Financing of the Fortnight Wonders If It's Time To Join The Parade

Biotech workers of the world unite, you have nothing to exercise but your stock options. At least a few more do these days. We’re far from the cries of “Mayday!” that echoed from the bottom of the financial canyon four years ago, and as we write this, the sector is abuzz with IPO pipeline activity.

GW Pharmaceuticals, a British purveyor of pain-relieving cannabinoid drugs already listed on the AIM, just raised $31 million and made its Nasdaq debut; and Insys Therapeutics, also in the prescription pain-relief business, raised $32 million in its IPO.

Both were modest, as are most dollars raised in biotech IPOs. But they’re the eighth and ninth of the year already. To relieve investors with grumpy LPs and give workers hope that stock options will one day put a little extra scratch in their pockets, it’s volume that’s needed. More liquidity across the board, please.

It seems the waters are about to flow. Ambit Biosciences, Regado Biosciences, Receptos, Epizyme, Portola Pharmaceuticals, and others are now in the queue, along with the mega-CRO Quintiles Transnational Holdings (with private equity, not venture capital, backers). We won’t make individual assessments of the worthiness of each company at this point, but on the whole it’s a well represented group.

Those are just the ones in the public eye. There could be plenty a few steps behind, thanks to the US JOBS Act of 2012. It made IPO registration easier and stealthier at first, giving companies the chance to lay the groundwork of a possible debut without having to open up to public scrutiny. Not so fun for journalists, of course, but it gives executives and their advisors more data to consider and more time to schmooze public investors before declaring themselves in pursuit of the brass ring. And that breathing room, people say, is helping. “The ability to make initial registration statement filings confidential, plus the ‘testing the waters’ rules have made a meaningful difference in helping companies pursue an IPO,” says Fenwick & West partner Matt Rossiter, whose clients include life science companies and venture investors.
  
Kleanthis Xanthopoulos took his microRNA company Regulus Therapeutics public last year and is a big believer in a long, slow IPO process. “The roadshow should be where people make their minds up, finally, rather than where they learn about you,” he said during a discussion about the IPO landscape at the recent Allicense conference in San Francisco.

The biotech analysts at Cowen & Co. agree that the JOBS Act, by allowing more investor exposure to pre-IPO companies, has increased investor comfort. Other factors besides the new rules are helping, too. Since 2004 there have been 332 biopharma acquisitions and 119 IPOs, they say, which leaves public investors hungry for new investments and new ideas. And the past couple years, IPO investments have on average outperformed the S&P 500. (A couple months ago, our friends at “The Pink Sheet” took a detailed look at the strong Class of 2012 here.)

“It seems quite reasonable that these factors have come together to produce a market more receptive to IPOs than at any point in the previous 5 to 10 years," write the Cowen team in a recent sector report.

Yes, but… (You knew that was coming.) If public investors are showing more interest, why is insider participation in IPOs so high? It’s a phenomenon we’ve tracked for a while now. A year ago it was startling. At his Allicense talk, Xanthopoulos cited data from Lazard Equity Capital Markets and FactSet that show why: For this current IPO window that began in late 2009, 71% of offerings have included insiders, and the median amount of proceeds they’ve bought at IPO is 43%. In the previous window, from 2003-2007, insiders participated in 29% of offerings and snapped up 20% of the proceeds.

Quite a bump. What gives? A small part of the bloated totals could be due to the crossover phenomenon, with hedge funds and other public buyers getting in before the IPO and bolstering their positions at the debut. And on any particular deal you might find an insider or two who are simply thrilled with the company, hungry for more, and in no rush to exit. But with so many firms out fundraising, or winding down operations, most of those insiders are wading in deeper simply to get deals done.

So keep an eye on those insider numbers. If IPO volume continues apace, and the insiders start to do what they really want to do -- own less stock, not more, after their companies go public -- we'll know the window is wide open.

In fact, May is the perfect time to throw windows open, let in the breeze, and do some housecleaning. We'll start right now by polishing up the latest edition of...

Symphogen: The privately held Danish antibody company said May 3 it has reeled in another €41 million ($53.9 million) to push forward its antibody mixture pipeline. The firm is developing products that contain more than one full-length monoclonal antibody, an approach that few companies have tried. As described in a START-UP feature earlier this year, Symphogen has pioneered the way for antibody mixtures (or combinations, or cocktails, as some might call them) into the clinic, and in 2012, it outlicensed its lead oncology program, a two-antibody mixture to treat head and neck and colon cancers, to Merck Serono following Phase II trials. The cash from that deal, plus its massive €100 million financing round announced in 2011, and the new funds, an extension of that round, has given the firm a long runway to develop its preclinical pipeline. Its lead program is now Sym013, a six-antibody mixture designed to inhibit HER1 (aka EGFR), HER2 and HER3 to prevent tumors from switching signaling pathways and building drug resistance. Ultimately the company wants to design combinations of antibodies that hit targets not just on the tumor cell surface but in the surrounding microenvironment.  The extension was led by existing investors Novo A/S and PKA, a Danish pension fund administrator, and included Danica Pension, making its first active investment in Symphogen. Symphogen has now raised €249 million in private capital. -- Alex Lash

