Deals of the Week: These Boots Are Made For Buying

Are you ready, Boots? Pharmacy chain Walgreen Co. may not have been ready to acquire international drugstore operator Alliance Boots outright, but it did acquire a 45% stake in the company for $6.7 billion in cash and stock this week. The deal includes an option for Walgreens to acquire Boots outright for an additional $9.5 billion, within a six-month window that will begin in 2015. Boots has been owned by private equity firm Kohlberg Kravis Roberts since 2007.

The deal gives Walgreens a vast international presence beyond its 7,890 U.S. stores. Boots currently operates 3,330 locations in 11 countries. The vast majority of its revenues from health and beauty products came from the UK; that amounted to £6.7 billion ($10.4 billion), compared with £965 million from Norway, Thailand, Ireland, the Netherlands and other territories. Headquartered in Zug, Switzerland, Boots also has wholesale pharmaceutical operations that delivered £16.8 billion in revenue last year, giving it a presence in 25 countries total.

The agreement comes as Walgreens struggles to replace U.S. market share it lost over the past several months, particularly due to an ongoing dispute with pharmacy benefit manager Express Scripts. By allying with Boots, the pharmacy stands to gain purchasing power, particularly for generics; Walgreen says it will become the world’s largest buyer of prescription drugs upon completion of the deal. Cost savings from the alliance could reach $1 billion by 2016, the companies say.

Investors reacted to the deal with some consternation, as Walgreens was thought to be taking a risk by entering Europe at a time of economic uncertainty. (“You keep losing when you oughta not bet.”) The prescription drug business could also be rocked by the Supreme Court’s impending decision on the constitutionality of the Affordable Care Act, due as soon as early next week. Walgreens shares dipped to a 52-week low of $28.53 on Wednesday, after having traded above as $32 on Monday.

You keep saying you got something for me, and sure enough, we’ve got something for you in return. It’s…

Sanofi/Joslin Diabetes Center: Sanofi has teamed up (pdf) with Joslin Diabetes Center, a research arm of Harvard Medical School, to discover new biologics and small molecule drugs for the treatment of diabetes. The collaboration is expected to begin mid-summer and is currently set to last three years with the option for an extension; Sanofi VP of external innovation Sridar Nateson said that the French pharma intends to extend the contract at that time in an even bigger collaboration. The company would not reveal the current level of funding that it will be providing to Joslin. Sanofi and Joslin will be working to develop compounds that can treat both type 1 and type 2 diabetes, focusing on four areas. The first is treatments for diabetes complications, specifically nephropathy. Researchers will also be looking into tissue-specific insulin – the first being liver-specific. The next area of focus for the collaboration will be insulin sensitivity; Joslin already has targets that could address this issue. Other projects will delve into personalized medicine for diabetes, using Joslin’s significant efforts in genomics to try to pinpoint why certain patients develop complications when others do not and why other patients development them at different times. Sanofi has been pursuing other collaborations with academic institutions more avidly since 2009, knowing that most of these deals will not produce results until years later. – Lisa LaMotta

Merck/Ambrx: Interest in antibody-drug conjugates remains high, in the wake of Seattle Genetics' launch of Adcetris (brentuximab vedotin) and encouraging late-stage data for Genentech's T-DM1 compound. The latest pharma to strike a deal in the area is Merck, which paid $15 million up-front for access to Ambrx's medicinal chemistry technology in order to discover and develop new drugs. Milestone payments could add $288 million to the deal, and San Diego-based Ambrx could receive additional royalties if a drug is approved and marketed. The companies haven't yet said what therapeutic areas they'll pursue, but both made it clear that they'll seek mutually-selected targets beyond oncology, potentially including autoimmune disease, cardiovascular disorders, inflammation and metabolic disorders. Ambrx has previously partnered with Pfizer-owned Wyeth and Bristol-Myers Squibb to develop specially targeted therapies that carry a therapeutic payload to a specific target by binding antibodies to drugs. As with the other deals, Merck will discover antibodies, then send them to Ambrx for optimizing; the arrangement won't cover any of Merck's existing pipeline candidates. - Joe Haas and Paul Bonanos

Genentech/AC Immune: Genentech must like what it sees in the monoclonal antibodies of Swiss company AC Immune. In a June 18 announcement, Genentech, a division of Roche, says it has turned again to AC Immune to develop antibodies against a target implicated in Alzheimer's disease, this time zeroing in on abnormal Tau protein. In a deal valued at just over $400 million, the two companies will work together to produce anti-Tau monoclonal antibodies, with Genentech taking responsibility for preclinical and clinical development, manufacturing and commercialization. AC Immune will receive an undisclosed upfront payment, development milestones and royalties on sales. Genentech originally partnered with AC Immune back in 2006, to develop monoclonal antibodies against amyloid-beta, another protein thought to be involved in Alzheimer's disease. The Swiss company uses antigens expressed on liposomes to create its molecules, and its anti-amyloid-beta research has produced one antibody, crenezumab, which is in Phase II clinical studies. The so-far benign side effect profile of crenezumab was apparently key to it being selected by the U.S. National Institutes of Health and others for evaluation in a trial aimed at preventing the onset of Alzheimer's, which will take place in a family group in Colombia with an inherited disposition to develop the condition. - John Davis

GSK/Liquidia: GlaxoSmithKline forged a deal with privately-held Liquidia Technologies under which it will use the startup's nanotechnology platform to develop vaccines and inhalable product candidates. Terms weren't released in the June 20 announcement (pdf), but the companies revealed that the up-front payment included both cash and equity, as well as research and development funding. With additional components of the transaction, including milestone payments, licensing fees, and royalties, the deal's value could spiral into the hundreds of millions of dollars over several years, the companies said. Founded in 2004 and based in Research Triangle Park, N.C., Liquidia has created a platform it calls PRINT (particle replication in non-wetting templates), with which it engineers and fabricates nanoparticles, most often used in vaccines thus far. While it retains rights to its own programs, the company also has a 2009 partnership with Abbott to discover particles that deliver siRNA-based drugs. Investors in Liquidia include PPD, Canaan Ventures, New Enterprise Associates, Morningside Venture Investments, Pappas Ventures, and Firelake Capital. - P.B.

