2013 M&A of the Year Nominee: Valeant/B&L

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

Valeant Pharmaceuticals -- the seemingly insatiable embodiment of growth-by-acquisition in modern pharmaceutical times -- has been party to more than a dozen significant M&A deals since acquiring Biovail in 2011. Its biggest move in 2013, earning an M&A-of-the-year nod from us, is the $8.7 billion takeover of ophthalmology specialist Bausch & Lomb.

The May 2013 deal was a big win for private equity owners Warburg Pincus. It put some extra shine on the reputation of then-B&L CEO Brent Saunders, who has moved on to Forest to work his Hassanian brand of turnaround-magic in the world of primary care. And it again highlighted ophthalmology -- and B&L's diversified pharma/device/consumer approach to the field -- as an industry hotspot.

But the main reason we've nominated Valeant/B&L for the M&A Roger this year is that it underscores the increased activity on the big deal front of specialty pharma over its supposedly deeper pocketed Big Pharma rivals.  In fact a look at the top biopharma deals by dollar value this year suggests none of the 'big' deals -- the recent exception of BMS selling its stake in its diabetes JV to AZ notwithstanding -- were Big Pharma deals.

Warner Chilcott went to Actavis for $8.1 billion. Shire bought ViroPharma for $3.3 billion. Onyx went to Amgen (OK we're splitting hairs there, but we'll call Amgen a 'big biotech'). The remains of Elan went to Perrigo. Big Pharma --  its stated penchant for bolt-ons be damned -- bolted on very little of substance this year. On the other hand, Spec Pharma has the firepower, as our friends at Ernst & Young reminded us this year. And it is using it.



Valeant in particular has been using it to diversify. At the time of the deal, CEO Michael Pearson said Valeant has made no secret of its interest in durable specialty sectors with low R&D risk such as eye care and dermatology (last year's big buy was derm specialist Medicis, for $2.8 billion). Acquiring B&L will enable Valeant to balance its revenue mix from both a geographic and therapeutic perspective, he added. Post-B&L, about 50% of Valeant revenue stems from the U.S., with Eastern and Central Europe comprising 15%, Western Europe and Japan 13%, and Latin America, Canada, Australia, Southeast Asia and South Africa rounding out sales.

In terms of therapeutic areas, dermatology and aesthetics contributes about 34%, eye health about 32%, neurology and “other” about 12%, and consumer and oral health about 11%, the CEO said. (Consumer businesses are absolutely on Valeant's radar since adding B&L's consumer brands, the company has said more recently.)

So vote Valeant for its personification of specialty pharma's growth ambitions, particularly in comparison to Big Pharma's 'hey everybody let's get small' religion. For the way it represents the shifting firepower available for the big deals (buybacks and dividend hikes aren't free -- and that's where a lot Big Pharma's money has gone over the past few years). And for its kid-in-a-candy-store, shopping-spree approach to building a large, specialist pharma player: think of it as a vote not just for Valeant/B&L, but for Valeant/Solta, Valeant/Obagi, Valeant/Medicis, and all the rest and what's to come.

Artillery photo via flickr/Paul Campy // cc

Deals Of The Week: Can Endo Succeed By Copying The Valeant Model?

Santa’s sleigh may be loaded to the brim with gifts come Christmas Eve but it was Deals of the Week that carried a heavy load during the final full business week before the Yuletide holiday. That’s roughly 20 business development transactions, and counting, for the week of Dec. 16-20 as this column went to press.

Below are some of the highlights, but let’s start with the latest stocking-stuffer at Endo Health Solutions, which has always relied on deal-making to fill its pipeline but may be poised to increase its prior business development pace since Rajiv De Silva signed on as CEO from perpetual deal-maker Valeant Pharmaceuticals in February. On Dec. 16, Endo agreed to acquire NuPathe and its recently approved sumatriptan patch, Zecuity, for $105 million upfront plus potential contingent payments pegged to future sales of the migraine product.

This closely followed the Nov. 5 $1.6 billion buyout of Canadian specialty pharma Paladin Labs, a move that would expand Endo’s international footprint to Canada, South Africa and Mexico, while providing tax advantages by allowing the suburban Philadelphia company to re-domicile in Ireland. It’s been a frenetic pace since De Silva took over and moved toward a Valeant-like pursuit of expansion via M&A activity.

While Wall Street did not rave about the NuPathe acquisition, perceiving it as mainly the acquisition of a single asset likely to post smallish sales but also enhance Endo’s pain product portfolio, analysts told Deals of the Week they approve of De Silva’s approach to re-making Endo.

“I actually like the strategy he’s pursuing,” said UBS Investment Research analyst Marc Goodman. “De Silva came in and said ‘we need to restructure this place first because our costs are out of whack with our revenues.’ That’s pretty much the same thing Valeant did a few years ago. The second thing he did was look at the assets and ask what they wanted to be in and what they didn’t. They decided to get rid of [urological services provider] HealthTronics, so that’s on the block. And it wouldn’t surprise me if in 2015 or afterward, once they fix [medical device unit] AMS that they sell AMS.”

Speaking to the Credit Suisse Healthcare Conference Nov. 12, De Silva said plans to divest HealthTronics, termed “not … a strategic fit with us anymore,” are making solid progress. “We have retained an investment bank and we are in the midst of doing management presentations and are optimistic about the level of interest that has been expressed so far,” the exec said. He didn’t address any plans to sell off AMS but said that apart from its women’s health offerings, the unit is showing quarter-to-quarter performance improvement, including year-to-date revenue growth compared with 2012.

The $105 price tag for NuPathe works out to about $2.85 per share. But if Zecuity, approved by FDA in January but not yet launched, meets certain sales thresholds, NuPathe investors stand to get additional payouts. They’ll get $2.15 per share if net sales of Zecuity top $100 million during any four-quarter period up to the ninth anniversary of the first commercial sale of the product. And they can obtain an additional $1 per share if the product reaches $300 million in sales during a four-quarter period during that same time span.

The only FDA-approved prescription patch for migraine, Zecuity is a disposable, single-use, battery-powered transdermal patch that delivers sumatriptan through the patient’s skin. Its approval was based on a Phase III program that tested nearly 10,000 units of the product in 793 patients.

While Goodman thinks Zecuity is unlikely to top the sales marks established under the deal’s contingent payment language, he believes the technology behind the patch product will make it hard to duplicate, frustrating attempts at generic competition and providing Endo with a “very long tail” of revenue (sumatriptan itself, developed and sold by GlaxoSmithKline, has been generic since 2008).

UBS initially will include annual sales of less than $100 million in its modeling for Endo, because of the highly genericized competition in migraine, the resulting pricing pressure and the possibility that doctors with patients who failed to obtain relief on an oral sumatriptan product might not be greatly inclined to try a sumatriptan patch in those very same patients. “I just wonder about the pecking order,” Goodman said.

Meanwhile, Morningstar analyst David Krempa sees the transaction as keeping with the tradition of bolt-on deals De Silva would have learned to value while serving as president and chief operating officer at Valeant.

“It’s a relatively small deal that basically fits in with the strategy they talked about, pursuing bolt-on deals similar to what we saw at Valeant, combined with the occasional mega-deal like we saw with Paladin,” Krempa noted. “Those are the kinds of deals that Valeant has had success with, ones in which it can acquire a product or asset and take out all the revenue without needing to add on any expenses. They don’t need the sales force that [NuPathe] has and so they add the new product onto their existing sales force’s portfolio and get all of the sales without taking on much of the expense that typically would go along with it.”

But Krempa shares Goodman’s concerns about the viability of the migraine space and pain therapy in general. Endo needs to seek out business areas offering “less pricing pressure and better organic growth prospects,” he said, citing dermatology, ophthalmology, branded generics and over-the-counter products as possible targets. The Paladin acquisition gives Endo entrée into some of those spaces, he added.

Meanwhile, plenty of other companies, including Valeant of course, were negotiating their own deals during the final shopping days before Christmas. Read on as we present a red-and-green tinged edition of ....

