2013 Alliance of The Year Nominee: Amgen/Astellas

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

In announcing a strategic alliance with Astellas Pharma in May, Amgen has placed an economic bet on Japan. It is also, indirectly, a bet on economic recovery in the U.S. and Europe, Japan’s two biggest export markets.

In fact, Amgen has been talking up its Asian ambitions since first broaching the idea at a business review meeting in New York last February. After rapid-fire acquisitions in Brazil and Turkey, and a partnership in Russia, “expanding into Japan and China are next on the Agenda,” said CEO Robert Bradway.

Four months later, Amgen inked a two-pronged alliance with Astellas. In the first stage, the partners co-develop and co-commercialize five Amgen drugs for the Japanese market: one in cardiovascular, one in  osteoporosis, and three oncology candidates. Among them are AMG145, the Phase III antibody against PCSK9 for hyperlipidemia and Phase II blinotumomab, the anti-CD19 bispecific BiTE antibody against hematological tumors picked up in its 2012 acquisition of Micromet. At a recent Credit Suisse event, Amgen CFO and EVP Jonathan Peacock projected the first launch in 2016.

The second stage, a joint-venture that is 51% owned by Amgen, opened in Tokyo in October. Operating as Amgen Astellas BioPharma KK, the JV is structured to allow Amgen to turn the operation into a wholly-owned Japanese affiliate as early as 2020, and a direct channel into Japan for any molecule in its portfolio including its six biosimilars in development. Eiichi Takahashi, a cardiologist in Pfizer’s Japan subsidiary who led Pfizer’s medical affairs organization for the Asia Pacific region, will head up the JV.



The move feels like a do-over. Amgen had launched a JV with Kirin Brewery in 1984, and in 1992 it formed Amgen KK in Japan, as a wholly owned subsidiary. It pulled the plug on Amgen KK in 2008, selling shares in the subsidiary to Takeda as part of an agreement in which it licensed 13 molecules to Takeda for development and commercialization in the Japanese market. Takeda paid $200 million upfront and is on the hook for over $700 million in development costs and success-based milestones, as well as Japan-specific royalties. Back in 2008, then-Amgen R&D chief Roger Perlmutter insisted to IN VIVO that Amgen was not "abandoning Japan." Rather, partnering was the answer.

And to be sure, partnering is still the answer. The Big Biotech knows first-hand the challenges, particularly as regards recruitment, in establishing a de-novo presence in Japan. But it is confident that it’s chosen the right partner in Astellas, whose strong cardio franchise and whose savvy moves in oncology recommended it to Amgen.

And it is confident that it’s targeted the right region in Japan, whose economy was the fastest growing in the developed world this year, goosed by the fiscal expansionary policies of Abenomics and by a recovery in exports – particularly car shipments, which grew 31% year-over-year last October. And according to Evaluate Pharma, Japan was the best performing region – using government-reported data – in terms of US$ Rx sales, posting 17% growth in 2010/2011 compared to 3.8% for Europe and 1.5% for the US, and likewise clobbering the US and Europe in terms of local currency growth.

And while the Japanese drug market has recently been slowed by biennial price reductions, generic inroads, and a price constraining national health budget, the future holds an easing of regulatory burden, an aging demographic, and a strong pipeline. Traditional regulations protecting the domestic market have crumbled over the past two decades, ushering in western investment and the presence of western firms. Takeda’s recent announcement naming GSK vaccines chief Christophe Weber as COO, putting him in line to succeed Yasuchika Hasegawa as CEO, is a symptom of this larger opening to the west.

In a canny move, Amgen, in its bold deal with Astellas, finds itself at the intersection of these global trends, and poised to cash in. Definitely worthy of our alliance of the year accolade. 

Thanks to Eddie O. for the flickr image // creative commons

Deals of the Week Looks At How Amgen’s Global Expansion Affects Partnering

why yes, these are Japanese flip-flops, why do you ask?

Amgen Inc. has made a big deal about expanding into Japan and eventually building a standalone subsidiary there. Now, the biotech’s Japanese expansion strategy is paying off for at least one of its partners: Cytokinetics Inc.

The two companies announced June 12 that they have expanded an existing collaboration for the heart failure drug omecamtiv mecarbil and other related compounds to include Japan. Cytokinetics will receive $25 million from Amgen in the form of a $15 million upfront fee and a $10 million stock purchase, sold at a 36% premium. The company is also eligible to receive up to $50 million in pre-commercialization milestone payments for the development of omecamtiv in Japan, as well as royalties on sales of the drug in the country. Amgen will also reimburse Cytokinetics for the cost of a Phase I study that will support the inclusion of Japanese patients in a potential Phase III program for the drug.

For investors, the deal represented a vote of confidence in omecamtiv, and Cytokinetics stock opened June 12 up 15% over the prior day’s closing price. The $25 million in cash is also important to Cytokinetics, which ended the first quarter of 2013 with $61.6 million.

Omecamtiv, a novel cardiac myosin activator, is one of Cytokinetics’ two lead programs. A Phase IIb trial evaluating an intravenous form of the drug in acute heart failure patients has completed enrollment, and a Phase II trial evaluating an oral formulation in outpatients with heart failure started in the first quarter. Amgen is conducting the trials.

Under the original 2006 collaboration, which excluded Japan, Amgen paid Cytokinetics $42 million upfront and paid $33 million to buy stock in exchange for an option to license omecamtiv. Amgen exercised that option in 2009 after positive Phase IIa data read out, and paid Cytokinetics another $50 million upfront and agreed to pay $600 million in milestones.

It looks as though the Cytokinetics deal expansion may be a one-off case, however. A review of Elsevier’s Strategic Transactions database revealed Amgen doesn’t have many other licenses that specifically exclude Japan. One example is KAI Pharmaceuticals Inc., which Amgen acquired in 2012 for $315 million. That acquisition excluded Japan, where Ono Pharmaceutical Co. Ltd. had previously bought the license.

But Japan remains the world’s second largest pharma market, and Amgen’s efforts to rebuild in the region could help future partners, both in terms of deal value and in that signing a single global partner can sometimes speed up the drug development process. Amgen announced plans earlier this year to aggressively expand in Japan and build a Japanese subsidiary by 2020. That reversal comes only five years after the company left the market in 2008, when it out-licensed 13 compounds to Takeda Pharmaceutical Co. Ltd. for $200 million upfront and $702 million in R&D funding and milestones. As part of that deal, Takeda acquired Amgen’s Japanese subsidiary Amgen KK for an undisclosed price.

In May, Amgen unveiled more details about how it will execute on its re-entry plan, namely through a partnership with Astellas Pharma Inc. with which it will form a joint venture to bring Amgen products to market in Japan. The Tokyo-based JV will be 51% owned by Amgen and 49% owned by Astellas and operate as Amgen Astellas BioPharma KK. The deal is structured to allow Amgen to turn the operations into a wholly-owned Japanese affiliate as early as 2020.

Amgen declined to provide any valuable insights on what might be next in terms of partnering in the region. But one thing is certain, we can expect more. CFO Jonathan Peacock specifically commented on Japan and China during the Goldman Sachs Global Healthcare conference June 11. “We’ll continue to branch out and make targeted investments in the markets that are important to our future growth,” he said. -- Jessica Merrill

We could never decline to provide you more valuable insights -- how could we when it's time for ...

