision to take over specialty ophthalmic player Alcon, especially if Novartis follows its toe-dipping GenVec deal by taking a more significant stake in another player with consumer or device offerings. -- Emily Hayes


Alcon/Sirion Therapeutics: While Alcon's minority shareholders gear up for the Novartis fight, the specialty eye company is trying to show that it's business as usual, at least when it comes to alliances. This week Alcon purchased U.S. rights for two FDA-approved topical eye-care products, the corticosteroid Durezol and the antiviral Zirgan. In addition, Alcon purchased global rights, excluding Latin America, for Zyclorin, a Phase III 0.1% cyclosporine solution for dry eye and other ocular surface disease. Terms of the transaction were undisclosed. The news emphasizes again the premier position Alcon--and now Novartis thanks to its at least 77% ownership stake in the company--plays in ophthalmology. Alcon has been among the most active deal makers in the ophtho space in recent months, despite claims from big drug makers that this specialist market is of primary interest. Among Alcon's notable deals: its take-out of device marker Optonol, its earn-out heavy purchase of EsbaTech, and its licensing/option-to-buy agreement with Potentia Pharmaceuticals. The Sirion deal adds to Alcon's bucket of late stage/marketed assets, while shifting the VC-backed biotech's focus to its much earlier stage clinical assets, especially the Phase II fenretinide, an oral vitamin A-binding protein antagonist being developed to treat the dry form of age-related macular degeneration. For more on Sirion, which raised $27.7 million from a syndicate of 17 investors in October 2009, check out this story from the July '09 issue of START-UP.--EFL


Axxam/Juvenile Diabetes Research Foundation/National Multiple Sclerosis Society: It seems to be the first collaboration of its kind. Two nonprofits--the JDRF and the National MS Society's venture philanthropy group Fast Forward--have teamed up with the Bayer spin-out Axxam of Milan, Italy, to hunt for drugs targeting a specific ion channel, Kv1.3, whose misregulation in certain immune cells has been implicated in both diabetes and multiple sclerosis. Financial terms of the agreement weren't disclosed, but Fast Forward's president Timothy Coetzee told "The Pink Sheet" DAILY that the two patient advocacy groups will invest equally in the project, with Axxam also kicking in funding. Under the agreement, Axxam will use its high-throughput screening technology to analyze its chemical library in search of compounds that modulate Kv1.3 ion channels in T cells. Apparently Axxam first reached out to JDRF and proposed the two groups review the Italian firm's compound library for diabetes candidates. JDRF then took the proposal to Fast Forward and suggested pooling resources since the work would be around a target implicated in both diseases. -- Joseph Haas