2011 M&A Of the Year Nominee: Takeda/Nycomed

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

Takeda's $13.7bn acquisition of privately-held Nycomed in May was a rich deal, both monetarily, and strategically. It allowed Takeda to tick off several of its strategic imperatives in one (expensive) swoop: jumpstarting an emerging markets presence, deepening a European footprint, fashionably diversifying the product mix to include OTC and branded generics, providing an immediate revenue- and income-boost and, not least, pepping up Takeda's stuffy corporate culture.

No wonder the Japanese group was happy to stump up over three-times Nycomed's revenues, to the deep satisfaction of Nycomed's private-equity backer Nordic Capital. Nordic had long been bent on an IPO for its Swiss-based protegee, but settled for quintupling its initial 2005 investment via M&A.

It's a deal that illustrates how M&A, for all its drawbacks, can, when properly engineered, help industry players out of tight corners. Takeda's typical in facing generic competition to its biggest drug, Actos. And despite prior internationalization moves, not least its 2008 purchase of Millennium, it was also still rather typically Japanese, with too much big-company conservativism.

Nycomed allowed Takeda to show investors once again that it could act decisively and win big prizes. This was the largest cross-border transaction by a Japanese company, and, although the borrowing requirements (Y600-700bn) prompted a credit-watch from ratings agencies, taking on debt makes sense in a low-interest environment.

Coming after months of negotiations and at least a week of press speculation, the deal multiplied Takeda's emerging markets sales by eight (sensible, in today's environment), lifted its European ranking from 29th to 18th (Europe still matters, despite its problems) and should, CEO Yasuchika Hasegawa promised, deliver $375m in annual cost savings after three years, and be EPS-accretive from year one.

Never mind the numbers, Nycomed provides its new owner with regulatory expertise and infrastructure across the globe, low-cost emerging markets manufacturing, and knowledge of how to tailor product mix to meet invidual market needs -- a very important skill as reimbursement hurdles rise, both nationally and regionally.

Takeda wanted to keep "as many as possible" of the key Nycomed people on board, in order to transfer those valuable skills, but it was hardly going to keep Nycomed CEO Hakan Bjorklund: he scooted off to join private equity firm Avista Capital Partners in October 2011.

So it's not all going to be smooth sailing. Daxas, the COPD drug that was ostensibly the branded jewel in Nycomed's crown, is coming up against reimbursement hurdles. It just got slammed by U.K. cost-benefit watchdog NICE which confirmed it wouldn't recommend public reimbursement for the drug, at least not without further trials.

But at least Takeda's sails are still up. Indeed, Nycomed's European and EM infrastructure appears crucial to the group's 2012 ambition to build a global vaccine division. Any deal that permits such progress, in today's stormy pharma world, deserves an accolade.

photo by cseward via flickr, used under creative commons license

Deals Of The Week Presents Last Week's Deals

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

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

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

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

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

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

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

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

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

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

Image courtesy of flickrer WarmSleepy via a creative commons license.

Deals Of The Week: Hot Pursuit

Takeda is in hot pursuit of Swiss biopharma Nycomed – or maybe not. After the rumorville erupted Thursday May 12 about a possible $12 billion take-out of the private-equity owned Nycomed (which has been on the auction block for months if not years), Takeda tried to squelch the speculation.

In a 96-word statement posted on its website Friday May 13, Japan’s largest pharma noted, “The company would like to make clear that Takeda has not agreed to any such an agreement as suggested by certain news publications…there is nothing that needs to be announced at this point.”

It’s customary practice for companies not to comment on pending M&A rumors (that’s what the bankers are for). And who really wants to announce the biggest deal in their company history on Friday the 13th? That’s like asking for bad integration karma.

Still, Takeda’s action ain’t going to do much to stop the whispers. Various news outlets are simply using the statement to point out that the inevitable persons familiar with the matter say a deal is in its final stages “but might take time to conclude.”