AstraZeneca/Pearl Therapeutics: British pharma AstraZeneca PLC has made a big play in respiratory disease with the $1.15 billion acquisition of Pearl Therapeutics Inc. AstraZeneca will pay $560 million upfront, as well as $450 million in development and regulatory milestones related to early-stage pipeline assets to acquire all shares of privately-held Pearl. Pearl shareholders are also eligible to receive $140 million in milestones related to sales of its lead pipeline candidate. The deal puts AstraZeneca in the midst of the fiercely competitive and changing treatment space for chronic obstructive pulmonary disease. The company gains PT003, a fixed-dose combination of glycopyrrolate, a long-acting muscarinic antagonist (LAMA), and formoterol, a long-acting beta-2-agonist (LABA), in Phase III development. It also gets an earlier-stage triple combination that includes a LAMA, LABA and inhaled corticosteroid (ICS). The drug is only in preclinical development, but AstraZeneca plans to move it into Phase II testing immediately. Triple combinations are expected to eventually play a major role in the market. Respiratory disease is one of three key therapeutic areas AstraZeneca is focusing on as part of its turnaround strategy, and the company has increased the pace of development of several projects. The acquisition of Pearl comes just a week after AstraZeneca announced it was pulling out of one of its other late-stage programs with partner Rigel Pharmaceuticals Inc. after the Phase III rheumatoid arthritis drug fostamatinib produced disappointing results. --Lisa LaMotta

Xenon/Isis: In a reversal of its usual out-licensing strategy, Xenon Pharmaceuticals Inc. has exercised an option to in-license a potential treatment for anemia developed under a 2010 alliance with RNA technology specialist Isis Pharmaceuticals Inc. The firms announced June 10 that Xenon will pay $2 million to Isis to license XEN701, a molecule in preclinical development that is designed to inhibit the production of hepcidin, a protein produced in the liver. By inhibiting hepcidin, XEN701 could offer a non-erythropoietin receptor-based mechanism for the treatment of anemia. It is the first drug to enter development from Isis’ collaboration with Xenon. Under the original deal, Xenon paid Isis an undisclosed fee in the form of a convertible promissory note in exchange for using the latter’s antisense technology to discover and develop drugs against hepcidin and hemojuvelin for anemia. Xenon also gained an option to license worldwide development and commercialization rights to candidates produced from the partnership. Isis also is eligible for milestones and royalties. Vancouver-based Xenon has been more active out-licensing its human clinical genetics platform out to larger pharma partners, including Merck & Co. Inc., Teva Pharmaceutical Industries Ltd. and Roche. --JM

Questcor/Novartis: Questcor Pharmaceuticals Inc. announced June 11 that it has acquired rights to develop Synacthen (tetracosactide) and Synacthen Depot from Novartis AG in the U.S. and plans to acquire rights in certain other countries subject to closing conditions. The deal is another example of big pharma’s increased willingness to sell-off non-priority assets, and Questcor appears intent on breathing new life into a mature brand, similar to how it has revitalized its existing Athcar Gel (repository corticotropin injection). The Synacthen products are already approved in 40 countries for certain autoimmune and inflammatory conditions, including rheumatoid arthritis and multiple sclerosis, and are also approved as a diagnostic test for adrenal insufficiency, but they have never been approved in the U.S. Questcor plans to develop the products for the U.S. market and use the drugs as an opportunity to build an international presence. Synacthen is a synthetic 24 amino acid melanocortin receptor agonist, an area of research Questcor specializes in with Athcar. Questcor has successfully built Athcar into a high-growth brand with sales of more than $500 million in 2012 by broadening its use from a niche indication in infantile spasm to larger patient populations like multiple sclerosis and nephrotic syndrome. But the company has also drawn criticism from insurers and some in the health care community for aggressively raising the price from $2,000 per vial to $28,000 per vial as part of its repositioning of the drug to fit in the rare disease business model. --JM

AstraZeneca/Cancer Research UK: Building on existing collaborations with Cancer Research UK, AstraZeneca is providing scientists funded by the world’s biggest cancer charity with compounds for use in developing potential new oncology drugs. One new project, announced June 14, will involve scientists at the University of Manchester testing compounds targeting a key protein involved in DNA damage response. AstraZeneca has first rights to any molecules discovered through the agreement and can choose to continue further development. In return, Cancer Research Technology Ltd, the UK charity’s commercial arm, will receive royalty payments when the project reaches certain milestones. CRT also has the option to develop the molecules further if AstraZeneca decides to pass. Britain’s second-biggest drug maker has also invited Cancer Research UK scientists from the Paterson Institute to test AstraZeneca’s compound collection against a potential oncology target at its UK research center in Alderley Park. It is the first time AstraZeneca has invited an external party to screen such an extensive set of compounds within its screening facility. AstraZeneca will have first rights of negotiation on any resulting projects. CRT has a growing, 90-strong in-house drug discovery effort which has expanded with the help of funding from Cancer Research UK – and has access to clinical development capabilities in conjunction with Cancer Research UK's drug development office. This includes CRUK’s Clinical Development Partnerships initiative, designed to move de-prioritized pharma assets into the clinic. This wide-ranging R&D capability and close linkage with academia has attracted in AstraZeneca to CRT, with the two first partnering in 2010 [W#201020370]. --Sten Stovall

BioLineRx/Jiangsu Chia-Tai Tianging Pharmaceutical: Israeli biotech BioLineRx Ltd. lined up a rare early-stage out-licensing partner for one of its two candidates for hepatitis C this week. Liver disease-focused Jiangsu Chia-Tai Tianqing Pharmaceutical (CTTQ) licensed development, manufacturing and commercial rights in China and Hong Kong to BL-8030, a preclinical second-generation protease inhibitor for HCV. BioLineRx receives an undisclosed upfront payment plus potential development, regulatory and commercialization milestones that could total $30 million for the compound. The Israeli company also could earn high-single-digit royalties on sales if ‘8030 reaches market. BioLineRx also will have access to CTTQ’s clinical data for the compound and can use the data for regulatory purposes outside the territories licensed by the Chinese firm. BL-8030 is one of two HCV candidates being developed by BioLineRx, along with Phase I/II BL-8020, an inhibitor of HCV-induced autophagy. Both compounds were in-licensed from France’s GenoScience Pharma in early 2012[W#201220060]. In a release, CTTQ President Jian Sun Emba noted that HCV prevalence is high in China, with about 3.2% of the population, or roughly 43 million individuals, infected with the virus. –-Joseph Haas

BMS/Simcere: In their third deal in three years, Bristol-Myers Squibb Co. and Simcere Pharmaceutical Group will collaborate in China to co-develop and commercialize a subcutaneous formulation of Bristol’s rheumatoid arthritis treatment Orencia (abatacept), the companies announced June 14. Simcere, based in Nanjing, will perform and fund all development and regulatory activities required to obtain marketing approval in China based on a pre-agreed development plan. The companies will share responsibility for commercializing Orencia SC in China, and will share profits and losses related to Orencia SC there. Financial terms were not disclosed. If approved, Orencia would become Bristol’s first biologic to enter the Chinese market. The novel T-cell co-stimulation modulator is approved already in the U.S., Europe and Japan, and booked global sales of $1.2 billion in 2012. It would theoretically launch into a very competitive RA market in China, which includes novel biologics, biosimilars, and is dominated by NSAIDs. Although Simcere would not comment on development timelines for China, the company confirmed to PharmAsia News that it would need to conduct certain clinical studies in China to obtain regulatory approval for Orencia. BMS and Simcere first tied up in 2010 to co-develop BMS-817378, a small molecule c-Met inhibitor in preclinical development. Under that deal, Simcere is funding and taking the lead for clinical trials in China through proof-of-concept in return for exclusive China marketing rights for the oncologic, while BMS retains marketing rights in the rest of world. In a second deal, announced in 2011, BMS and Simcere are co-developing a preclinical CETP (cholesteryl ester transfer protein) inhibitor, BMS-795311, in China. --Josh Berlin

photo from flickrer nb360 used under creative commons license

Deals Of The Week Takes Action

It was quiet on the deal making front as major news this week was of a regulatory or clinical nature. Despite a three-month delay, GlaxoSmithKline and Human Genome Sciences earned a BlyS-fully easy approval March 9 for Benlysta (belimumab), the first new lupus treatment in 56 years. That the approval didn’t come with a risk mitigation scheme or onerous labeling shows yet again that regulators are treading lightly in arenas where good therapeutic options are lacking. (Just practice the phrase "unmet medical need" three times fast.)

The good news about Benlysta was likely a comforting balm for GSK – or at least distracted the big pharma’s investors. Less than 48 hours later, the company and its partner Tolerx announced disappointing results for a Phase III trial of their humanized anti-CD3 monoclonal antibody for Type 1 diabetes, otelixizumab. Otelixizumab’s failure wasn’t entirely unexpected: a similar drug from Eli Lilly (remember them?) and MacroGenics called teplizumab has also floundered in the clinic.

While otelixizumab's results haven't yet sparked a “no-deal”, it wouldn’t be surprising if GSK were to decide the DEFEND-1 data made its 2007 agreement with indefensible. For the moment, the big pharma is investigating additional dosing regimens of the drug and has halted recruitment in a separate clinical trial.

