Deals Of The Week: Living With The Constancy Of Change In HCV Drug Development

One of the frequent thematic tropes found in the music of Canadian prog-rock trio Rush is the constancy of change, that change is constant, and constantly changing, etc. Anyone trying to follow hepatitis C drug development probably understands that message.

Just when it appeared that nucleoside polymerase inhibitors were the way to go in the effort to develop a paradigm-changing combination of all-oral, direct-acting antiviral drugs for the virus, a pair of recent setbacks in the “nuc” arena have made other classes of drugs and the companies developing them more relevant, and potentially more valuable.

Hence, the reported increased interest in Achillion Pharmaceuticals, which expects to produce early data for a proprietary combination of a protease inhibitor and an NS5A inhibitor during the first quarter of 2013. Once thought in danger of being left behind as the M&A mavens at big pharma circled Pharmasset, then Inhibitex, and continued to kick the tires on Idenix Pharmaceuticals, Achillion now is considered by many Wall Street analysts to be on the radar screen of HCV players such as Merck & Co., Bristol-Myers Squibb, Roche and possibly others.

Achillion raised $41.7 million in a registered direct offering just before Labor Day, placing 6.4 million new shares with QVT Financial LP at $6.57 per unit, its closing price on Aug. 31. That marked the New Haven, Conn.-based biotech’s third significant fund raise since August 2010, as it brought in $60.9 million through a follow-on public offering in June 2011, and $49.1 million under a PIPE (private investment in public equity) deal in August 2010.

But Wall Street widely expects that Achillion will have some big pharma R&D machinery behind its HCV efforts soon, maybe even before the Phase II combo data for protease inhibitor ACH-1625 (sovaprevir) and NS5A inhibitor ACH-3102 are unveiled.  (The firm also will disclose Phase I proof-of-concept data for ‘3102 this fall.)

Dismissed as barely relevant in the combo race as recently as earlier this year, Achillion may get a second chance thanks to the disastrous safety issues encountered by Bristol’s expensive nuc prospect, BMS-986094. The pharma paid $2.5 billion to buy that drug’s developer, Inhibitex, only months before shutting development of the drug down entirely in mid-August due to cardiotoxicity that killed one patient and hospitalized eight others.

The news then got worse or better, depending on your perspective, when FDA placed Idenix’s nuc, IDX184, and second-generation compound, IDX19368, on clinical hold because of concerns about their similarity in chemical structure to the Bristol nuc. It’s important to note that the “nuc” class is by no means dead – Gilead Sciences is still viewed as the leader in the HCV combo race thanks to the eye-opening data its nuc, GS-7977, is producing. And Vertex Pharmaceuticals is bringing a nuc licensed last year from Alios BioPharma into the clinic, as well.

Achillion has an analyst day presentation slated for Sept. 27, and with the expectation for POC data with ‘3102 and drug-drug interaction data for the ‘1625/‘3102 combination expected this quarter, Robert W. Baird & Co. analyst Thomas Russo thinks a partnership prior to the combo trial would make sense. “While lack of visibility makes this timing impossible to predict, generally speaking we’d view [a] non-exclusive collaboration positively because it would add shots on goal, external validation, and perhaps regimens that would augment investor excitement and conviction,” he wrote in an Aug. 8 note.

He added that Bristol and Abbott Laboratories have been demonstrating in the lab that high sustained virologic response (SVR) rates can be attained by antiviral combos not including a nuc. “Achillion’s pipeline features PIs and NS5A inhibitors that look best-in-class, complementary, and reasonably likely to succeed in interferon-free combos – all under its roof and/or via external collaboration,” Russo said. “We believe big players will fight on for some period longer, with some looking to fill gaps in their HCV pipelines and others perhaps looking for a complete solution.”

Sovaprevir, in triple-combination testing with existing standards ribavirin and pegylated interferon, has demonstrated effective inhibition of viral replication without generating “meaningful resistance,” an unending concern in the protease inhibitor class, wrote Brean Murray Carret & Co. analyst Brian Skorney on Aug. 9. “Although not a clear home run … [this is] a characteristic we believe is unique to only handful of antivirals in development for hep C,” he added.

Now, on to our weekly roundup of:

Merck KGaA/Symphogen – Danish biotech Symphogen AS has licensed its lead oncology product, Sym004, a mixture combining two antibodies targeting the epidermal growth factor receptor (EGFR) on tumor cells, to Merck KGaA for an upfront payment of €20 million ($25 million). Symphogen was evaluating Sym004 in two Phase I/II studies, which have shown initial signs of the drug’s clinical benefit and have been transferred into Merck’s control. The deal underlines the growing interest in combination therapies for cancer, as well as Merck’s desire to build on its marketed EGFR-targeted anticancer, Erbitux (cetuximab), which is its second largest-selling product, garnering sales of €855 million ($1.13 billion) in 2011. Merck receives exclusive development and commercialization rights for Sym004 worldwide, and now will fund all further development of the compound. In return, Symphogen receives the upfront and potentially could earn €225 million in clinical development and regulatory milestones, as well as €250 million in combined sales performance milestones and royalties on net worldwide sales, bringing the total potential value of the deal to €495 million. Merck is much in need of clinical-stage products that it can advance quickly following a string of late-stage product failures, which have prompted a management reorganization and the start of a cost-saving program including job losses at its R&D facilities in Switzerland, and across functions in Germany. – John Davis

Valeant/Medicis – In a move to become a leader in dermatology, Valeant Pharmaceuticals announced Sept. 3 that it has agreed to pay $44 per share, or $2.6 billion, for Scottsdale, Ariz.-based Medicis Pharmaceutical – representing a 39% premium to Medicis’ closing price of $31.56 on Aug. 31, the last trading day before the deal was announced. The Medicis acquisition, which will be funded entirely with debt, adding to the company’s $7.6 billion debt (as of the end of 2011), will make Valeant the largest dermatology player in the U.S. and second only to Galderma SA in the rest of the world. While Valeant has interests in several specialty pharma areas including dentistry and branded generics, the largest part of the business belongs to dermatologics with a focus on acne, eczema, and topical antivirals. Medicis brings a handful of products that will be complementary to Valeant’s current portfolio including the oral acne product Solodyne (minocycline oral), which will fit in with the company’s topical acne offerings. The company also makes aesthetic injectables like Restylane, Perlane and Dysport – which fit in with Valeant’s collagen stimulator Sculptra. Valeant expects $225 million in synergies – an estimate the company considers conservative and does not take into account any revenue upside or further upside from anything that may come out of the Medicis pipeline. According to Wells Fargo analyst Michael Tong, the deal will nearly double Valeant’s dermatology business, which was expected to produce revenues of $958.7 million in 2012 (analysts estimated Medicis would bring in approximately $820 million in revenues in 2012). – Lisa LaMotta

Medivir/Novadex – Achillion is not the only player in the HCV space looking to take advantage of recent stumbles by Bristol and Idenix. Medivir AB, which is developing Phase III protease inhibitor simprevir (TMC435) in tandem with Johnson & Johnson unit Janssen Pharmaceuticals for hepatitis C, announced a deal with Novadex Pharmaceuticals Sept. 6 in which it acquired a package of preclinical HCV assets, including novel nucleoside polymerase inhibitors. A release said the deal will include an upfront payment and potential milestones, but did not disclose specific terms. Medivir said the deal will include intellectual property and prodrug technologies that will further strengthen its HCV platform and know-how. The prodrug technologies could be applied to both protease inhibitors and nucleoside analogues to enhance their overall pharmacokinetic profiles, the company added. TMC435 also is being tested in combination with Bristol’s NS5A inhibitor daclatasvir (BMS790052) under a collaboration between Janssen and Bristol that was extended in April. – Joseph Haas