Indeed, as we pointed out in this story from “The Pink Sheet” DAILY, one of the reasons the rumors have garnered so much traction – aside from the juicy valuation Takeda allegedly places on the company – is the logic of the tie-up. As the 15th biggest pharma worldwide, Takeda has been trying since its $8.8 billion take-out of Millennium Pharmaceuticals to become a significant multi-national player. That 2008 acquisition did more than expand the Japan co’s presence in oncology, a core therapeutic area. It also dramatically increased the company’s US footprint at a time when the its joint venture with Abbott was winding down, and bolstered Takeda’s senior executive team with the likes of Deborah Dunsire, Christoph Bianchi, and Nancy Simonian.

In the same vein, a Nycomed buy would significantly boost Takeda’s European footprint (one of Takeda’s long-stated goals), while also jump-starting its emerging markets strategy (another more recently stated goal). Like most Japanese pharma, Takeda has been behind its multinational counterparts when it comes to inking deals in various EMs. But with a single deal, the Japan drug maker could increase the percentage of sales revenues coming from this increasingly valuable part of the world. Almost 40% of Nycomed’s $4.5 billion revenues from 2010 came from emerging territories, and the company forecasts that share to increase to 60% by 2015.

It’s true that Nycomed’s therapeutic focus on respiratory diseases and inflammation doesn’t quite chime with Takeda’s areas of interest. But Nycomed’s expertise in GI seems like a natural fit; the company got its start in 1895 manufacturing and selling bismuth – the basic ingredient in Pepto-Bismol. The ability to leverage Nycomed’s strong existing OTC biz is also likely an allure; Nycomed demonstrated its prowess in this arena in 2009 when it scored Europe’s second centralized Rx to OTC switch for pantoprazole. (Coincidentally that’s the same year OTC versions of Takeda’s blockbuster PPI Prevacid hit the market.)

Certainly if Takeda wants to ramp up quickly in both Europe and EMs, there aren’t too many specialty cos that are affordable – and available for purchase. Let’s not forget that Nycomed’s ownership structure – PE firm Nordic Capital holds more than 40% with Credit Suisse’s DLJ Merchant Banking, Coller International Partners, and Avista also having stakes – means there’s increased pressure on the privately-held Nycomed to create some exit options. Thus, if the Takeda deal doesn’t materialize, it’s a fair bet another suitor for Nycomed will emerge.

Stay tuned to IN VIVO Blog as the chase for Nycomed evolves. Meantime there’s no need to delay the deal making gratification. Ever in pursuit of the week’s top deals, we bring you – signed, sealed, and delivered – another edition of ...


Alkermes/Elan Drug Technology: Nycomed isn’t the only European company that’s been looking for a buyer. In the week’s biggest confirmed deal, Alkermes announced it has snapped up Elan Corp’s Elan Drug Technology group in a cash and stock deal worth nearly $1 billion. The new company will be incorporated in Dublin but have a decidedly US look: Richard Pops, Alkermes’ current chairman and CEO will retain those job duties, while EDT’s CEO Shane Cook becomes president of the new entity. The acquisition could be a transformational event for Alkermes, which has spent the last few years trying to step out of the shadow of some big name partners (Eli Lilly, Amylin, Johnson & Johnson) and dodge the negative Exubera press that gave drug delivery a bad name. The transaction certainly deepens the drug delivery technology capabilities within Alkermes, but that’s not the story line executives are playing up. In an interview with “The Pink Sheet” DAILY, Pops was pretty clear that he didn’t want Alkermes tarred with that brush. Indeed, the biotech has spent the last several years trying to reinvent itself, emphasizing its CNS-focused product development expertise a la Vivitrol. In this case, the drug delivery expertise is a means to that end – and a pretty lucrative one. Technology from the newly combined EDT/Alkermes is embedded in more than two dozen commercial products, from Acorda’s Ampyra to J&J’s anti-pyschotics Invega Sustenna and Risperdal Consta to Eli Lilly/Amylin’s Bydureon. That means there are some nice royalties coming the new Alkermes’ way to support its drug development ambitions. As Pops told PSD, “it takes us immediately to a cash-flow positive company.” And it’s hard to argue with a balance sheet in the black.—Lisa LaMotta and EL