Of course, GSK has to share the late-stage failure spotlight with Sanofi-Aventis and its partner Regeneron, who revealed this week that their non-small cell lung cancer drug aflibercept failed to increase overall survival time relative to comparator docetaxel in a Phase III study. The announcement is a definite setback for the French pharma, which has spent the past two years rebuilding its oncology business with a greater emphasis on targeted therapeutics and biologics.

Of course, the failure also raises questions about Sanofi’s ability to meet its revenue goals via its internal pipeline, illustrating yet again that to scale its 2013 patent cliff, the drug maker had few options but to consider a sizeable acquisition on the order of Genzyme. (If anyone's still curious about that M&A, we'll have more in the c oming March IN VIVO.)

Aside from clinical setbacks, this week’s deal-making highlights feature Japanese pharmas, academic collaborations and the importance of reprofiling existing compounds to identify potential new uses. Drumroll, please...

Eisai/Epizyme: Privately-held Epizyme’s March 10 agreement with Eisai is the biotech’s second big pharma partnership of the year, following a January tie-up with GlaxoSmithKline. But Epizyme CEO Robert Gould is eager to stress that the two deals are different and serve separate parts of his firm’s business strategy. The deal with Eisai centers around EZH2, a preclinical epigenetic enzyme expected to yield treatments for lymphoma and other cancers in genetically defined patients. As part of the deal, Epizyme will receive $6 million upfront and can earn up to $200 million in milestones and up to double-digit royalties. The Japanese pharma also will cover 100% of R&D costs through human proof-of-concept, at which point Epizyme can opt in to share development and U.S. commercialization costs and profits. In contrast, the GSK deal centered on a defined but undisclosed package of histone methyltransferases. GSK paid $20 million upfront with the potential for up to $630 million in milestones plus double-digit royalties. That deal is basically a “handover” of the related assets to GSK, whereas the Eisai deal involves joint decision-making with the possibility of Epizyme taking on the role of full partner, says Gould. If Epizyme elects to opt in after proof-of-concept, it would co-commercialize the resulting drug in the U.S., while Eisai would retain development and commercial rights for the rest of the world.--Joseph Haas

AstraZeneca/Galderma: AZ on March 7 signed up global dermatology giant Galderma to reprofile some of its assets to treat skin diseases such as psoriasis, acne and atopic dermatitis. The five-year R&D agreement, for which financials weren’t disclosed, sees the French-based biotech gain access to several already-identified AZ compounds from within the big pharma’s core therapy areas, including oncology, inflammation and central nervous system. The deal is both a sign of the times, and a reminder of how AstraZeneca stands apart from some of its big pharma peers. It’s another example of large drug firms’ push to squeeze out all the value they can from their assets, especially in non-core therapy areas. This is the second reprofiling alliance AZ has struck: in 2009 it signed a similar agreement with Alcon in ophthalmology. Under terms of that deal, should Alcon discover potentially interesting compounds, it can license them on a case-by-case basis, with AZ eligible for regulatory milestones and royalties. The Galderma tie-up also emphasizes AZ’s ‘pure-play’ strategy and its preference to team up with recognized experts in areas it considers outside its expertise. That’s in contrast to companies like GlaxoSmithKline, which paid $3.6 billion in 2009 to buy dermatology player Stiefel, creating its own specialist business with attractive, risk-mitigating trimmings including OTC and aesthetic portfolios. Not that dermatology is, strictly speaking, a new opportunity for either GSK or AZ: both used to have their own skin-care businesses, in the days before dermatology went out of fashion. --Melanie Senior

Evotec/Harvard: It ain't just big pharma heading back to school. Even biotechs are looking for tie-ups with universities these days. German small-molecule drug discovery company Evotec announced a deal this week with Harvard University and the Howard Hughes Medical Institute to investigate new therapies for diabetes, specifically in the area of beta cell replication. Financial terms weren’t disclosed. Harvard professor Doug Melton will be the principal investigator, working alongside Chevy Chase, Md.-based nonprofit HHMI and the German pharma. The move deepens Evotec’s commitment to diabetes, following a deal last summer to acquire metabolic disorders specialist DeveloGen. That company, now operating as an Evotec subsidiary, has multiple projects underway, including insulin sensitizers and drugs that prevent destruction of existing pancreatic cells as well as compounds that induce beta cell regeneration. Its immune-modulating drug DiaPep277, which protects pancreatic cells, is in Phase III trials, and was partnered with Andromeda prior to the acquisition. DeveloGen also has an ongoing discovery partnership with Boehringer Ingelheim. Evotec says the goal of its new arrangement with Harvard and HHMI is to create orally available small-molecule drugs that trigger or support beta cell regeneration. --Paul Bonanos

Yakult Honsha/Aeterna Zentaris: Behold another sign that regional deal-making is alive and well. On March 9, came news that Aeterna Zentaris, a Canadian company specializing in oncology therapies, has partnered Japanese rights to its lead oncologic, perifosine, for $8.3 million upfront and another $60.9 million in clinical and regulatory milestone payments. Perifosine is a novel oral medicine that inhibits Akt activation in the phosphoinositide 3-kinase (PI3K) pathway, which is associated with programmed cell death, cell growth and cell survival. Phase III trials in colorectal cancer and multiple myeloma are ongoing in the U.S. and EU.The deal with Yakult Honsha, a diversified Japanese player that develops foods, beverages and cosmetics in addition to pharmaceuticals, represents the third time Aeterna has sliced up rights to perifosine. In 2002, it licensed North American rights to the molecule, in Phase I studies at the time, to privately held Access Oncology for at least $18 million. (Those rights transferred to Keryx Biopharmaceuticals when it purchased Access Oncology two years later.) Aeterna also cleaved off Korean rights to the molecule, dealing them to Handok. In general, blocking this particular cellular cascade is an area of great interest to pharmas looking to extend their oncology franchises, with developers of inhibitors specifically targetting PI3K striking rich deals. (Think Gilead/Calistoga or Sanofi-Aventis/Exelixis.) Deal terms for Akt inhibitors don’t appear to be as pricey based on Elsevier’s Strategic Transcations database. Of course, because Aeterna Zentaris out-licensed the highly valuable North American rights to perifosine at Phase I, it’s also limited the upfront potential dollars it could receive, demonstrating the trade-offs companies make when partnering at such an early stage. --EFL

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

Deals Of The Week Goes To The Oscars

It's that time of year. The science of bracketology has yet to enliven talk around the water cooler, the official start to the 2011 baseball season is still a month away (no, spring training doesn't count), and all the backchecks, forechecks, and stick-checks are about as meaningless as the top shelf or the five hole. (Yes, this blogger admits she's a philistine.)

Which leaves us with Oscar drama. The Black Swan or The King's Speech? Sorry, not The Social Network. An Oscar nod to a film about a 26-year-old and a company that stands to raise a gazillion dollar IPO is a little like giving a 40-something president in his first term the Nobel Peace Prize. (Oh, wait a minute.)

Far from Hollywood's glitterati, there's been plenty of drama in the biotech industry this week and a couple of Oscar- (er, Roger?) worthy performances. Roche's Genentech continues to challenge FDA, trying to position itself as David against a regulatory Goliath in the ongoing brouhaha surrounding Avastin's use in breast cancer and the FDA Oncology Drugs Advisory Committee's decision to rescind accelerated approval.

On Feb. 24 Genentech said a hearing to review the decision will go forward, but within ODAC itself. That's not what the drugmaker wanted; it was pressing for "an objective advisory committee with substantial breast cancer expertise," arguing that the recent ODAC session was underpowered in this indication. But FDA will use its ODAC to make the decision, with Commissioner Margaret Hamburg's designee Karen Midthun arguing the rules don't allow FDA to substitute a different advisory committee. (Recall Avastin use in this indication was shot down 12-1 in the December meeting.)

Moreover, FDA won't be adding additional consultants to the current ODAC panel, arguing that the controversial nature of Avastin's breast cancer approval makes it difficult to find additional unbiased panelists. "We must face the reality that many experts in this area have already expressed a view on this issue and/or might be considered as having conflicts of interest because of their association with one of the parties to the hearing or competitors to Genentech," said Midthun.