Valeant/Solta Medical: Serial buyer Valeant moved to expand its aesthetics business this week with the addition of Solta Medical, the makers of medical device systems for aesthetic applications. Valeant announced Dec. 16 it will acquire Solta for $250 million in the latest in a string of acquisitions by the Canadian firm in recent years, including several that have expanded the company’s portfolio in medical devices and dermatology. Solta will complement Valeant’s portfolio on both fronts by augmenting its offerings to dermatologists and plastic surgeons. Its 2012 revenues were $145 million, coming from products like Thermage CPT radiofrequency skin-tightening system, Fraxel skin repair system and the Clear + Brilliant laser skin-resurfacing system. Solta has made a number of major acquisitions in recent years, including Sound Surgical Technologies in February 2013, and the LipoSonix business from Medicis Pharmaceutical in 2011. Valeant ultimately acquired Medicis in 2012 for $2.6 billion, building significantly on its dermatology and aesthetic offerings at the time. - Jessica Merrill

Merck/GlaxoSmithKline: Merck announced Dec. 18 that it is teaming up its highly anticipated early-stage cancer compound, MRK-3475, with GlaxoSmithKline’s kidney cancer drug Votrient (pazopanib), which was approved in October 2009. The two pharmas will test the protein kinase inhibitor with the anti-PD-1 immunotherapy in a Phase I/II clinical trial that will evaluate the safety and efficacy of the combo in treatment-naive patients with advanced renal cell carcinoma, they said in a statement. Financial details of the collaboration were not disclosed. But the dollar amount attached to the deal is almost irrelevant; for Merck, the anti-PD-1 immunotherapy is one of its few programs to garner much enthusiasm of late – both inside and outside the company – as the New Jersey pharma struggles to move drugs through its pipeline successfully. Merck is relying heavily on the cancer immunotherapy – which has shown a lot of promise but is still very early – to deliver its first blockbuster in several years; and the company intends to partner, partner and partner some more. “We look forward to initiating further collaborations to investigate MK-3475 in combination with other anti-cancer agents across a range of tumor types,” said Iain Dukes, SVP of Licensing and External Scientific Affairs at Merck Research Laboratories. So expect to see plenty more of these little tie-ups in 2014 – but don’t hold your breath for any financial terms to be revealed. - Lisa LaMotta

Pfizer/Siemens: Pfizer and Siemens Healthcare Diagnostics have entered into a master collaboration agreement to design, develop and commercialize diagnostic tests for therapeutic products across Pfizer’s pipeline. Siemens is providing in vitro diagnostic tests that Pfizer can use in its clinical trials and potentially as companion diagnostics for Pfizer drugs. Terms were not disclosed, nor were development priorities, but Trevor Hawkins, SVP, strategy & innovations, diagnostics division of Siemens Healthcare, said the deal is open-ended and could be applied to Pfizer’s entire portfolio, from early-stage development to commercialized drugs. The partners already have two active programs, one of which requires Siemens to identify a marker for a compound and the other of which requires Siemens to develop a test for a biomarker that Pfizer has identified already. The partners have set up a joint governance committee, which is meeting weekly. Both companies have partnerships with others around companion diagnostics, but those are mostly one-offs; Siemens, for example, in June, entered into a global agreement with Janssen Pharmaceutica to create a companion diagnostic for an early-stage heart failure therapeutic. Pfizer has at least three companion diagnostic deals, including one with Qiagen, which it signed in 2011 to develop a molecular test for dacomitinib, then in Phase III for non-small cell lung cancer. And in 2012, it signed a deal with Roche Diagnostics Corp. to develop an immunohistochemistry companion test for Xalkori (crizotinib), also for NSCLC. Pfizer isn’t the first pharma to enter into a master agreement around companion diagnostics; Eli Lilly has one with Qiagen. As the deal’s reach shows, pharma’s inherent skepticism about the value of companion diagnostics is gone, although many uncertainties remain, both technical and commercial, about the field. - Wendy Diller

Bristol-Myers Squibb/AstraZeneca: AstraZeneca announced Dec. 19 that it will acquire the entirety of Bristol-Myers Squibb’s interests in their diabetes alliance, including drug assets, staff and infrastructure, paying $2.7 billion on deal completion, $1.4 billion in regulatory and commercial milestones, and royalties up to 2025. The deal ends a seven-year diabetes alliance between the two parties that culminated in the 2012 co-purchase of Amylin Pharmaceuticals for $7 billion. With the dissolution of the alliance, AstraZeneca gets all patents and global rights to DPP-4 inhibitor Onglyza (saxagliptin) in all combinations and formulations, SGLT4 inhibitor dapagliflozin (Forxiga in Europe), metreleptin (recombinant leptin) for treatment of lipodystrophy, and Amylin’s GLP-1 assets Bydureon (exenatide, weekly injection) and Byetta (exenatide, twice-daily injection). The transaction illustrates the divergence in strategy between the two companies, as AstraZeneca believes its geographic reach and its scale in diabetes assets, infrastructure and capabilities position it to succeed. Bristol, on the other hand, will use the breakup to accelerate its transformation into a sharply focused specialty care company and to re-allocate its resources toward its PD1 program and its immuno-oncology franchise, said CEO Lamberto Andreotti on a same-day business update call. AstraZeneca’s focus in 2014 will be on its upcoming launch of dapagliflozin in the U.S., on building the Bydureon brand, and on life-cycle management of Onglyza. - Mike Goodman

Bayer/Algeta: Everyone likes to see a billion-dollar acquisition or two quickening the markets a bit going into the annual industry festival that is the JPMorgan Healthcare Conference. Obligingly, Algeta and its partner Bayer are providing one; the biotech said on Dec. 19 that it has agreed to be acquired by the pharma for $2.9 billion. Algeta originally disclosed an offer from Bayer on Nov. 26. In the intervening weeks, it got the pharma to sweeten the pot a bit to NOK 362 per share from NOK 336. That increase raised the offer from the original price of about $2.65 billion. The price is a 37% premium to the closing price on Nov. 25, the day before it disclosed the original Bayer offer. The pair partnered on prostate cancer therapy Xofigo (radium-223 dichloride), which was approved and launched in the U.S. in May. It subsequently was approved in the EU in November. In a market crowded with new and expensive entrants, the therapeutic offers a new mechanism of action and is aimed specifically at the treatment of castration-resistant prostate cancer in patients with symptomatic bone metastases, a critically ill subset. In Xofigo’s first full quarter of sales, it had $17 million in revenue during the third quarter. Administration sites have to be licensed to sell the product because of its radioactivity; as of Oct. 18, Algeta said there were 626 facilities licensed to treat patients with Xofigo in the U.S. That number had progressed faster than expected. Algeta received €100 million ($137 million) in Xofigo milestones during the first three quarters of 2013. Half of this amount came due on the FDA submission for Xofigo, with the other half tied to the first sale of the product. Under the terms of the 2009 partnership, Bayer paid €42.5 million up front. Then in 2012, Algeta exercised its option to co-promote Xofigo in the U.S., which entitled it to a 50/50 split with Bayer of profits and commercialization costs. Bayer owns sole rights ex-U.S., paying Algeta a tiered double-digit royalty on product sales. Analysts estimate Xofigo will be a blockbuster. Bayer clearly was unwilling to share any upside with its biotech partner and, with enough cash, it didn’t have to. - Stacy Lawrence

