DotW: You Can Get Anything You Want at IVB

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why I called the post Deals of the Week.

You can get anything you want at IN VIVO Blog.

You can get anything you want at IN VIVO Blog.

Log right in, it's a click away.

Just a finger tap. You don't have to pay.

You can get anything you want at IN VIVO Blog.

Now it all started one Thanksgiving ago, was on--last Thanksgiving, when Chris Morrison and I start writin' a blog about deals, but not every day, just once a week. And writin' about deals once week, you know it's a lot of work, and there's a lot of garbage you gotta sift through, but we decided it would be a friendly gesture on behalf of readers.

So we trolled around the Internet with our shovels and rakes and other implements of destruction (aka FDC-Windhover's Strategic Transactions database) looking for deals to analyze. But then a big bad editor said why are you doin' that? We are closed on Thanksgiving.

And we had never heard of a blog closed on Thanksgiving before (we don't get out much) and with tears in our eyes we drove off into the sunset looking for another place to put the garbage--I mean our deals.

We didn't find one. So we wrote our post anyway, went back and had a Thanksgiving Day that couldn't be beat, and it's been a recurring feature here at IVB ever since.

In honor of the day, we hope you consider joining the IN VIVO Blog Movement. All you've got to do is walk into the office wherever you are, just walk in and say "You can get anything you want at IN VIVO Blog." And walk out.

You know if one person, just one person does it, they might think he's really sick and they won't take him...And can you, can you imagine fifty people a day, I said fifty people a day (okay, we'd really like 1000) walking in, quoting a line from IN VIVO Blog and walking out?

And friends, they might think its a movement. And that's what it is, the IN VIVO Blog Movement.

Remember Deals of the Week? (This is a post about Deals of the Week.) Without further ado, we bring you this week's installment inspired by Arlo Guthrie. Feel free to sing along in four part harmony. With feeling.

King/Alpharma: King Pharmaceuticals' is finally king of pain. Its relentless--and often contentious--battle to win Alpharma came up aces this week. The two companies announced Nov. 24 that they have signed a definitive merger agreement in a deal that values Alpharma at $37 a share or roughly $1.6 billion. The deal, which remains subject to approval by the Federal Trade Commission, substantially bolsters King's pipeline of marketed pain products, adding Kadian and the Flector pain patch. The merger also gives King Alpharma's experimental Embeda, an abuse-resistant oral form of morphine that won a positive but not overwhelming vote of support from the FDA's Anesthetic and Life Support Drugs and Drug Safety and Risk Management Advisory Committee on Nov. 14. Together with King's own tamper-resistant version of oxycodone, Remoxy XRT, whose approval also is under review at FDA, the addition of Embeda stands to make the Bristol, Tenn.-based specialty pharma a leader in the abuse-deterrent opioid market. Analysts lauded the news: Corey Davis, of Natixis Bleichroeder called the deal "a no-brainer for King", while Cowen and Company's Ian Sanderson wrote in a same-day research note that "the merger is a strategic and financial plus for King. Still it almost didn't come to pass. Even after Alpharma had a change of heart and began entertaining the offer, King still had to come up with the financing to get the deal done--no mean feat in the current business climate. In the end, the company's lenders came up with a smaller total loan package than was originally proposed: a combined debt financing that provides King with $775 million in cash to complete the Alpharma acquisition and another $430 million on the books post-acquisition for drug development and additional deal-making. But it didn't come cheap: Cowen's Ian Sanderson estimated the proposed interest rates on both facilities were LIBOR plus 500 basis points, or 7.15 percent. "The debt repayment terms are fairly onerous, reflecting the risk aversion of the lending banks even to a well-capitalized merger transaction," he said in an interview with "The Pink Sheet" DAILY.

Novo Nordisk/Merrion: Diabetes powerhouse Novo Nordisk announced Nov. 24 that it would continue it's collaboration with Merrion Pharmaceuticals to develop and commercialize oral insulin analogs, despite its wishy washy approach to another alternate delivery technology, inhaled insulin. Under the deal, Merrion will apply its proprietary GIPET process to synthetic insulin candidates selected by Novo Nordisk. In return, the Dublin, Ireland-based biotech will receive €47.5 million ($58 million) in up-front fees and milestone payments, plus royalties, for the first product developed under the partnership. In an interview with "The Pink Sheet" DAILY, Merrion CEO John Lynch declined to break out the upfront and milestone-based deal figures. (Translation: there ain't a lot of money flowing into Merrion's coffers just yet.) The move isn't too surprising. Novo Nordisk has a history of hedging its bets when it comes to insulin delivery. That was very much the company's strategy when it partnered with Aradigm for that biotech's inhalable insulin. But following the failure of Exubera in the marketplace--and the rapid exits of both Pfizer and Lilly from the inhaled insulin stage, Novo Nordisk quickly followed suit, transferring its entire portfolio of inhaled-insulin patents to Aradigm earlier this year. Merrion might want to have a chat with another Novo partner: Emisphere. Earlier this summer Novo and Emisphere teamed up to develop an oral version of Novo's long-acting GLP-1 analog Victoza in a deal worth $10 million up-front. Emisphere is no stranger to the oral insulin field. It gave up on that delivery route some months ago.