ImaginAb/MacroGenics – Two privately held companies in the antibody development space agreed Sept. 5 to collaborate on a pair of imaging products that could support ongoing development of new therapies. Los Angeles-based imaging specialist ImaginAb said it would develop a clinical imaging product for inhibition of the CD3 T-cell receptor based on an anti-CD3 therapy belonging to MacroGenics of Rockville, Md. The companies did not specifically name teplizumab as the therapy, but that is MacroGenics’ most advanced anti-CD3 program.ImaginAb also will develop a companion imaging agent for an immune-regulating B7-H3 target; MacroGenics’ Phase I clinical candidate, MGA271, addresses B7-H3. ImaginAb’s agents typically are used by partners to select patients and monitor responses to clinical treatments. The two companies share at least one investor, the oncology-focused Nextech Venture of Zurich. MacroGenics has raised more than $125 million from a long roster of venture investors since it was founded in 2000; five-year-old ImaginAb announced its $12.5 million Series A round in March 2012, and already has forged partnerships with drug companies such as Astellas Pharma and Oxford BioMedica, as well as a variety of cancer research organizations. Last month, ImaginAb named Eleven Biotherapeutics CEO Abbie Celniker as chair of its board of directors. – Paul Bonanos

Pfizer/SFJ Pharmaceuticals – Pfizer and SFJ Pharmaceuticals announced a collaborative development agreement Sept. 7 to conduct a Phase III trial for dacomitinib (PF-00299804), a pan-human epidermal growth factor receptor (pan-HER) inhibitor in advanced lung cancer. To be conducted at multiple sites in Asia and Europe, the Phase III trial will test the agent in patients with locally advanced or metastatic non-small cell lung cancer with activating mutations of epidermal growth factor receptor. SFJ will fund the trial and provide clinical development supervision as needed to prepare dacomitinib, an oral, once-daily, small molecule inhibitor of the HER-1, HER-2 and HER-4 tyrosine kinases, for regulatory filings as a first-line treatment in advanced NSCLC. If the compound obtains regulatory approval, SFJ will be in line to earn milestone and other earn-out payments. No other financial details were disclosed. This is the second collaboration between the world’s largest pharma and San Francisco-based SFJ, founded in 2009 a co-development partner for pharma and biotech. Earlier this year, the two partnered to run a Phase III trial in Asia of Inlyta (axitinib) for adjuvant treatment of patients at high risk of recurrent renal cell carcinoma following nephrectomy. – JAH

Photo credit: Wikimedia Commons

Navigating The FDA Advisory Committee Road To Success … Or Not

On the eve of FDA’s Antiviral Drugs Advisory Committee reviews of the first protease inhibitors for hepatitis C, the drugs’ sponsors – Merck (boceprevir) and Vertex Pharmaceuticals (telaprevir) – are no doubt scrambling to make sure everything is in order.

Presumably, the companies have already locked down their slide decks, put the finishing touches on their presentations, researched the backgrounds of the committee’s standing members and shipped their AdComm teams off to hotels near FDA’s White Oak headquarters, where the meetings will take place.

Boceprevir and telaprevir are viewed as therapeutic breakthroughs in the treatment of HCV, both having shown improved cure rates when added to the current standard of care. However, the drugs have complicated and differing dosing regimens, which are likely to be an area of AdComm discussion.

Merck, which will present its case on April 27, is an old hand at the AdComm process, having most recently gone before a panel in December when it unsuccessfully sought to add prostate cancer risk reduction language to the label of its BPH drug Proscar. Vertex, on the other hand, is making its maiden voyage on the USS AdComm. The company will present its case on April 28 and should benefit from hearing panelists’ questions and concerns in their review of boceprevir the day before.

No matter how well prepared the sponsors think they might be, the AdComm road is littered with landmines. That, in a nutshell, was the message conveyed by AdComm meeting veterans at the Center for Business Intelligence’s Second Annual Forum on Effective Preparation for FDA Advisory Committees in Washington, D.C. last month.

At the two-day conference, battle-hardened veterans of the AdComm process – including pharma employees and consultants who make their living preparing drug companies for meetings – shared experiences from the trenches and offered some best practices to consider when tackling what has become a significant hurdle in drug development.

Some suggestions fall in the common sense category. It's imperative not only to have good communications with FDA leading up to an AdComm, but also to begin the meeting planning process early. Practicing presentations and Q&A is not surprisingly also considered good AdComm hygiene. But the CBI speakers voiced some additional pearls of wisdom that sponsors appearing before FDA committees might want to keep in mind, starting with…

Know Your AdComm
Pete Taft, founder and CEO of PharmApprove, a company that provides AdComm meeting preparation services, said sponsors should be ready to deal with four general types of personalities on FDA panels:

the expert – someone who knows a lot about your field and possibly your product, and is going to be well prepared for the meeting;

the judge – an individual who is swift to make judgments about your product or argument;

the thoughtful one – a quiet panel member; and,

the naysayer – the “Simon Cowell of AdComs” who you can either fight or forget about securing their vote.

PharmApprove has interviewed former AdComm members to find out how they prepare and what they expect from sponsors. At the top of their list is this nugget of wisdom...

Keep It Simple, And Don’t Be Irritating
The importance of clarity and simplicity in a sponsor’s presentation was echoed by FDA Director of Advisory Committee Oversight Michael Ortwerth, the lone agency presenter at the CBI conference. “That’s a really important thing, that the message is clear … and slides are very well put together,” Ortwerth said. “When you have slides that are so busy and so ladened and heavy, then you can’t focus on what the actual issue is.”

If AdComm members don’t like busy slides, they’re also not thrilled with sponsors or presenters who come off as cocky or overconfident. “I’ve always had this intuitive sense that if we press the committee or cause them to feel irritated, that some of that emotion will be transferred to their rational thinking,” said Taft, whose suspicion has now been confirmed. He noted the comments of a former AdComm chairman, who said: “You don’t want to make me angry about you, because then I transfer that from you onto the data and onto the drug.”

AdComm prep needs to be heavy on practice, planning and contingency planning, the speakers said. In the course of advance planning, it’s important that sponsors …

Don’t Let Belly Dancers Get In The Way
Don Cilla, vice president and product development team lead at AstraZeneca’s MedImmune division, led the company’s AdComm team for the June 2010 review of motavizumab for prophylaxis of respiratory syncytial virus. He recommends conducting AdComm team practice sessions and holding pre-meeting preparations in the same hotel ballroom that FDA will use for the meeting (when they’re not being held at White Oak). At the time of the motavizumab meeting “there was a convention of belly dancers that had that room booked for the three days leading up to it, so we couldn’t get in there to practice.”

If the company's AdComm team is all staying, and eating, together as a group for two or three days before a meeting, they should …

Avoid Eating The Mayonnaise
One of the speakers at the CBI conference recounted how a consultant, upon seeing open mayonnaise sitting at a buffet, banned all condiments at future meals so as to avoid the risk that team members would come down with a debilitating case of food poisoning on the day of the big meeting. “We had backups for everybody,” Cilla said of his team for the motavizumab meeting. “We didn’t know if they were going to get the bad mayonnaise or the Mexican food the night before or if they just couldn’t get there.”

While sponsors should plan for anything and everything to go wrong logistically, there are some factors they may have no control over. This includes the possibility that committee members will be suffering from …

An Avandia Hangover
Back-to-back scrutiny of different drugs on consecutive days can have a detrimental effect on those coming at the end of a multi-day meeting, suggested Alexander Fleming, president and CEO of the consulting firm Kinexum.

Case in point is Vivus’ obesity drug Qnexa. At a July 15 meeting, FDA's Endocrinologic and Metabolic Drugs Advisory Committee voted 10-6 against approval due to safety concerns. The negative vote took some FDA officials by surprise, but Fleming believes timing was a crucial factor. The Qnexa review marked the third consecutive day of work for the committee, its two previous days having been spent on an extensive and intensive review of the cardiovascular safety of GlaxoSmithKline’s diabetes drug Avandia.