Roche/Seaside: Privately-held Seaside Therapeutics has made considerable progress in researching neurological disorders such as Fragile X syndrome and autism spectrum disorder. Now, Roche has partnered (pdf) with the start-up, licensing patents that are the basis for one key drug while taking an option on another. For an undisclosed amount, Roche took rights to patents on a glutamate receptor subtype 5 (mGluR5) antagonist, RG7090, currently entering Phase II for Fragile X; the patents are also of interest for ASD. Roche also obtained an option to license Seaside's GABA-B agonist, known as STX209 or arbaclofen, in Phase III for Fragile X and Phase IIb for autism. Seaside will continue to develop the latter drug with funds received in the deal, but Roche will be able to license it upon completion of certain milestones. Novartis has a competing mGluR5 drug, AFQ056, in late-stage development for Fragile X as well. - P.B.

We're indebted to Scott Steinke for his report on the Walgreens/Boots deal in "The Pink Sheet" DAILY, though he didn't mention Nancy Sinatra. As for Eileen, thanks to the Aquarium Drunkard.

2011 M&A of the Year Nominee: Sanofi/Genzyme

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're 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 (half a 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™.

Sanofi’s drawn-out and complicated acquisition of Genzyme was the story that had it all – a hostile takeover attempt (which eventually morphed into friendly merger talks); more than a year’s news flow with well-timed leaks and opportunities to interpret cryptic “he said, he said” commentary from the two companies’ principals – Chris Viehbacher and Henri Termeer (neither a shrinking violet); a huge price tag ($20.1 billion); a relatively novel deal add-on in the form of a contingent value right pegged to sales performance of Lemtrada and manufacturing of Cerezyme and Fabrazyme; and, oh yes, regulatory controversy.

When Sanofi began “kicking the tires” of the Boston big biotech, Genzyme was digging out from a summer 2009 plant shutdown due to viral contamination in a bioreactor, a six-week interruption in production that plagues the availability of top-selling enzyme replacement therapies Cerezyme and Fabrazyme to this day. By the time Viehbacher and Co. completed their quest for diversification into biologics and ultra-rare diseases, Genzyme was operating under an FDA consent decree and constantly fielding complaints from patient advocacy groups about rationing of Cerezyme and Fabrazyme.

But Sanofi had good reason to go ahead with the acquisition – it was facing near-term loss of patent exclusivity for blockbusters like Plavix, Lovenox and Taxotere. Despite its manufacturing woes, Genzyme could add $4.05 billion in product sales to Sanofi’s top line and $422 million in profits to the bottom line. In addition, Genzyme’s portfolio of drugs for rare diseases offered Sanofi another growth platform, like the consumer health products and expertise it gained in its 2009 purchase of Chattem.

Ultimately, the French pharma closed the deal in February 2011, buying out Genzyme for $74 a share, a decent premium and a bit up from its initial bid of $69 a share, but not in the range of the $87 a share or so that Termeer lobbied for in the press and behind the scenes. The uncertain future of Cerezyme and Fabrazyme, complicated by competition from new drugs from Shire and Pfizer partner Protalix, hamstrung Genzyme’s bargaining power, and ultimately one of the most-celebrated U.S. biotech success stories ended up just a subsidiary to a multinational Big Pharma.

The CVR continues to intrigue nearly a year after the deal closed – it brought shareholders the potential for up $14 per each Genzyme share tendered to Sanofi. Of that, $13 will be tied to future sales performance of Lemtrada, a pipeline candidate for multiple sclerosis. It’s anyone’s guess at this point how much, if any, of that return will be realized – Lemtrada remains in clinical development, but Genzyme announced promising data from the Phase III CARE-MS II trial in mid-November. The remainder, dependent on Genzyme meeting 2011 guidance for production of Cerezyme and Fabrazyme, already is a lost cause, as Fabrazyme in particular has met one production snag after another since the 2009 shutdown.

Other DOTY candidates in the M&A category may beg for votes – the oft-delayed Sanofi/Genzyme marriage simply does not need to. It was the story of the year in biopharmaceutical M&A.—Joseph Haas

image from flickr user f-oxymoron used under creative commons license

Deals of the Week Takes a Backseat to Non-Deal Newsiness

Not quite a goose-egg

Deals, Schmeals. What about Geron's stem-cell about-face? Denner's departure from Icahn's shop? And how about an IPO that wasn't underwater? Don't even get us started on MLB re-alignment or seeing Papelbon in a Phillies uniform. The news this week came thick and fast; it just didn't come for the most part in the form of alliances and M&A.

It has definitely been a big week for financings: Clovis Oncology took the prize when it took the rest of its Series A to the public markets, raising $130 million to fund its ambitions in tough-to-treat cancers. Staying private (for now) was Agios Pharmaceuticals, which raised a whopping $78 million in Series C funds to move beyond cancer metabolism (courtesy its existing venture backers and corporate partner Celgene, but also some shiny new-but-unidentified crossover types). And we haven't even mentioned molecular diagnosticians Biocartis' $100 million venture round, but at this point we'd better move on before FOTF smacks us over the back of the head with a shelf financing.

It's also been a big week for regulatory action: today's unsurprising surprise announcement from FDA Commissioner Hamburg revoking Avastin's metastatic breast cancer approval will not draw an appeal from Genentech even as it draws supporters' ire. But a couple nifty approvals for some niftily named new orphan drugs (Incyte's Jakafi and Erwinaze from EUSA Pharma) should dampen the enthusiasm of FDA-bashers. And of course there was the news that FDA may soon have some new approval mechanisms at its disposal, Progressive Approval and Exceptional Approval, as detailed in this piece from Monday's "The Pink Sheet".

Deals of the Week will take a break next week -- don't worry, you'll get your Alice's Restaurant -- as we gear up for our fourth annual Deals of the Year competition. But of course we've got a few nuggets to tide you over until December. Take a gander at...