ScioDerm: Dermatology start-up ScioDerm has raised the first $9 million of a planned $16 million Series A round, intended primarily to support clinical trials on lead program SD-101. The Raleigh, N.C., start-up’s backers were Morgenthaler Ventures and Technology Partners, which made us do a slight double take. Turns out Morgenthaler’s life sciences team is still investing the firm’s 2008-vintage ninth fund, even though the group has already joined forces with Advanced Technology Ventures’ biotech team to create a new firm, Lightstone Ventures. Morgenthaler is not expected to make new life sciences investments from future funds. In February, ScioDerm filed an IND to study SD-101 in epidermolysis bullosa, a rare genetic disorder that results in sensitive and fragile skin, disfigurement due to wounds from blistering and tearing, and early death. It had previously conducted a Phase II study of SD-101 in some subtypes, including the simplex, recessive dystrophic, and junctional forms of the disease. Also this fortnight, ScioDerm received Breakthrough Therapy designation from FDA, potentially speeding the drug’s clinical development. A Phase I study is expected soon, with a Phase IIb/III study expected as soon as late 2013. – Paul Bonanos

Esperion Therapeutics: Longitude Capital joined a roster of investors in cholesterol-fighting drug developer Esperion, leading a $33 million Series A extension that builds on $22.75 million the company raised in 2008. Returning backers included Aisling Capital, Alta Partners, Domain Associates, Arboretum Ventures and Asset Management. Esperion is attempting to grab a piece of the market for cholesterol-lowering prescription drugs that appeal to patients who cannot or prefer not to take statins such as former Pfizer blockbuster Lipitor (atorvastatin), generic since November 2011. The company recently presented encouraging data suggesting that Phase II candidate ESP-1002 reduced low-density lipoprotein cholesterol by more than 40% in type 2 diabetes patients; it’s studying the drug in additional patient populations as well. By some estimates, a fifth of high-cholesterol patients are statin-intolerant, suffering pain or muscle weakness. Other novel drug classes, such as PCSK9 inhibitors, are being studied for statin-intolerant patients, but Esperion co-founder Roger Newton – a co-discoverer of Lipitor – said ESP-1002’s oral availability and once-daily dosage may give it an advantage over injectable alternatives. Ann Arbor, Mich.-based Esperion expects to partner the drug “in a couple of years,” according to CEO Tim Mayleben. Pfizer acquired the original Esperion for $1.3 billion in 2004 and retained several key assets, even though it shifted many to the back-burner. A management team including Newton, an original Esperion founder, engineered a 2008 spinout, establishing the new company with an external investment. – P.B. 

Intrexon: The synthetic biology company said May 1 it has reeled in a $150 million Series F round of funding to continue building operations in its four areas, health care, food, energy, and environment. Health care is where Intrexon CEO and chairman Randal Kirk amassed the fortune that he’s been plowing into Intrexon since his first investment eight years ago. Kirk was majority owner of New River Pharmaceuticals, which he sold to Shire in 2007, and Clinical Data, bought by Forest Laboratories in 2011. He became CEO of Intrexon in 2009 and much of the $509 million the firm has raised has come from him or his affiliated venture funds. A majority of the Series F round came from undisclosed new investors, according to the company. The news of the financing came on the heels of the firm’s latest biopharmaceutical deal, an agreement with Soligenix to co-produce monoclonal antibodies for the treatment of melioidosis, an infection caused by Burkholderia pseudomallei endemic to Southeast Asia and Northern Australia. Other recent health care deals include an agreement with AmpliPhi BioSciences to develop a range of anti-infectives and a license of its technology to Fibrocell Science for use in development of fibroblasts and dermal cells for aesthetic and therapeutic applications. Oragenics, Adeona Pharmaceuticals and Halozyme Therapeutics have also partnered with Intrexon. – A.L.
 
All The Rest: New investor Oracle joined in for a second closing of Proteus Digital Health's Series F round, now totalling $62.5M… Celator closed a $39.3M financing to fund a Phase III study of CPX351 in acute myeloid leukemia… HPV vaccine developer Genticel raised €18.2M in Series C funds… Synthetic biology company Gen9 received a $21M investment from Agilent… Acumen Pharma, developing the ACU193 antibody for Alzheimer’s, completed the first close in a $20M Series A… Becker Ventures led a $15M round for AltheRx, developer of overactive bladder candidate solabegron... To support technology to distill real-time patient insights from social media, Treato raised $14.5M… ActoBiotics developer ActoGeniX completed a €10.7M Series B… Anterios collected $8.5M in venture funding for its aesthetic and dermatological drug candidates… viDA Therapeutics’ $3.6M seed round will fund a granzyme B inhibitor for fibrotic, autoimmune, degenerative, and age-related chronic inflammatory diseases… US and European institutional investors put €54M into Belgian biotech Galapagos… Radius Health, which is working on the transdermal and IV candidate BA058 for osteoporosis, raised $43M… Arrowhead Research completed a $36M private offering of common and Series B convertible preferred shares…concurrent with closing its reverse merger with publicly traded Tranzyme, Ocera plans to raise $20M… Health care-dedicated institutional buyers invested $10M in Northwest Biotherapeutics… Lincoln Park Capital Fund provided Elite Pharma with $10M… As it prepares to launch its radiopharmaceutical agent Lymphoseek, Navidea privately raised $5.1M… To pay for the NDA for male hypogonadism treatment CompleoTRT, Trimel publicly sold $Cdn40M in stock… Boron chemistry platform company Anacor completed a $20M FOPO… Cell therapeutics developer NeoStem raised $10M through a public stock sale... Immunomodulating company Idera raised $8.75M in a secondary offering... Less than a year after closing a $51M Series E round, cardiovascular firm Regado Biosciences filed for its IPO… Receptos, Quintiles, and Ambit all set terms for their IPOs… Theravance is spinning off into two independent publicly traded companies, one focused on the Breo deal with GSK, and the other on small-molecule R&D… Supernus netted $72M in a convertible senior secured notes offering… Immunotherapy-focused TNI Biotech filed a Form 10 to become public reporting entity… GSK and Avalon are partnering to start up multiple drug discovery companies over the next three years with a total of $495M in potential funding… Harvard University received a $50M donation to support translational research… Atlas Venture closed its $265M ninth fund... Capital Royalty announced an $805M fund for nondilutive financing. -- Amanda Micklus

Thanks to Paul Bonanos for help with this fortnight's column.  