“If nothing else, the advisors had to be exhausted” by the time they got to Qnexa, Fleming said. Calling the AdComm timing “pure bad luck” for Vivus, Fleming said the company knew “this was going to be a real disadvantage to them ... and only in retrospect do you see how it really had a major effect.”

Sponsors also may have no control over an AdComm’s walk down the path of …

Comparative Effectiveness And Cost
Disease background presentations by the sponsor are a hallmark of any product-specific AdComm. A good presentation will include a comparison of products that are on the market, including mechanism of action and limitations, said Mary Rofael, COO of scientific and regulatory communications at ProEd Communications, a firm that provides AdCom prep services.

“Many of you will say we’re here at an advisory committee, the committee should focus on evaluating the benefit/risk of a particular product,” Rofael said. “In this day and age you can’t stop people from thinking about comparing it to what they’re using currently or what’s on the market. It’s just a discussion that’s going to take place. Whether or not you engage in it, that’s a different story, but it’s important to anticipate it because these kinds of questions are being asked more and more today.

“It’s almost like the question of cost,” Rofael continued, venturing down a road that almost no sponsor wants to travel during an AdComm. “The advisory committee room is the only room where cost is not discussed … but eventually I think it’s going to make its way in. People are starting to ask about the cost of products and what the burden of cost is on the health care system.”

Aside from the detour down the cost path, what’s a sponsor to do when an AdComm’s discussion of the data starts …

Spiraling Out Of Control?
If the panel’s conversation has gone awry at some point after the sponsor’s presentation, the best a company can hope for is that the meeting agenda includes an upcoming break, said PharmApprove principal Martha Arnold. “If there’s a situation where things just are spiraling out of control, and … you think perhaps the committee is dealing with information that is just plain wrong, that there’s been a misinterpretation either of your data or FDA’s data, if there’s a break you have an opportunity to at least approach the chair” and express concern, she said.

If there are no further scheduled breaks, the sponsor could pass a note to the panel’s industry representative “or tap them on the shoulder and say, ‘Hey, can you help us out here,’” said Bruce Burlington of DB Burlington Consulting, who often serves as the industry rep on AdComms. “Alternatively, if it’s really outrageous, just stand up and say, ‘Mr. Chairman, I request your permission to insert a correction in the discussion at this point.’”
It may be more problematic, however, for sponsors to insert themselves into the process of …

Question-Morphing
Anyone who has sat through at least a handful of AdComms can confirm that panelist confusion over the wording of FDA’s questions is a fact of life, often leading to discussions as to whether and how the questions should be re-written on the fly. While these question-writing “audibles” can be disconcerting for sponsors, so can the initial questions themselves.

CBI conference attendees cited tremendous variability among review divisions in the types of questions posed at AdComs, ranging from straightforward questions on risk/benefit to queries that run multiple pages and “in essence make the FDA case in the form of a question,” one conference attendee said.

FDA’s Ortwerth acknowledged room for improvement in how review divisions ask questions. “It is important that there be consistency in the way we try to communicate. … There needs to be the right way to communicate something and a clear way to communicate something and not to drive the direction of the answer.”

Even if sponsors are able to navigate all the trouble spots outlined above, they need to keep in mind that they can …

Spend Big Money, But Still Lose Big
Preparing for an AdComm involves shelling out big bucks, all of which can be for naught if a drug is decimated when it comes to the panel’s vote. MedImmune’s Cilla said his company spent approximately $900,000 on AdCom preparations for motavazimub, which included the cost of consultants, meeting space and four mock panel meetings at approximately $60,000 each. The investment resulted in a 14-3 AdComm vote against approval, which was followed by an FDA “complete response” letter and the company’s decision to withdraw the BLA.

Sanofi-Aventis Associate Vice President of Global Regulatory Affairs Kevin Malobisky said his company spent about $1.3 million preparing for one meeting that resulted in a 14-0 vote against approval – an apparent reference to the unsuccessful June 2007 AdComm for the obesity drug Zimulti (rimonabant).

Were IN VIVO Blog writing an AdComms for Dummies manual, we might put it this way: it's expensive and a lot of work to prep for an AdComm, but you have to do it. Even so, there's no money-back guarantee.

Maybe we should start consulting--at least we've got a sense of humor.

-- By Sue Sutter (s.sutter@elsevier.com)

DOTW: Passing The Hat

The potential impending government shut-down is the top no-deal of the week as Republicans and Dems struggle with the “c” word. (Compromise is such an adult concept.)But the fall-out from a work stoppage could have real consequences for the drug industry, and not just in the much-discussed delayed food and drug inspections.

As FDA Law Blog spelled out in early March, the practices put in place at the Food and Drug Administration during last year’s Snowmageddon may become the operating standard if a government shutdown causes the agency to furlough a significant number of its 13,000 workers.

Bare minimum, submissions received during the closure are likely not to be marked as “received”, which could delay the time ticking on the regulatory clock. Pending PDUFA and MDUFU decisions would also be extended; that’s, bad news for companies expecting decisions near term such as Eisai and Pfizer (who are expecting a regulatory decision on their transdermal version of Aricept), Shire (Lialda), Horizon Pharma (HZT-501), and Sanofi-Aventis (Menactra). (For more on the potential impact, keep an eye out for coverage from Pink Sheet colleagues, and breaking analysis on the blog.)

This has IN VIVO Blog wondering if it should pass the hat; sadly we don’t exactly have a budget either. Perhaps we can get big tobacco to sponsor? After all, of FDA’s nine centers, only the 275-person Center for Tobacco Products will continue to be fully operational during a shut down since it’s funded by user fees paid by tobacco manufacturers and importers.

In the interim, we never resort to stop-gap measures, somehow finding a way to profile deal makers who--at least this week-- won’t have to sing “Brother Can You Spare A Dime”. It’s time for your favorite Friday column...

Vertex/the Cystic Fibrosis Foundation: Vertex is one company that doesn’t need to pass the hat, pulling in a cool $75 million from the CFF as it expands one of the most successful public-private partnerships in existence. Since its founding, CFF has put hundreds of millions of dollars to work supporting industry R&D via its non-profit drug discovery affiliate, Cystic Fibrosis Foundation Therapeutics Inc. CFFT has worked directly with Vertex since 2001, when the biotech purchased Aurora Biosciences and its first-in-class CF therapy, VX-770. Recently reported positive results from two late-stage trials testing '770 have set the stage for an NDA submission later this year and show Vertex growing beyond its anti-viral bona fides. In the meantime, the latest tie-up is five year deal funding R&D activities related to two other early-stage CF drugs, VX-661 and VX-809, which work by a different mechanism than '770. Of the two, ‘809, which is already in Phase II trials is the furthest along. In return for its support, CFFT gains royalties on future net sales of drugs developed as part of the research collaboration. Despite reporting cash and cash equivalents of roughly $1 billion in its 2010 annual report, Vertex faces some big expenses as it gears up to launch its juggernaut Hep C treatment, telaprevir, in the coming months (the drug has a May 23 PDUFA date). Thus, without additional support from CFF, Vertex might have opted to reduce its R&D burn by developing ‘661 and ‘809 in series rather than simultaneously. Thanks to CFF, however, Phase II trials of ‘661 will commence later this year. The news is a reminder that venture philanthropy is alive and well, and it isn’t just private biotechs who want to avail themselves of all important non-dilutive financing.--EFL