Shire/Heptares: The hope that new technologies can crack intractable targets continues to lure big pharma to the deal making table. But in the case of this week’s early stage R&D alliance, a tie-up between Shire and the GPCR-focused start-up Heptares, that allure wasn’t so strong that the pharma in question didn’t want to hedge its risk. Thus, Shire – not usually one to reach so far back in the value chain – has agreed to take an exclusive option on a novel adenosine A2A antagonist currently in preclinical development at Heptares for the treatment of the symptoms of Parkinson's disease. (It has the potential to treat other CNS diseases as well.) Of course, Shire already has significant business in the CNS area, with the ADHD therapy, Vyvanse (lisdexamfetamine), being its top-selling product. The financial terms of Heptares’option agreement with Shire weren’t disclosed, but include an upfront payment and, according to Heptares’ CEO Malcom Weir, significant downstream royalties. There’s also a separate payment owed if and when the option is exercised. This is the second big pharma alliance Heptares has inked in as many months; in April it announced a tie-up with Takeda worth £4.5million upfront (also CNS focused, though that particular target was not disclosed). Heptares also isn’t one to shy away from options. In 2009, eight months after the Swiss pharma’s Novartis Option Fund invested in the biotech’s $30 Series A, Novartis and Heptares announced an option-based alliance that requires the start-up to produce small molecules against a GPCR of the pharma’s choosing.–John Davis & EL

Allos/Mundipharma: Allos Therapeutics achieved a key strategic goal May 10, announcing a co-development and commercialization pact for Folotyn with the U.K.’s Mundipharma International Corporation Ltd. The deal is worth $50 million upfront to Allos, and the smaller firm gets to keep 100% of the US market. (Mundipharma has exclusive ex-US rights.) Folotyn, a folate analog metabolic inhibitor, was approved under accelerated review by FDA in 2009 for relapsed or refractory peripheral T-cell lymphoma and remains the only drug approved in the US for this indication. (Currently there are no approved drug therapies in Europe.) Still that hasn’t helped sales of the medicine, which are most diplomatically described as tepid. Folotyn’s US approval came with a requirement for four post-marketing trials, including studies that measure efficacy in previously undiagnosed PTCL patients and in combination with bexarotene in relapsed or refractory cutaneous T-cell lymphoma. Importantly, the deal requires Mundipharma to fund 40% of the costs of those trials. The cost-sharing would be split 50/50 if Folotyn garners a positive nod from the European Medicines Agency, an event that could happen in 2012. Allos also can earn commercial progress- and sales-based milestones totaling up to $310.5 million under the partnership, along with tiered double-digit royalties on sales occurring in Mundipharma’s licensed territories. Meanwhile, Allos’ monopoly in the U.S. may be short-lived, as Celgene Corp. has a June 17 PFUFA date for its application to add progressive or relapsed PTCL to the label of its HDAC inhibitor Istodax, which already is approved for second-line therapy in cutaneous T-cell lymphoma.—Joseph Haas

Pfizer/Zealand: We’re late to this break-up, which was apparently first tipped when Zealand pharma released its IPO prospectus back in 2010 and again in the biotech’s annual report, but it finally caught our eye yesterday. (Hey, the third time’s the charm.) As part of an announcement about its first quarter results, the Danish biotech said yesterday it had regained rights to danegaptide, a gap junction modifier with potential in atrial fibrillation, from former partner Pfizer. Pfizer got its mitts on the project as part of the Wyeth acquisition (Wyeth and Zealand originally teamed up in 2003) and has since made no bones about its desire to exit cardiovascular research. Specific terms of the give-back weren’t announced but Zealand now holds “all rights to and all clinical data generated with this compound,” the IV version of which has completed two Phase I studies. Zealand intends to take an oral version of the drug into Phase I and “together with a new large pharma partner we intend to prepare for the Phase IIa proof of principle study in 2012,” according to the company’s 2010 annual report. Pfizer’s decision to pull back on cardiovascular R&D reflects a broader industry trend away from an area that was once close to most pharmas’ hearts (sorry). Zealand’s search for a new partner will therefore see it knocking on fewer doors, though with a first-in-class compound with potential acute and chronic uses, it’s likely to get a look-see from the remaining cardiovascular stalwarts.—Chris Morrison