Roche/Memory: Thanks for the memories, Memory Pharmaceuticals. The latest cash-strapped biotech lost its battle for independence on Tuesday Nov. 25, when Roche announced it would put an end to its partner's misery, buying the company for just $50 million, or 61 cents per share. Having seen its share price drop to just pennies on the dollar, the struggling Memory Pharmaceuticals faced an impending NASDAQ delisting on Dec. 3 and had just a few months of cash left in its coffers. The acquisition gives Roche full ownership to Memory’s nicotinic alpha-7 agonist program, including the Phase IIa drug R3487/MEM 3454 currently in Phase IIa trials for Alzheimer’s disease and cognitive impairment associated with schizophrenia, as well as the Phase Ia Alzheimer’s medicine R4996/MEM 93608. “This deal represents a 319 percent premium to the previous day’s closing price of $0.15, which we believe is fair given the current environment for small cap biotechnology valuations and Memory’s balance sheet,” wrote Rodman & Renshaw analysts Christopher James and Jason Butler in a Nov. 25 research note. Hmm. Wonder if Memory's private investors, which include MPM Capital and Great Point Investors, feel the same way. With just $20 million on its books and another $50 million from Roche, this can't be a money-making deal for investors. According to FDC-Windhover's Strategic Transactions database, Memory raised $80.3 million through a variety of financings, including an $11 million debt placement and a PIPE worth $32.7 million since it went public in 2004. According to the company's CFO, Michael Smith, the news for investors is even more grim: since its founding Memory has accumulated $250 million in deficits. We are tempted to sing a revised version of "Where have all the flowers gone?"--"Where has all the money gone?" Perhaps "Brother can you spare a dime?" is more appropriate.

Cephalon/ImmuPharma: Analysts such as Barbara Ryan at Deutsche Bank may wring their hands at Big Pharma's unwillingness to buy assets (Roche and J&J being this week's exceptions). But we aren't surprised to see more deals like tie-up between Cephalon and ImmuPharma announced this week. The terms of the deal give Cephalon an option to obtain exclusive worldwide rights to ImmuPharma's experimental lupus medication Lupuzor, currently in Phase IIb clinical trials, for a $15 million up-front fee. Cephalon--like King--fits what T. Rowe Price portfolio manager Kris Jenner believes is the profile of the industry's less obvious deal-makers. “There are lots of cash-rich companies short on product flow,” he argues in an upcoming IN VIVO feature. Moreover, while investors are clamoring for acquisitions, licensing arrangements that provide pharmas with valuable products and biotechs with cash to keep the lights on--could become the norm in today's tough business climate. Certainly, the Cephalon/ImmuPharma deal fits that model. ImmuPharma gets some much needed cash right away--as of June 30, the company was down to it's last £1.6 million according to its quarterly filings. (In July, the company announced a private placement worth £2.7 million, making its cash position marginally better. But still...) And if the drug works as advertised, ImmuPharma also stands to gain up to $500 million in various milestones. Cephalon, meanwhile, gets to defray the commercial and regulatory risks associated with buying 100% of Lupuzor until it is much further along in the clinic, when much of the scientific uncertainty about the product has been removed. If Cephalon exercises its option, it will assume all expenses for Phase III studies and beyond. "Our current cash position has created the opportunity to make this type of deal, which helps to position Cephalon and our pipeline for longer term growth," Frank Baldino, chairman and CEO of Cephalon, said in a press release announcing the news.