Optimer/Cubist: Optimer, maker of the late stage Clostridium difficile therapy Dificid (fidaxomicin), announced a two-year co-promotion tie-up with Cubist Pharmaceuticals this week. The April 6 deal came one day after an FDA advisory panel backed approval of the drug, 13-0, based on its non-inferiority to vancomycin in producing an end-of-treatment cure. (The drug's PDUFA date is May 30.) After partnering Dificid rights in Europe and other territories earlier this year, it’s a fair bet this wasn’t necessarily the kind of partnering industry wags anticipated, with the most obvious alliance being a US-focused deal for a sizeable up-front that gave Optimer a future co-promotion option. Although the actual deal ensures Optimer retains significant ownership of the product, it means the biotech continues to shoulder significant costs too. As it works with Cubist to reach prescribers in the 1,100 hospitals where 70% of C. diff cases occur, Optimer will hire and train a 100-person sales team of its own. (Cubist, on the other hand, should be able to mobilize its existing crack team of Cubicin sales reps, with Dificid becoming yet another drug it can sell at the same call point.) For its efforts, Cubist will receive quarterly service fees of $3.75 million beginning after the first commercial sale of Dificid. The company is eligible to receive another $5 million in the first year after the first commercial sale and $12.5 million in the second year if annual sales targets are met, as well as a share of Optimer's gross profits from net sales above the annual sales target. – Cathy Dombrowski

Pfizer/Zacharon Pharmaceuticals: In the latest big-pharma grab for a tiny patient population, Pfizer has tapped startup Zacharon to collaborate on drugs to treat lysosomal storage disorders (LSDs), a family of rare diseases such as Fabry and Gaucher that have become the basis of big business and mega-deals. Pfizer and Zacharon didn’t disclose the deal’s upfront, but the total package could eventually bring the tiny biotech $210 million, the companies said April 7. As noted in this 2009 START-UP profile, the firm spun out of the Univeristy of California, San Diego with high-throughput screening technology for glycan-targeting small molecule candidates. The deal comes out of Pfizer's newly-formed orphan and genetic disease group, which is scrambling to catch up to Genzyme -- soon to be part of Sanofi-Aventis--and Shire. Pfizer's first big foray was a late 2009 partnership with Israeli firm Protalix BioTherapeutics, in which Pfizer paid $60 million upfront for commercial rights to Uplyso, a Gaucher's disease treatment, as well as access to Protalix's plant-based protein drug production. In February, the FDA declined to approve Uplyso, sending it back to Pfizer and Protalix for more data. In addition to developing drugs, Zacharon is working on a diagnostic tool with the Mayo Clinic to screen newborns for LSDs. The firm has received government grants and private investments, but the only institutional investor so far is Avalon Ventures, which provided a $3.5 million Series A round in 2008. How timely: Avalon and its preference for flying solo in early stage investments is the subject this month of START-UP's inaugural Capital Matters column.-- Alex Lash

Millennium/Biogen Idec/Sunesis Pharmaceuticals: In its first divestment since it pledged last November to get rid of its oncology programs, Biogen Idec transferred rights to two preclinical kinase inhibitors to Millennium, the US oncology subsidiary of Takeda Pharmaceutical. Announced April 5, the deal itself involves little money changing hands, at least publicly. The originator of the two compounds, Sunesis receives a $4 million payment from Millennium. Otherwise, the terms of the licensing deal Sunesis struck with Biogen Idec in 2004 stay about the same, with Millennium taking over from Biogen and responsible for up to $60 million in milestone payments to Sunesis for each compound. Millennium is compensating Biogen as well, but terms were not disclosed. The more advanced compound is a pan-RAF kinase inhibitor that has demonstrated anti-cancer activity in melanoma and other tumor models. In Millennium's hands the compound could begin a Phase I dose-escalation trial in patients with solid tumors this year, according to Sunesis CEO Daniel Swisher. Biogen Idec will keep working on the kinase inhibitors in immunology but has yet to conduct IND-enabling studies, Swisher said. Beyond the kinase inhibitors, Biogen still has a number of oncology compounds for out-licensing or a potential spin-out, including galiximab (originally developed by IDEC), volociximab (in-licensed from Protein Design Labs Inc. in 2006), and the HSP-90 inhibitor BIIB-021. For a recent look at Biogen's strategy see this January 2011 IN VIVO feature.--AL

Merck/Inspire: In one of its biggest deals and only its second acquisition since it bought Schering-Plough for $42 billion in 2009, Merck has agreed to pay $430 million in cash for the specialty pharma company Inspire Pharmaceuticals, the maker of Azasite for bacterial conjunctivitis and Restasis for dry eye At a price of $5 a share, a 26% premium to Inspire's closing stock price on April 4, the deal hardly breaks the bank for Merck—especially when Inspire's $94 million in cash holdings are taken into account. All told, Inspire had sales of $106 million in 2010, bringing the deal multiple to roughly four times sales. The boards of directors of both companies have approved the sale, and Warburg Pincus, the private equity firm that owns nearly 28% of Inspire, has also agreed to the deal. Warburg had invested $75 million into Inspire in July 2007, according to Elsevier's Strategic Transactions database. –Wendy Diller

SuperGen/Astex Therapeutics: On April 6, SuperGen announced it was buying private U.K group Astex Therapeutics in a cash and stock deal designed to create a cancer-focused group with over $120 million in cash, three Phase II pipeline assets and over $50 million in expected royalty revenues for 2011.SuperGen will pay Astex shareholders $25 million in up-front cash, and grant them 35% of the combined company's total shares post-closing. Given SuperGen's current market capitalization of about $200 million, and assuming this represents 65% of the new larger entity, the deal values Astex at about $100 million. Astex's backers will receive a further $30 million, to be paid in cash or stock, over the following 30 months. Although this money is guaranteed, according to Astex CEO and co-founder Harren Jhoti, its timing is linked to milestones within several of Astex's current drug discovery partnerships. As for the up-front cash component: it's roughly equivalent to the £17 million Astex held at the end of 2010. Thus, this deal doesn't represent a great return for Astex's VC backers, which include Abingworth, Advent International and Alta Partners. Astex has raised over £80 million in equity in the eleven years since its inception, according to Jhoti, but thanks to the company's successful partnering strategy, it hasn’t sought VC money since 2003. – Melanie Senior

Notes from AASLD: Apples and Oranges and Null Responders

The liver disease community – if not the investment community – has largely moved on from the novelty of comparing Vertex Pharmaceuticals' telaprevir and Merck's boceprevir, the two direct-acting antivirals that together form the threshold to a new era in hepatitis treatments if the buzz at the American Association for the Study of Liver Diseases is any indication.

Instead, physicians are celebrating the fact that two therapies may soon be available that can help patients achieve success rates that handily best the current 50% success rate from the standard of care interferon and ribavirin therapy, which is described as 48 weeks of constant flu-like symptoms and PMS.

The sense of promise is palpable at AASLD, now under way in Boston, where many of the sessions are standing room only.

A lot of the excitement now is around the IL28b genetic marker and its implication for better cure rates, and the lure of a still-years-away all-oral therapeutic regimen.

But first, there will be protease inhibitors. Merck and Vertex, who are jockeying to be first-to-market with a direct-acting antiviral for hepatitis C, plan to complete FDA submissions by the end of the year, with approval possible in mid-2011.

Based on overall profile, the odds-on favorite for best-in-class in this initial class of two seems to be telaprevir, but boceprevir may find a top-rung niche in experienced patients.

However, comparisons can be tough. Vertex had no short-course option in the Phase III study of telaprevir in experienced patients, REALIZE. Final results in that study have not yet been reported, but top line data showed 65% of experienced patients treated with telaprevir achieved SVR compared to 17% in the control arm.

Meanwhile, Merck released data at AASLD showing their response-guided therapy plan, which shortens the treatment period for patients who respond early, can work in prior treatment failures.

Another question frequently asked of presenters this year at AASLD concerns the definition of null responder, that is, patients who have had the poorest results with standard of care.

The definition of null responder used by Merck in RESPOND-2 is those who achieved less than 1 log decrease in viral load after the four-week lead-in period with standard of care. According to the abstract on the trial presented at AASLD, 33% of null responders (15/46) in the response-guided arm achieved SVR, a statistically significant improvement over the control arm, in which none of 12 patients had a cure. Null responders in the 44-week triple therapy arm had a 34% cure rate (15/44), also statistically significant.