Jazz/Gentium: Recently re-domiciled in Ireland, as Endo now is planning to do, Jazz Pharmaceuticals signed an agreement Dec. 19 to purchase Italy’s Gentium for $57 a share, a bid that would total out to about $1 billion. Key to the deal is Defitelio (defibrotide), approved by the EU this past October to treat veno-occlusive disease in adult and pediatric patients undergoing hematopoietic stem-cell transplantation. The sale is structured as a tender offer – both companies’ boards of directors have approved the transaction. Based on a single-stranded oligodioxyribonucleotide extracted from DNA in pig intestines, defibrotide had been filed for approval in the U.S. but Gentium withdrew its NDA in August 2011 after learning that FDA would refuse to file the application over questions of data quality and the conduct and monitoring of clinical trials. “Incorporating Gentium into Jazz Pharmaceuticals is a strong strategic fit, as Defitelio would diversify our development and commercial portfolio and complement our clinical experience in hematology/oncology and our expertise in reaching targeted physicians who treat serious medical conditions,” Jazz Chairman and CEO Bruce Cozadd said in a release. “Because Defitelio is already approved in the EU, the acquisition would add a new orphan product that has potential for short- and long-term revenue generation, high growth and expansion of our multinational commercial platform.” In a Dec. 20 note, Brean Capital analyst Gene Mack said the acquisition should be immediately accretive for Jazz, with defibrotide bringing in a projected $71 million in sales in 2014, crossing the $200 million annual sales threshold in 2018 and nearing $500 million in 2023. - Joseph Haas

Photo credit: Wikimedia Commons

Deals Of The Week Is Keeping Score – Valeant Wants Actavis, Which Covets Warner Chilcott …

Whether the pastime is baseball, Broadway or the daytime soaps, the old adage is that you can’t keep track of the players without a scorecard. The M&A front involving specialty pharma and generic drug makers has become similarly frenzied, as Canada’s acquisition-driven Valeant Pharmaceuticals sought after the newly minted Actavis, with Actavis then turning to a pursuit of Warner Chilcott once negotiations with Valeant broke down.

What, exactly, is going on here? And just as vitally, why?

Recall that the dust only recently settled on Actavis, the re-branded Watson Pharma, following the merger of those two firms last year. At an investor day presentation Jan. 25, CEO Paul Bisaro proclaimed that the new Actavis could boast a widened geographic footprint and a diversified portfolio comprising regular and branded generics, brand-name pharmaceuticals and over-the-counter products.

With the Watson/Actavis combination, the resulting company merely was trying to keep pace in a consolidating generics industry that had seen sector-leader Teva continually branching out into branded drugs and perhaps biosimilars and Mylan increasing its capabilities and geographic reach via a run of targeted deal-making.

In late April, reports surfaced that talks of a merger between Valeant and Actavis had collapsed, apparently due to Actavis shareholder concerns over valuation. Actavis has been a centerpiece of Wall Street discussion in recent months, due to a consistently rising share price. (Or has the conversation lifted the share price? A chicken vs. egg conundrum, to be sure.) The stock opened trading March 1 at $85.17, and rose to $92.33 on April 1 and to $105.24 on May 1. At the close of trading on May 16, Actavis’ stock price stood at $123.61.

Meanwhile, it was not necessarily clear who was the suitor in the Valeant/Actavis talks, although the safer bet seemed to be Valeant, helmed by acquisition-hungry CEO Michael Pearson. A Wall Street investment analyst said that the Valeant/Actavis talks seemed to be the catalyst for the resulting Actavis/Warner Chilcott rumors as well as possibly emerging interest in buying out Actavis from Mylan and from Novartis.

“We know that Valeant is an aggressive negotiator in terms of valuation,” the analyst said. “Going by their track record, they’re not going to pay some kind of excessive premium. The question we had was if nothing happened, did Valeant learn something really negative about Actavis during its due diligence?”
The analyst opined that the talks might have been a power-play by Bisaro himself, with the Actavis CEO picturing himself as the leader of a combined company with Valeant. “If Bisaro is talking with Pearson and trying to sell the business for $120 a share, isn’t he sending a signal that the game is up?,” asked our source. “Now, Bisaro might be saying Actavis is undervalued and going to do all these things, but his wallet is doing the talking. Actions speak louder than words, and they’re saying now is the time to pull the ripcord on the parachute.”

But if Valeant was the pursuer, Actavis’ current gambit for Warner Chilcott might have a “poison pill” element, an effort to make Actavis too rich for the Canadian specialty pharma to swallow. “It seems too coincidental that this happened so quickly after the Valeant story,” the analyst said.

In any event, the analyst perceives an Actavis/Warner Chilcott merger as highly likely, given how much the Irish firm has to lose if it puts itself up for sale and fails for a second year in a row. It would broaden Actavis’ portfolio in women’s health and dermatology and a strong sales force that could bolster Actavis’ commercial capabilities. What’s more, a reverse merger would domicile the resulting business in Ireland, providing tax advantages.

More elements were added to the story mid-week: Pittsburgh-based Mylan was reported to have made a roughly $15 billion offer to acquire Actavis, and then multinational pharma Novartis was said to be weighing its own bid. Novartis later publicly denied interest in Actavis, however. - Joseph Haas

The final chapters of that story remain to be written, but other biopharma deal-making has come to fruition in the latest installment of …

Elan/Theravance: In one of the more interesting deals of the past week, or for that matter the year, Elan announced a deal May 13 in which it agreed to pay Theravance $1 billion upfront in exchange for a portion of the potential future royalty payments it will receive from four respiratory programs partnered with Theravance. It’s a hefty up-front that many analysts believe exceeds the value of the interest Elan would acquire. The deal is the first of several Elan plans to make as it looks to reinvent the company through licensing and acquisitions. The announcement also comes as Elan looks to push back a hostile takeover bid from Royalty Pharma. Under Irish takeover law, the Theravance deal will require approval from investors, who already are considering an $11.25 per share buyout offer from Royalty. Elan would gain a 21% interest in potential future royalty payments to Theravance from GSK on four partnered respiratory drugs, including Breo Ellipta, which was approved by FDA May 10 for the treatment of chronic obstructive pulmonary disease. It also includes Anoro Ellipta, a combination of vilanterol with the LAMA umeclidinium, which is pending at FDA with a Dec. 18 user fee date, as well as in a bifunctional muscarinic antagonist-beta1 agonist (MABA) monotherapy and vilanterol monotherapy, both in development. For Theravance, the deal would have been hard to refuse given the rich terms, even though the company recently announced a separation to form one entity to manage the royalty revenue stream from Breo. Management said the arrangement will complement the company’s previously announced plan to separate into two companies. The firm said April 25 it will split into two entities, a royalty company called Royalty Management. Co. with a focus on near-term profitability and returning capital to shareholders, and Theravance Biopharma, a research-focused biopharmaceutical company. - Jessica Merrill

Alvine/AbbVie: On May 14, AbbVie signed its second deal since spinning out from parent company Abbott Laboratories in January, this time with San Carlos, Calif.-based biotech Alvine Pharmaceuticals. AbbVie agreed to pay $70 million upfront for an option to either acquire Alvine outright or license all of the assets related to its lead compound ALV003 for the treatment of celiac disease. The disease, which is characterized by gastrointestinal inflammation due to the ingestion of gluten-containing foods, affects about 3 million Americans and currently has no treatment options other than limiting gluten intake. ALV003 has completed a Phase IIa study and Alvine is prepared to take the drug through a 500-patient Phase IIb study, slated to read out in late 2014. Should AbbVie opt into the program, it will pay a “substantial” option fee, as well as further near-term milestone payments. The amount of those payments was not disclosed. The relationship between Alvine and AbbVie has a rich history; AbbVie’s venture arm (then Abbott Biotech Ventures) backed the biotech in May 2010 when it invested an undisclosed amount. AbbVie’s funds were an extension of Alvine’s Series A – the initial tranche was $21 million in 2006 led by Sofinnova Ventures with additional participation from Prospect Venture Partners, InterWest Partners, Cargill Ventures and Flagship Ventures. Another $21.5 million was raised when Panorama Capital and Black River Asset Management joined the syndicate in 2009. - Lisa LaMotta