Sanofi Pasteur/Curevac: The option-deal signed Nov. 15 between the private German biotech CureVac and Sanofi's vaccine division provides some measure of validation for the former's RNA-vaccine technology. It also gives the French drug maker rights to certain infectious disease programs, with R&D partially underwritten by Uncle Sam. On the same day Sanofi and CureVac said they were teaming up, the two companies also announced a $33.1 million, four-year R&D collaboration with further partners In-Cell-Art, a French nanotech company, and the US Department of Defense's Defense Advanced Research Projects Agency (DARPA). Because it has an option on the programs that in essence are being funded by the four-way collaboration (mainly by DARPA), Sanofi gets to kick the tires on CureVac's platform before committing significant cash. Its option rights -- based on pre-agreed license terms around vaccine programs against 'between five and ten' pre-defined pathogens -- are linked to the fulfillment of certain criteria within the DARPA-funded validation program. Pulling the trigger could cost Sanofi up to €101.5 million per pathogen in upfront and milestone payments for global marketing rights. That figure jumps to €150.5 million in the case where a prophylactic and therapeutic vaccine are developed. -- Melanie Senior

Shire/Shionogi: Shire has landed a Japanese market partner for undisclosed elements of its flagship ADHD franchise. The company said Nov. 18 it would team up with Shionogi & Co. to co-develop and co-commercialize ADHD meds in Japan, in exchange for an up-front fee and sharing future costs, though specific terms weren't released. Deal-wise, Shionogi has been more active in ex-Japanese markets this year (acquisitions in China and the US, for example) than at home, where it said earlier this year it would open a new R&D center. Compatriots like Daiichi and Ono Pharmaceuticals, which in recent months has licensed in Japanese rights to products from BMS, Merck-Serono, Servier, and KAI, have been more actively seeking out assets to sell in Japan. Shionogi has some experience in ADHD through its 2008 acquisition of Sciele Pharma, which sells Methylin for the condition. Hey, is that a goose in the back seat of an old Beamer?-- Chris Morrison

Genzyme/CFF: Genzyme (a Sanofi company) and the Cystic Fibrosis Foundation said Nov. 16 they would together work to identify "corrector" compounds that could fix malfunctioning CFTR proteins in patients with the disease's most common mutation, Delta F508. The collaboration will benefit from Genzyme's and Sanofi's extensive compound libraries, the companies said in a statement, and build not only upon past collaborations between the biotech and the CFF but also Genzyme's ongoing efforts in CF R&D. The company holds an option for global rights rights in all territories outside the US and Canada -- in all indications (except Duchenne/Becker muscular dystrophy) to PTC Therapeutics' ataluren (formerly PTC124), including CF, where the compound is in Phase III. The development of ataluren, which is being developed for a variety of genetic disorders involving nonsense mutations, was also partially funded by CFF grants. -- C.M. [Ed Note: the original version of the post misstated the territories/indications for which Genzyme has an option on PTC's ataluren. We regret the error.]

Medicis/Graceway: Medicis is buying the U.S. and Canadian pharmaceutical assets of bankrupt Graceway Pharmaceuticals for $455 million, subject to approval by Graceway’s board of directors. Graceway was founded in 2006 by private equity firm GTRC Golder Rauner and Jefferson Gregory, a co-founder and former chairman of King Pharmaceuticals. It filed for bankruptcy in September 2011. Details about the bankruptcy and other aspects of Graceway’s business are sketchy but the deal gives Medicis, a specialty pharma with projected 2011 sales of more than $730 million, a commercial portfolio with six key drugs with combined revenues of more than $125 million. The Graceway products complement Medicis’ focus on dermatology and aesthetics; they include Aldara (imiquimod) cream for basal cell carcinoma, Atopiclair for dermatoses, Maxair Autohaler (pirbuterol acetate inhalation aerosol) for bronchospasm, and Estrasorb (estradiol topical emulsion) for menopause. The deal also gives Medicis a small R&D program, including an undisclosed Phase II dermatology compound and a women’s health compound in Phase II. At the time it formed Graceway, GTRC said it would put up to $200 million into the company. Later, Graceway acquired the branded pharmaceutical business of 3M for $875 million, and rolled in with it another GTRC portfolio company focused on dermatology drugs, Chester Valley Pharmaceuticals. GTRC had formed that company in 2004 with an investment of $75 million. -- Wendy Diller


image by flickr user smohundro used under creative commons license.

Sanofi's Lyxumia: The Crestor to Victoza's Lipitor?

As Sanofi quietly filed its GLP-1 agonist Lyxumia (lixisenatide) in Europe on Nov. 3, there came a chance to consider how this fourth-to-market drug may fare. David Solomon, CEO of Danish biotech Zealand Pharma, which discovered the drug (and stands to make a low double-digit royalty from its sales) applied a statin analogy that partner Sanofi might not appreciate as it gears up to take on Novo Nordisk's incumbent Victoza, which has been flying off the shelves.

"Crestor didn't kill or hurt Lipitor much, but it built a nice $6bn business," Solomon told The IN VIVO blog. "You could argue that Crestor's not as good as Lipitor, but it found it's own spot," he continued. (Responses in writing, please, Sanofi.) In other words, Lyxumia isn't going to displace the mighty Victoza, it will just provide another treatment option for those patients that need a rather longer post-prandial boost (Lyxumia apparently hangs on a bit longer to the GLP-1 receptor than does Victoza). "It's a nuanced effect," he continued, asserting that doctors will choose this profile for some patients depending on indivdual needs.

Naturally enough, one Novo exec we spoke wiht dismisses the new once-daily diabetes contender as a "fourth-in-class, me-worse drug." The exec also dismisses and potential advantage Lyxumia may claim as a result of a label approving the drug's use in combination with basal insulin (a label Victoza tried but failed to get in Europe).

The story doesn't end there, however (though we must point out that Sanofi tucked the EU filing news into its third quarter results). The GLP-1 market overall is growing, and so is the incidence of diabetes worldwide. Meanwhile it's still Sanofi, not Novo, that boasts leading insulin Lantus. And it's on Lantus' mighty back that Lyxumia will ride in order to reach Crestor-like sales (to borrow Solomon's analogy). Indeed, as Solomon puts it, "It [Lyxumia] is not so much going to be a launch, but more of a step-function of Lantus." He estimates that roughly 1 million Lantus patients (of the 7 million total) may take Lyxumia as add-on to control weight issues.