That null-responder definition, however, appears to be at odds with the FDA guidance. In the document, FDA describes that population as people with "less than a 2 log10 reduction in HCV RNA at week 12" of standard of care therapy, the point at which the therapy is typically dropped for futility.

A footnote in the draft indicates that "other definitions for null response have been proposed, such as less than 1 log decline in HCV RNA at week four of treatment. However, failure to achieve a greater than 2 log decline … at week 12 has typically been used as a treatment futility criterion," and use of the 1 log decline definition "causes a gap in classification for individuals with a viral load reduction" that falls between the two.

Vertex has used that definition in its REALIZE study in experienced patients. In an interview, Robert Kauffman, chief medical officer at Vertex, reasoned that using what he called the "standard definition" prospectively to identify patients at the time of enrollment, rather than "on treatment," ensured that all patients were in the appropriate group.

To test the difference in the two definitions, Vertex used a four-week induction arm in REALIZE, and looked at the correlations between less than a 1 log drop at week four of the delayed start and the standard definition, Kauffman explained.

The outcome of the analysis was "a clear difference," he said. The two groups had different responses to the triple therapy. In addition, he said, the trial showed that both groups can have a "very, very good response."

A subanalysis of REALIZE reported at AASLD showed that among combined partial responder and relapser patients in the lead-in arm, 18% (31/171) fit the less than 1 log reduction definition at the end of the lead-in with standard of care. Of those patients 58% (18/31) went on to achieve SVR compared to 31% (46/147) patients prospectively-defined as prior null responders using the "standard" definition.

– Shirley Haley

flickr image by e g g used under a creative commons license.

2009 Exits/Financings DOTY Nominee: Vertex's Milestone Sale

It's time for the IN VIVO Blog's Second Annual Deal of the Year! competition. This year we're presenting awards in three categories--that's 300% more fake prizes than last year!--to highlight the most interesting and creative deal making solutions of the year. The categories are: Big Pharma Deal of the Year, M&A/Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (roughly 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™.

In the future, when the industry's historians sit down in their maroon smoking jackets in comfy, plush leather chairs situated in dimly lit libraries smoking apple-scented tobacco from antique Exubera inhalers to write the history of the biopharma industry (while watching the earth rise out the window) we like to imagine they'll pause, and smile a little smile, when thinking about our friend, the once-elusive biobuck.

Oh, phantom biobuck! We've mocked you, for sure. But we also recognize that in your capacity to spread risk, you make the bio-universe go round. And in 2009 we got a fleeting glimpse of you without having to resort to hijacking the Large Hadron Collider to smash NCEs together under the Swiss countryside. And for that, we can thank Vertex Pharmaceuticals.

In July Vertex announced that it would sell its future milestone payments associated with the filing, approval and launch of the HCV protease inhibitor telaprevir in Europe. Those milestones are owed (potentially, of course) by J&J, which licensed European rights to the HCV protease inhibitor from Vertex in 2006, and could total $250 million: $100 million for filing and approval of the molecule, $150 million for launch.

The proposal was just the latest move by Vertex in a series of ambitious financings that have raised hundreds of millions of dollars over the past two years (one of which you'll remember was nominated for a DOTY last year).

But more importantly it gave us a data point in the ongoing debate about the value of biobucks. So what's $250mm in biobucks worth? In this case, $155 million. Only it's not so straightforward, and involves TWO transactions, so let's go back to what we wrote when the deal--with undisclosed investors--was announced September 30th.

In transaction A, Vertex gets $120 million cash in exchange for notes securitized with $155 million in J&J milestone payments. If the payments come through as expected, by 31 October 2012, the milestone buyers get the cash. If these payments don't come through, Vertex makes up the shortfall--in any case, the buyers get $155 million, but Vertex pays nothing before 31 October 2012. In transaction B, Vertex gets $35 million in cash in exchange for $95 million of J&J milestones related to launch in any two territories. If those milestones don't come through, Vertex doesn't have to pay a dime.

Why the split? CFO Ian Smith: "From an investor's perspective, they have effectively provided Vertex with $155 million which, to a certain point, is interest free. Upon the achievement of milestones, they then get their return on the $155 million." But "the allocation between $120 million and $35 million, it's important, but it's mainly important from the tax perspective of how the transaction came together."

From Vertex's perspective--and we'd define that as the 'going all-in on telaprevir' strategy--the biotech gets access to cash at a reasonable cost. Smith pins that down around 15% cost of capital, "depending on your probability of success with the milestones."

So what's a biobuck worth? In this case, that still depends, ironically, on whether telaprevir is approved and launched in Europe. For the investors who paid out $155 million, they'll get either $155 million or $250 million in return in three years (it's hard to see a middle ground). For Vertex, they get 62% of the value up-front, and if the drug fails, they pay it back.

Is this the Exit/Financing of the year? We say yes. It's novel, shrewd, and--we'd guess--soon to be imitated. What's next for our friend the biobuck? Only time will tell.

image by flickr user mackius used under a creative commons license.

Financings of the Fortnight’s Pot Luck Supper vs Food for Thought from Tauzin and Kindler

This week we’ve got a little bit of everything out there for you FOTFanatics. Corporate Venture? Of course. Meaty FOPO? You got it. Odd restructuring? Why not. Sexy SEDA? Your wish is our command. And unlike last fortnight’s Eurolicious entourage, this week we feature some All-American talent. And a Canadian.

These guys--and their investors--obviously didn’t get the memo from PhRMA honcho Billy Tauzin and Pfizer CEO Jeff Kindle, who spent their podium time at yesterday’s Partnering For Cures meeting publicly worrying about the state of the States’ hospitality to the biopharma industry.

Tauzin woke us up as he railed at the state of the Food and Drug Administration, noting the regulator was no longer the premier drug agency in the world (that’d be EMEA, if you’re wondering); FDA didn’t take all the blame of course, to Tauzin some of its ineptitude was the fault of Congressional indifference. Meanwhile, someone please buy Margaret Hamburg and co. a DVD player, or maybe a TiVo?

"12:00 is blinking on a VCR at FDA, they are that far behind technologically," observed Tauzin. (No word on whether FDAers were sporting neon leg warmers while listening to Whitesnake while wearing out their Betamax copy of Top Gun on said VCR, but that’s what we were thinking.)

[NOTE: Keep your eyes peeled for coverage out of Windhover's ongoing FDA/CMS Summit in Washington, where FDA's John Jenkins just coincidentally unpacked and disputed the argument that FDA is more 'conservative' than EMEA.]

Other panelists at the breakfast session walked back the criticism. Bob Beall, president and CEO of the Cystic Fibrosis Foundation, commended FDA for its progress in clinical trials in the rare diseases space, noting that any path forward with the agency should begin with direct dialogue and not with confrontation, and not with Congress passing laws to tell it what to do.

And the earlier that dialogue begins, the better. With regards to personalized medicine, for example, he noted that a company can’t wait ‘til Phase III, or even IND stage, to start a discussion about biomarkers. He did lament the status of inter-agency harmonization between EMEA and FDA, but in the end with a wave in Tauzin’s direction said “I’m optimistic about the FDA.”

Founder and CEO of the Multiple Myeloma Research Foundation Kathy Giusti agreed with Beall. FDA, she said, had been “phenomenal.” And using an age-old technique she later suggested if only foundations could get academic and industry attorneys on the same page with contract language “we can all start using,” things would be so much better. As with most remarks that blame the lawyers, those words received a round of applause.

But in any case we shouldn’t be surprised when everyone relocates to Singapore, seemed to be part of the message from Tauzin. That’s something Pfizer’s Jeff Kindler alluded to as well.