RuiYi/Genor/CMC Biologics: China-U.S. hybrid RuiYi announced May 16 a series of partnerships to develop RYI-008, a novel anti-interleukin-6 monoclonal antibody in China to treat autoimmune disease and cancer. Formerly Anaphore, the hybrid is 90% a Chinese company, and about 10% U.S.-based, CEO Paul Grayson said. RuiYi conducts research at a facility in the Zhangjiang Hi-Tech Park in Pudong Shanghai, China, with only its executive management team based in offices in La Jolla, Calif. The antibody, in preclinical development now, will be developed first in China, and the company has forged a partnership with three other companies to get it there. China has said it would make biotech innovation a priority, but few companies have been bold enough to develop innovative biologics in the country, choosing instead to focus on biosimilars and generics for China, Grayson said. RYI-008, formerly ARGX-109, was in-licensed from Belgian/Dutch biotech arGEN-X in October 2012. RuiYi inked an exclusive licensing and co-development agreement with Shanghai-based Genor Biopharma to develop RYI-008 in China. Financial details of the deal were not disclosed. The company was chosen partly due to its close relationship with China FDA and its deep knowledge of China’s regulatory environment. Founded in 2007, Genor is focused on development and commercialization of therapeutic mAbs and Fc-fusion proteins. The company has more than 10 products in its pipeline, three of which are at IND and clinical stages. Danish contract manufacturer CMC Biologics will develop a cell line for RYI-008 for global manufacturing in all markets. Specific terms of the agreement were not disclosed. - Tamra Sami
Roche/Curie-Cancer: France’s Curie-Cancer and Roche announced May 15 that they are building upon a four-year partnership to expand their translational research programs and hasten development of new cancer treatments. In 2009, they agreed to partner around a preclinical research program which gave Roche access to a platform of preclinical models developed by the research teams at the Institut Curie. Curie-Cancer develops Institut Curie’s industry partnership activities. The Roche Institute for Research and Translational Medicine is the Swiss group’s arm there which aims to identify leading French academic research teams and build partnerships with them in areas of shared interest. The initial partnership gave Roche access to preclinical models that are highly representative of the tumors observed in patients. Using the platform, Roche determined in which sub-type of breast cancer an antibody was most effective. The Institut Curie also owns the Reverse Phase Protein Analysis platform, which gives researchers better understanding of how a Roche antibody works on the cancer cells at the molecular level, and also helps to identify predictive response markers. Curie-Cancer and Roche currently are working on a number of translational research programs involving Roche molecules that make use of the same technology. For example, a team of Curie-Cancer clinicians, anatomopathologists and researchers are working on developing a new Roche molecule targeting tumors. No financial details of the partnership were disclosed. - Sten Stovall

Quintiles/Merck Serono: Merck-Serono and newly public CRO Quintiles Transnational announced May 15 a five-year strategic collaboration that appears to go beyond the typical consolidation which the provider services industry’s larger pharmaceutical companies have pursued over the past few years. The deal, which the companies described as “first of its kind,” will create a drug-development engine by combining “expertise and experience” from the two organizations. Merck-Serono will lead strategically while Quintiles will handle the nuts and bolts of clinical trial planning and execution. In short, this is about more than saving money for Merck-Serono, a company that apparently is saving quite a bit these days. The mid-sized pharma’s parent company Merck KGAA reported May 14 during its quarterly earnings call that it was ahead of schedule in executing on its restructuring – which involved the closure of Merck-Serono’s Geneva headquarters – and that it would move forward its financial targets from 2014 to this year. Merck-Serono Executive VP and Global Head of Development and Medicine Annalisa Jenkins said that the partnership transcends the typical preferred-partnership outsourcing model. The deal moves beyond trading volume for “a better rate card,” she said. Quintiles has the benefit of seeing across different companies throughout industry, she said, and of integrating that knowledge, adding, “it’s remarkable that we don’t make a greater attempt to embrace and integrate that knowledge in how industry plans and executes studies.” The Merck-Serono/Quintiles tie-up does just that, she said, and “financially the incentives are set up to drive to more efficient decision making.” Specifics of the financials weren’t disclosed. The deal is Quintiles’ first since its public market debut May 8. The industry’s largest CRO and its existing investors sold more than 27 million shares combined at $40 apiece, raising about $950 million (Quintiles netted about $500 million). - Chris Morrison

AbbVie/Galapagos: AbbVie made further news May 17 when it and partner Galapagos announced that they will extend their 2012 collaboration centered on GLPG0634, a Phase II Janus kinase inhibitor, to development in Crohn’s disease. Under the revised agreement, the Belgian biotech will fund and complete a Phase II trial in Crohn’s, which should facilitate rapid progression into Phase III. AbbVie will pay Galapagos $50 million upon completion of the study, expected in mid-2015. Galapagos will initiate what is planned as a 20-week, Phase IIa/b study of ‘0634 in Crohn’s patients in early 2014, investigating for both disease remission and early maintenance of the drug’s beneficial effects. The study will be performed in parallel with a Phase IIb study in rheumatoid arthritis, pursuant to the agreement Galapagos signed with then Abbott Laboratories in February 2012. At the time, Abbott paid $150 million upfront with a commitment for $200 million more if the JAK inhibitor met pre-determined criteria in Phase II study in RA. - J.A.H.
Photo Credit: Wikimedia Commons

Deals Of The Week Wonders Whether Heated Competition To Buy Ache Laboratorios Will Muddy The Brazilian Waters

Could a bidding war for Brazil’s privately held Ache Laboratorios do for Latin America what Abbott Laboratories’ gargantuan purchase of part of India’s Piramal Healthcare did for biopharma M&A in India?

Call it the “Piramal effect,” if you will. Abbott reset expectations among India’s domestic pharma world with its $3.72 billion purchase in 2010 of Piramal’s branded generics business. Brazil hasn’t yet seen the kind of blockbuster deal that would raise prices across the board; the highest value deal in that market to date is Sanofi’s $662 million buyout of Brazilian generics firm Medley Pharmaceuticals in 2009.

Sanofi got in early – staking its claim before big pharma’s buying spree in emerging markets generated significant deal inflation – but the deal hardly lifted the value of Brazilian companies across the board. That transaction was followed by smaller deals, such as Takeda’s $251.5 million (BRL 500 million) buyout of Brazilian branded generics specialist Multilab Indústria e Comércio de Produtos Farma about one year ago, which also included potential for up to BRL 40 million in earn-outs.

But, now comes word that could blow all previous Brazilian deals out of the water – Abbott and two of its big pharma competitors, Pfizer and Novartis, are preparing a second round of bids to buy Ache, Brazil’s leader in the sale of prescription drugs. The rumored price tag for Ache, fourth overall domestically in drug sales when over-the-counter products are included, ranges between $4 billion and $5 billion, a matter complicated by talk that at least one of three ownership families does not wish to sell. Ache’s public stance is that it is not up for acquisition.

Ache reported net earnings of $270 million for the 12 months ending Sept. 30, 2012. Nonetheless, a source familiar with the company told Deals of the Week that Ache remains an appealing investment for big pharma due to higher gross margins than its domestic competition, high top-line growth and strong relationships with distributors. In an emerging-markets competition where it is difficult to acquire worthy assets without overpaying, the three pharmas are facing a reality that a price tag above $5 billion – about 20 times EBITDA (earnings before interest, taxes, depreciation and amortization) – may be required just to get a foot in the door.

One pharma executive who asked not to be named told DOTW that his company is so discouraged by prices for assets in the primary emerging markets that it already is looking to next-generation possibilities such as Nigeria and Colombia.

As an article in The Atlantic notes, for overall business climate, Brazil recently has been viewed as the shining jewel of the so-called BRICS nations (Brazil, Russia, India, China, South Africa), with an average real gross domestic product growth rate of 4% between 2004 and 2010, including an eye-opening 7.5% in 2010. Add in low unemployment and a fairly industry-friendly regulatory environment, and Brazil perhaps was positioned to join China as the top emerging market for biopharma.

An early 2013 Business Monitor International report states that total pharmaceutical expenditure in Brazil in 2011 was more than $28.7 billion, and that total was expected to grow by 7.6% in local currency terms in 2012 (while declining in U.S. dollar spending due to exchange-rate fluctuations.) However, the biopharma opportunity in Brazil is being diminished by drug rebates, which are increasing both in total numbers and in size.