From Zealand's point of view, that would be just fine; after all, "we'll be durably profitable when Sanofi sells just $250 million of Lyxumia," he says, mentioning 2014.

So Lyxumia on its own probably isn't going to make much of a splash, other than perhaps in some emerging markets like Brazil, Argentina and Indonesia, where Lantus is strong and Novo less so. In Europe, the recent approval of Amylin (now ex-Lilly)'s once-weekly Bydureon may provide another headwind.

Yet Lyxumia may prove a useful tool for Sanofi to expand Lantus' reach. And it sets the scene for the far bigger prize, the Lantus-lixisenatide-nice-device combination. Unfortunately this project has already been delayed: Phase III trials aren't now due to start before 2013, putting it behind Novo's effort to combine Victoza with its ultra-long-acting insulin Degludec (recently filed as a standalone and in combination with insulin aspart). But if it gets as far as the regulators, eventually, we bet Sanofi won't tuck it up within its quarterly results, nor accept anything less than Lipitor-like status.

Deals Of The Week Battens Down The Hatches

Mother Nature, you've been busy this week. The entire East Coast population remains glued to Wunderground or The Weather Channel as it tracks the path of the lumbering hurricane Irene. The good news? After the strongest earthquake in nearly seven decades struck outside Washington DC, everyone should have already stocked up on batteries and bread. Just in case, you know, there's an after shock.

Yes, residents of the bankrupt but beautiful California mocked the twitter outcry that ensued after the 5.8 temblor. Consider it pay back for the repeated digs about our obsessions with tree-hugging, organic grass-fed lamb, Steve Jobs, and the Facebook IPO. Maybe the daily lack of humidity just makes us mean. Based on this blogger's perspective, the only truism that matters is that residents of neither coast know how to drive in the snow -- or rain.

If it's been quiet in biopharma land on the deal front, companies like Seattle Genetics are finding ways to make noise. Lots of noise. Hundreds of thousands of dollars per patient worth of noise. Yes, hard on the heels of the Friday August 19 approval of Adcetris came the Monday August 22 unveiling of SeaGen's pricing strategy for the new conjugated antibody. And it's ambitious: depending on the course of treatment, the biologic, which is approved for late-stage Hodgkin lymphoma and systemic anaplastic large cell lymphoma, could cost as $121,500 based on the clinical trial experience.

We applaud the company's chutzpah; the company's CEO, Clay Siegall has come out swinging as to why this hefty price will pass the ever higher bar payers set on "value". Indeed, this is the first drug for Hodgkin lymphoma in 30 years and boasts a strong objective response rate. And we understand that the two approved indications in the drug's label are not the most prevalent cancers, meaning insurers likely won't balk at paying the price tag, given the total dollars won't quickly run into the billions.

All of which is not so subtle messaging from Seattle Genetics execs that they think Adcetris won't suffer from what is now widely being termed the "Provenge Problem" (and before that "the Folotyn Foible") -- essentially the lackluster launch of a new oncologic in part because of the drug's high price tag. Still, given the lack of traction for Dendreon's Provenge in the marketplace, it's not surprising that investors reacted to SeaGen's pricing news with all the enthusiasm of Cleveland welcoming home its prodigal son, LeBron James.

Siegall and his commercial team are confident they won't repeat Provenge's mistakes. As we write in this week's "The Pink Sheet", the biotech has a plan -- an extended payment plan to be exact -- to overcome the reluctance of physicians, who may hesitate to front the cost of the drug before there is clarity on its reimbursement. That has apparently been a major issue for urologists when choosing between Provenge and other alternatives, like the significantly cheaper Zytiga from Johnson & Johnson.

But the twinning of Adcetris and Provenge may not ultimately prove the best comparison. What Seattle Genetics really wants to avoid is the Avastin issue. You see, while payers may not balk at shelling out $120K (or whatever the drug ultimately costs, since labeling permits administration of up to 16 cycles of the drug, which potentially raises the price tag north of $200,000) for a few thousand patients, eyebrows could rise as the biotech and its partner, Takeda Pharmaceuticals, look to expand the drug's label into more prevalent cancers like non-Hodgkin lymphoma. Especially if there aren't overall survival data and/or quality of life measures to support Adcetris's use in a particular indication.

You can bet the topic will be front and center at this year's 21st annual Pharmaceutical Strategic Alliances meeting (tune in September 22 for a discussion officially titled "The Changing Oncology Landscape and watch for #PSA11 tweets).

We know. You haven't had time to check out the agenda because you've mistakenly been crooning "Come On, Irene" all week. By now, you've bought the candles and the water. You've unearthed the hand-crank radio. Take a break from battening down the hatches and tune into another Category 5 edition of...

Baxter/Baxa: Publicly traded Baxter International made a move to expand its medication delivery business by acquiring Baxa, a closely held maker of pharmacy products used to prepare and administer fluid drugs. Baxter will pay $380 million in cash to acquire Englewood, Colo.-based Baxa, which posted $157 million in 2010 sales. Founded in 1975, Baxa still sells its first product, an oral syringe, but also manufactures automated compounding devices used in pharmacies, as well as dose preparation systems for intravenous and oral drug delivery. Baxa is thought to have about a 65% share of the automated compounding device market, placing it ahead of the larger but more diversified Baxter, which also has a bioscience division and significant sales from renal health products. Baxter’s medication delivery division, which includes a variety of pre-mixed drugs, syringes, drug reconstitution systems, infusion pumps, and nutrition products, brought in $4.8 billion in 2010 sales, about three-eighths of its $12.8 billion in overall sales. Baxter has since merged its medication delivery and renal businesses into a single unit; the company also bought irregular heartbeat drug developer Prism Pharmaceuticals for $170 million up-front, plus contingent payments worth up to $168 million, earlier this year. Analysts regarded the Baxa deal as sensibly-priced and low-risk. – Paul Bonanos and Zach Miners