During Partnering for Cures' lunch-time session, Kindler, fresh off the “pharma needs to own up to its mistakes to regain public trust” circuit of interviews and talks, sat down with FasterCures founder Michael Milken to discuss Pfizer’s attempts to shorten the timeframe of the drug discovery-development continuum.

Along the way he discussed some of Pfizer’s impressive feats—the creation of HIV specialist ViiV Health Care with competitor GSK, for example, or this week’s deal with Israeli biotech Protalix for its Gaucher’s disease treatment (we’ll leave it til tomorrow’s Deals of the Week to get in-depth on that one).

But he repeatedly invoked the strides made in emerging markets and industry hubs like China and Singapore to speed up clinical trial recruitment, for example. We in the US “have to be mindful of the fact that there are a lot of advances being made in other countries that are very interested in having those clinical trials done there, and that’s where a lot of innovation is going to occur. I think that’s where the big opportunity for speeding up bringing medicines to patients is.”

He later noted that governments in some emerging markets “are very ambitious and aggressive” in beginning to meet the unmet medical needs of their populations and “in encouraging innovation and research and providing incentives for companies like ourselves to locate manufacturing, research and clinical trials in those countries.” In case the message wasn’t clear he added: “And are doing so I might add in many cases with a coherent government/business collaboration that quite candidly we’re not seeing as much of in the United States as we’d like.”

He went on to talk about how China has headhunted Chinese-born young, ambitious, and eager scientists based in the US and elsewhere to return and set up shop in places like Shanghai’s Zhangjiang Park and elsewhere. This migration is “something we need to take account of as US policies are adopted that can have an impact on our ability to support what I consider to be a very important American industry,” he said.

Read more about Kindler’s remarks in today’s Pink Sheet DAILY (and for more on Pfizer's activity in China, see this IN VIVO feature). Then fly the flag for the companies below, this fortnight’s fancy financing phenomena. It’s …


Forma Therapeutics: It’s not that often you see a start-up raise more than $50 million in venture capital and pen two notable alliances with pharma companies within one year, but Forma Therapeutics has managed to do just that. The biotech—which according to this recent profile in START-UP may be onto a winner with its combination of structure-guided cancer drug discovery and proprietary cell-based screening capabilities—pulled in $25.5 million through a Series B financing led by Lilly Ventures (more corporate venture!), announced on December 1. Also participating were Novartis Option Fund and Bio*One Capital, investors in Forma’s January 2009 $25 million Series A. Forma has deals with Novartis (in oncology, signed shortly after it’s A round) and Cubist Pharmaceuticals (antibacterials). The latter deal included a note that converted into stock in the current Series B.—Amanda Micklus

Receptos: The $25 million Series A financing for newly formed Receptos is not as simple as it first appears. The San Diego firm targets GPCRs and described its initial financing as a two-tranche deal, $17 million now, maybe $8 million later. The full story is that Receptos purchased Apoptos, which had raised $28 million in its own relatively recent Series A in January 2008 (so it's more of a reinvention). Roughly $5 million left from that financing was included as part of the first tranche of Receptos’ round – along with $12 million from the company’s venture backers, explained Jim Schmidt, VP of finance and administration. Receptos can qualify to receive the second tranche of $8 million upon the filing of an IND for its lead candidate – a sphingosine-1-phosphate receptor candidate for multiple sclerosis. That filing is expected by the fourth quarter of 2010, says Chrysa Mineo, VP of corporate development. Participants in the new round were Venrock, ARCH Venture Partners, Flagship Ventures and Lilly Ventures. (There’s that corporate venture again!) Each of those funds received a seat on the Receptos board, with Venrock’s representative, former Biogen Idec Executive Chairman William Rastetter, serving as CEO and chairman.—Joseph Haas

Vertex Pharmaceuticals: According to Elsevier’s Strategic Transactions database, follow-on public offerings have increased substantially from a low of $3 million in the fourth quarter of 2008 all the way up to $1.6 billion in the third quarter of this year. While final fourth quarter numbers are not yet available, it looks to be on pace to beat Q3 thanks to a few big FOPOs completed this fortnight by Salix Pharmaceuticals ($128 million), Human Genome Sciences ($415 million), and namely yesterday’s $442.8 million stock sale by Vertex Pharmaceuticals. The small-molecule drug developer, which focuses on several therapeutic areas including infectious diseases, offered 11.5 million shares at $38.50, a price on par with what the company has been trading at for the past few weeks. The stock jumped 8% to $36.15 on November 2--and has been gradually increasing since then into the high $30s/low $40s--following news that 83% of HCV patients in each arm of Vertex’s C208 study had achieved a sustained-viral response with twice-daily telaprevir. Vertex is planning an NDA for the HCV protease inhibitor in the second half of 2010. Less than two months ago, the company monetized future European milestones it would have gotten from telaprevir partner Janssen in a deal with four investment funds, which bought $120 million in Vertex convertible debt and paid another $35 million cash in exchange for $250 million in regulatory and launch milestones. Earlier this year, Vertex completed another huge follow-on offering, which netted $314 million. Since 2008, the company has raised $1.4 billion through four FOPOs.--AM

Labopharm: The public markets are slowly warming to biotech—note Vertex and HGSI’s monster $400 million public offerings, UCB’s €500mm bond offering and Movetis’s announcement that it closed its IPO, bringing in €85m (with the overallotment yet to be determined). But for many of the smaller players capital is still a scarcity, making alternate financing arrangements like Labopharm’s $25 million standby equity distribution agreement (add SEDA to your bin of acronyms to name drop this holiday season) with Yorkville Advisors, an attractive prospect. Under the terms of the agreement, YA will provide up to $25 million during the next three years, available at Labopharm’s discretion via the purchase of new shares, issued at a predetermined discount (that maxes at 5%) to the prevailing stock price. In addition, limits prevent YA from owning more than 19.9% of Labopharm’s issued and outstanding common shares at any one time. The control offered by the SEDA—in addition to the biotech determining when to pull the trigger, it also determines the amount to draw down, with a built-in minimum price—is clearly attractive to smaller biotechs or specialty pharmas who might have cash-generating milestones on the horizon while simultaneously lacking the in-house resources to reach those events. The Quebec, Canada-based Labopharm fits the bill. The company had just over $14 million in cash and cash equivalents at the end of its third quarter, as well as roughly $21 million in long term debt payable starting in 2012. In addition, the company is preparing for the 2011 launch of its second product, DDS-04A, which is a once daily-formulation of the serotonin antagonist reuptake inhibitor traszadone that is currently awaiting a regulatory decision from FDA. In the SEDA-world (it’s not an obscure planet in a galaxy far, far, away) Yorkville has been an active player. This year alone, the company has inked SEDAs with Advanced Life Sciences, RXI Pharmaceuticals, Pharming, and Achillion. –Ellen Foster Licking

image from flickr user Jamie Anderson used under a creative commons license.

What's a Biodollar Worth? Let's Ask Vertex

Vertex announced this morning that it intended to sell (to an unnamed buyer) its future milestone payments associated with the filing, approval and launch of telaprevir in Europe.

Those milestones would be paid out by J&J, which licensed European rights to the HCV protease inhibitor from Vertex in 2006, and could total $250 million: $100 million for filing and approval of the molecule, $150 million for launch. (It's not clear how these break down--launch in heterogeneous Europe is obviously different than launch in the US, for example.)

But what are they worth right now? Vertex isn't saying yet, but sooner or later we'll get another datapoint to help us determine the elusive dollar-to-biodollar exchange rate.

Of course telaprevir isn't an early stage molecule; it's in Phase III trials and predicted to be the first HCV protease inhibitor on the market. So the value of biodollars associated with telaprevir is going to be much different than the value of those associated with earlier-stage alliances. But there remains an element of risk, to be sure. Even promising Phase III drugs implode from time to time.