DotW: Earn, Baby, Earn

What, you thought we’d go all Sarah Palin on you? We're guessing the phrase “Drill, baby, drill!” is about as popular as that oil slick inexorably spreading toward the Gulf Coast right now. Anyone out there scrambling to remove a certain bumper sticker?

In case you were partying with the Dendreon crowd or locked up in a dark room practicing the pronunciation of what used to be an obscure Iceland volcano -- for the record, it’s ay-uh-fyat-luh-yoe-kuutl -- you must have tweaked that it was another heavy earnings week in biopharma land.

And yes, the handwringing over costs tied to healthcare reform continues, at least if you are BMS, which reported one of the most significant hits on its first quarter earnings call this week. Meanwhile, the EU-based pharmas seem a bit blasé about the issue, or at least they're good at hiding their concern. Execs on GSK’s, Sanofi’s, and AstraZeneca’s earnings calls all sounded the same theme: forecasts already bake in the impact of US healthcare reform.

Of course, the U.S. was a problem territory for many of the multinationals long before health care reform, which is why companies like GSK and Sanofi have been on such a tear in the emerging markets. As the week ended, Pfizer looked to pull a page from Sanofi’s playbook: the world’s biggest pharma is rumoured to be sniffing around the Brazilian generics maker Teuto. Perhaps nabbing Teuto will make up being on the losing end of the RatioPharm deal. (Or maybe Pfizer CEO Jeff Kindler just needs an excuse to visit Brazil.)

Here at IVB, we do our best to earn our keep with a regularly occurring column loaded with insight and levied with snark that we like to call….



Charles River/WuXi AppTec: As top pharmas look to China to outsource more and more of their early stage R&D, the contract research organization, Charles River Labs, deepened its presence in the country this week with its proposed purchase of WuXi for $1.6 billion. The proposed tie-up would create a CRO with end-to-end capabilities, marrying WuXi’s chemistry expertise with Charles River's in vivo biology business. At a 28% premium to WuXi’s closing stock price on April 23, the deal has the blessing of both companies’ boards. To become a reality, however, it must also win approval from shareholders and China’s Ministry of Commerce. Ge Li, WuXi’s founder, and a rock star in the Chinese biopharmaceutical community, will continue to play a key role in the combined company post-merger as an EVP and president of global discovery and China services. As our sister publication PharmAsia News points out, Charles River/WuXi, if approved, represents the third major acquisition of Chinese CRO in recent month following PPD’s buy-outs of smaller players BioDuro and ExcelPharma Studies. Analysts generally hailed the deal but cautioned that even as the combined company provides one-stop shopping, it could face increased price competition from Chinese CROs capable of greater pricing flexibility. -- Kevin Holden and EFL

Aton Pharma/Bristol-Myers Squibb: Advancing its strategy of acquiring underappreciated mature products, Aton paid an undisclosed upfront to BMS April 26 for the US commercialization rights to the off-patent Parkinson’s disease drug Lodosyn. “Our strategy is [to] assume ownership of a product that does not have great awareness within the marketplace,” Aton’s CEO Michael Wells said in an interview with “The Pink Sheet” DAILY. This tactic isn’t exactly new, and it isn’t without risks. ViroPharma employed exactly the same logic when it in-licensed Vancocin from Eli Lilly in 2004 and quickly grew sales of the product. But once it demonstrated a demand for the C. difficile drug, generic competitors quickly piled in, putting pricing pressure on the medicine. For Aton, this deal represents another step in its evolution from oncology-focused biotech to specialty firm. Purchased by Merck in 2004 due to its work in HDAC inhibitors, Aton was bought out by Wells in 2006 (backed by Cerberus Capital Management and his own Princeton Pharma Holdings). Until the Bristol deal, Aton’s entire suite of products, including the Timoptic line of glaucoma drugs in-licensed last year, were originally Merck products. -- Joseph Haas