J&J/Omrix: Johnson & Johnson began its cash tender offer for biosurgical sealant specialist Omrix Biopharmaceuticals this week, valuing the company at $438 million or $25 per share. Omrix will operate separately and report through J&J’s Ethicon unit, which already sells Omrix’s fibrin sealant and thrombin-based product lines. Ethicon will also get a line of antibody-based immunotherapy products for immune deficiencies and various infectious diseases. Sales of those products hit $10.1 million in 3Q 2008, up 40% from the same period in 2007. J&J will take a $120 million charge to complete the deal, which could signal the beginning of an opportunistic J&J buying spree as the medical products giant looks to use its $14.8 billion in cash to buy up assets from companies pressured by shrinking valuations. Leerink Swann analyst Rick Wise calculates Omrix will add a tenth of a percent to 2009 top-line growth, as J&J weathers declines in Procrit and Cypher sales (5% and 3% of total 2007 sales, respectively) and generic pressure on Risperdal and Tomamax, which accounted for just under 10% of total 2007 sales. Although J&J already had a relationship with Omrix and the deal can be seen mainly as a low-risk way to leverage its sales force in new territories, it also shows the logic of Omrix’s development strategy of sourcing multiple products from human plasma (fibrin, thrombin, immune globulins). It stands in contrast to thrombin competitor ZymoGenetics, whose recombinant human thrombin Recothrom, a higher priced product, has been struggling to gain market share since its launch in early 2008. In the face of Recothrom’s troubles and a poor cash position, on November 21, Zymogenetics’ CEO Bruce Carter retired--Mark Ratner.

Just remember. You can get anything you want at IN VIVO Blog. Excepting Roger. Happy Thanksgiving!

Deals of the Week: A Little Less Conversation, A Little More Action, Please

This week was one of those weeks where so much more seemed to happen than actually did. Yes there was the rumor that Pfizer was buying Bayer (we tend to agree with Derek Lowe's thoughts on that one, the deal is on the "Edge of Reality"), the Carl and Jim Show ("Return to Sender," covered extensively by our Pink friends) and King's hostile attempt to take over Alpharma ("Don't be Cruel," see yesterday's release here and our coverage of King's original offer here), and various other rants and rumors.

Execs across the industry have been "All Shook Up" in the most compelling actual news this week, with Christine Poon retiring from Johnson & Johnson in March 2009, Ellen Strahlman leaving Pfizer to become GSK's chief medical officer and GSK CEO-runner up Chris Viehbacher taking the top slot away from Gerard Le Fur at Sanofi.

Finally we thank the dealmakers below. They didn't step on our "Blue Suede Shoes" and so they have the honor of ...

GSK/Cellzome: GSK has entered into an option agreement with Anglo-German biotech Cellzome around seven kinase inhibitor programs in the area of inflammation, the companies said on Wednesday. Though the deal generated several hyperbolic wire story headlines the guaranteed payments (about $25 million in equity purchases and cash, split undisclosed) were rather more pedestrian. More importantly, the deal has some interesting features and further underscores the externalization of R&D at GSK under new chief Andrew Witty. Cellzome is essentially becoming GSK's center of excellence in kinase drug discovery, at least in the inflammation space, Cellzome CEO Tim Edwards told IN VIVO Blog yesterday. GSK has an option to license--at clinical proof of concept or earlier--drug candidates from Cellzome's kinases programs against four identified targets (which very likely comprise the biotech's previously announced programs against mTOR, Zap-70, PI3K delta and JAK3) and an additional three further targets. Edwards noted the deal does not include Cellzome's lead PI3K gamma program for which the company hopes to file an IND in 12-18 months. Until such time as GSK opts into a project, Cellzome is footing the R&D bill. However the biotech can earn milestone payments along the way that will cover those costs, and keeps rights to programs GSK declines. "We have day-to-day control," explains Edwards. "They're sponsoring us, as it were, and as we make achievements we bring in additional dollars." Cellzome has previously inked a handful of deals around its proteomics mapping platform and has outlicensed Alzheimer's programs to J&J, but this deal is its first around its Kinobeads technology. That platform allows the firm to screen for kinase inhibitors in a "physiological setting," which Edwards claims means they can identify very selective inhibitors of individual kinases. "In oncology you can hit four or five targets," without compromising the safety/efficacy profile of a kinase inhibitor. "But that isn't OK in inflammatory disease, and the solution is to have very selective inhibitors. It's amazing how you can change a molecule in a very small way and change its selectivity profile in a profound way," he says. Optioning nearly all its programs to one partner in its chosen (and crowded) field of kinase discovery does suggest that GSK is the private firm's only potential suitor, however, significantly limiting Cellzome investors' exit options (the company has raised at least €73 million since 2000 from a variety of VCs). "Today that may be the case," says Edwards. But perhaps not for long, he says. Cellzome aims to reconfigure its screening platform for other target classes and is also diversifying out of inflammatory disease into CNS and potentially other therapeutic spaces. And then there's the PI3K gamma program. For now, Edwards is keeping the details of that program under wraps.