Photo of ILGWU members in a 1937 May Day parade courtesy of the Kheel Center, Cornell University. 

DOTW: Early Stage Investing Pays Off

Preclinical protein platform play Envoy Therapeutics got taken out by Takeda this week for up to $140 million. That magical “up to” typically hides a multitude of sins, but here that may not be the case.

The milestones are all preclinical and achievable within a year and a half, Envoy investor John Diekman of 5AM Ventures tells In Vivo Blog. VCs invested a mere $8 million in Envoy, which was founded in 2009. That puts an exit at 17.5x, if all the milestones are hit. That means 5AM's investment of about $4 million could be parlayed into around $70 million.

Although that’s an amazing multiple, with such a small investment it doesn’t quite provide the home run that VCs often rely on to create venture returns. It will return almost half of the $150 million fund the firm raised in 2006. 5AM subsequently raised a $200 million fund in 2009.

Diekman said the board originally bargained hard to get paid entirely upfront but, once they realized Takeda had solely preclinical milestones in mind, they were happy to relent. Comps for the deal are hard to find; there haven’t been any disclosed acquisitions of preclinical companies this year that paid cash and had the potential to be worth over $100 million, according to our deals database.

He noted 5AM Ventures planned to put $20 million total into Envoy and said, “If there’s anything we don’t like, it’s that we didn’t get enough money into the company."

But Diekman said the next inflection point likely would have been Phase II data, when the company could again be a promising acquisition candidate. So when the investors started evaluating options, they took into account the amount of money and the time that would be necessary to take the company to that next stage.

Envoy has bacTRAP technology, which combines genetic engineering with molecular biology techniques to label and extract protein-making components of specific types of cells. “This is one of the nicest platform companies I’ve seen in my life. They have the ability to bind new targets in such as way that you can start screening them in CNS and other areas,” said Diekman.

The central nervous system application is the attraction for Takeda, which has moved aggressively into the field in recent years. 

Takeda and Envoy have history. Takeda Ventures participated in the 2009 Series A round for Envoy, so it already held 12.5% of shares ahead of the acquisition. Another strategic investor, Roche Venture Fund, also participated in that financing. In 2010, Takeda and Envoy did a deal to discover schizophrenia drugs that offer greater efficacy and safety than approved treatments. Envoy received $3 million upfront and an additional $2.25 million per year for three years. 

“Takeda was an investor from the beginning and saw the technology. They did a deal with us, discovering a number of compounds. They watched the technology and saw how good it was and where it was going. And they wanted more,” said Diekman.

While Envoy secured a Takeda partnership and then an acquisition, this week a couple other biotechs went in the opposite direction and lost partners. We’ll give you all the details in this week’s edition of. . .

Sun Pharmaceutical/Dusa Pharmaceuticals: India’s largest drug maker by market cap, Sun Pharmaceutical, acquired U.S.-based specialty dermatology company Dusa Pharmaceuticals, a step it said will help build a global specialty dermatology business. The deal valued Dusa at $230 million, which translates to about 4x sales and 36x annualized after-tax profits based on 1H12 figures. Sun marked the deal as a departure from the company’s usual strategy, which is to acquire distressed assets. Also, Sun struck a conservative agreement that gives it market depth compared to a jump in its top-line. In an earlier interview, Sun Pharma Managing Director Dilip Shanghvi tempered expectations of any large deals. Dusa drew most of its $45 million revenues last year from Levulan, a single drug-device combination therapy for treatment of non-hyperkeratotic actinic keratosis, or AKs, of the face or scalp. Actinic keratosis is a common precancerous skin condition caused by excessive exposure to ultraviolet light and made up of rough, dry, tan- or pink-colored blemishes that often appear on facial skin or other skin exposed to sunlight. Founded in 1991, Dusa had a long gestation and only turned profitable in 2010. In addition to Levulan, it sells Blu-U, a blue light device used to treat moderate inflammatory acne vulgaris and general dermatological conditions. With the acquisition, Sun said it expects to provide about five million treatments per year in the U.S. Shanghvi pegged the market at well over $1 billion, adding that the cost of treatment is a factor for the number of treatments received.-- Vikas Dandekar

Merck/ Regenstrief Institute: Merck & Co. signed a five-year agreement with The Regenstrief Institute to collaborate on a range of projects that will use clinical data “to inform personalized delivery of health care,” Merck said in a statement. Regenstrief, a non-profit medical research organization affiliated with the Indiana University School of Medicine, has access to a large data repository that includes de-identified clinical data on over 13 million individuals, according to Sanchin Jain, Merck’s chief medical information and innovation officer.  The foundation for the database is the Indiana Network For Patient Care, a healthcare information exchange that goes back to 1994 and captures a range of clinical and claims data from providers and payers across the state. The companies will use the data to explore novel methods for studying diseases and treatments for chronic conditions. The collaboration began in April, but Merck announced it on Nov. 8, so scientists from both organizations are in the midst of completing nine projects in 2012 and plan another 10 for 2013, focusing in total on osteoporosis, diabetes, hypertension, hyperlipidemia and insomnia. Financial details were not disclosed, but the collaboration aims to advance the science of bioinformatics and to “have a practical effect on Merck’s approach to bringing new products to patients,” Jain said. Study results could provide insights into medication adherence and patient outcomes, as well as improved methodologies for conducting observational research, he added. Results of collaboration studies will be published in peer-reviewed journals. Jain said that Merck selected Regenstrief, which is more than 40 years old, because of its expertise in biomedical informatics, health services research, and its world-class health information system. For Regenstrief, an alliance with Merck offers an opportunity to globalize some of its ongoing research and work with a leading pharmaceutical company.-- Wendy Diller