To add to the excitement, the biopharma community won't just be watching, it will actually be in town when the ODAC convenes. The meeting coincides with BIO's national wheeling and dealing event in DC in late June. No word on whether FDA will roll out a red carpet in advance of the event, but we're guessing it's not in the regulatory body's budget.

Other biopharma events worth a call-out this week? For best stoic performance, the leading candidate has to be David Bredt, Eli Lilly's beleaguered head of neuroscience, who unexpectedly resigned this week. And for best comedy of errors, in a sequel to the Bad News Bears, Johnson & Johnson is clearly the leading nominee. The big pharma continues to hamstring its own R&D advances with manufacturing slip-ups. This week came news of problems with its Simponi injector and a recall of more than 660,000 Sudafed packages due to a 'not'-ty typo in the label that reminds consumers the following: "do not not divide, crush, chew, or dissolve the tablet." That's got to be a nomination for worst proofreading in a major consumer product label, not to mention an affrontery to the King's English.

We don't have the envelope yet, but odds are the winner for most insightful deal analysis is going to be...


Gilead Sciences/Calistoga: For the DOTW Oscar for best performance in a competitive space, with a nod to a separate category -- risk-sharing -- look no further than this week's tie-up between Gilead and privately-held Calistoga. Gilead announced February 25 it would pay $375 million in upfront cash, plus another $225 million in potential milestones, to take out Calistoga, one of the most closely watched entities in the PI3K inhibitor space. The on-the-table dollars represent a 4.6x increase over the $81 million the four-year-old start-up has raised from its venture investors, which include Frazier Healthcare, Alta Partners, and Three Arch. It's also one of the richest deals yet in the PI3K space, an arena big pharmas are eager to enter because the signaling pathway involved is implicated not only in oncology, but also inflammatory disease, cardiovascular disorders, and neuro-degenerative conditions. The acquisition gives Gilead a Phase II asset and a basket of interesting, highly specific but early-stage PI3K blockers. It also deepens the big biotech's commitment to oncology, building on its 2010 acquisition of CGI Pharmaceuticals and that firm's kinase discovery engine. Gilead's decision to make Calistoga its base of oncology expertise via the creation of a stand-alone Seattle division is probably smart but could be tricky to execute. Recall Gilead's commercial strength remains squarely in the anti-infective space and the strategy to acquire oncology capabilities is one other biotechs have tried and failed to replicate in the past. Biogen (via the Idec merger), for example, never grew into the dominant oncology player it planned to be and has since jettisoned that half of its business, betting that focus not diversification will be the greatest path to shareholder value. The onus on Gilead is to ensure the Calistoga team, especially its R&D and early clinical development execs, stay on board; the earn-out structure may help in that regard. -- EFL

TiGenix/Cellerix: Belgium-based regenerative medicine player TiGenix and Spanish cell therapy firm Cellerix propose to combine forces via a share exchange to create “a new European leader in cell therapy." The enlarged company will have two marketed products in Europe (including the first ever cell-therapy product to be approved by the European Medicines Agency, TiGenix’s ChondroCelect), two stem cell platforms (TiGenix’s allogeneic one, and Cellerix’s autologous one), and at least €33 million in cash that will last two years minimum. Indeed, both sides have concurrently secured additional financing from their shareholders, signaling investors’ general support for the deal. TiGenix has secured €10 million of a planned public rights offering, while Cellerix’s investors have committed the final €18 million of a €28 million round that began in late 2009. The hope is the newly enlarged group will provide investors a better shot at getting a return. Since its inception Cellerix has raised about €60 million as one of Spain’s first biotechs, and this deal values the Barcelona-based group at about the same. In the short term, the combined group may be better placed to lock in an interested big pharma partner. Importantly, Cellerix’s platform, based on expanded adult stem cells extracted from adipose tissue, creates off-the-shelf products that are less complex and expensive to create and administer than TiGenix’s ChondroCelect, which requires harvesting a patient’s own cells. Signs that big pharma is no longer running away from cell therapies? Think Cephalon’s December 2010 deal with Australia’s Mesoblast, GlaxoSmithKline’s toe-dipping with Harvard Stem Cell Institute, and Sanofi-Aventis’ tie-up with the Salk Institute. -- Melanie Senior

Forest Labs/Clinical Data: Much of the buzz around this week’s merger agreement between Forest and Clinical Data was around valuation. Forest is paying $30 per share, or $1.2 billion, plus up to $6 per share in contingent milestones to get ClinData’s antidepressant vilazodone, which was approved in January in the US for major depressive disorder. The price was less than ClinData’s prior Friday closing price of $33.90 and only a 6.6% premium over the volume-weighted average trading price since the vilazodone approval. But there’s considerable risk attached to vilazodone; hence the contingent payout to shareholders, which begins to kick in at $1 per share if trailing four-quarter sales exceed $800 million within five years. The drug label looks “clinically undifferentiated to us,” Leerink Swann noted, adding that the lack of an active comparator in trials “makes it difficult to tease out any meaningful benefits.” That said, it also believes Forest can get solid formulary coverage for the drug based on its track record with payors with its existing medicines -- Celexa and Lexapro -- and the strength of the new brand in a category that’s become genericized. (Lexapro, for example, goes generic next year. ) Vilazodone’s development is a true success story for ClinData, which got the drug via its 2005 acquisition of Genaissance Pharmaceuticals for $55 million, and ultimately for the Genaissance team, which had licensed vilazodone from Merck KGAA in one of its early pharmacogenetics programs. But like Vanda and its schizophrenia drug iloperidone, ClinData did not fully execute on the original premise for the development of vilazodone: i.e. its initial evaluation using pharmacogenetics would lead to a drug approval in parallel with a biomarker that would direct the drug to an enriched patient population for which it would show a more favorable risk/benefit profile. Indeed, for psychiatric drugs, that kind of targeting still seems a long way off. -- Mark Ratner

Kyowa Hakko/ProStrakan Group: Best foreign drama has to be the evolving Prostrakan/Kyowa Hakko tie-up. Three months after putting itself up for sale, U.K.-based specialty pharma ProStrakan might be teaming up with Japan's Kyowa Hakko Kirin. The 130 pence-per-share deal, announced Feb. 21, values the company at about £292 million ($475 million). If finalized, ProStrakan would provide Kyowa a commercial presence and regulatory expertise in Europe and the U.S. that would be useful as it looks to commercialize its pipeline assets outside of Japan. The two companies are already familiar biz cronies: Kyowa is a licensee for two of ProStrakan's products in Japan and other Asian countries. The price represents a 41% premium to ProStrakan's share price one day before its offer period began in November 2010, and it's supported by more than 47% of the specialty pharma's shareholders. But most analysts believe it undervalues the U.K. group. ProStrakan suffered a series of regulatory and manufacturing setbacks in 2010, sending its shares to an all-time low of barely 40 pence in September. That led to an unsolicited offer from privately held pan-European Norgine (which, when rejected, went on to buy a 12.6% shareholding), and, subsequently, ProStrakan's decision to put itself up for sale. The logic behind the move: fix ProStrakan's internal commercial and regulatory issues and then secure a reasonable sale price. The first has happened, but the second hasn't, according to some. "A fair price would have been 160 pence per share," Nomura Code analyst Samir Devani told sister publication "The Pink Sheet" DAILY. The current deal values ProStrakan at about 2.7 times revenues, less than the 3.5 times revenues paid by Meda for U.S.-based specialty pharma Alavan Pharmaceuticals in August 2010, and well below the (admittedly punchy) 4.5 times revenues paid by Biovitrum for orphan-diseases focused, pan-European player Swedish Orphan in November 2009. -- Melanie Senior

Roche/Transgene: And finally, the DOTW Oscar for best performance in the face of adversity goes to Transgene, which this week announced its big pharma partner Roche was pulling out of a collaboration to develop the smaller company's TG4001, a Phase 2b therapeutic vaccine for lesions caused by Human Papilloma Virus infection. The good news (also known as the spin): Roche's decision won't have a significant impact on Transgene's financial situation, at least in the short term. Also, the termination won't slow down the ongoing Phase IIb trial, which is structured to test the vaccine in over 200 patients. Transgene already has 195 patients enrolled in its mid-stage study, and anticipates interim data by the end of the year or early in 2012. In addition, Transgene "regains full and unencumbered development and commercialization rights to the product" according to the press release announcing the news. That means when the licensing deal officially concludes this summer, Transgene can look for another deep-pocketed partner to help prepare a registrational trial. Will another pharma bite? Specialty products and especially vaccines are all the rage these days, and Trangene emphasized in its press release that the "no deal" was the result of a strategic decision by Roche, and "is not data driven." The question is who might have greater strategic interest in HPV than the Swiss pharma, which via its diagnostic business is developing its cobas HPV test to individually detect HPV-16 and HPV-18, the two HPV genotypes causing 70% of cervical cancer cases. (Interestingly, the Swiss pharma published new positive data about the test this week in the American Journal Of Clinical Pathology.) -- EFL

DotW: Navel Gazing

It was a week of painful navel-gazing from many in the venture community, as some of the industry’s best and brightest gathered in Napa for the annual C21 Bioventures conference at the Meritage Resort.