Tripos/Pharsight: Drug discovery informatics player Tripos said this week it was acquiring clinical-software specialist Pharsight for about $57 million ($5.50/share). That price is a 29% premium to Pharsight's 30-day average. The combined company will now provide R&D software and services from discovery through to the market, says the release. Sorry to "Forrest Gump" you, but that's all we have to say about that.

Alfama/hemoCORM: Alfama and hemoCORM, two companies pursuing the use of carbon monoxide releasing molecules (CORMs) in a variety of chronic and acute diseases, merged this week. The terms were undisclosed. We profiled each of these companies back in 2004 (see here and here). Back then we wrote: "CO is produced naturally in the body as a result of the breakdown of heme oxygenase, an enzyme involved in the recycling of iron. But CO is more than simply a useless by-product. Recent research has shown that under physiological conditions, it is also important signaling molecule with vasodilatory, anti-inflammatory and anti-apoptotic properties." Both Alfama and hemoCORM are working on metal carbonyls, one of the first types of compound identified as a potential CO-carrier. hemoCORM's initial efforts are focused on ischemic perfusion injury, while Alfama is working primarily on treatments for inflammatory and auto-immune disease. Alfama chief Nuno Arantes-Oliveira will lead the combined group.

CV Therapeutics/Menarini: This week's late-breaker see's CV Therapeutics licensing European, CIS, and certain South and Central American rights (27 countries in all) to its recently approved ranolazide (Renaxa) to Italian pharma Menarini for $70 million in upfront payments plus a potential $315 million in milestone payments and investments linked to European label extensions and sales figures. The angina treatment has been marketed in the US by CVT since January 2006; currently the company aims to secure approval in a first-line angina setting.

Amgen/potential denosumab partner: Remember when we were all "Amgen might be looking for a denosumab partner, how much would you pay for it"? And you readers were all "sorry, IVB, I'd really like to take a stab at this, but I'm washing my hair, can I get back to you"? Well, it seems absent any solid advice from you guys, Amgen CEO Kevin Sharer is now saying that a US partnership around denosumab is unlikely (though things might be different overseas). "It is very hard for me to imagine what another company would bring to us," in North America, Dow Jones reports Sharer saying at the Morgan Stanley health care conference on Tuesday. Maybe Sharer needs to watch a little Sesame Street to get those imaginative juices flowing. Let us help out: a worldwide or US partner on denosumab would not only bring Amgen a significant upfront payment, primary care expertise, and drug reps, but also a big ol' hedge against the risk that the product will be delayed or even fail. Bonus Denosumab: The Pink Sheet DAILY points out today that doctors worried about denosumab getting adequate reimbursement are asking Amgen for assurances for financial protection in the event Medicare won't cover the full cost of the drug.

DotW: Dog Days

As the dog days of summer come to an end, it's time for last-minute barbeques and beach trips before the frenetic fall calendar of investor and scientific meetings commences. It's been a week filled with news--though not necessarily of the biobucks variety.

Lilly and partner Daiichi Sankyo published positive Phase III data for their anti-platelet drug prasugrel in the European Heart Journal, while shares of Amylin took a bath thanks to concerns that the drugs may cause pancreatitis. Meantime, a group of Harvard researchers published a study in the New England Journal of Medicine this week questioning the cost-effectiveness of HPV vaccines such as Merck's Gardasil and GSK's Cervarix.

The Food and Drug Administration must have finally used up all its "approvable letter" stationery. Johnson & Johnson's Doribax, an IV-antibiotic already approved for intra-abdominal infections, has the dubious honor of receiving the agency's first "complete response" letter regarding its use to treat hospital-acquired pneumonia. J&J, which declined to make the letter available to journalists at The Pink Sheet Daily, is currently "reviewing the agency's letter and will work to resolve any outstanding questions," the pharma said in a statement.

But dog gonnit. We aren't just waiting with baited breath for J&J to respond to regulators. We continue to watch the Roche/Genentech chess match. Roughly one week after it rejected Roche's initial buy-out offer, Genentech announced a $371 million retention plan that covers "substantially all employees," including executive officers in lieu of the biotech's planned 2008 stock option grants. Whether the proposed payola is enough to convince senior execs to remain at the company is a subject of heated debate, as regular readers of both CafePharma and Derek Lowe's In the Pipeline already know.

As we enjoy the last hazy days of summer, here's a look at the week's deals....