Merck/Nycomed: Days after Nycomed's Daxas, a potential first-in-class phosphodiesterase 4 enzyme inhibitor for COPD, got a positive nod from the European Medicines Agency, the drug landed a new commercial partner. On April 26, Merck and Nycomed announced a co-promotion agreement for the medicine in Canada, and certain European countries, including France and Germany. (Merck gets exclusive commercialization rights to Daxas in the UK.) The financial terms of the deal were not disclosed, but Nycomed will receive an undisclosed upfront and is eligible for regulatory and commercial milestones. Daxas already has a U.S. commercial partner in Forest Labs, which acquired rights to the drug for $100 million upfront in August 2009. At this juncture it looks like Merck, in the near-term, may have gotten the better deal. Daxas’s regulatory path to approval in the US is far less certain; earlier this month, FDA’s Pulmonary-Allergy Drugs Advisory Committee recommended against approving the medicine due to the drug's apparent modest efficacy and serious side effects. It’s possible FDA still could approve the drug, which has a May 20 PDUFA date. -- Jessica Merrill

Therabel/BioAlliance Pharma: BioAlliance Pharma of Paris announced Monday that privately-held European specialty pharma Therabel is taking an undisclosed equity stake in the company. The ownership stake isn’t unexpected. Therabel and BioAlliance announced an alliance April 6 around the European commercialization of the biotech’s Loramyc, an antifungal drug for use in immunocompromised patients, and Setofilm, an anti-nausea medication for the prevention and treatment of chemotherapy, radiotherapy, and post operative-induced vomiting. The deal includes a €6.5 million upfront and up to €48.5 million in milestone driven payments, and at the time BioAlliance hinted an equity stake worth €3 million was on the table. It's worth noting the April 6 deal holds one of the first examples of a trend we’ve long been predicting would materialize: milestones tied not to a drug’s sales but to its reimbursement. The press release clearly states, “additionally €3 million will be linked to Loramyc reimbursement in three EU countries.” The prospect of a reimbursement driven milestone was a subject of much debate at our recent Pharmaceutical Strategic Outlook meeting, where some dealmakers argued that the hedge was already included in sales milestones. What do you think, IVB reader? Are more reimbursement milestones on the way? -- EFL

Image courtesy of flickrer TW Collins through a creative commons license.

DotW: Sideshow

It's that time of year when reasonable folk take vacation, so perhaps that's the explanation for the carnivale nature of this week's biopharma news. Healthcare reform continues to draw heated exchanges, particularly as Congressional reps hold town-hall style meetings more prone to ranting than reason.

And there was plenty of drama--and confusion--at the circus which was yesterday's denosumab advisory committee meeting . (Did you follow our of-the-moment tweets by Ramsey Baghdadi and Lauren Smith?) The mighty regulator Richard Pazdur may have received his comeuppance when he tried to change the wording of a question late in the day only to be chastized by the advisory committee chair about FDA's disinclination to do so. Guess it doesn't matter that Padzur is FDA.

For the record, we stand by our analysis last night--and agree with Deutsche Bank's Mark Schoenebaum--that the ad com results were a huge win for Amgen despite the REMS requirement (this ain't Tysabri) and the "no votes" in post-menopausal osteoporosis prevention and treatment induced bone loss in breast cancer.

To add to the carnival nature of the week, note the reemergence of swine flu hysteria, which has rabbis praying on airplanes to create a flu free zone over Israel and Indians rushing to purchase masks after the announcement of the first death in that country. There was also the brouhaha over one Florida health department doctor's public rant against Dunkin' Donuts. And of course, who could forget Regis Philbin's tirade about that "turkey" of a pharmaceutical stock, Pfizer, on Fast Money? CNBC's Mike Huckman suggests Pfizer CEO Jeff Kindler and Regis sort things out over a Blue Moon or a Bud Light--or maybe Pfizer can get Philbin's sassy co-host, Kelly Ripa, to explain the pharma's value proposition.