Vertex has demonstrated a flexible financing strategy over the past couple years. Last year the company netted $160 million from the sale of its royalty stream on the HIV therapies it co-discovered with GSK. And in between the royalty sale and today's announcement Vertex raised some $540 million through equity offerings; clearly the company doesn't have trouble bringing in cash through more traditional means.

So why monetize the JNJ milestones now? Because drug development is damn expensive, and even for a company like Vertex, cash is king.

At the end of the first quarter the company had about $870 million in cash and nearly $300 million in debt (about half of which it has since converted to common stock). But it also burns through cash pretty quickly, and by our back-of-the-envelop calculation that's lately to the tune of about than $125 million in the average quarter, and that's without expenses related to the acquisition of ViroChem or any other deal Vertex wants to pursue. So until telaprevir sales start coming in, even a net cash position of more than $600 million won't last the company very long.

The math isn't our strong suit and we'll update if and when we hear back from Vertex.

UPDATE: No official word from Vertex but we think our rough calculation is in the right ballpark. We should also note that this isn't a done deal, and when it does close we'll be able to see for ourselves the current value of these future milestones.

Forbes' Matt Herper brings up an interesting point on his twitter feed, and we think he's only half facetious: Will, he asks, the Vertex deal lead to hot trading in biobucks derivatives?

We think though it's certainly possible this isn't the last milestone monetization deal we'll see (and probably isn't the first either, though can't think of any off the top of our heads) it's hard to imagine that the royalty and synthetic royalty buyers--who would be the logical buyers here too--would allow the mission creep into the earlier and riskier development stages that would make any serious market possible. Those guys get edgy buying future royalties for registration-staged projects, much less Phase III or even earlier. That risk would mean seriously low prices paid for most milestone packages. Sure we may see a few more telaprevir-style deals, but that's probably it.

We could be wrong. What do you think?

image from flickr user tadson used under a creative commons license.

Notes From BIO: Josh Boger Goes Back to Merck

Okay, no, this isn't a news flash. We don't have a scoop on what Vertex' outgoing CEO Josh Boger plans to do once he officially leaves the company he founded at the end of this week. And we certainly aren't predicting that he will return to Merck, where he began his career in pharmaceutical R&D before leaving to found Vertex in 1989.

But we do know what Boger did when it was time to step down as chairman of the Biotechnology Industry Organization: he returned to the legendary vision statement offered by George Merck in 1950, which served as the touchstone for Merck's vision of leadership for the rest of the 20th Century.

George Merck's famous advice--usually paraphrased as "putting patients first"--is not just a slogan, Boger observed, but a business plan, complete with the assertion that the "better" industry remembers that medicine is "for the people...not for the profits," the better the profit ultimately is.

It is also a mission statement for the future: "We cannot rest until the way has been found to bring our finest achievements to everyone."

DotW: Pink Is The New Black

It's official. Pink is the new black. Any doubt, look at the week's most depressing news item: the U.S. government's announcement that 651,000 jobs disappeared in February.

These days everyone knows someone touched by the rapidly deteriorating economy. We are all frugalistas (frugalistos?) now.

The blogosphere has errupted with sites outlining helpful hints for the newly unemployed, designed to help curb spending and add meaning when someone's work identity is in flux. One of our favorites: 100 Creative, Painless (and Even Therapeutic) Ways to Downsize Your Life After a Layoff.

Pharma types could learn a lot from the site, which includes the following suggestions: hold a garage sale; consider a smaller house; use less or reuse. In our lexicon that could be reworded to mean monetize unwanted assets (aka outlicense), accept that your company may need to downsize instead of growing larger (the anti-Pfizer strategy made manifest by BMS), jettison R&D (Sanofi and Valeant are the first to admit they might need less internal research), and utilize a stable of technologies to find new uses for old drugs (an homage to the reprofilers!).

Our own personal favorites from the top 100 suggestions:

58. Discover community theater. Pfi-eth, Roche/Genentech, preemption, the hunt for an FDA commish, and the fall-out from Obama's healthcare budget all seem to apply if you are looking for a biopharma-centric spin to performance art.

45. Collect coins, as in make a game of finding coins on dressers, the floor, or the street, collect them, and deposit them in the bank (Roche are you listening? It's one way to find the extra $4 billion you need for your $93-a-share bid for Genentech).

43. Surfing the internet. As long as it includes a visit to IVB and Deals of the Week, of course.


Pfizer/Aurobindo: A year after signing a smaller arrangement with the Indian generics firm, Pfizer signed up again with Aurobindo to sell up to 60 generics, primarily in the U.S. but also in Europe. (We’re not exactly sure what this means for Aurobindo, incidentally — since it also has a growing U.S. presence.) The whole thing is an expansion of Pfizer’s “mature products” strategy — an idea initially articulated as a way of squeezing more profits out of existing drugs largely by selling brands into emerging markets. Such a strategy wouldn’t change the pharma business model fundamentally: Pfizer would still use detail reps to sell brands and the brands, although lots cheaper than they’d be as patented U.S. drugs, would still net some premium. The idea isn’t unique to Pfizer: Sanofi-Aventis acquired Zentiva to sell generics in Eastern Europe, while GlaxoSmithKline teamed up with South African generics company Aspen to sell generics in emerging markets. But Pfizer now is moving wholesale into the U.S. generics business. With the Aurobindo deal, it’ll have approximately 120 generic drugs to sell (injectable and oral) in the U.S. – better than one-third of Teva’s list. Why the relative shift in geographic emphasis? Pfizer’s seen the power of generics to interrupt its own U.S. business (Lipitor U.S. sales fell 12% last year, largely because generic simvastatin has been eating its lunch; even its apparently fast-growing Lyrica has been hobbled by the managed-care driven popularity of its generic predecessor, gabapentin, despite its worse label for pain). And the apparent re-emphasis also may reflect rising pessimism about the health of emerging markets, where the economies have been hurt a lot more than in the U.S by the global crisis. Meanwhile, there’s no question about the health of the U.S. generics market. The problem is that Pfizer now is going directly into competition with companies like Teva, Watson and Mylan, and without an obvious strategic or tactical advantage compared to companies that have been built for the high speeds and narrow margins of the generics world. The generics strategy hasn’t worked wonderfully elsewhere, investors point out — Novartis never has made Sandoz into a top generics performer, despite its size. We see it as further evidence that Pfizer is trying to recreate itself as a truly industrial company, a value stock, with modest if predictable top line growth boosted into less modest bottom line growth by strict limits on the expense line. (You can read more about our thesis in the February issue of IN VIVO.)--Roger Longman.

Pfizer/Bausch & Lomb: But Pfizer's diversification strategy isn't limited to generics. On the same day it announced its deal with Aurobindo, it also announced a U.S. co-promotion tie-up in ophthalmology drugs with privately-held Bausch & Lomb. In an environment in which pharma companies are looking to cut costs and retool selling strategies, the co-promotion offers the opportunity for the two organizations to consolidate their commercial structure without sacrificing breadth and reach. The partnership will market Pfizer’s Xalatan, which tallied total sales of $1.75 billion last year, including $536 million in the U.S., with B&L’s Alrex, Lotemax and Zylet. Pfizer also gets a piece of B&L’s bacterial conjunctivitis candidate Optura, which sailed through an FDA Dermatologic and Ophthalmic Drugs Advisory Committee meeting in December. FDA action on the NDA is expected this quarter--Jessica Merrill.