Meanwhile, GDP declined 0.9% in Brazil last year, combining with a 6% inflation rate to tarnish the South American giant’s emergence. Outside investment hoping to tap Brazil’s huge population, highlighted by a rising consumer class, faces what is known as “the Brazil cost” – a combination of high tariffs, poor infrastructure and red tape that increase the cost of doing business, the Atlantic reported.

But industry interest in tapping the Brazilian market cannot be denied. A review of Elsevier Business Intelligence’s Strategic Transactions database reveals six major equity investments in Brazilian biopharma holdings this decade. Beside last May’s Takeda/Multilab transaction, these include:

• Valeant Pharmaceuticals paying $28 million in May 2010 for Instituto Terapeutico Delta, a private branded generics and OTC company focused largely on dermatology;
• Pfizer anteing $240 million plus performance-based earn-outs to acquire 40% of generics firm Laboratorio Teuto Brasileiro in October 2010;
• Amgen ponying up $215 million in cash for Bergamo, a hospital-focused company with an emphasis on oncology, in April 2011;
• Merck investing an undisclosed amount in February 2012 to create and own a 51% stake in a Brazilian joint venture with Supera Farma Laboratorios, Cristalia Produtos Quimicos Farmaceuticos and Eurofarma Laboratorios; and
• UCB Group paying an undisclosed sum with potential for performance-based earn-outs to acquire 51% of specialty pharma Meizler Biopharma. The May 2012 deal included an option for UCB to buy out the remainder of the company.

While we await the outcome of the multi-company pursuit of Ache – GlaxoSmithKline reportedly dropped out of the bidding a while back – other biopharma deal-making was completed in the past week as we tally up …

AstraZeneca/AlphaCore: Following through on CEO Pascal Soriot’s promise to rebuild the company’s cardiovascular pipeline, AstraZeneca announced its third cardiovascular deal in two weeks. In the latest tie up, announced April 3, AstraZeneca’s biologics unit MedImmune acquired private biotech AlphaCore Pharma for an undisclosed sum. The big pharma gains ACP-501, a recombinant human lecithin-cholesterol acyltransferase (LCAT) enzyme that is believed to play a major role in removing cholesterol from the body and also may increase levels of high-density lipoprotein (HDL) cholesterol, better known as “good cholesterol.” A Phase I trial testing the drug met its primary safety and tolerability endpoint and also showed that ACP-501 raised HDL cholesterol in patients taking it. The cholesterol space is a high-risk, high-reward area of drug development, given the growing regulatory and commercial hurdles. But Soriot vowed AstraZeneca would embrace risk as a key to unlocking success in the drug-development process during an overview March 21 in which he unveiled his turnaround plan for the company. Cardiovascular disease is one of three core therapeutic areas the company has committed to. In March, the company signed two deals in the field: an option agreement with messenger RNA developer Moderna Therapeutics for up to 40 programs in exchange for $240 million upfront and a research partnership with Sweden’s Karolinska Institute. - Jessica Merrill

Bind Therapeutics/Pfizer: Nanotech company Bind Therapeutics has inked its second deal with a major player this year, signing a collaboration with Pfizer on April 3. Pfizer will pay Bind to combine its Accurins technology with small molecules provided by the big pharma. Pfizer will pay $50 million in upfront and near-term development expenses per molecule and Bind is eligible for $160 million in regulatory and commercial milestones for each product that reaches the market. Bind did not retain any commercialization rights, but will receive tiered royalties on worldwide sales. The company would not reveal the number or kinds of molecules covered by the deal or the therapeutic area of focus, but did say the agreement covers more than one molecule. The Accurins technology has been explored in the areas of oncology, inflammatory diseases like arthritis and cardiovascular indications. In January, Bind announced a similarly sized agreement with Amgen to develop and commercialize kinase inhibitor nanomedicines to treat solid tumors. - Lisa LaMotta

Ra Pharma/Merck: Less than a year after exiting stealth mode, Ra Pharmaceuticals has landed its first partnership, aligning with Merck to help the pharma discover and develop drugs for difficult-to-hit protein targets. Under the agreement announced April 1, Ra will use its proprietary Extreme Diversity platform to find and develop cyclomimetic candidates that can address intracellular protein-protein reactions in multiple undisclosed therapeutic areas. Ra will receive an undisclosed upfront payment and research funding; discovery, development, regulatory and commercialization milestones could bring its full remuneration to $200 million. While the deal stemmed from early conversations between Ra executives and Reid Leonard, head of Merck Research Ventures Fund, it does not include an equity component for the pharma, Ra President and CEO Doug Treco said. It also includes no risk-sharing, such as a co-promotion option down the road. Ra is developing what it terms a new class of drugs, peptide-like molecules offering the diversity and specificity of antibodies along with the attributes of small molecules, such as oral bioavailability. Cyclomimetics, the cyclic polymer drug candidates produced with Ra’s technology, are characterized by their cyclic structure and backbone as well as side-chain modifications that can provide beneficial properties not offered by natural peptides, the company says. It claims that Ra’s platform produces molecules that are highly specific and stable, offering improved cell permeability and potential for increased bioavailability as well as longer half-lives. - Joseph Haas

Astellas/Ambrx: In its latest tie-up with a major pharmaceutical player, Ambrx announced April 5 that it will collaborate with Japanese pharma Astellas Pharma on a series of antibody-drug conjugates (ADCs) in the oncology setting. Astellas will pay the biotech $15 million upfront, as well as $285 million in potential development, regulatory and sales-based milestones to discover and develop an undisclosed number of molecules that use its site-specific ADC technology. Last June, Ambrx inked a deal with almost identical financials with Merck. While details of the targets the companies intended to focus on were not disclosed, it was revealed that they would focus on areas “beyond oncology.” Ambrx also has tie-ups with Eli Lilly and Bristol-Myers Squibb. Previously it had arrangements with Wyeth, Roche and Merck Serono. ADC technology, which allows drugs to be targeted to a specific site carrying a therapeutic payload, have become a hot space since Seattle Genetics got approval of its ADC lymphoma drug Adcetris (brentuximab vedotin) in August 2011. - L.L.

Agios/Foundation Medicine: Agios Pharmaceuticals and Foundation Medicine signed a pact April 4 to use the latter’s clinical assay, FoundationOne, to create diagnostics which could identify ideal patients for Agios’ compounds aimed at cancer metabolism. No financial terms were disclosed. The diagnostic-discovery collaboration will focus on Agios candidates intended to inhibit tumors that carry mutations in the IDH1 and IDH2 metabolic enzymes. The work will seek to identify tumor genomic alterations that would be most likely to respond to Agios’ candidates, and to potentially develop and commercialize companion diagnostics for Agios compounds. Foundation, which developed the FoundationOne genome analysis profiling system for personalized cancer treatment decision-making, raised a $42.5 million Series B financing in 2012 with a syndicate of venture capital and corporate venture outfits. The round was topped off with an additional $13.5 million this past January from individual investors including Bill Gates, Yuri Millner and new board member Evan Jones. Agios, partnered since 2010 with Celgene on cancer metabolism R&D efforts, raised a $78 million Series C round in 2011 and announced plans to branch out therapeutically into rare genetic disorders. - J.A.H.

Novartis/ImmunoGen: ImmunoGen on April 4 updated the status of its 2010 licensing agreement with Novartis to apply the biotech’s Targeted Antibody Payload (TAP) technology platform to create cancer-fighting antibodies for undisclosed targets chosen by the multinational pharma. Under an amendment to the agreement, Novartis has exclusively licensed one compound against a still-undisclosed target, while taking a non-exclusive license to a second compound which can be converted later to an exclusive license. ImmunoGen will receive $4.5 million upfront under the amendment and could earn between $200 million and $238 million in milestones pegged to the two compounds, plus potential sales royalties. Of the upfront money, $1 million is an option exercise fee, while the remaining $3.5 million, which could be credited against future milestone payments, will be paid if Novartis terminates development of one or both compounds. In a same-day note, Cowen & Company analyst Simos Simeonidis called the developments “an incremental positive for ImmunoGen” that helps to validate the TAP platform. In October 2010, Novartis paid $45 million upfront for the license, intended to help it create antibody-drug conjugate (ADC) therapeutics for cancer. The deal offered the potential for up to $200.5 million in milestones for each target leading to development of an ADC, as well as sales royalties on any products reaching market. - J.A.H.