Got your fill of the sideshow that is biopharma? Afraid our antidote may not help, but in case you are wondering no two-headed writers contributed to the writing of this post.

Ikaria/Fibrex: Ikaria maintained a brisk in-licensing pace with its second deal in as many months and third in under a year, agreeing Aug. 10 to acquire the worldwide license to three investigational fibrin-based peptides from Fibrex Medical. The two privately-held biotechs opted not to disclose financial terms (hey, that's their prerogative). According to this "Pink Sheet" DAILY story, Fibrex will receive an upfront payment, potential clinical development milestones, and royalties on net sales for any product that reaches the market. The transaction expands Ikaria’s portfolio of investigational critical care drugs and centers on Phase II myocardial infarction candidate FX06, which produced mixed results in last year’s F.I.R.E. (Fibrex in Ischemia and Reperfusion Injury) trial. Fibrex’s peptides bind to vascular endothelial cells to preserve endothelial barrier function and prevent tissue injury. The drug also demonstrated a reduction of two markers of muscle damage, but Ralf Rosskamp, Ikaria’s R&D chief, said his company will go “back to the drawing board” with the peptide, including new preclinical research in animal models and formulation changes. Ikaria’s goal is to set a clinical development direction for FX06 by the beginning of next year. Based in Clinton, N.J., Ikaria got into the gaseous messenger molecule space via its 2007 merger with INO Therapeutics, resulting in INO owner Linde Group getting 17 percent equity in the new company. In addition to last September’s deal with Orphan Therapeutics for North American rights to hepatorenal syndrome drug Lucassin, Ikaria last month licensed BL-1040, a Phase I/II candidate for preventing ventricular remodeling following acute heart attack from Israel’s BioLineRx.--Joseph Haas

AstraZeneca/Forest: In years gone by, practically no Big Pharma would have signed a licensing deal that didn't include U.S. rights. These days, however, the rise of China, India and other emerging markets is providing more geographic carve-out opportunities for deal-makers. Thus, in Forest Laboratories' tie-up with AstraZeneca, announced Aug. 12, the Big Pharma gets ex-U.S., Canadian and Japanese co-development and commercialization rights to the specialty pharma's Phase III broad-spectrum antibiotic ceftaroline, in development for the treatment of complicated skin and skin structure infections (cSSSI) and community-acquired bacterial pneumonia (CABP). Financials weren't disclosed, but for a signing fee, AZ takes on responsibility for development and regulatory approval in its licensed territories and will pay sales-related royalties and milestones to Forest. For AZ, this deal signals the continued importance of emerging markets--especially China--to the company's future growth, and plugs a hole in its anti-infective pipeline, which is largely built around the antibiotic Merrem, the phase II anti-TNF antibody for sepsis, CytoFab, and a number of antivirals. For Forest, the deal--it's second of the week--provides confidence in the approvability of its late-stage candidate and will help boost worldwide sales - both welcome given the patent expiry in 2012 of the company's highest-selling drug, depression and anxiety treatment Lexapro. Although neither AZ or Forest will comment on the deal terms, Basilea's 2005 tie-up with J&J may provide some clues about ceftaroline's partnership economics: although a worldwide deal, it was also signed when ceftobiprole was in Phase III and provided Basilea with $25 million up front and up to $310 million in milestones, 75 percent of which are said to be pre-launch.--Melanie Senior