Pfizer/Alliance For Lupus Research: Pfizer’s Centers for Therapeutic Innovation (CTI) announced a partnership on November 7^th with the Alliance for Lupus Research (ALR) to co-fund the translation of promising lupus treatments into Phase I trials. In a reminder of how the R&D ecosystem is rapidly evolving away from the only-within-our-walls mindset, the collaboration is the first in which a Big Pharma joins with academic investigators and a non-profit research foundation to accelerate emerging science. Tony Coyle, VP and CSO of Pfizer’s CTI, says the program’s presence in each of the major U.S. life science hubs enables it to assemble highly customized teams with specific perspectives and skillsets. Pfizer and ALR will split the funding of academic investigators in Pfizer’s CTI network during the three-year collaboration. The partners have agreed to start off with four projects, but Coyle expects that, driven by success, the collaboration may run additional ones. He envisions funding in the $1 million-$2 million range depending on the particular needs of the project and how rapidly it can progress from bench to clinic. Coyle believes the team model – pharma, disease research foundation, and academia – can be replicated to other diseases and locales. Lupus, which is poorly served by drug therapy, is a natural test case since it’s a multi-organ disease that has recently seen dramatic advances in the understanding of its underlying mechanisms. It’s also genetically heterogeneous, and will require multiple drugs to treat all symptoms and subtypes. Pfizer, with two early-stage lupus candidates in its clinical pipeline, already has a head start.-- Michael Goodman

Arena/Ildong Pharmaceutical: San Diego biotech Arena Pharmaceuticals secured a second marketing partner for obesity drug Belviq (lorcaserin), as Ildong agreed to market the compound in South Korea. In a deal announced Nov. 6, Arena receives an upfront of $5 million and an additional payment of $3 million upon the drug’s approval by the Korea Food and Drug Administration (KFDA). Arena will manufacture Belviq and sell it to Ildong for 35% of annual net sales. That price will increase on a tiered basis up to 45%, not to exceed $15 million. Eisai has rights to Belviq in the U.S., Canada, Mexico and Brazil. That deal has a similar structure in which Eisai purchases Belviq from Arena in exchange for a percentage of annual net sales. In its Q3 earnings call on the same day as the Ildong announcement, Arena said Eisai would start to market Belviq in the U.S. in early 2013, subject to the U.S. Drug Enforcement Administration's final scheduling designation. Arena expects a decision by EMA on Belviq in 1H13. Investors don’t seem particularly convinced of the strength of a Belviq launch: shares are off almost 10% since approval on June 27. Still, competitor Vivus is off by much more – almost 60% since its Qsymia approval on July 18 – on a rejection by EMA for European brand name Qsiva (phentermine/topiramate) and a weak early Qsymia launch.-- S.L.

Chiromics/GlaxoSmithKline/Bristol-Myers Squibb: New Jersey-based Chiromics announced a pair of tie-ups on Nov. 9 under which Bristol and GSK will get non-exclusive licenses to the biotech’s chemical compound library. Bristol also will receive an exclusive license to a collection of proprietary chemical compounds discovered by Chiromics. Central to each deal is a screening collaboration to discover and optimize novel small-molecule candidates against multiple undisclosed therapeutic targets using Chiromics’ “cascade catalysis” technology. No financial terms were disclosed for either transaction. Based on technology discovered at Princeton University, this platform enables “accessible complexity,” the discovery of diverse molecules, including novel classes of drugs, that are differentiated from existing small-molecule therapeutics while offering drug-like properties, the ability to develop structure-activity relationships and ease of re-synthesis, Chiromics said. The biotech’s proprietary hit recognition algorithm, Chalis, also will be used in the discovery process with both pharmas.-- Joseph Haas

Pfizer/Auxilium Pharmaceuticals: The parties mutually agreed to end a 2009 partnership for the development, commercialization and supply of Auxilium's Xiapex (clostridial collagenase for injection) for Dupuytren's contracture and Peyronie's disease in the EU and 19 other European and Eurasian countries. The deal ends as of April 24, 2013. Xiapex (the EU trade name) is approved to treat Dupuytren's contracture in the U.S. and E.U. and an sBLA has been submitted for Peyronie's disease. Asahi Kasei has development and commercialization rights for Xiaflex in Japan, while Actelion has them in Canada, Australia and Mexico. The treatment is in Phase IIa testing for Frozen Shoulder syndrome (adhesive capsulitis) and in Phase Ib testing to treat cellulite. Auxilium recognized $15.7 million in Xiaflex/Xiapex revenues in Q3, including $13.2 million in U.S. revenues. As a result of the Pfizer deal ending, Auxilium will recognize $94 million of deferred revenue and $9 million of deferred costs in Q4. Auxilium president and CEO Adrian Adams said on the Nov. 7 Q3 earnings call that both parties were “disappointed” in the deal and that he’s in the midst of weighing options for these regions. -- Stacy Lawrence