BMS/PDL: PDL BioPharma is a biotech that has been dogged by troubles, but the company announced a bit of good news this week: the company partnered its Phase I antibody for multiple myeloma, elotuzumab (formerly known by the tongue-tripping moniker HuLuc63), to BMS in a deal worth a modest $30 million up-front and up to $480 million in additional development and regulatory milestones. The deal also gives BMS an option to expand the collaboration to include PDL241, another antibody still in preclinical trials. The deal is back-end loaded, requiring PDL to complete on-going Phase I studies and provide support for Phase II trials, but does allow for profit-sharing on elotuzumab sales in the US. (Outside the US, PDL will receive undisclosed sales royalties.) Still investors are likely to view the news as positive given the risky nature of elotuzumab, a first-in-class therapeutic that binds to a cell-surface protein called CS-1 that's found selectively on myeloma cells. And the announcement deflects concerns about recent or impending staff departures: Pat Gage, PDL's CEO left in late May and the company's CSO, Donald Richard Murray, will resign at the end of this month. For BMS, the deal shows the New York-based pharma is conducting business as usual despite the drama associated with its proposed takeover of ImClone. Moreover, it deepens the company's footprint in oncology, especially the multiple myeloma space, building on the pharma's May acquisition of Kosan, which has the Hsp90 inhibitor tanespimycin in Phase III trials.


TEVA/Cel-Sci: Cel-Sci announced Tuesday that it gave Teva the OK to market and distribute it's head and neck cancer drug Multikine in Israel and Turkey. Precise financial details weren't disclosed but once the drug has been approved, Cel-Sci will make the product, while the Israel giant will be responsible for sales. Teva will also participate in the global Phase III clinical trial and fund a portion of the studies. The stock bounced on the news but sharply retreated on a day generally associated with market turmoil. The steep drop prompted Geert Kersten, Cel-Sci's CEO to issue a letter to shareholders, saying:

You asked, "How is it possible that the stock can be down after such a good announcement?" As the company's largest shareholder...I am as puzzled andas disappointed as you.

We've noted before that licensing deals don't always give company stock prices a much needed bump. But in this case, Kersten and others believe something nefarious may be afoot as short sellers "painted the tape," illegally dumping large volumes of the stock just before the close of business August 19 in order to make the stock look weak and unattractive. Kersten implores his shareholders to contact their congressional representatives to convince regulators to delve into the trading records of the last several weeks to resolve the issue. Meantime The IN VIVO Blog will continue to follow the situation and update you with any further news.

Lilly/Monsanto: Lilly continues to pursue a diversified business strategy, announcing late Wednesday that it would pay $300 million for rights to Monsanto's synthetic milk-producing hormone, Posilac, which is better known as recombinant bovine somatotropin (rBST). In addition to global sales rights, Lilly also obtains the Georgia-based manufacturing plant as part of the deal. The announcement comes at at time of growing consumer opposition to the use of hormones, particularly in dairy and meat products. Still, for many pharmaceutical companies, the looming threats of patent expiries and increased regulatory scrutiny make diversified business models built on generics or consumer products-a la Novartis's stake in Alcon and Daiichi's purchase of a controlling interest in Ranbaxy--more attractive. And Lilly has showed in other ways its interest in mitigating risk. Earlier this summer, it partnered its Phase III Alzheimer's drug with private-equity play TPG-Axon and Quintile's NovaQuest unit and off-loaded its R&D risk by teaming up with Covance. For its own part, Monsanto's decision to sell-off Posilac is in keeping with a stated mission to divest of smaller animal units in order to concentrate efforts on popular crop-agriculture product lines, including the herbicide Roundup.

King/Alpharma: Latebreaker! King Pharmaceuticals takes top dog in biobucks this week with its $1.4 billion unsolicited bid to acquire Alpharma. The Tennessee-based specialty pharma is behaving more like a dog with a bone, threatening to turn hostile if Alpharma's board refuses to accept the bid, which it apparently presented to the company in early August. Alpharma execs weren't available for comment--of course--but Reuters reports that the company appears to have rejected the bid. King's offer of $33 a share represents a 37% premium over the $24.04 closing price of Alpharma's stock on August 21. Not too surprisingly, Alpharma shares surged 41% premarket to $34, while King fell 1% to $11.12. By disclosing the rejected bid, King appears to be putting pressure on Alpharma in hopes of completing a friendly deal. That King is willing to go to extreme measures shows its desperation. Earlier this month, King reported that its second-quarter net income tumbled 34% as sales of its blood-pressure drug Altace stalled thanks to competition from generics. After losing a patent case last year, King has sought to refocus its portfolio with an emphasis on pain therapeutics. With its extended release morphine product Kadian and the NSAID containing Flector patch, Alpharma would give King several branded products in this arena.

(Photo courtesy of Flickr user NinJA999 courtesy of a creative commons license.)