A panel of VCs kicked off the event with a gloom-and-doom overview of the private financing world. As Ilan Zipkin, a partner with Prospect Ventures succinctly put it, "It’s a good thing we’re not holding this meeting in San Francisco. Here in Napa there are no bridges to jump off."

Ouch. Are things really that bad in private biotech land?

As we’ve been pointing out for some time, for VCs, the answer is yes. Funds raising money now are having a tough time and the expectation is future fund sizes will be smaller too, with returns down across the board. As InterWest Partners’ Chris Ehrlich put it: "People feel worse about themselves. LPs, the life blood of capital for venture, are saying the role of VC an asset class is limited. That casts a pall." Ehrlich likened the current climate for VCs who came of age in the most recent decade as "born in the crossfire of a hurricane." (Our heart goes out to Ehrlich and we’d likely be far more sympathetic--if we weren’t in the publishing industry.)

For biotechs looking for financing, things are a bit more hopeful, thanks to the rise of corporate venture groups, including newly formed units from Boehringer Ingelheim and Abbott. But certainly expectations must be adjusted. In terms of exits, Alison Kiley of Alta Partners is telling her firms to "keep their heads down, operating as if there will be NO IPOs." And, as IVB has said in the past, the shift is away from big M&A to back-end licensing deals, with pharmas using their leverage to make smaller biotechs share the risk and cost of early stage drug development. Still, a negative discussion about the rise of option-based deals in the final panel of the first day suggests many in our own industry are refusing to face up to the new economic realities.

In the words of the immortal Charles Darwin, it’s worth remembering that "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change."

Of course, VCs and early stage biotechs aren’t the only ones who need to adapt. J&J and BP come to mind as well. On that cheery note...we break for a holiday weekend and no more tsk-tsking from your mother for wearing white shoes. It's time to fire up the barbecue, crack open a cold one, and turn on the tunes (The Ramones "I want to be sedated" and Greed Day's "Basket Case" come to mind.) All the while reading another edition of …

Sanofi-Aventis/ Nichi-Iko: Sanofi’s deal team has been on a role, especially when it comes to inking very early stage collaborations (see below) or tie-ups with players in the consumer and generics spaces. (So much for the coming M&A storm, eh?) The French drug maker continues its eastward march, moving from Poland to Japan this week with a joint venture with one of the top Japanese generics’ firms, Nichi-Iko. Sanofi-Aventis owns 51% of the new J/V which is less than creatively named Sanofi-Aventis Nichi-Ikko K.K. (we’re guessing the abbreviation of choice will be SANI not SANK.) One of the J/V’s top initial priorities will be to rake over marketing and distribution rights in Japan for Sanofi’s anti-insomnia medicine Amoban, which generated 2009 sales of roughly €43 million. As our sister publication PharmAsia News has noted many a time, western pharmas are increasingly interested in tapping into the Japanese generics market because of a series of national policies that are encouraging generic drug use. (Japanese cos are interested too; hence Daiichi’s desire in 2008 to take partial ownership of Ranbaxy.) Pfizer, Merck, and Novartis have all made forays into the Japanese generics market, as has Teva. In allying with Nichi-Iko, Sanofi gains a considerable footprint in the island nation. Nichi-Iko owns five distribution centers and supplies drugs to 120,000 medical facilities in Japan. Last month the company reported generic sales grew 13.7%, with net profits up 103.9% for the quarter ending in February.—Ellen Foster Licking

Sanofi-Aventis/Massachusetts Institute of Technology: Another week, another corporate/academic research collaboration surfaces. This week it’s Sanofi-Aventis’ turn to make headlines, announcing a three-year, $4.2 million research collaboration with MIT’s Center for Biomedical Innovation. The collaboration's initial focus will be in the areas of nanotechnology and biologics. Although no funding has been awarded yet, the pharma is most interested in emerging technologies that provide new solutions for patients, such as next-generation nanoparticles for drug delivery, novel sensor technologies for diagnostic purposes, needle-free and wireless drug-delivery tools, and devices that monitor clinically relevant metabolites and biomarkers. As such, it fits Sanofi’s evolving belief that the drug companies of the future will be those that provide not just pharmaceuticals but end-to-end health care solutions in the vein of its recent acquisition of glucose monitoring play AgaMatrix. The MIT partnership will build on Sanofi's existing presence in Cambridge, Mass., which includes a 60-person research center and the company's vaccine subsidiary, Sanofi Pasteur Biologics. With Big Pharma companies looking at ways to reduce R&D spending, low-risk partnerships with academia and startup drug companies, in which drug makers get access to external R&D for a nominal price, are becoming more common. Pfizer recently announced a five-year tie up with Washington University in which university researchers are granted access to Pfizer compounds and data in a reprofiling effort. In the case of Sanofi's alliance with MIT, a joint steering committee will allocate annual grants ranging from $100,000 to $150,000 to academic researchers, with the French pharma holding an option on any completed research to fund further work.—Joseph Haas

Clovis/Avila: Clovis Oncology, which raised an impressive $145 million Series A in 2009, has partnered with three-year old Avila Therapeutics to develop and commercialize Avila's preclinical epidermal growth factor receptor (EGFR) mutant-selective inhibitor (EMSI) and a companion diagnostic. Under the terms of the deal, Avila and Clovis will collaborate on the preclinical development of the drug, which is being tested as a potential non-small cell lung cancer therapy. Clovis bears responsibility—and cost—for the drug’s clinical development and commercialization, as well as for the creation of the diagnostic. Total biobucks associated with the deal are $209 million, with Avila receiving an undisclosed upfront fee. For Clovis, the deal, announced May 25, marks the second asset the company has acquired since its initial financing. The company-- led by Pat Mahaffy and a band of cohorts formerly from the oncology play Pharmion--was formed with the aim of in-licensing oncology drug candidates in clinical development and pushing them through to commercialization. In November 2009, Mahaffy’s company bought Clavis Pharma’s Phase II lipid-conjugated formula of Eli Lilly's chemotherapy Gemzar (gemcitabine) in development for pancreatic cancer for $15 million upfront. In both the Avila and Clavis deals, the importance of a companion diagnostic targeting the appropriate patients has been a central part of the deal logic. Whether or not Clovis does the actual dx development is a different question. Earlier this year, Clovis signed a deal with Roche's Ventana Medical Systems, Inc. to develop and commercialize the diagnostic for the gemcitabine compound.—Jessica Merrill

Gentiva/Odyssey Healthcare: IVB doesn’t typically devote much space to healthcare services but the size of the Gentiva/Odyssey tie-up makes it impossible to ignore. Gentiva is a major provider of home health care services, while Odyssey is one of the leaders in hospice care in the U.S. Both companies have strong balance sheets and scale, so as Daily Finance writer Tom Tauli put it "assuming the integration is seamless, the result will be a powerful combination." Gentiva will spend about $1 billion to bring Odyssey’s 20 in-patient facilities and 92 Medicare-certified programs in-house, as well as the ability to provide a seamless transition from in-home care to end-of-life care. The $27-a-share price for Odyssey represents a 40% premium to the company’s closing stock price on Friday May 21, the day before the merger was announced. Hospice care is a relative new industry but one of increasing importance, given the aging demographics in the U.S. Analysts have been debating the merits of combining hospice and home-based care for some time, with proponents emphasizing synergies in shared referral and recruitment sources and marketing staff. Certainly the recent regulatory scrutiny over home health-care billing practices may have encouraged Gentiva to diversify, especially after it divested non-core assets in respiratory and infusion therapy back in February. Still, according to the WSJ, at least one analyst, Arthur Henderson of Jefferies & Co., was "taken aback by the magnitude" of the deal, Gentiva’s first in the hospice space. "We view this deal as an indication of management’s renewed vigor in driving accelerated growth through an aggressive acquisition strategy," Henderson said.--EFL

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

Ed. Note: Let's Go Flyers!