ArQule/Daiichi Sankyo: In our “No-Deal” of the week, collaborators ArQule and Daiichi Sankyo have decided to terminate an early-stage collaboration around Phase I oncology compound ARQ-092. The news comes just months after a Phase III setback of the companies’ later-stage oncology compound tivantinib, which the two companies will continue developing together. Daiichi opted to license ARQ-092 in November 2011 and paid $10 million upfront at the time, as well as Phase I development expenses. ArQule stood to gain $255 million in milestone payments and the deal included development of multiple compounds; the program now has been returned to the Woburn, Mass.-based company. Meanwhile, tivantinib failed to show overall survival in a late-stage trial in non-small cell lung cancer. The drug’s development focus now has been shifted to liver cancer. The partners signed their initial agreement for tivantinib (known then as ARQ-197) in November 2008. Daiichi agreed to pay $60 million upfront, as well as $560 million in milestones to license the c-Met receptor tyrosine kinase inhibitor. - L.L.

Photo Credit: Muddy Amazonia

Deals of the Week Wants Cash on the Barrelhead

 

For pharmas making all but the largest acquisitions, cash is king. From speculative buyouts of preclinical start-ups all the way through bolt-on deals worth a few billion dollars, pharmas typically spend cash rather than swap stock to make their acquisitions. Except in the cases of mega-mergers, a pharma’s purchasing power lies on its balance sheet, not in its share price.

So when Moody’s Investor Service issued a March 18 study of the U.S. companies whose cash coffers were the richest, Deals of the Week couldn’t help but turn an eye to the seven health care companies named in the report. None of them has disclosed a pharma acquisition yet in 2013, but rumors are swirling that one will strike soon.

Pfizer was the wealthiest in the bunch, with $46.9 billion in the till at the end of 2012. That’s enough to place it fourth across all industries, behind only Apple, Microsoft and Google. And although Pfizer had the world’s best-selling drug for several years running until Lipitor (atorvastatin) lost patent protection in 2011, not all of its bounty came from product sales. It did, after all, pare off its nutrition business in an $11.85 billion sale to Nestle SA last year, not to mention its Capsugel unit to private equity firm Kohlberg Kravis Roberts in 2011. Pfizer hasn’t done a pharma acquisition since its (all-cash) takeout of NextWave Pharmaceuticals Inc. in November.

Ninth-place Amgen made four large cash buys in 2012, including deals for Micromet Inc., deCODE genetics EHF, KAI Pharmaceuticals Inc., and Mustafa Nevzat Pharmaceuticals that totaled more than $2.5 billion. But those made a small dent on Amgen’s balance sheet; Moody’s said the big biotech had $24.1 billion at year’s end. The report also noted that 78% of Amgen’s liquidity is located overseas; two of its four large 2012 deals were for non-U.S. companies.

Beyond Amgen, Johnson & Johnson wasn’t far behind at 13th place with $21.1 billion, while Merck was 15th with $16.1 billion. (J&J-owned Cordis made one device acquisition this month, buying Flexible Stenting Solutions Inc. for an undisclosed sum.)

Moody’s reported that Abbott had $15.2 billion in cash on Dec. 31, enough for 17th on the overall list, but a day later, the company split in two. Its pharma descendant, AbbVie, had $7.98 billion upon launch, according to a March 15 regulatory filing. Rounding out the top pharmas were Lilly at 23rd with $12 billion and Bristol-Myers Squibb at 40th with $6.4 billion.

More broadly, the pharma industry holds about 14% of the $1.45 trillion corporate cash pile, a share which has remained roughly the same for several years. It’s the second largest sector behind technology, which gained share to 38%, while energy is among the industries losing share.

If Big Pharma isn't yet striking, some companies are still buying, licensing, and partnering. You won't get thirty days in the jailhouse, but you won't be abreast of this week's dealmaking news without...

Valeant/Obagi: Canada’s Valeant Pharmaceuticals is again strengthening its dermatology business through acquisition, this time by buying Obagi Medical Products, the maker of several proprietary aesthetic and prescription skin-care lines sold through physician offices. The companies announced Valeant’s plans to acquire the Long Beach, Calif., company March 20 for $19.75 per share in cash, or about $360 million. Valeant’s offer represents a 42% premium to Obagi’s closing share price March 14, the last trading day prior to the disclosure of its fourth quarter and full-year 2012 earnings. The company generated sales of $120.7 million in 2012. Obagi’s portfolio includes a range of skin-care lines, including Obagi Nu-Derm, Obagi-C Rx, Obagi Condition & Enhance and ObagiCLENZIderm M.D. acne therapeutic system. Valeant has built itself into one of the world’s leading dermatology players through acquisitions. Last year, Valeant announced plans to buy Medicis Pharmaceutical for $2.6 billion, positioning it as the largest dermatology player in the U.S. and second in the world behind only Galderma. - Jessica Merrill

AstraZeneca/Moderna: Along with its new R&D strategy and organizational restructuring, AstraZeneca unveiled a massive bet on an early-stage biotech platform March 21 that suggests the big pharma has taken to heart its new CEO’s directive to be more willing to embrace risk. The deal, an option agreement for up to 40 programs across several therapeutic areas with privately held Moderna Therapeutics, carries an eye-catching price tag: $240 million up front, plus potential earn-outs. All told, Moderna, which aims to use messenger RNA (mRNA) as therapeutics, could earn more than $1 billion under the deal with AstraZeneca, announced March 21. That same day, AstraZeneca also unveiled a research partnership in cardiovascular, metabolic and regenerative disease with Sweden’s Karolinska Institute, one of several collaborations between those two groups in recent years. Beyond the $240 million upfront payment – the largest this year in a biotech/pharma collaboration and one of the biggest ever for a deal built around preclinical assets – Moderna also can earn up to $180 million in “technical milestones,” an arrangement Moderna CEO Stephane Bancel described as almost a secondary, contingent upfront payment. Moderna also could bring home development, regulatory and commercial milestones for each drug candidate licensed by AstraZeneca, as well as sales royalties ranging from the high single digits to low double digits. - Joseph Haas

Merck/Cerecor: Well-funded Baltimore start-up Cerecor has licensed a portfolio of neurology drugs from Merck that have shown potential in treating Parkinson’s disease. The program includes more than 2,000 molecules that inhibit catechol-O-methyltransferase, or COMT, a compound that breaks down dopamine in the brain and is linked to improving brain functions such as cognition, motivation and emotion. In a March 20 statement announcing the deal, Cerecor said Merck’s research has improved toxicity issues related to other COMT inhibitors. Marketed drugs in the class include Novartis’s Comtan (entacapone) and Valeant’s Tasmar (tolcapone), which typically are prescribed with levodopa, a synthetic form of the natural dopamine-producing chemical L-dopa. Terms of the Merck-Cerecor arrangement weren’t released, although Cerecor said it will pay milestones and royalties “consistent with other preclinical licenses in neuroscience.” The start-up has a Phase I anti-tussive drug, as well as a group of preclinical D-amino acid oxidase inhibitors obtained from Johns Hopkins University’s Brain Science Institute, in its pipeline. Last April, Cerecor raised $22 million in a Series A round using placement agent Maxim Group; the specific investors weren’t named. Former Celgene CEO Sol Barer is Cerecor’s chairman. - Paul Bonanos

Celgene/bluebird bio: Speaking of Celgene, the Summit, N.J., gene- and protein-regulation specialist has teamed up with 2012 Deals of the Year nominee bluebird bio in a gene-therapy deal (pdf) that will target oncology. Specifically, the two companies will collaborate to develop therapies that modify a patient’s own chimeric antigen receptor T-cells, then re-introduce them to target cancer cells. Although bluebird bio will foot the bill for Phase I trials on clinical products, Celgene will have the option to obtain a global license for each for an unspecified fee; bluebird bio retains the right to share U.S. rights in exchange for reduced milestone payments. Celgene’s upfront payment wasn’t revealed, but total fees including milestones for each product could total $225 million plus royalties. Celgene also agreed to collaborate on CAR T-cell research with scientists at the Center for Cell and Gene Therapy at Baylor College of Medicine, Texas Children’s Hospital and The Methodist Hospital, Houston. The team at bluebird bio also will have access to the scientists, led by Baylor professor Malcolm Brenner. - P.B.