Forest/Nycomed: Forest's other deal this week was the in-licensing of Nycomed's PDE-4 inhibitor Daxas, which is pending full Phase III results and regulatory approval in chronic obstructive pulmonary disease. U.S. commercialization rights to the program didn't come cheap, costing Forest $100 million up-front plus undisclosed regulatory and commercial milestones. But Forest, which needs to bulk up its pipeline given the pending expiry of Lexapro (we know we mentioned it already but it's a critical event for Forest), likely saw potential synergies since the deal allows the specialty pharma to gain a foothold in the COPD market while developing its own products, the Phase III aclinidium and Phase II oglemilast. If approved, Daxas adds an additional growth product to Forest's drug stable, which includes Bystolic and Savella. For Nycomed, the Daxas partnering was a welcome event given the drug's long and sometimes rocky development path. Initially developed by the German pharma Altana, which Nycomed purchased in 2007, earlier Daxas clinical trials yielded mixed results, forcing the mid-sized European pharma to focus on its use in the most severely-ill patients. Moreover, Nycomed has been talking up a partnering event for the drug for months given its lack of interest in building a U.S. sales force (for more see this "Pink Sheet" DAILY story). Daxas partnering might also help bolster investor interest in the company; Nycomed's private equity backers are thought to be mulling a possible IPO and may consider the timing suitable given this week's respective debuts by Cumberland Pharmaceuticals and Emdeon on the NASDAQ and NYSE.--Emily Hayes and Ellen Foster Licking

CombinatoRx/Clinical Data: Fresh off its adjustable-stake merger with Neuromed, CombinatoRx is teaming up with Clinical Data to test the latter's preclinical adenosine A2A agonist, ATL313, in a combination treatment for multiple myeloma and other B-cell cancers. There appears to be no upfront payment but CombinatoRx is paying for preclinical and clinical development and Clinical Data retains a co-development opt-in after Phase IIa. According to a CombinatoRx 8-k, Clinical Data's subsidiary PGxHealth LLC can exercise its option up to 90 days after Phase IIa data is available by paying CombinatoRx 50% of the drug's previous development costs and evenly splitting future costs. If the option is declined CombinatoRx can maintain its exclusive license by paying $5 million to Clinical Data, which will be eligible for $50 million in clinical and regulatory milestones for an initial indications, another $50 million for clinical and regulatory milestones in a second indication, and potential sales milestones and royalties. For CombinatoRx the move is a relatively low-cost way to access pipeline opportunities while it waits on the approval of Neuromed's Exalgo painkiller, which has a PDUFA date in November 2009 and was recently licensed to Covidien's Malinckrodt.--Chris Morrison

Image courtesy of flickrer New York Observer via a creative commons license.

Deals of the Week: Deal--or No Deal

The debate over Vytorin's medical benefits and, by extension, the utility of all cholesterol meds, continues to rage. Meantime, the Zyprexa marketing scandal reared its head: new this week, the NY Times reports Lilly is in talks with federal prosecutors to settle investigations into its marketing of the antipsychotic. If an agreement is reached, it could cost the pharma $1 billion, the largest fine ever paid by a drugmaker for breaking federal laws governing a medicine's promotion.

And, it was earnings week, with fourth quarter reports from Wyeth (up, but flat forecast for '08 due to generic Protonix), AZ (down), BMS (down, and WSJ's Health Blog highlights concerns that this big pharma may be affected by the sub-prime mess), Novo Nordisk (down, but did beat analysts' expectations sending the stock up), and Merck (down, thanks to Vioxx settlements) among others.

All in all, a crazy week, but not necessarily on the deal-making front. That's prompted this IN VIVO blogger to ponder the deals that happened--and those that did not. Without further ado, the Deal or No Deal edition.

First, a look at the actual deals that got done...

Inverness/Matria: On Monday Inverness announced its third major acquisition in the health management space, buying Georgia-based Matria for $900 million and the assumption of $280 million in debt. Definitely the big money deal of the week, though Wall Street reacted negatively to the news. Inverness continues to build through acquisition: the Matria deal is its twelfth in the past 12 months. (For more on Inverness's acquisition strategy, click here.) The company's recent emphasis on health management suggests another trend we've been following: the expansion of the diagnostic business model to include services not exclusively related to in vitro tests or reagents. Such business activity has muddied the waters stretching the definition of what it means to be a diagnostic company.