Par Pharmaceuticals/Anchen: The earthquake and impending storm didn't stop Par from making s.its second acquisition this year: the $410 million purchase of privately-held generic drug maker Anchen Pharmaceutical. The latest acquisition, announced August 24, is significantly larger -- and thus, more important -- than the company's May purchase of Edict Pharmaceuticals for $37.6 million. Chairman and CEO Patrick LePore said during a same-day conference call that the Anchen buy would be immediately accretive to earnings, expand the Woodcliff Lake, N.J., company's R&D capacity and nearly double its pipeline of ANDAs awaiting FDA approval. The company, which has both a generics and a proprietary drug business unit, called Strativa, has been focused on topping up its generics portfolio, which generates 80% of its total sales. Through the deal, Par acquires 218 Anchen employees, including about 70 R&D staff, greater expertise in extended release technology, and manufacturing capabilities in southern California. Anchen also brings with it five marketed products that are expected to generate about $125 million in gross revenues this year, including generic versions of GlaxoSmithKline's antidepressant Wellbutrin XL and Bayer's Cipro. Par had $307 million in cash as of June 30, 2011, and plans to finance the acquisition with cash and a $350 million loan.--Joseph Haas

Sanofi/Universal Medicare: After rumors started to circulate early in the week that Sanofi was eyeing acquisitions in India, came Wednesday's news that the French pharma's subsidiary, Aventis Pharma Ltd., will purchase the over-the-counter drug biz of Mumbai-based Universal Medicare. The final purchase price was undisclosed but The Indian Express reports the take-out could cost around $110 million based on discussions with undisclosed sources. The deal gives Sanofi, which has been a nominal player in the Indian OTC space, around 30 brands with estimated annual sales of around one billion rupees. It's no secret big pharmas have been moving aggressively into high growth emerging markets, especially India and China, as sales of key drugs in emerged arenas like Europe and the U.S. stall due to patent expiries. Even as companies eventually look to sell their expensive, on patent medicines in these markets, much of the initial effort has been on creating a presence via a stable of more affordable products aimed directly at consumers. Sanofi has been among the most aggressive of the big drug makers in its pursuit of local EM players (it's recent hunt for Genzyme not withstanding). This latest bid doesn't eclipse its 2009 take-out of the Indian vaccine player Shanta Biotechnics, which cost the French pharma an estimated $784 million. But hopefully the revenue pay back will be better. Shanta hasn't turned out to be such a great deal for Sanofi, given the vaccine company's manufacturing woes.--EL

Image courtesy of www.nasa.gov.

Deals of the Week: Liberté, égalité, fraternité

Sacre bleu! For oncology drug developer Exelixis, le quatorze juillet brought the wrong kind of liberation. In a regulatory filing, Exelixis revealed that longtime partner Bristol-Myers Squibb has terminated the companies’ licensing agreement around XL281, freeing up rights to the Phase I RAF kinase inhibitor studied in patients with solid tumors. BMS’s decision spells the end of the companies’ December 2008 alliance that covered two drugs, for which BMS paid $240 million in up-front and near-term fees. Left unpaid will be a lot of biobucks: $315 million in development and regulatory milestones, $150 million in sales milestones, and double-digit royalties. The partnership officially ends in October.

Hewing to its chosen strategy, Exelixis won’t enjoy XL281’s newfound liberty. But if there's a silver lining for Exelixis, it's that the company will receive the remaining unpaid $120 million of the up-front component by October, rather than on a deferred schedule that would have drawn out payments until April 2014. That gives the company a little more cash to put behind primary program cabozantinib, the compound formerly known as XL184, which interestingly was also part of the bitoech's mammoth 2008 alliance with BMS.

Exelixis also recovers full control of XL281, which its well-heeled business development team could partner away again. After all, BRAF remains a hot target, and nearly every pharma has identified oncology as a core pursuit.

Cabozantinib still has its risks, of course. BMS walked away from the drug last June, becoming the second Big Pharma to do so: GlaxoSmithKline lost interest in it in 2008 as well, effectively ending its six-year partnership with Exelixis. Cabozantinib has shown strong promise in prostate cancer, where it’s thought to be a potential blockbuster. The candidate is farthest along in medullary thyroid cancer, although Exelixis said last week that results of a Phase III study in MTC would be delayed for three months.

BMS and Exelixis have been moving apart in oncology for some time. Last fall, BMS waived its option on the last compound of a three-drug oncology agreement, after one of the others failed. Exelixis also opted out of a collaborative agreement on BMS-833923, formerly XL139, leaving further development to BMS. The two companies still have tie-ups covering diabetes and inflammatory diseases, based on new agreements forged in October that brought Exelixis $60 million in up-front payments.

From those of us in the Fourth Estate to the rest of you, we hope you’ve got a free moment for this week’s installment of…Valeant/Dermik and Valeant/Ortho Dermatologics: Canadian specialty pharma Valeant Pharmaceuticals may not have been able to take out Cephalon in a hostile bid this spring, but the company hasn’t lost its appetite for acquisitions. The company made two major moves in dermatology this week, snapping up both Sanofi-Aventis’ Dermik unit for $425 million and Janssen Pharmaceuticals’ Ortho Dermatologics subsidiary for $345 million. Dermik markets a small portfolio of creams and lotions as well as the injectable Sculptra Aesthetic, for correcting facial wrinkles and folds, and comes with its own manufacturing and packaging facility in Laval, Quebec. The facility produces 70 formulations and more than 200 presentations of tablets, capsules, non-sterile liquids, ointments and creams, for itself and for other companies. Sanofi was magnanimous about selling the unit, waving it off with glad tidings: "Dermik will benefit from being part of a larger dermatology business," it commented. Ortho manufactures Retin-A-Micro and Renova, two formulations of tretinoin for acne, as well as Ertaczo (sertaconazole) for athlete’s foot. Dermik brought in $240 million in sales in 2010, while the J&J unit took in $150 million. Valeant also acquired North American rights to dermatitis cream Elidel (pimecrolimus) from Sweden's Meda AB in late June. - John Davis and Paul Bonanos