NPS/Takeda: Two assets came full-circle March 19 as NPS Pharmaceuticals re-acquired ex-U.S. rights to a pair of rare disease drugs in a deal that will increase the equity position of Japanese pharma Takeda Pharmaceutical. NPS previously out-licensed the rights to teduglutide and PTH 1-84 in separate deals with Nycomed Pharma, which then was acquired by Takeda. In an unusual deal structure, NPS, which is marketing teduglutide in the U.S. as Gattex and hopes to file PTH 1-84 under the brand name Natpara later this year as a biologic therapy for hypoparathyroidism, brought the ex-U.S. rights to those two compounds in-house in exchange for $50 million in common stock. Down the road, Takeda can earn an additional $30 million, which will be either cash or additional equity at NPS’ discretion, when the two drugs achieve combined worldwide, single-year net sales of $750 million. Takeda holds an equity position of about 7% following this deal, NPS President and CEO Francois Nader said. Both the licensing fee and the sales-based milestone were structured as equity (although the milestone can be paid out as cash if NPS opts) partly to preserve cash, Nader said. An ex-U.S. license to both drugs is just the start of what NPS gains under the deal. The transaction also transfers an inventory of active pharmaceutical ingredients for both drugs to NPS, a less-expensive method for making teduglutide, a glucagon-like peptide 2 (GLP-2) analog, and a pen delivery system that could be used with PTH 1-84. - J.A.H.

CRT/Janssen: Cancer Research Technology, the technology transfer arm of world’s largest charity Cancer Research UK, and Janssen Biotech have joined in the search to find potential new multiple myeloma drugs. The duo hope they can identify molecules and develop potential medicines that block a key protein on a cell-signaling route called the unfolded protein response (UPR) pathway. Teams at The Institute of Cancer Research (ICR), led by Ian Collins in the Cancer Research UK Cancer Therapeutics Unit and Faith Davies in the Division of Molecular Pathology, will work alongside a team at Janssen. Together, Cancer Research UK and Janssen will fund up to 25 scientists, with Janssen providing some of the funding to support the research at the ICR in London. Janssen also will pay future milestones and royalties and take the lead on the clinical development of any potential drugs. The two sides announced their deal on March 21 but gave no financial details. CRT long ago moved beyond simply commercializing and managing the intellectual property generated by the £500 million in research funding provided by Cancer Research UK to five core research institutes across the U.K., as well as to researchers at dozens of other universities and organizations. The breadth of CRT’s academic network – it has sourced and managed IP from more than a dozen global charities and institutes, as well as that of Cancer Research UK-funded research and drug discovery – positions it as an important gateway to cancer-focused research in the U.K. It has a strong in-house drug-discovery capability and access to clinical development capabilities in conjunction with Cancer Research UK’s drug development office. Janssen Biotech is part of the Janssen Pharmaceutical Companies of Johnson & Johnson. J&J earlier this month opened an innovation center in London but a spokesperson for the U.S. drug company said Janssen’s alliance with CRT was not the result of that center’s establishment. - Sten Stovall

Merck Serono/Nordic Bioscience and Merck KGaA/BMS: Merck Serono, a unit of Merck KGaA, said on March 18 it formed a strategic alliance with Denmark-based Nordic Bioscience AS around the German drug maker’s investigational therapy sprifermin, or recombinant human FGF-18, in osteoarthritis of the knee. Under the terms of the agreement, Nordic Bioscience will provide Merck with clinical development services on a shared-risk basis in exchange for a payment structure that includes service fees and potential milestone and royalty payments on the program. Financial terms of the collaboration were not disclosed; however. Merck retains full responsibility for the development and commercialization of the investigational drug. According to the World Health Organization, more than 5% of adults over 40 in developed countries, or more than 30 million people, suffer from osteoarthritis of the knee. A multi-national Phase IIb trial, dubbed the FORWARD study, is expected to begin enrolment in the second half of 2013 to evaluate further sprifermin for inhibition of the progression of structural damage, reduction in pain and improvement of physical function in patients with osteoarthritis of the knee. Sprifermin is a protein thought to induce chondrocyte stimulation leading to matrix synthesis and chondrocyte renewal. It is delivered by intra-articular injection. Two phase I trials in moderate/severe osteoarthritis of the knee previously were completed; a Phase II trial to evaluate the efficacy and safety in patients with cartilage injury of the knee is ongoing. The program was originally was in-licensed in 2004 from ZymoGenetics, a Bristol-Myers subsidiary. The next day, on March 19, Merck KGaA said it inked a deal with Bristol to promote type 2 diabetes drug Glucophage (metformin hydrochloride) under different formulations in China. Under terms of the agreement, Merck Serono and Bristol will co-promote Glucophage in China through a profit-sharing arrangement. Glucophage has been marketed by Bristol-Myers Squibb-SASS in China since 1999. The two companies will tap existing resources and complementary strengths, with Bristol-Myers Squibb-SASS continuing to manufacture Glucophage’s IR (immediate release) formulation. The collaboration will seek to expand the geographic distribution of Glucophage and provide diabetes-related health and medical information including education for health professionals. In addition, the co-promotion will significantly increase outreach to hospitals. Other terms of the agreement were not disclosed. -- S.S.

Thanks to YouTube user cweiandnd for uploading the Louvin Brothers clip. Keep clicking, there's more where that came from.

Deals Of The Week Wonders What Merck's Latest Biosimilars Move Really Means

Ever since Merck jumped into the biosimilar field in 2008 with a ferocious go get ’em attitude more fitting of an NFL tackle than a big pharma, we’ve been following their progress – and then lack of progress – closely. Back when most pharmaceutical manufacturers were still griping about defending their biologic brands, Merck’s early aggressive ambitions made an interesting case study in how a big pharma might strike offensively by positioning itself as a contender in the biosimilar space.

So the company’s announcement Feb. 20 that it has partnered with Korea’s Samsung Bioepsis to develop multiple undisclosed biosimilar candidates, while delivered quietly in a concise statement, struck us as a noteworthy change in strategy.

You didn’t have to read tea leaves to see that Merck’s original strategy wasn’t working out. In 2008, Merck established a business unit devoted to the field and pledged to invest $1.5 billion and launch six or more biosimilars between 2012 and 2017. But last year, as we reported here, the company closed Merck BioVentures, the unit it created devoted to biosimilars, and folded the research into biologics and vaccines at Merck Research Labs. And Mike Kamarck, the charismatic proponent of biosimilars who led Merck’s charge into the field, left the company.

Now, we can’t help but wonder what the latest announcement means for Merck’s biosimilar strategy.
Is it a reaffirmation of the company’s commitment to biosimilars, albeit through a more modest path, or is Merck effectively washing its hands of biosimilars while still holding out for some hope of an eventual commercial reward? Samsung will be responsible for preclinical and clinical development, manufacturing, clinical trials and registration of any candidates, while Merck will commercialize the products. It’s not clear how much Merck is putting behind the effort either, as the financials of the deal were not disclosed; Merck is paying Samsung an upfront and has agreed to milestones.