Sepracor/Nycomed: A few weeks ago when Nycomed got FDA approval for its inhaled corticosteroid ciclesonide we figured Sanofi-aventis, the original partner of Altana (bought by Nycomed in '06), still had US rights to the drug--we hadn't heard otherwise, after all. So we were a little surprised on Monday when Sepracor picked up rights to the drug (Alvesco) for $150 million upfront plus various development and sales milestones. Nycomed will also receive payments for manufacturing and royalties on sales. Alvesco's route to the US market has been chock-full of speed bumps. Way back in 2002 Altana suggested the drug might be approved in 2003, but an NDA wasn't filed until December 2003. Altana and Aventis received an approvable letter in October 2004 and the drug was launched in 2005 in Europe.

Iroko Pharmaceuticals/ Merck: Specialty pharma Iroko inked a deal with Merck for non-US commercial rights to Aggrastat, a drug used alongside heparin in patients with unstable angina to prevent cardiac ischemic events. Financial terms of the deal were not disclosed. This is the third product Merck has out-licensed to Iroko and the second in the beleaguered cardiovascular space. Last spring the company acquired rights to Indocin, for rheumatoid arthritis, and Aldomet, a hypertension treatment, from the big pharma. As we reported here, the independent futures of many spec pharmas are in question, as product-poor pharmas gobble them up in hopes of fattening their pipelines. Still, primary care remains a popular space for many, especially as big pharma eschews risky products in the cardiovascular and metabolic disease space.

(Clearly someone forgot the briefcase models.)

BiogenIdec/Genmab: Perhaps we should say "No deal, yet." This week BiogenIdec was once again in the news thanks to manueuvers by Carl Icahn to install three supporters onto the company's board. Also swirling in the ether, rumors that BiogenIdec intends to buy Genmab. Certainly, such a deal would scupper any attempts by Icahn to sell the company to another entity. Adding Genmab's pipeline would go a long way to securing an independent future for the Cambridge, MA-based biotech. But such a deal won't come cheap. In part, because it seems likely that GSK might up the ante. The British pharma, after all, has three partnerships with Genmab, including a very rich co-development, co-promotion deal for the biotech's HuMax-CD20, an antibody to treat cancer and rheumatoid arthritis. Until now, GSK's had no real reason to bring Genmab in-house--it's already got rights to the antibody cow's milk, after all. But it may not be willing to stomach the risk associated with a change in Genmab ownership, deciding its worth the hefty price tag to nail down its rights to its partnered products.

Lilly/Gastrotech: Deal or No Deal? Here's an odd one for you. On Jan 28, Denmark’s Gastrotech Pharma announced it was in-licensing Lilly’s GLP-1 analog GTP 010 for IBS and functional dyspepsia. That’s a deal, not a non-deal, surely? Well, depends on how you look at it. Simply turn it over and you get….a non-opt-in by Lilly.

Lilly and Gastrotech had been collaborating on GTP 010 since 2004, when Gastrotech took over Phase II trials of this Lilly compound in IBS and dyspepsia (in part thanks to the biotech’s ownership of some use patents for GLP-1 analogs in IBS, according to chairman Hans Schambye, though no, that wasn’t mentioned in the release).

That—four years ago--was arguably the real licensing deal. And that was also when Lilly received an option to later take over development and commercialization of the compound in return for milestones and royalties.

This week's news is that Lilly didn’t take that option, which means Gastrotech gets to keep the compound, instead, paying Lilly royalties. “Sure,” Schambye acknowledged to IN VIVO Blog, “you could look at it both ways. Either party could have licensed the drug.”

See? Hmm, exactly. Now ok, we know that small biotechs need all the positive spin they can get, but we're getting pretty close to "Press Release of the Week" territory here. Perhaps Gastrotech will do something big with 010, who knows (Lilly did take an equity stake). But please, a bit of clarity and objectivity wouldn’t go amiss.