GlaxoSmithKline/Xenoport: When is a parting of the ways not really a goodbye? In another “No Deal” this week, GSK and Xenoport ended a sales partnership, but the multinational pharma still agreed to buy an equity stake in the smaller firm at a premium price. GSK terminated a five-year marketing partnership for Xenoport’s Horizant (gabapentin), under which the it commercialized the restless leg syndrome drug worldwide except for six Asian countries, including Japan, for which Astellas held marketing rights. GSK said it is exiting the partnership due to an increased focus on core products. It paid $75 million upfront in 2007 for commercial rights to gabapentin, with up to $565 million in milestones potentially going to its California-based partner. To date, Xenoport has collected at least $130 million in milestone payments under the deal. While departing, GSK also is buying a 4.3% share in Xenoport, spending $20 million to buy 1.8 million shares at $10.86 per unit, a 30% premium over the stock’s 10-day average prior to the deal’s disclosure. Xenoport, which gets back all rights to gabapentin that were held by GSK, also is able under the deal terms to require the pharma to buy up to another $20 million in equity over the next six months.-- J.A.H.

Photo courtesy of flickr user 401(K) 2012 via Creative Commons license. 

Financings of the Fortnight Checks The Forecast

We’ve got forecasts on the brain this fortnight. No laughing matter: What happened on the East Coast with Hurricane Sandy was grim, and as of this writing remains so. If you haven’t yet, please take a minute to donate to the relief effort.

A continent away, we here at FOTF HQ have many colleagues, friends and loved ones directly affected by the storm; before, during and after we have watched intently. The forecast called for disaster, and the storm brought fresh appreciation for what that overused term really means. We’re always amazed how people shrug away warnings of impending danger by saying previous warnings didn’t live up to their billing. Hurricane Irene barely ruffled New York City’s feathers, so how was Sandy going to be any different? Psychologists say this all-too-human trait is a reliance on cognitive schemas – forming assumptions or predictions upon an organization of previous experience.

We here in earthquake country are taking some time this weekend to make sure our emergency supplies are refreshed and at hand. Just because there hasn’t been a Big One in our lifetimes doesn’t mean there won’t be one tomorrow.

One example of humans – indeed, Californians – trying to imagine beyond their previous experience was the creation of the California Institute for Regenerative Medicine, or CIRM, a $3 billion bond measure the state voted for in 2004 to create an untouchable reservoir of funding for stem-cell and regenerative-medicine research. Whether such a measure would pass today, with the state fighting its way through a mountain of debt, is another matter. But Californians agreed eight years ago with the forecast that warned this brave new scientific world needed a protectorate. Eight years later, those monies are slowly making their way up the R&D food chain. In our next issue of Start-Up, we’ll check in on CIRM and the effect of its public largesse, including the new stem-cell-related companies that have sprung from CIRM-funded academic projects. CIRM has also funded a handful of for-profit companies through its various grant programs, and one thing our story will explain is a new initiative that awards grants to companies with solid venture backing or corporate partnerships. One of those awards just went to bluebird bio, which we detail in our roundup below.

Bluebird also happens to be part of another story in the next issue of Start-Up. The firm's $60 million Series D round, announced earlier this year, has significant participation from crossover investors; it's one of many big venture rounds in recent months to include hedge or mutual funds. The recession drove them away from investing in pre-IPO companies for the most part, but like a slow-moving weather system, the cycle has spun back around. The crossovers are back, investing the past 12 months in a sizable number of the venture rounds of $50 million or more, and we’ll explain why – and what’s different this time.

Another company in the news this fortnight is one of the biggest crossover successes to date, Puma Biotechnology, which became public in 2011 via reverse merger but only recently gained a listing on a major stock exchange – and raised $138 million to boot, as we explain below in our roundup.
 
Meanwhile, the real fundraising begins this week in thousands of towns, from the nation's largest on down, to put lives and communities back together. We're forecasting a lot of hard work ahead, and we're keeping everyone who was in Sandy's path in our thoughts as we head into another edition of...


  
bluebird bio: The gene therapy company said October 26 it received a $9.3 million grant from the California Institute of Regenerative Medicine to push forward a Phase I/II trial of its treatment for beta-thalassemia, a genetic blood disorder. Bluebird’s lentivirus technology inserts a gene into a patient’s hematopoetic stem cells ex vivo to correct a mutation, the cells are reintroduced to the patient and prompt the bone marrow to start producing healthy red blood cells. The stem-cell angle qualifies bluebird for a grant from CIRM, which was approved by California voters as a $3 million bond in 2004 to create a steady source of stem-cell and regenerative medicine support. The bluebird grant is part of CIRM's new $60 million fund earmarked for companies that have either rounded up significant venture backing or secured a partnership. Bluebird is in the former category, having announced in July a $60 million Series D round, and puts the Cambridge, Mass. firm in the spotlight of a small renaissance for gene therapy, as we detailed in a recent Start-Up article. The field fell into disfavor for much of the previous decade, but a gene-therapy product was approved today in Europe, and bluebird has made clinical progress, with safety concerns giving way to clinical, manufacturing and commercial problems to solve. -- Alex Lash