DotW: On the Front Burner

It's one of life's great ironies that the minute children head back to school, the mercury soars. It isn't just the temperature that's heating up, however.

The tepid deal-making climate of recent weeks came to a slow boil this week with Dainippon Sumitomo showing the Japanese aren't afraid to pay a bundle to build a presence in the U.S. market (see below). Too bad the seventh largest Japanese drug maker is late to that party--Takeda, Eisai, and Shionogi get bragging rights for being early adopters.

DxS continued to get in on the companion diagnostics action, with a tie-up with Lilly's ImClone division for a diagnostic test for Erbitux. Talk about serial monetization--DxS has partnered with nearly every developer of an EGFR inhibitor, from AstraZeneca to Boehringer Ingelheim to Amgen. Will the company's strategy work? The debate over business models for companion diagnostics rages on...

So, too, does the ongoing debate over health care reform. (It never did get back burnered, did it?)

Congress won't be back in session until next Tuesday but already President Obama is stirring the pot with an address on the hill set for next week. It's likely to be the most important speech of the Prez's career to date--his honeymoon lasted a little bit longer than 100 days, but poll numbers show he's got some work to do, especially on the health care front.

Meantime things are heating up between Biogen and Elan. In a surprise ruling yesterday, Judge Deborah Batts ruled in Biogen's favor, giving Elan just 23 days to sort out some new deal with J&J that doesn't infringe on the two biotech's change-of-control provision for Tysabri. (Note to Elan's CEO Kelly Martin: good luck with that. And fear not, if things don't work out, there's always a nice "no deal of the week" write-up as compensation.)

Like health care reform, swine flu never really got off the front burner either. It may not count as a four letter word (yet)--unless you are Miss Piggy--but if you need a refresher on proper "H1N1 etiquette" Elmo's your guy--er, muppet.

We hope the three day weekend provides a chance to cool down. Until then, here's another edition of

Dainippon Sumitomo/Sepracor: Stop the presses! Another Japanese pharma wakes up to the challenges of selling in its home market and wants to diversify, buying a toe-hold in the U.S. In 2007 Eisai got the ball rolling with its acquistion of MGI Pharma; last year saw the billion dollar deals by Takeda (Millennium) and Shionogi (Sciele). Now it's the turn of Japan's seventh largest drugmaker, Dainippon, which officially announced Sept. 3, it was buying specialty pharmaceutical player Sepracor in a deal worth $2.6 billion. At $23-a-share, Dainippon's cash offer represents a 27.6 percent premium over Sepracor's Sept. 1 closing price of $18.03. The deal gives Dainippon a portfolio of marketed and pipeline medicines, including the sleep aid Lunesta (don't forget the moth!), the asthma medicine Xopenex, and anti-epileptic Stedessa, which is under review at the FDA. Perhaps more importantly, the deal also provides Dainippon with a ready-made commercial group, including 1,200 sales reps and an experienced regulatory team. That's important because the Japanese pharma is in the throes of preparing an NDA filing for its novel schizophrenia drug lurasidone. Phase III data released in August showed lurasidone was significantly more effective than placebo in treating schizophrenia with similar effects on weight and total cholesterol. But the anti-psychotic market is crowded, and positive data alone will not be enough to grab market share, especially come 2011 when Eli Lilly's Zyprexa is scheduled to go generic.

Leo Pharma/Peplin: The privately-held Danish firm Leo Pharma scooped up the Aussie turned U.S. biotech this week in a deal worth about $287.5 million in cash. It's proof yet again that medical dermatology has gotten under the skin of at least some biopharma cos. (Want other proof? Think GSK/Stiefel Labs. On a much smaller scale 10-year-old SkinMedica sold two derm assets this week to Bayer for an undisclosed price) In the case of Peplin, the purchase price, which involves a CHESS Depository Interest (hey, it's still partly Australian), amounts to a 72% premium to the company's Aug. 31 close of A$0.60. Leo is far from a household word stateside, but that doesn't mean it's not bringing home the bacon--a sizzling $1.1 billion in 2008, up 9% from 2007. As part of the transaction, Leo is also providing Peplin with access to credit of up to $24 million until the deal closes. Peplin didn't say what the money would be used for, but it has a substantial - and costly -- development program underway for its late stage actinic keratosis medicine, even as it sits on just $17.6 million in cash and cash equivalents. For the money, Leo gets Peplin's lead product, a gel called PEP005 currently in Phase III clinical trials for treatment of actinic keratosis, a common skin lesion, on both head and non-head extremities. AK lesions can lead to cancer if they are not treated, but current therapies are cumbersome and not effective enough.

Bayer/Algeta: Interest in phase III oncology products continues to bubble too. Bayer fell hook line and sinker for Norwegian cancer therapeutics maker Algeta's radiopharmaceutical Alpharadin this week, inking a deal worth $61 million upfront and $800 million in extra bio-bucks. The German drug maker has agreed to foot the bill for most future development costs of Alpharadin as a treatment for bone metastases from HRPC and other cancer indications.
A formulation of radium 223 chloride, Alpharadin is being tested in men with late-stage, hormone refractory prostate cancer, an indication where the only drug approved is the chemotherapeutic agent docetaxel. Big Pharmas have been keenly interested in therapies for HRPC despite some late stage flame-outs such as satraplatin. Recall Johnson & Johnson snapped up the oral, Phase III abiraterone (CB7630) for advanced prostate cancer via its nearly $1 billion planned acquisition of Cougar Biotechnology earlier in the year. For recent investors in Algeta--the company raised a $37.5 million PIPE earlier in the year with backing from Abingworth--the partnership news provided a quick return, and showed the wisdom of VC investment in public companies. Abingworth and its co-investors got their shares at a 28% discount when they did the deal in February; the stock price has been on a steady climb from 10.90 Kroners ever since, with the company's share price reaching 56 Kroners Sept. 3, the day the Bayer deal was announced.

Roche/PTC Therapeutics: PTC Therapeutics' GEMS technology platform certainly has lived up to its name of late. The privately held biotech announced a new R&D collaboration with Roche on Sept. 2 that could yield nearly $1 billion in milestones over the life of the deal. (In your DOTW two-fer, the biotech also reported that Celgene exercised its option to advance work on a joint oncology discovery project.) As part of the Roche deal, PTC gains $12 million upfront, as well as all important research funding (every little bit helps, we say). In exchange the biotech will use its GEMS (Gene Expression Modulation by Small molecules) technology, designed to yield orally available compounds that modulate post-transciptional control mechanisms, to identify candidates for four central nervous system targets the companies will select jointly. Of course, Roche handsomely threw in some healthy bio-bucks: PTC could earn up to $239 million per target in research, development, regulatory and commercialization milestones, as well as double-digit royalties on sales from any resulting product, under the deal. (Nice, but if that works out PTC will be a Roche subsidiary long before investors see that money.) Meantime, PTC continues to push forward with its Duchenne muscular dystrophy therapy, ataluren. The orally available compound, which is partnered with Genzyme in a deal that leaves PTC with North American commercialization rights, is also being studied as a potential treatment for cystic fibrosis and hemophilia.

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

Deals of the Year Nominee: Takeda/Millennium

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

Takeda's $8.8 billion bid for Millennium Pharmaceuticals--the largest deal in its storied two century history--deserves a nod as deal of the year for a number of reasons.

Along with Eisai's 2007 acquisition of MGI Pharma and Daiichi Sankyo's $4.6 billion buy-out of a controlling interest in Ranbaxy (another 2008 deal of the year), Takeda's purchase of Millennium shows the determination of Japanese pharmaceutical companies to morph into global players on the biopharmaceutical industry stage. Indeed, as a group, Japanese pharmas were one of the top acquirers of private biotech from 2003 through August 2008, according to a recent START-UP article.