Micromet/Amgen: Rockville, Md., and Munich-based oncology drug developer Micromet has teamed up with Amgen on the development of three solid tumor targets using Micromet’s BiTE (Bispecific T-Cell Engager) antibody technology platform that mobilizes T-cells to cause apoptosis. Amgen will pay €10 million ($14 million) upfront, plus Micromet is eligible to receive €342 million ($479 million) in clinical and commercial milestones for the first product that is developed under the collaboration. The terms are similar to other deals that Micromet has struck with other Big Pharma. Amgen has the right to pursue development of two of the three targets. Micromet will receive another €25 million ($35.1 million) payment should the antibodies be advanced to IND. Amgen will pay a comparable amount in milestones for the second product. Amgen will also cover all research and development costs. Micromet has four other deals in place with large pharmaceutical companies for its BiTE antibodies, including Sanofi and AstraZeneca. - Lisa LaMotta

Array/ASLAN: When it raised a $12 million Series A round of funding in April, Singapore-based ASLAN Pharmaceuticals said its business model would involve in-licensing early-stage drug candidates, developing them to the proof-of-concept stage, and out-licensing them to larger pharma partners. Now the young start-up has found its first candidate in Array BioPharma’s ARRY-543, a molecule being studied for gastric cancer with potential elsewhere in oncology. ASLAN will conduct Phase II trials in Asia, then seek a partner for the drug, an HER2/EGFR inhibitor with potential to augment or supersede Roche’s Herceptin (trastuzumab) in HER-2 positive gastric cancer patients. The somewhat unusual licensing deal did not include an up-front component; rather, the two companies will “split the back end economics,” Array CEO Robert Conway said in an interview with PharmAsia News, adding that Array will still receive “a significant portion” of the proceeds if Aslan completes an out-licensing deal after Phase II trials are complete. The arrangement between the two companies also includes an option for ASLAN to negotiate a license for a second Array compound. Singapore’s BV Healthcare II, a fund managed by BioVeda Capital, led ASLAN’s Series A round, investing alongside Sagamore Ventures and other backers. – Tamra Sami and P.B.

Durect/Zogenix: Durect is the latest company to partner its extended release technology to turn an old staple into a new product. Zogenix will use Durect’s Saber technology to create a once-monthly formulation of risperidone, an antipsychotic that went off patent in 2003. The drug is expected to start clinical trials in 2012, but will face plenty of competition once it hits the market. Johnson & Johnson already makes a twice monthly injectible risperidone called Risperdal Consta that had sales of more than $1.5 billion in 2010. Zogenix will pay Durect $2.25 million upfront, as well as $103 million in future clinical, regulatory and commercial milestones. Durect will also be eligible for royalty payments should the product reach the market. The deal was a relatively small one, but will help the company move forward the rest of its pipeline, which is largely pain medications.- L.L.

Public domain image from Wikimedia Commons.

DOTW: Rising Temperatures

It's July and the temperature's rising -- and so are early stage deal values in oncology.

You want proof? The chart to the right, derived from our Strategic Transactions database, says it all. Average upfront deal values for Phase I oncology programs have soared from around $20 million in 2007 to more than $40 million this year, as big pharmas race to lock up first-in-class assets in what is now considered a core therapeutic area. Interestingly during this same period Phase III deal values for oncologics have declined from a 2008 high of $66 million to about $37 million.)

There are, of course, caveats to the analysis. In a given year, the individual number of oncology deals associated with a particular phase of development is small (on the order of 2 to 10); thus, any one deal can skew the average.

Despite the limitations of the data, there's no denying this week's deal between Bristol-Myers Squibb and Innate Pharma for worldwide rights to the biotech's Phase I immuno-oncology asset was a big one. Bristol, now the darling of analysts for its small is beautiful, double down on biopharma approach and the recent approval of Yervoy, paid $35 million upfront for Innate's novel humanized antibody, IPH2102.

In Phase I as a possible treatment for acute myelogenous leukemia, IPH2102 acts on innate immunity, a universal but so-far little explored biological process, in which natural killer (NK) cells are stimulated to attack cancer cells. When the antibody binds its target, it removes a block that inhibits the activity of NK cells; thus, this kind of therapy is expected to complement the more conventional adaptive immune response approach exploited by other immunotherapies. (And there's no doubt after this year's ASCO that combo therapies in oncology are becoming the path forward.)

In addition to the hefty upfront, BMS could pay up to $430 million more in milestones in addition to pre-specified double-digit sales royalties. Interestingly, Innate Pharma will continue to develop the molecule to the end of Phase II (at which point work transitions to the big pharma), with BMS picking up the development tab. A joint steering committee with representatives from both companies will oversee the development process, which will include exploring '2102's role in other cancer types, including solid tumors, and whether it should be used as a monotherapy or as part of a combo.

As noted in "The Pink Sheet" DAILY, one reason for the deal's size may stem from the fact that '2102 is a follow-on compound to a Phase II precusor molecule called '2101 that is being studied in multiple myeloma patients. Thus, while '2102 is a novel compound (its made by a different manufacturing process that is more amenable to regulatory approval than the earlier version), the existing data associated with '2101 likely provided BMS with additional comfort about the follow-on's mechanism of action and clinical utility.

What other therapy areas could also enjoy a torrid increase in deal value in the coming months? Deals for anti-infectives, especially medicines targeting pesky gram-negative microbes, seem poised for an uptick as certain big pharmas are cycling back into the space after ignoring it for years. Given the unmet medical need associated with Type II diabetes and obesity, it's tempting to think products in this arena should also command high values. (Zafgen and Catabasis are certainly hoping so.) But given the recent spate of regulatory failures associated with Contrave, lorcaserin, and Qnexa, expect pharma partners to be circumspect (er, wishy-washy) until there's significant data showing efficacy AND safety.

In the mean time, consider cooling off by diving into another edition of...