Vertex/ViroChem: As Vertex anticipates bringing its protease inhibitor for hepatitis C, telaprevir, to market, it expanded its HCV pipeline March 3 with the purchase of privately-held Canadian biotech ViroChem. In the process, the Cambridge, Mass., biotech gained a pair of Phase I polymerase inhibitors. But they didn't come cheap: Vertex reportedly had to beat several competitors for the acquisition, eventually paying $100 up-front and issuing 9.9 million new common shares of its stock, pushing thetotal deal value to nearly $340 million. “It was a really competitive process and there were many large pharma companies that were looking at this with us,” Vertex Chief Commercial Office Kurt Graves told "The Pink Sheet" DAILY. The relationship the two companies built, combined with telaprevir’s lead in the HCV protease inhibitor race, gave Vertex a big advantage, he added. Graves cited several strategic underpinnings for the deal, including the ability of the ViroChem drugs' to enhance the lifecycle of telaprevir-based regimens, establishing the foundation for a franchise of specifically targeted antiviral therapy combinations in HCV that can displace the current standard of care ribavirin and peg-interferon. Of the two ViroChem compounds, Vertex seems most interested in VCH-222, which in a five-patient, three-day trial showed the most substantial viral-load reduction seen so far with an investigational polymerase inhibitor for HCV. Telaprevir and ‘222 are complementary in safety, Vertex says, because they are metabolized differently, and the biotech hopes to begin combination therapy study of the two compounds later this year--Joseph Haas.

Sanofi-Aventis/AEterna-Zentaris: Sanofi-Aventis is hoping to add to its bag of tricks in the U.S. market with a co-development and commercialization deal announced today with AEterna Zentaris. Sanofi gains rights to AEZ’s injectable cetrorelix pamoate, a leutenizing releasing hormone antagonist in Phase III development for benign prostatic hyperplasia. AEZ will receive $30 million up-front and stands to gain up to $135 million in regulatory and commercial milestone payments, plus an escalating double-digit royalty on net U.S. sales; it also will complete the current Phase III program — three Phase III trials involving more than 1,600 patients with symptomatic BPH in Canada, the U.S. and Europe — and handle the NDA submission. Sanofi is responsible for post-marketing studies and AEZ will have access to any data from Phase IIIb and IV clinical trials for use elsewhere, while hanging onto “certain” U.S. co-promotion rights as well. For AEZ, the move provides some additional cash to get cetrorelix across the finish line in BPH. (Cetrorelix acetate is already marketed as Cetrotide by Merck Serono ex-Japan [Shionogi in Japan] to prevent premature ovulation in women undergoing in-vitro fertilization.) The Canadian biotech had sold off non-core assets in 2008 to raise cash to fund the compound’s pivotal BPH program and an earlier-stage oncology candidate, and nearly was down to its last few Loonies when it inked a deal last fall with Cowen Healthcare Royalty Partners bringing in $52.5 million in exchange for AEZ’s royalty income from fertility sales. AEZ shares spiked more than 50 percent on the deal news, but the firm’s market cap remains anemic at about $57 million--Chris Morrison.

Pharmexa/Affitech: Eager not to miss out on the high-value antibody shopping that big pharma have indulged in over the last few years, Norwegian private group Affitech is reverse-merging into Denmark’s listed Pharmexa. The idea is to create a fully-integrated antibody group quickly, combining Affitech’s phage-display-based antibody discovery technology and expertise (similar to that used by CAT, acquired for about $1 billion in 2006 by AstraZeneca) with Pharmexa’s immunology and product-development skills, hitherto focused on vaccines . The new company, to be called Affitech and headquartered at Pharmexa, will be listed on the Nasdaq OMX Copenhagen exchange and owned 70 percent by Affitech shareholders, 30 percent by Pharmexa. Standalone Affitech didn’t have the development capability likely to attract Big Pharma partnerships or acquisitions—they want technology and product candidates. That helps explain why certain antibody companies, including Dyax and Sweden’s BioInvent, haven’t been snapped up: they started product development relatively late. So Affitech needed a quick way to fix the situation—since its shareholders, some of which have been around since 1999, were starting to get itchy for an exit. “Organic growth would have taken too long,” says Affitech’s CEO Martin Welschof, who will become Chief Technology Officer of the new group. He claims the company already is discussing potential partnerships, but not a trade sale — at least, not quite yet--Melanie Senior.

Novartis/Proteon: Anyone following IVB's twitter feed know that corporate venture financings have been prominent news lately. This week came news that the MPM BIO IV NVS Strategic fund, Novartis' corporate venture gambit with MPM Capital, invested in the $38 million Series B financing of Proteon. Similar to other recent MPM/Novartis deals, the financing gives Novartis the option either to buy the Waltham, Mass.-based biotech or acquire a global license to said start-up's lead compound, PRT-201, at the conclusion of the recombinant human elastase's Phase II program. The drug currently is in Phase I/II studies in end-stage renal disease patients undergoing surgery for arteriovenous fistula creation. While specific details of Novartis' option were not disclosed, Proteon said acquisition and regulatory milestones could exceed $550 million. These kinds of option arrangements were tricky to negotiate just a few years ago. When VCs were flush with cash, many thought twice about signing off on a deal that capped the ultimate upside of a portfolio company. With Novartis taking an option on a significant program, what other pharmas would think seriously about acquiring said biotech at a premium? And what if they pharma didn't actually exercise the option? These kinds of agreements didn't protect the start-up in the event of such negative news. But in an environment where cash is king--and cash now is even more important--corporate venture groups looking to broker option-style deals ala Novartis might be gaining more leverage. Certainly this is the second deal in recent months for the MPM/Novartis group. In January, they invested in Peptimmune, with Novartis optioning worldwide development and commercialization rights to PI2301, a Phase Ib multiple sclerosis candidate.

(Image by flickr user my hobo soul used with permission through a creative commons license.)

Deals of the Year Nominee: Vertex/Undisclosed Investors

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

Your next DOTY nominee is the best example we can think of from 2008 of a phenomenon that will surely gather steam as biotech firms search around for non-dilutive sources of capital: Vertex's June 2008 sale of the royalty stream on its HIV protease inhibitors (which are marketed by GSK) to a group of undisclosed investors.

How much for that money in the window? This time, $160 million. We discuss the concept of royalty and revenue financing in-depth in this IN VIVO feature from June.

Vertex's deal is part of its plan to dispose of non-core assets and shore up its balance sheet as it invests in its hepatitis C franchise; back in June the need to secure capital was less obvious, so Vertex also gets serious points for timing. (What's more, in September, before the economy really began circling the drain, Vertex finalized the terms of a $25.50/share follow-on public offering which eventually netted the biotech $220 million.)

"Receiving a $30 million royalty in 2011 is less relevant for the company" compared to potential future product revenues, Vertex CFO Ian Smith told us back in June. "Our belief is that we should get that money on the balance sheet now, and invest it in R&D. Money that has less significance to us in two or three years," when Vertex could be marketing its own blockbuster HCV protease inhibitor, lowers the company's financial risk today, he pointed out.

Amprenavir (Agenerase) and fosamprenavir (Lexiva) royalties totalled $34 million on sales of $242 million in 2007, but it wasn't like the market was attaching significant value to that royalty stream. Other biotechs are recognizing similar unappreciated or underappreciated revenue or royalty streams and looking to sweep up some cash while they can. Hey it beats selling shares or scrounging for debt, now more than ever.

And there's no shortage of buyers. Beyond the specialists like Paul Capital Healthcare and Cowen Royalty Partners et al., hedge funds are getting into the game as well (see TPG-Axon's April 2008 purchase of half the royalty stream to CV Therapeutics' A2A adenosine receptor agonist regadenoson (Lexiscan), the injectible stress agent, for $185 million).

Expect to hear much more in 2009 about this brand of alternative financing. The phenomenon is by no means new--but it's gathering steam, and it's not just cash-desperate biotechs that might find such deals beneficial, as Vertex's $160 million demonstrates.

"We've never been busier," Paul Capital Healthcare partner Lionel Leventhal told the audience at this years' PSA meeting. "The pharmaceutical industry is a vociferous user of capital and it doesn't matter how the markets are doing - they still need capital." With equity markets down and debt less than an ideal way for the industry to obtain the money it needs, royalties and revenue-interest financing is become more mainstream, he added.

image of bank$y graffiti art by flickr user guano used under a creative commons license.