Puma Biotechnology: The single-asset company quietly went public through a reverse merger in late 2011, but only recently did it tap the public markets for the first time, all while upgrading its listing to the New York Stock Exchange. On October 24 Puma closed out a $138 million offer, selling 8.625 million shares at $16 apiece that included more than a million additional shares purchased by the underwriters. The company was formed to develop neratinib, a small-molecule PAN-HER inhibitor licensed from Pfizer in October 20011. The compound is currently in Phase II trials to treat HER2-positive breast cancer. In November 2011, Puma reverse-merged into a shell company and raised $60 million by selling 16 million shares at $3.75 each to a group led by Adage Capital Partners, even though its stock was not listed on an exchange. It began trading publicly in April on the over-the-counter bulletin boards. Its shares closed Wednesday Oct 31 at $20.60. Part of the company’s appeal is its founder's track record. Puma is led by Alan Auerbach, who built Cougar Biotechnology around the prostate cancer drug abiraterone, brought it into Phase III, and sold it to Johnson & Johnson in 2009 for $1 billion. J&J ushered abiraterone to an FDA approval in 2011 with the trade name Zytiga. Like Puma, Cougar in 2006 reverse-merged its way to public standing and raised cash to push forward its lead candidate. The J&J deal helped peel away some of the stigma reverse mergers carry (as in, “if you couldn’t go public the normal way, how good can your company really be?”). One high-profile VC actually said last year the acquisition provided inspiration to reverse-merge the osteoporosis company Radius Health into a shell. Radius recently filed for its first public offering, aiming to bring in $56 million, and a Nasdaq listing. -- A.L.

Atara Biotherapeutics: Amgen and venture firm Kleiner Perkins Caufield & Byers jointly announced the spinout and funding of Atara Biotherapeutics on Oct. 26, creating the company to house and develop six Amgen assets. The start-up will have programs in nephrology and oncology, with assets ranging from pre-clinical to Phase I. Amgen will retain an unspecified amount of equity in the new company, while Kleiner will provide funding in its early days. A former Kleiner partner, Isaac Ciechanover, will be its chairman and CEO. Neither Amgen nor Kleiner would comment specifically on the assets or why Amgen chose not to develop them itself, and it’s not yet clear whether Kleiner will eventually close a formal Series A round or attempt to form a funding syndicate with other VCs. The biotech and venture firm have a prior relationship: Boston-based cancer drug maker Tesaro, a Kleiner portfolio company, acquired a key asset from Amgen in 2011, a year before it went public. Amgen has spun out other companies as well; it created Relypsa to house assets that formerly belonged to Ilypsa, a company it acquired in 2007. – Paul Bonanos

Aclaris Therapeutics: Newly formed dermatology start-up Aclaris announced Oct. 24 a $21 million Series A funding with the founder and former CEO of Vicept Therapeutics and  support from the same three venture capital firms that backed Vicept. Vivo Ventures and Fidelity Biosciences led Aclaris’ initial funding, and Sofinnova Ventures provided a supplementary component of the round. A $16 million Series A round from those three firms supported Vicept from its inception in 2009 through its July 2011 buyout, in which Allergan paid $75 million upfront. Aclaris CEO Neal Walker wouldn’t disclose the nature of its primary asset except to say the compound is a preclinical, topical treatment for a highly prevalent condition. The drug will have both medical and aesthetic uses. Aclaris is the second entity to emerge from NeXeption, which establishes, funds and supplies management to independent operating companies tied to individual assets it believes are potential targets for pharma partnerships. The model echoes creative asset-based financing structures that venture firms have formed, such as the Velocity group carved out of venture firm CMEA Capital, the Atlas Venture Development Corp., or Inception Sciences, which was formed by Versant Ventures to discover drugs and spin them out into single-asset virtual operating companies. But the start-ups under NeXeption’s umbrella will license rather than discover new assets, and they will be standalone entities staffed by a combination of NeXeption executives and additional employees brought in to suit their specific needs. NeXeption also shares risk with outside venture investors, while taking equity itself. NeXeption’s first company was Ceptaris Therapeutics, which is developing a topical treatment for cutaneous T-cell lymphoma. Vivo also has invested in that company, formerly known as Yaupon Therapeutics. – P.B.

 Photo courtesy of flickr user Brian Birke via Creative Commons license.

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

Things Mike Pearson Has Learned

It’s always interesting to hear Mike Pearson, the blunt CEO of Valeant, expound on how nimbly his company is responding to Pharma’s complicated business environment. At an analyst meeting on June 21—coincidentally the last day of BIO 2012 – he took a few minutes for reflection on Valeant’s current strategy, as well as lessons learned from his four years at the helm: Only compete in attractive markets, defined as those in which competition is manageable and overall sales are growing. 

No direct mention of health care reform in the U.S. or market access issues in Europe crossed his lips, but clearly reimbursement and pricing hurdles are behind Valeant’s decision to almost entirely exit Western Europe (a move made prior to the current melt-down), its declining presence in the U.S., which will account for roughly 50% of sales in 2012, down from 65% in 2010, and its de-emphasis of innovative drugs in favor of OTC and branded generics ( 71%, 9% and 20% in 2010 to 59%, 14%, and 27%, respectively, in 2012).  An increasing proportion of Valeant revenues comes from products and geographies that have a heavy out-of-pocket component, even on the innovative side. 

Pearson cited several critical priorities for the company, which relies on a blend of organic and business development activities for growth. If Valeant does not deliver on a 15% return on shareholder value over three years, management takes a hit. With that kind of mandate, Valeant executives can not afford to wait out long R&D cycles.

That approach stands in contrast to Forest Laboratories,which on June 20 also provided investors with an update of its strategy, and which is also somewhat contrarian. Slightly larger than Valeant, although with a significantly lower market cap ($9.2B versus Valeant’s $13B), Forest also avoids risky early stage research in favor of a strong emphasis on business development with a focus on clinical assets.