Roche/The Cancer Prevention and Research Institute of Texas: Dollar figures weren't announced in this week's alliance between Roche and CPRIT, but the deal is a reminder not just of the ongoing interest in oncology, but also the role academia can play as a source of that innovation. Under the terms of the agreement, CPRIT and Roche will jointly collaborate to identify new oncology-focused ventures and technologies originating from academic groups housed in Texas, with both organizations providing financial support to the nascent programs. The Swiss pharma will assess investment opportunities and offer support to selected ventures, including the ability to tap Roche personnel for help with drug development, and clinical and regulatory questions. As is typical of current pharma-academia collaborations these days, a joint committee will oversee research progress while the selected projects are in the accelerator program. It's the first large pharma partnership for CPRIT, which was formed in 2007 with support from the Long Horn state's citizenry to expedite the commercialization of cancer-related research originating from both public and private institutions within Texas.--EL

Johnson & Johnson/Pharmasset: Pharmasset Inc. and Johnson and Johnson's Janssen Therapeutics unit (the division formerly known as Tibotec) will study two investigational agents in combination for the treatment of hepatitis C without interferon, the current standard of care. The tie-up adds to the blizzard of ongoing studies to find a safe and effective interferon-free regimen and shows how companies must collaborate with potential competitors (is that collabetition or compellaboration?) in order to do so. As part of the clinical alliance announced July 6, Janssen will initiate a Phase II study evaluating the safety and efficacy of Pharmasset's key asset, the nucleotide polymerase inhibitor PSI-7977, in combination with its protease inhibitor TMC435. No money changed hands as a result of the collaboration. The study, which will enroll HCV genotype 1 patients who had a prior null response to peg-inteferon alfa and ribavirin, will evaluate the combination with and without ribavirin. With the announcement, PSI-7977 now is being studied in combination with three of the leading direct-acting antiviral classes: protease inhibitors, NS5A inhibitors, and nucleotide polymerase inhibitors. Earlier this year, Pharmasset and Bristol announced a clinical collaboration to study Bristol's NS5A replication complex inhibitor BMS-790052 with PSI-7977 and in May launched a Phase II trial in 84 previously untreated patients with HCV genotypes 1, 2, or 3.— Jessica Merrill

Rib-X/Sanofi: Ribosome-focused Rib-X Pharmaceuticals will receive $10 million upfront and could earn another $9 million in near-term research milestones under an agreement it signed with Sanofi July 6. The two companies will co-develop novel antibiotics to treat drug-resistant gram-negative and gram-positive hospital-acquired infections. Sanofi also gets the option to license molecules resulting from the research, with structured payouts going to Rib-X. The deal is structured as an exclusive worldwide research collaboration centered around Rib-X’s preclinical RX-04 program and initially pertains to four product profiles within an agreed-upon portion of the ribosome. But the deal essentially gives Sanofi “drilling rights” in that area, which is expected to yield potentially thousands of candidates, all of which Sanofi will have option rights to. Anything Sanofi does not option, however, will revert fully to Rib-X. Each molecule optioned and developed by Sanofi could yield up to $86 million in development and regulatory milestones as well as more than $100 million in commercial milestones, plus potential low double-digit royalties on sales. Privately held Rib-X also has the option to co-promote in the US one program of its choosing from the collaboration.—Joseph Haas

Merck KGaA/Idera: For every high profile oncology tie-up, there is also the inevitable no deal. This week came news that German pharma Merck KGAA would halt a key trial on a toll-like receptor 9 agonist that was a critical piece of its 2007 oncology partnership with Idera Pharmceuticals. Merck KGAA announced it would cease development of IMO-2055 as a potential treatment for first-line squamous cell carcinoma of the head and neck, based on results of a Phase I trial in combination with cisplatin/5-FU and Erbitux (cetuximab). The trial showed increased incidence of neutropenia and electrolyte imbalances. The stoppage doesn’t completely unravel the companies’ partnership, under which Merck KGaA paid Idera $41 million upfront and which included $381 million in potential milestone payments. The German company said it would continue a Phase II trial on IMO-2055 as a second-line treatment in combination with Erbitux in recurrent and/or metastatic SCCHN patients, and will continue to evaluate Idera’s other TLR9 agonists. It’s not the first failure for IMO-2055; the drug failed to meet its primary endpoint in a 2008 Phase II study of tumor response in advanced renal cell carcinoma patients, and Merck declined to initiate a dose-escalating component in a Phase Ib study of the drug in metastatic colorectal cancer. – Paul Bonanos

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

Deals of the Week Declares Its Independence

On a holiday weekend that celebrates a great nation’s vow to separate from its oppressive parent, we at Deals of the Week are pondering the benefits of going it alone versus being a piece of something bigger. For venture-backed startups on the brink of maturity, that used to mean a choice between an IPO and a sale. But with the former hard to achieve, creative thinking has led to innovative deal structures that deliver returns without following either of the two traditional routes. (We’ve been watching these new strategies emerge for some time.)

How do you sell and stay independent at the same time, bringing returns to your investors without sacrificing autonomy? Forma Therapeutics, for one, has found a seemingly new way, by turning a licensing deal into a potential payoff for its stakeholders. This week, it licensed a tumor metabolism program to Genentech, bringing in an unspecified amount of cash to fund its other oncology programs. The twist in the deal, however, is that Genentech also took an option to buy the program outright, in which case Forma’s VC backers, including Lilly Ventures, the Novartis Option Fund and Bio*One Capital, will receive a cash payment. The arrangement could therefore bring returns to the VCs without diluting their stakes in Forma, which will carry on with its other programs as a standalone operation.

In it's end goal, the deal echos the dividend paid out to Knopp Neuroscience’s shareholders last year when Biogen Idec licensed its Phase II amyotrophic lateral sclerosis drug – a payout without an exit. And while some firms such as Index Ventures and Atlas Venture explore novel asset-based financing structures that effectively match returns with drug candidates rather than whole companies, Forma and its backers have found yet another way to adjust for the changing VC climate.