And their penchant for ex-Japan acquisitions is likely to continue, fueled in large part by a demanding domestic market where yearly price cuts on drugs are mandated by the government, stagnating growth, and a slower regulatory approval process. Add in pipeline pressures, large war chests of cash, and the relative strength of the yen to other currencies (a condition that gives the Japanese the upper hand in bidding wars), and its not unreasonable to believe that in 2009 Japan pharma companies will continue to be some of the industry's most active--and important--dealmakers.

But the Takeda/Milllennium deal doesn't just illustrate the prowess of Japanese deal-making. The transaction underscores another major theme at work in the industry: Big Pharma's apparently insatiable appetite for oncology products.

Think about it. In the past six months, we've seen Pfizer restructure with an eye to a more flexible future--a move that included eliminating early stage R&D in Big Pharma standbys like cardiovascular and obesity, and a greater emphasis on oncology, through the creation of its oncology business unit. Then there was Eli Lilly's October surprise--the $6.5 billion purchase of ImClone, a move that gives the Indianaoplis-based drug maker partial ownership of Erbitux plus a pipeline of targeted, but primarily early stage oncology products.

Indeed, Lilly's rationale for the ImClone deal sounded a lot like the reasoning Takeda offered up for its own bid for Millennium back in April: a need to bulk up in biologics, particularly in an indication with high unmet medical need and a smoother regulatory approval path.

Certainly, from a deal-making perspective Takeda has become the new deep-pockets of the cancer world. In 2008 alone, it inked handsome—some might argue excessive--agreements with Amgen, Cell Genesys, Millennium, and Alnylam to boost its abilities in oncology.

In its two-part monster deal with Amgen in February, for instance, Takeda spent $300 million up-front to gain Japanese rights to 13 compounds, including Vectibix, a humanized antibody to treat metastatic colorectal cancer, and purchased world-wide rights to motesanib, Amgen's Phase III angiogenesis inhibitor for various cancers. As part of the deal, Takeda agreed to purchase Amgen KK, Amgen's Japanese subsidiary, for an undisclosed price, in a bid to bulk up its large molecule offerings.

In May, the company announced one of its biggest research tie-ups yet: a deal with Alnylam worth $150 million up front for a nonexclusive license to develop drugs against oncology and metabolic disease targets using that company's RNA interference technology (another deal of the year nominee.)

But as we wrote in this feature, the acquisition of Millennium, which gives Takeda a potentially important marketed product in Velcade plus 10 other molecules in early-stage clinical trials, has to be considered the most significant--and perhaps strategically transformative--deal in Takeda's history.

Takeda's president, Yasuchika Hasegawa apparently played a critical role in pushing the deal through the company, convincing fellow executives and board members of its wisdom via a plethora of data that included financial simulations and pipeline studies. Key selling points in Millennium's favor: it offered Takeda geographic and pipeline synergies, dramatically expanding the company's commercial capabilities in the US, as well as strengthening its oncology franchise. In addition, Millennium already had in place a very capable management team, including president and CEO Deborah Dunsire, MD, a seasoned pharmaceutical veteran.

"Our typical approach when doing an acquisition is to select a target company with a proven track record where we don't need to implement major restructuring after the purchase," said Hasegawa in an interview with IN VIVO following the deal's announcement. But analysts have roundly criticized the deal for its expense, the lack of revenue generating products it provides, as well as the near-term quarterly hit on earning growth it will necessitate. Back in May, Takeda predicted that integrating Millennium would reduce the pharma's profit by 55% this year alone. In a November update, the company revealed just how much the acquisition cost its bottom line: ¥137.7 billion, reflecting in part the adverse impact of the U.S. economic slowdown.

Even so, six months later, it looks to have been a smart move. Velcade's approval in June as a first-line therapy for multiple myeloma has dramatically increased sales of the drug. In early December came news that worldwide sales of the product eclipsed $1 billion for the first-time. Moreover, a spate of positive news at the annual American Society for Hematology meeting suggest that the drug will remain a cornerstone of myeloma treatment for years to come.

And the truth is, Takeda' emerging cancer franchise, with Velcade as its cornerstone, is the company's lone bright spot. Recall that Takeda's two biggest money-makers, Actos and Prevacid, will go generic in 2013, at which time analysts expect profits from those drugs will drop 35% and 26% respectively. But thanks to late-stage clinical failures and missed PDUFA dates there's little beyond Velcade to make up the revenue gap.

Put another way: without eggs such as Velcade--and to a lesser extent Amgen's Vectibix--Takeda's basket of products would be decidedly empty.

Earlier this year the company announced it was shelving TAK-475, a novel cholesterol lowering drug in Phase III clinical trials, and matuzumab, a humanized antibody targeting the EGFR receptor under development with partner Merck KGAA. In late summer came news that the Phase III GVAX prostate cancer vaccine developed by Cell Genesys (for which Takeda paid $50 million upfront in a deal announced March 2008) failed to show efficacy in two different clinical trials. On October 17, Takeda officially pulled the plug on GVAX.

And the bad news kept coming. As October slid into November, the Japanese pharma announced the FDA has missed PDUFA dates for both its Prevacid follow-on TAK-390MR and its DPP-IV inhibitor, alogliptin. Both drugs fall squarely into the category of primary care drugs with high bars for regulatory approval.

TAK-390MR treats gastro-esophageal reflux disease, a non life-threatening condition well-treated by generic meds such as Zantac and Prilosec (and soon to be generic Prevacid). If regulators have any concerns about potential safety signals--Takeda attributes the delay to a backlog at FDA not something more sinister--they may be taking their time to evaluate the drug's application.

In the case of alogliptin, the drug's approval may be delayed due to shifting guidelines on diabetes meds. On Dec. 18, the agency put more stringent guidelines related to cardiovascular safety criteria into place for diabetes medicines. The new guidelines appy to all drugs in development or currently under agency review.

But to date, Takeda's oncology franchise is holding its own. Three out of six products in development registered advances. In addition to the dramatic uptick in Velcade sales, Takeda's TAP-144-SR for prostate cancer won marketing approval in Austria and Germany this year; and the colon cancer drug Vectibix recently completed Phase III trials and is pending approval in Japan.

No wonder its oncology all the time at Takeda these days.

beautiful basket of chicken eggs courtesy of flickr user woodleywonderworks through a creative commons license.

Deals of the Year Nominee: Alnylam/Takeda

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

This year's biggest RNAi deal isn't quite as big as last year's biggest RNAi deal, but we like Alnylam's Japanese alliance with Takeda nonetheless. First off it reinforces Takeda's position as one of 2008's pre-eminent dealmakers--the February Amgen alliance and the April acquisition of Millennium were its first two big noises this year--and it also marks Alnylam's move from simple-yet-unprecedented platform monetization into the kind of technology-for-product-rights deal that could see it gaining access to others' development candidates.

At the time of the deal we intentionally mangled Alnylam CEO John Maraganore's kegger analogy by which he describes RNAi's potential to help relieve the productivity problem in drug development and provide free beer for all mankind. (Did we do so again? Oh dear.) It's fair to say that this remains a ways off, but meanwhile Takeda's cash ought to keep the fridge full in Cambridge.

Alnylam received $100 million in up-front cash and $50 million in near-term technology transfer payments for a non-exclusive license to its RNAi platform in oncology and metabolic disease, and first right of negotiation on its RNAi programs in Asia (excluding ALN-RSV01) should Alnylam look for a partner there. Alnylam also gets first right of negotiation on any project Takeda decides to shop in the US and more importantly, gets opt-in rights for 50/50 co-development/co-commercialization deals in the US on up to four Takeda programs of its choosing (exercisable all the way through the start of Phase III), plus the usual gajillion biobucks in development and commercial milestone payments.

As we noted when the May deal was signed: it bears repeating that Alnylam has once again struck a non-exclusive deal--and can go out and re-license those same therapeutic areas again at any point. That said, on the call to announce the deal Maraganore essentially laid down some ground rules. "We wouldn't do a platform license for a double-digit upfront payment," he said. "Given the opportunity cost of enabling a partner we have to and will be very discriminate in how we value these kinds of partnership alliances."