However, it has an entirely different commercial and portfolio management mindset, with deep roots in primary care: it has no problem building support gradually for drugs that demonstrate incremental improvements over standard of care, continuing to back them despite slow launch trajectories-- an approach that worked brilliantly but now makes analysts jittery, given worries that once-proven tactics won't work in today's vastly constrained markets. 

And while Pearson struck a contrite tone with investors, who have been questioning him lately about lack of visibility on organic growth and ex-U.S. exposure, Forest’s management, led by founder Howard Solomon had a 'hold the fort' message. That message: the company's overhaul of its product development portfolio has succeeded and the current mode of operating is to stay the course.

Of course, Forest has patent cliff issues (80% of revenues at risk by 2015), which Valeant, by eschewing innovative molecule research and early clinical development, strives to avoid. And it is Valeant we’re looking at in this note. In fact, in the four years since he assumed the helm, Pearson said explicitly that he's learned to avoid primary care 'tail' products, such as the anti-depressant Wellbutrin, which did not perform to expectations after it was acquired as part of Valeant's 2010 takeover of Biovail. Also critical is discipline on integration costs. 

That said, company’s returns on its acquisitions has been “phenomenal” Pearson says, and it sees business development opportunities as “quite large” – a contrast to some others in the industry who bemoan the lack of attractive late-stage deals. So the plan is to shift capital deployment from half acquisitions and half share repurchase to more emphasis on the former. And it prefers to buy assets over full companies due to favorable tax treatment, though both are in the cards. In business development, it expects a 20% return, statutory tax rates and a cash payback within six years.

In the past year, Valeant has become a leader in certain sub-segments of dermatology and ophthalmology – and moved into podiatry and dental care, all businesses with a heavy out-of-pocket pay component. Likewise, geographically, its play in Russia is particularly aggressive, as its sales have gone rapidly from less than $40 million to $200 million. Even within that market, though, it is not selling innovative medicines, so much as branded generics and OTC products. In fact, if an asset has government ownership or reimbursement, Valeant walks away.

That sort of flexibility and aggressive rush into non-patent protected franchises implies a willingness to forgo a high-value certainty in favor of operational complexity and the vagaries of economically sensitive products. Its success--Valeant's stock has more than doubled in two years, compared to Forest, which is up only 25% in the same time frame -- is indicative of the climate in which pharma currently operates as it navigates patent cliffs, healthcare reform, and European market access hurdles. It may be an attractive way forward for mid-sized pharma right now but it is a bet on execution and opportunism over innovation and long-term commitment--currently hard-to-reach goals for an industry under siege.

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DOTW: It's Hot, Hot, Hot

There's nothing like a big deal to get the blood pumping, especially given the lassitude-inducing temperatures hitting most of the US. And just as journos were reminiscing about the good ol' days of hostile then friendly pharma-biotech tie-ups, Express Scripts and Medco deliver a deal with enough uncertainty to keep tongues wagging for months -- or at least until the FTC makes a ruling on whether the marriage merits its blessing.

Who knew pharmacy benefits could be so sexy?

As "The Pink Sheet", WSJ, Fortune, and other pubs have noted, anti-trust concerns are the primary question for investors. And given Medco's stock price mid-day July 22 -- shares were up 18% relative to the day before news of the tie-up broke but still well below Express Scripts' $71.36-a-share offer -- the market clearly believes this ain't a deal that will definitely get done.

Aside from the "Will they? Won't they?" questions tied to FTC, there are plenty of other uncertainties bubbling up (like apple pie fresh from the oven or hot asphalt on the Garden State Parkway). For starters, how will this deal impact drug companies and the kinds of rebates they need to offer to get their drugs covered by such a PBM behemoth? Ross Muken of Deutsche Bank estimates Express Scripts and Medco together process a whopping 35% of all US prescriptions and the WSJ's "Heard on the Street" column pegs the rebates both PBMs collected in 2010 at around $12 billion.

That's a lot of dough -- and could be a reason FTC will eye the merger sympathetically. Rebates after all get passed on to customers -- the employers and health plans who contract with the likes of Express Scripts and Medco to manage their pharmacy spend. Theoretically, the ability to negotiate better rebates means greater control over drug costs, one of the major factors tied to spiraling health care spend. Not surprisingly that was a message management from both PBMs played up in their joint conference call announcing the deal.

Of central interest to drug makers ought to be how a combined Express Scripts-Medco will negotiate rebates for specialty drugs like cancer medicines. Pharmas have doubled down on nichier areas because the high unmet medical need and grievous nature of diseases like cancer, lupus, and rheumatoid arthritis has -- at least historically -- offered tremendous pricing freedom. That's starting to change; the increasing number of oncologics for renal cell cancer, for instance, means payers can choose -- based on efficacy and cost -- which medicines to prioritize without being crucified for denying care. With so much profit stemming from specialty medicines, drug makers are sure to be wary about the negotiating power of an enlarged Express Scripts: more rebating to get coverage for their meds will definitely start to eat into profits.

We'll have more to say about the implications for specialty drug spend in the coming issue of "The Pink Sheet", even as we try to understand another key unknown: how will this merger impact personalized medicine initiatives already underway at both companies?

With integration plans likely focused on simply making this massive entity work logistically, how much energy will be devoted to the interesting (but admittedly not explicitly bottom-line focused) research efforts spearheaded by Felix Frueh and company at Medco Research Institute? Paradoxically any de-emphasis on those initiatives ought to give drug cos something to cheer about. Frueh's team after all has helped resurrect warfarin use and the group looks to be doing the same thing in RA with methotrexate.