Merck declined to offer further insight on the move, but said the deal with Samsung will complement its internal effort. The only biosimilar Merck has in its internal pipeline that has been publicly disclosed, however, is a copy of Roche/Biogen Idec’s Rituxan, the one drug Samsung Bioepsis won’t be developing because the company – formed in 2011 out of joint venture between Samsung Biologics and Biogen – won’t make any biosimilar versions of Biogen products.

Given Merck’s inability to get new drugs to market of late, the decision to take a contract research approach to biosimilars may be the best way for Merck to hold onto the potential commercial upside of biosimilars without the investment internal development requires. Merck ran into the field at high speed, and we admired their optimism, but given the evolving regulatory and commercial dynamics, a cautious path may be the wiser one.

And let’s not forget why the decision to jump into biosimilars was easier for Merck to make than for some other big pharmas: Merck never had a history in biologics and hasn’t traditionally had treasured blockbuster biologic brands to protect. It gained some knowledge of the field and rights to Remicade in certain territories outside the U.S. through its mega-merger with Schering-Plough. But it’s hard to envision Merck’s inexperience as a competitive advantage in a notoriously difficult field like biologics. Development and manufacturing is just as hard for biosimilars, even when manufacturers have a reference molecule to use as a road map.

Three years after the U.S. government laid a regulatory framework for biosimilars, no applications have yet been filed through the new pathway with FDA. Today, while Merck has adopted a more subtle tone when it comes to biosimilars, Amgen – a biologics expert – is crowing about its grand ambitions for the field.

Roche/Chiasma: Roche and privately held Chiasma Inc inked a deal Feb. 18 to develop and commercialize the Israel-based biotech’s proprietary pill Octreolin, initially for acromegaly and, afterwards, for neuroendocrine tumors (NET). Their pact brings a new Phase III drug to Roche’s pipeline, targeting both an oncology (NET) and non-oncology indication (acromegaly). It gives Roche worldwide exclusive license to Octreolin, and Chiasma receives upfront payments of $65 million and future milestone payouts of up to $530 million, along with tiered, double-digit royalties on Octreolin net sales. Roche said it decided to partner with Chiasma and commercialize Octreolin in part because of the convenience and improved quality of life an oral therapy might offer patients. The pill may consequently command a higher price to injectables and there appears to be little oral competition on the horizon near-term. Delivering octreotide orally twice daily would be a major advantage for patients with acromegaly as they would avoid the painful monthly injections involved in current treatment options such as Novartis' Sandostatin LAR. - Sten Stovall

Chiesi/Cornerstone: Cornerstone Therapeutics’ majority shareholder is looking to buy out the company. North Carolina-based Cornerstone announced Feb. 20 that it received a letter from its majority shareholder – Italy’s Chiesi Farmaceutici – offering to buy the remaining outstanding shares of the company. Chiesi offered $6.40 to $6.70 per share for the 40% of the company it doesn’t already own – valuing the specialty pharma at $177 million. In a letter from Chiesi to the board of directors of Cornerstone, Chiesi’s CEO Ugo Di Francesco said the company “has adequate liquidity available and excellent relationships with our banks to effect an all cash bid.” Di Francesco added that Chiesi has “conducted an extensive review of Cornerstone based on publicly available information, our own deep experience in the pharmaceutical industry and consultations with our outside advisors.” The Italian drug maker plans “to move promptly” in regard to the bid “and is committed to working vigorously and expeditiously with [Cornerstone] to complete a transaction.” Cornerstone said in a statement that “no decisions have been made by the board of directors with respect to Chiesi’s proposal.” The two companies paired up in May 2009 when Chiesi granted Cornerstone an exclusive U.S. license to sell its porcine-derived lung surfactant Curosurf (poractant alfa) for a 10-year period. In return, Chiesi took an equity stake in the company that now accounts for a 60% share. - Lisa LaMotta

Janssen/Pharmacyclics/Abbott: Partners Janssen Biotech and Pharmacyclics will work with Abbott to develop a molecular diagnostic test to identify patients with a genetic sub-type of chronic lymphocytic leukemia (CLL). Abbott will develop the test using its proprietary FISH (fluorescence in situ hybridization) technology; the test will identify hard-to-treat CLL patients who have a deletion within chromosome 17p (del17p). These patients are likely to respond to ibrutinib, a small molecule inhibitor of Bruton tyrosine kinase (BTK). At the American Society of Hematology conference in December, the partners presented positive Phase Ib/II data in a subset of relapsed/refractory CLL patients with the 17p deletion. The partners have an ongoing Phase II trial for ibrutinib in CLL patients with the 17p deletion. The company expects enrollment in this trial will take about 12 months to complete. On Feb. 12, FDA granted breakthrough designation to ibrutinib to treat two B-cell malignancies: relapsed or refractory mantle cell lymphoma (MCL) and Waldenstrom’s macroglobulinemia (WM). This could mean an approval for ibrutinib as soon as early next year. Pharmacyclics’ share price has been on a white-hot streak since last May, climbing more than 200%. News of the breakthrough designation bumped shares up about 20%. Details of the Abbott partnership remain undisclosed. - Stacy Lawrence

Eisai/Valeant: Valeant Pharmaceuticals announced Feb. 21 that it has acquired U.S. rights from Eisai Inc., the U.S. subsidiary of Japan's Eisai Co. Ltd., for cutaneous T-cell lymphoma treatment Targretin (bexarotene). Eisai received $65 million up front and is eligible for additional payments tied to undisclosed milestones. In March 2011, Eisai granted exclusive rights to Minophagen Pharmaceutical to develop and commercialize Targretin in Japan, expanding that agreement in April 2012 to cover Asia, Oceania, the Middle East, Eastern Europe and other regions. And in a deal similar to the Valeant agreement, in December 2012, Eisai sold U.S. commercial rights to Gliadel Wafer (carmustine) for glioblastoma to Arbor Pharmaceuticals. Gliadel and Targretin are aging products. However, the company’s cancer pipeline – oncology is 70% of Eisai’s revenues – has shown recent signs of stumbling. Farletuzumab, which entered Eisai’s pipeline with its 2007 acquisition of Morphotek, demonstrated disappointing results last January in platinum-sensitive ovarian cancer, not meeting the primary PFS endpoint in its first Phase III attempt. And Halaven (eribulin), approved in the U.S. in 2010 for metastatic breast cancer, missed its primary endpoints last year in a head-to-head Phase III superiority study against Xeloda (capecitabine). Much of the excitement around eribulin at the time of its approval was the likelihood of extending its label, which is now drawn into question. Eisai said the deal with Valeant would maximize the product’s value in the U.S. It went on to add that the agreement would enable Eisai to “strategically reallocate resources to other mid-to-long-term business growth areas” but it didn’t elaborate. As for Valeant, this deal continues its strategy of acquiring what it considers to be undermanaged commercial assets. - Mike Goodman

UCB/ConfometRx: Belgium’s mid-sized pharma company, UCB, is to link up with the Santa Clara, Calif.-based G-protein coupled receptor (GPCR) structural biology firm, ConfometRx, to discover new drugs in UCB’s sweet spot, the neurosciences. As often stated, GPCRs are the target for 25%-30% of marketed products, but GPCR research is hampered by the difficulty in extracting active receptors from cell membranes for use in research and drug screens. ConfometRx is developing crystallization techniques for GPCRs to make the screening process easier for GPCR-targeted drugs and antibodies. The two-year, multi-target research collaboration between UCB and ConfometRx is intended to gain insights into modulating GPCR targets in order to design differentiated drugs, the companies said Feb. 21. ConfometRx will receive an upfront payment, research funding and milestones, but further details of the agreement were not disclosed. UCB is building “super-networks” of innovation, which include tie-ups with Harvard University and the University of Oxford’s medical sciences division over the past three years. ConfometRx already is collaborating on various GPCR-related research projects with Bristol-Myers Squibb, Novo Nordisk and Lundbeck, while other companies active in providing research insights in the GPCR space include Heptares Therapeutics of the U.K., France’s Domain Therapeutics and San Diego-based Receptos. - John Davis

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