Speaking of which, we hope Stateside readers find themselves in warm, clear evening weather to watch the fireworks this weekend. (Gosh, we wish there’d been a notable spinout this week, the better to jibe with our Founding Fathers’ document-signing party.) But even if Mother Nature rains on your parade, we hope you find cause for celebration with…

Sanofi/Weill Cornell: In a year marked by numerous tie-ups between pharmas and academic researchers, the latest company to strike a deal with a university is Sanofi, which seeks to develop tuberculosis therapies in conjunction with Weill Cornell Medical College, the New York City-based biotech research facility and medical college of Cornell University. The French pharma said it will supply 80,000 chemical compounds to the laboratory of Cornell researcher Dr. Carl Nathan, which has obtained funding separately from the Bill & Melinda Gates Foundation. Nathan’s lab will determine if any of Sanofi’s compounds has the potential to shorten the course of tuberculosis treatments, which currently range from six months to two years. Sanofi has already ventured onto university campuses twice previously in 2011, launching an interdisciplinary drug discovery deal with Stanford’s Bio-X Center and a diabetes deal with Columbia University Medical Center. The deals build on existing arrangements with Caltech, Harvard and MIT. - P.B.

AstraZeneca/PTC: South Plainfield, N.J.-based PTC Therapeutics struck a deal with Britain’s AstraZeneca to develop up to eight targets across different therapeutic areas using PTC’s GEMS (Gene Expression Modulation by Small molecules) technology platform, which identifies small molecules that modulate post-transcriptional control mechanisms. It yields orally available compounds that act by targeting processes that occur through the untranslated, regulatory regions of messenger RNA molecules. Under the terms of the arrangement, AstraZeneca will pay an undisclosed upfront as well as research funding. PTC will qualify for research, development, regulatory and commercial milestones. AstraZeneca will retain the global commercialization rights to any products that result from the collaboration, but PTC will be able to participate in the development of certain compounds. AstraZeneca will pay PTC tiered royalties on worldwide sales. – Lisa LaMotta

Valeant/Meda: Valeant Pharmaceuticals International and Sweden’s Meda this week announced the terms of a deal that the two companies agreed to in April. Under the agreement, Valeant will pay $76 million upfront for the U.S., Canadian, and Mexican rights to dermatitis cream Elidel (pimecrolimus) and cold sore treatment Xerese (acyclovir/hydrocortisone). Meda is also eligible for $130 million in milestones and royalties over the next 18 months. Valeant will pay further double-digit royalties totaling $120 million from 2013 to 2015 on Elidel and Xerese sales, as well as sales of Valeant’s oral antiviral drug Zovirax (acyclovir). Meda announced in April that it was buying the global rights to Elidel from Novartis for $420 million. That same day, Meda also announced a commitment in principle to sell the U.S., Canadian, and Mexican rights for Elidel to Valeant. The addition of Elidel and Xerese expand Valeant’s slowly growing dermatological franchise. The Canadian biotech re-acquired the U.S. and Canadian rights to cold sore treatment Zovirax in February. It also paid Allergan CA$500,000 ($519,000) upfront plus royalties for rights to the acne medication Aczone (dapsone) in Canada. - L.L.

Flamel/Digna: Spanish university spinout Digna Biotech revealed an agreement with French drug developer Flamel Technologies that entails joint development of three early-stage compounds. Flamel will apply its proprietary drug delivery techniques to Digna’s compounds, creating new drug candidates on which Digna will conduct studies. The two will share costs, although they didn’t discuss financial terms of the agreement; the companies eventually expect to partner the drugs with larger pharmas. The first drug, P144 (disitertide), is already in Phase II trials in a topical formulation for scleroderma but is considered a candidate for pulmonary fibrosis in an injectable form featuring Flamel’s nanogel technology. The same formulation of Digna’s P17 is thought to have potential in treating cirrhosis and in halting angiogenesis, with further implications in oncology. Lastly, an oral formulation of Digna’s methylthiadenosine is a candidate for multiple sclerosis, an area in which Flamel has experience, having developed a long-acting beta interferon in conjunction with Merck Serono that’s now in the clinic. Flamel’s partnering strategy also includes a joint development deal with French pharma Theralpha, under which it developed an injectable form of pain relief candidate THA-902. Funded by Spanish investors, Digna was spun out of the University of Navarra in Pamplona, Spain, in 2003. – John Davis and P.B.

Gilead/Tibotec: Two prominent HIV drug makers have agreed to a deal that will combine a marketed drug with a late-stage candidate. J&J-owned infectious disease specialist Tibotec Pharmaceuticals agreed to license Gilead Sciences’ Phase III therapy cobicistat in order to create a new pill combining the drug with protease inhibitor Prezista (darunavir), which Tibotec will formulate, manufacture and sell, pending approval. Gilead will retain rights to cobicistat, thought to boost levels of anti-HIV drugs in the bloodstream, as a standalone agent and as a combination therapy with other drugs. The two companies also revealed plans to combine Prezista with cobicistat and two other Gilead therapies, the already-approved Emtriva (emtricitabine) and the Phase I candidate GS 7340, although they’re still negotiating terms for that single-tablet therapy. The deal tightens the two companies’ relationship beyond an existing partnership forged in 2009 to combine Gilead’s Truvada (emtricitabine and tenofovir) with Tibotec’s Edurant (rilpivirine). - P.B.

Astellas/Royalty Pharma: It's been a while since we've sunk our teeth into a royalty monetization deal, but we do have a soft spot for these cash-money-now transactions. This week Astellas sold off the royalties from a portfolio of diabetes-drug-related IP to Royalty Pharma for $609 million. The patents, largely around DPP-IV inhibitors and held by a subsidiary called Prosidion that the Japanese pharma acquired when it bought OSI Pharma, turned out to be a solid investment. Prosidion acquired the IP in 2004 from Probiodrug for $35 million and since then the revenues from the likes of BMS's Onglyza and Merck's Januvia have rung the till to the tune of more than $200 million in revenue -- and will continue to generate income until they expire in the 2017-19 timeframe. While there's something to be said for a steady stream of cash, the bolus paid by Royalty Pharma can be put to use now, and will be reinvested in strategic initiatives, Astellas president and CEO Yoshihiko Hatanaka remarked in the statement announcing the transaction. The deal should be no surprise to readers of our sister publication PharmAsia News, which reported in January that Astellas was likely to dispose of its Prosidion assets; the unit's drug development candidates are also being considered for disposal. -- Chris Morrison

Thanks to Flickr user cliff1066 for the Founding Fathers in wax, reproduced under a Creative Commons license.