With so many questions, it's no wonder debate about the deal has reached a fevered pitch. While we dig for answers, bide your time with a spin through biopharma's latest wheeling and dealing. It's ...

AMAG/Allos: Mergers of equals can be a hard sell to shareholders (remember Biogen and Idec?). Thus it's hardly surprising that Wall Street -- and pundits -- reacted quickly and skeptically to the proposed merger between AMAG and Allos, announced July 20. Execs from both companies argue the deal helps their one-product companies move into the black, and speeds growth, helping to overcome the disappointing launches of the iron deficiency therapy Feraheme (AMAG), and oncology drug Folotyn (Allos). The companies plan to combine their sales forces to sell both drugs, via a combined team of about 75 reps. In addition, the companies claim they can achieve cost synergies of between $55 million to $60 million, by cutting R&D and administrative overhead. Yet it's hard to see the synergies afforded by two very different products. Can the sames sales reps really detail both products given the lack of overlap? Folotyn, after all, is a high-priced drug aimed at specialist doctors and a small patient population, while Feraheme has a much broader patient population and prescriber base. Thus, analysts worry the proposed merger resulted because the companies lacked any better options. (It's a case of 1+1 not even equaling 2, let alone the 3 you'd want to get to justify the integration upheaval.) It will be interesting to see if shareholders get fired up about the merger in the coming weeks; it wouldn't be surprising if significant AMAG investors like Palo Alto Investors and Adage Capital Partners objected. These firms could just as easily argue a dividend is more likely to add value than the proposed merger. --Lisa LaMotta and EFL

Pfizer/Icagen: Pfizer announced July 20 plans to buy its partner Icagen, which develops sodium ion channel modifiers for pain, as part of efforts to bolster the big pharma's capabilities in this therapeutic area and expand its newly created Neusentis research unit. Under the terms of the deal, Pfizer will acquire the outstanding 8.3 million shares of Icagen it does not already own for $6 per share. The deal is valued at $56 million, including the 11% of Icagen Pfizer already owns, the firms said. Recall the two companies have been partners since 2007 when they entered into a collaboration for the discovery, development and commercialization of compounds that modify three sodium ion channels. Over the next two years, Pfizer invested $38 million upfront, including $15 million in equity and $11 million in R&D funding. Meantime, Pfizer clearly believes there is significant market potential in new pain meds; just months after CEO Ian Read announced a restructuring to refocus Pfizer around its innovative core, the drug maker established Neusentis in Cambridge, England to develop new therapies for pain, sensory disorders and regenerative medicines. Ruth McKernan, who heads the newly minted CNS group, told "The Pink Sheet" DAILY Pfizer was increasingly interested in potential new therapies targeting ion channels. Based on this, she claims a strategic partnership with Icagen "made more sense" than relegating the biotech to working on just one or two programs. --Jessica Merrill

Allergan/Vicept Therapeutics: Wasn't it only last week that J. Michael Pearson, CEO of Valeant, notched two acquisitions in his quest to build that specialty-focused, anti-R&D outfit into an dermatological power-house "bigger than anyone else's"? Looks like Allergan is going to give Valeant a run for its money. The maker of Botox has been building its medical dermatology portfolio, and the acquisition this week of privately-held Vicept Therapeutics aids this ambition, providing the bigger spec pharma with V-101, a Phase II daily topical cream to treat the redness associated with rosacea. Under the terms of the deal, Allergan has agreed to pay $75 million upfront plus another $200 million in regulatory and development milestones. Vicept investors are also eligible to receive undisclosed payments should certain sales milestones be reached. That's a tidy -- and quick -- exit for Vicept's backers, which include Sofinnova, Vivo Ventures, and Fidelity Biosciences. The VCs only staked Vicept two years ago with a $16 million Series A, meaning the upfront payment alone affords them a 4.6x step-up on their venture dollars. (Add in the known earn-outs and the theoretical return jumps to around 17x.) With the entrance of Valeant as a prime derm player, the number of potentially interested acquirers of products in this space continues to increase. Long-considered a pharmaceutical back water with innovation essentially meaning reformulation of existing medicines into topicals, dermatology is enjoying a renaissance. Who knows? With a few more exits like Vicept's, this particular TA could have VCs crooning "I've got you under my skin."--EFL

BMS/Amira: The latest addition to Bristol-Myers Squibb’s pipeline-refreshing “string of pearls” strategy is Amira Pharmaceuticals, which BMS acquired July 21 for $325 million up-front. The deal, which could bring in another $150 million in milestone payments, centers on Amira’s fibrotic disease holdings, including idiopathic pulmonary fibrosis and scleroderma treatment AM152. Scheduled to enter Phase II later this year, the drug is one of several racing to become the first approved IPF treatment in the US. BMS also gets Amira’s autotaxin program, which has shown preclinical promise in neuropathic pain and cancer metastases. The acquisition represents a strong exit for Amira stakeholders including Avalon Ventures, Prospect Venture Partners, Versant Ventures and Novo Ventures, which have supplied Amira with $28 million in two rounds since 2005. The deal doesn’t cover certain Amira assets which will be spun out, however; a new LLC shell company has been organized to collect ongoing revenues from an existing partnership with GSK around a Phase II asthma treatment, and another has been set up for its unpartnered asthma and COPD programs, which Avalon’s Kevin Kinsella said are likely to be sold. BMS will retain San Diego-based Amira’s key scientific staff following the deal. – Paul Bonanos

Image courtesy of flickrer Lori Greig via a creative commons license.

Deals of the Week: Liberté, égalité, fraternité

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

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

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

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

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

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

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

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

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

Public domain image from Wikimedia Commons.