In other words, pony up $100 million or it's not worth our time and effort. How many triple-digit deals it can do before its proposition is diluted below the $100 million low-water mark remains to be seen (it hasn't done any since, though there is plenty of time to fulfil its stated goal of two or more new partnerships through the end of 2009).

In these cash-constrained times, the deal allows Alnylam to end the year with approximately $500 million in cash. It makes Takeda the sole big RNAi player in Japan (though Japanese rights to Alnylam's Phase IIALN-RSV01 product were not included in the deal and later licensed to Kyowa Hakko [our take here]) and cement's the Japanese pharma's place among the most active and creative dealmakers of 2008. And it sets the RNAi pioneer up for pipeline building down the road.

Readers, it's up to you. The voting begins next week and will be open into the new year. No stuffing the ballot box!

image via flickr user furiousgeorge81 used under a creative commons license.

DotW: Specifics a Surprise; Trends -- Not a Surprise

Your blogger this week did not expect that John McCain would select a nationally obscure, half-term governor of Alaska as his running mate. What wasn’t a surprise was the selection of a pro-life evangelical to shore up the Republican base.

Which leads to our theme in this edition of Deals of the Week. Specifics a surprise. But basic trends: not a surprise.

Take for example the announcement from Zymogenetics and Merck Serono that the two companies were restructuring their deal on the fusion protein atacicept so that Zymo could save up to $260 million in co-development and –commercialization contributions through 2012. (See our Pink Sheet Daily coverage here). Fact is deals which could get biotechs bigger downstream profits also cost them a lot more upfront – and with biotech funding scarce, those obligations are looking pretty scary these days. And particularly scary for Zymo, which was hoping to pay its share mostly out of proceeds from its marketed drug Recothrom. But the recombinant thrombin product hasn’t become the blockbuster Zymo hoped it would be – sales are actually down from the last quarter. In effect, Zymo is now opting to share a lot more of the risk – risk which, following the commercial challenges of Recothrom, looks a lot hairier than it did in 2001, when Recothrom was a great idea about to be a great reality and atacicept the next engine to turbocharge Zymo’s journey to the biotech valuation stratosphere.

And so, on to our surprising but unsurprising...


Medivation/Pfizer: Luckily, little risk sellers have big-company risky buyers to help them out. The late-stage products in other companies’ pipelines look like the only bridges available over the vertiginous patent chasm most Big Pharmas must cross in the next few years -- however shaky those bridges may be. Were it not competing with plenty of other bidders, Pfizer wouldn’t have agreed to pay $225 million upfront, $500 million in development milestones, 60% of the development and commercial costs in order to get 60% of the profits from Medivation’s Alzheimer’s disease drug dimebon (for more of our analysis, see this post). But even Big Pharmas are increasingly unwilling to make these bets on their own. Lilly has taken on financing from TPG-Axon to help it fund Phase III trials of its two late-stage Alzheimer’s drugs. (For a brief idea of what Lilly’s doing, take a look at this posting; for a more significant analysis, see the September issue of IN VIVO – out next week). The economics of the Medivation deal aren’t all that dissimilar from the deal Bristol-Myers Squibb signed last year with Pfizer on apixaban, in which it off-loaded a bunch of the risk that drug might not work out very well. And as we noted last week, that wasn’t a bad move: the drug underperformed Lovenox in its knee-replacement trial and now has lots of people scared that it won’t work in its larger indications, particularly acute coronary syndrome and stroke prevention. Less noted – another big-bet Phase III deal looks smart for the licenser, less so for the licensee: the mid-sized Spanish firm Almirall collected $60 million from Forest Labs plus big help in funding trials, which last week underperformed their sponsors’ and investors’ expectations, with Forest stock dropping 17%.

Shionogi/Sciele: It’s likewise unsurprising, though again the specifics continue to astonish, to see Japanese companies continuing to snap up US properties. We’ve got to believe Shionogi is, years later, still smarting over its decision to out-license Crestor to AstraZeneca. Had it been a bit more self-confident, it could have done what Takeda did with Actos, co-commercializing the drug with a US partner (Lilly, in that case) and then taking the thing over when it could stand on its own two feet. Now Shionogi is paying $1.4 billion, a 37% premium over the pre-announcement 10-day average price (but only an 8% premium to what the company had been trading at last October), to take over spec pharma Sciele Pharma which – probably for all sorts of good reasons – has nonetheless seen declining operating income and prescription volumes in key products. (Check out our PharmAsia News report on the deal.) A comparatively strong yen and a constricting home market are making the US look real good to Japanese companies – which is why you’ve seen them willing to pay up big time for Millennium (Takeda), MGI Pharma and Morphotek (Eisai), and Agensys (Astellas).

Novacea/Transcept: When a company’s major drug fails, and it has plenty of cash left, it’s got basically two choices: distribute the money to shareholders (rarely done) or roll the dice on someone else’s pipeline – usually through reverse mergers (the popular choice). Indeed, since January 2005, we’ve seen 29 such deals announced (not all closed), with privately held Transcept’s reverse-merging into publicly traded Novacea the most recent. Since November of 2007, when it stopped its pivotal trial of its anti-cancer drug Asentar because more people were dying on the drug than in the control arm, the writing was on the wall for the company. With something like $90 million in cash and marketable securities as of its last 10Q, Novacea was more valuable as a bank and a listing than as a company. And although these deals are hardly picnics, they seem a lot easier than going public (two IPOs in the US this year vs. two dozen in 2007). Whether that’s the right thing for investors is another question: analysis from our colleague Chris Morrison shows that the average share price decline for reverse-merged companies was about 40%, worse even than the declines from IPOs or the biotech index in general (we’ll publish a more in-depth analysis in next month’s Start-Up).

Ablynx/Merck-Serono: Apologies for spoiling the theme, but it wasn't all surprises this week. Merck-Serono has been relatively straightforward in its ambitions to assemble rights to a handful of next-generation large molecule technologies around chosen targets (or so said M-S EVP research Dr Bernhard Kirschbaum when we spoke to him for a story about one of their current partners, Archemix, a few months ago). And so its deal with Ablynx announced Thursday fits right in. The two-target deal will see M-S and Ablynx co-discovering and co-developing Ablynx Nanobody-based therapies in the areas of oncology and immunology. Ablynx receives €10 million up-front and the companies will split all costs and profits 50/50. Unless! Unless Ablynx decides to fully opt out (in which case it will receive milestones and a royalty) or partially opt out (in which case it will receive a reduced profit share). Ablynx CBO Eva-Lotta Allan told us today that this was the biotech's first 50/50 deal, a result of being in a solid financial position thanks to last year's healthy IPO proceeds of €85.2 million. --CM

Acucela/Otsuka: On Thursday, Japanese pharma Otsuka and ophthalmology-focused biotech Acucela announced twin licensing deals. In Part One, Otsuka will pay Acucela $5 million upfront plus milestones for co-development rights to Acucela's Phase I dry AMD small molecule compound ACU-4429. The companies will share commercialization expenses and profits 50/50 in North America, Acucela retains all European rights, and Otsuka gets Asia and some rest-of-world territories. The pharma also funds all pre-Phase III development costs. Part Two sees Acucela getting co-dev/co-promo rights to Otsuka's Phase III rebamipide suspension for dry eye in the US. Otsuka will again pay Acucela an (undisclosed) upfront and milestones, plus royalties on sales, and Acucela will take the lead in getting the drug approved. Under certain circumstances, Acucela could co-promote rebamipide as well, but Otsuka will cover all development and commercialization costs. If you are having deja vu, that might be because Otsuka has licensed this drug before (though the first time it probably took money in instead of paying it out). In 2005 Novartis took on worldwide rights to rebamipide (which was in Phase III back then as well), but at some point between now and then killed the project. In a conversation with IN VIVO Blog, Acucela CEO Ryo Kubota, MD, PhD, wouldn't let on what hindered the drug, saying only that the partners hope to run another Phase III and that the drug could be developed "relatively quickly." Acucela was founded in 2002 but only came out of stealth mode earlier this year. The biotech is developing so-called visual cycle modulators and has raised more than $40 million in three rounds of venture funding from Japanese investor SBI Investment Co. Ltd.--CM