DOTW Is Enlightened In The New Way Of Doing Deals

Enlight Biosciences announced on August 2 that KNODE had entered into a “strategic partnership with AstraZeneca PLC and other industry and academic partners.” Now what you first need to understand about this is that KNODE is not a line of furniture from IKEA (that bin you're looking for is KNODD). Nor are Enlight’s other portfolio companies – Entrega  or Endra.

Rather, KNODE is a company incubated by Enlight and recently emerged from stealth mode; and it is also the name of KNODE’s soon-to-launch web-hosted platform for connecting R&D workers with the information sources and expert individuals needed to form teams and to advance their research. According to the KNODE website, it’s a tool for convening experts in collaborations or projects, for identifying tech licensing collaborators, and for accessing up-to-date information to optimize decision making. According to Baruch Harris, Enlight’s chief business officer, KNODE is also a professional network consisting of R&D scientists – a network turbocharged by KNODE’s proprietary semantic and topic extraction algorithms. Its tagline is “It’s not who you know, it’s who you should know.”

Enlight is a company created by PureTech Ventures in 2008 to address the dearth in financing of early stage technology ideas. Enlight’s members, senior R&D managers at big pharma and big biotech, share challenges, expertise and experiences with the goals of (1) identifying unmet needs in R&D and (2) sourcing solutions. Enlight facilitates the process, and when a potential technology is spotted, proposes to its members that they launch a company to commercialize it. As such, unlike an advisory firm that brings investment grade ideas to its clients, Enlight flips the process, so that its pharma members – the ultimate end users – specify their needs and Enlight tailors a solution.

It’s a novel take on pre-competitive collaboration, but with a commercial twist. The companies that Enlight mints are pushed out into the market place to sell their wares to all comers. Enlight members can chose to invest in the portfolio companies and to partake in the potential upside. Take KNODE for example: AstraZeneca, an Enlight member, invested in the idea and is apparently involved enough to partner with other (unnamed) Enlight members and academic institutions to harvest all their expert knowledge and contacts and so develop the IT platform to the point where it can be launched.

Harris says the platform, currently in “private beta,” will be launched late in 2012. He spoke of a “freemium” pricing model. “Our plan is to make the basic functionality broadly available later this year. But there’s also an enterprise price model, for example, for big pharma companies, where they can have some customization built in. Also, they would give KNODE access to their own internal, proprietary information that probably wouldn’t be available to the outside world. And then, for the version that is available to the outside world, there would be value-added tools layered on top that you would have to pay for.” The enterprise value-added version is planned for an early 2013 launch.

We asked Harris if Enlight had plans to crowdsource the information – about what life science researchers are working on and thinking about – that resides in KNODE, and to use it internally or even to sell it.  "We will be crowdsourcing, not private data from our pharmas, but - on an opt-in basis - people claiming their profiles, editing info, and chiming in on the expertise of their peers and colleagues," he said.

He also said that “capturing the information of our strategic partners is not the first priority for us and respecting privacy and private information is paramount.” Harris adds that KNODE is quite useful for “identifying emerging areas of expertise that people are starting to think are relevant” and that “we’re interested in building profiles and following user behavior, but mainly with the goal of improving the product.”

If the deal aspect in all this seems elusive, here’s how it works: investing members in Enlight’s latest company, KNODE, are collaborating with KNODE to develop and launch the newco’s expert network platform (also called KNODE). Basically, the investors are “collaborating” with their investment.

What’s the payoff? KNODE will sell its platform to all comers. Enlight makes money (it has an equity interest in the newco), KNODE and its investors (Enlight members) make money, and surely PureTech dips its beak along the way.

Ka-ching. It’s the new way of doing deals, brought to you by...

Adimab/Mersana: Two leaders in the antibody drug discovery space have teamed up to build and sell an integrated antibody-drug conjugate (ADC) platform. Antibody discovery firm Admiab and ADC developer Mersana Therapeutics announced a partnership Aug. 1 to offer pharmaceutical manufacturers access to Adimab’s antibodies optimized for use in ADCs made with Mersana’s Fleximer polymer and customizable linkers. Adimab is one of the industry’s leading antibody discovery companies, with a fleet of partners including Eli Lilly & Co., Merck & Co., Pfizer and Genentech. Meanwhile, Mersana’s Fleximer is a novel, biodegradable and bio-inert polymer that can be linked to small or large molecules to enhance their pharmacokinetic and safety profiles. Using Fleximer, Mersana says it can develop ADCs that have advantages over existing ADCs like Seattle Genetics Adcetris and Roche’s trastuzumab-DM1. Mersana announced a $27 million recapitalization July 31, led by new investor NEA, joined by new investor Pfizer, and with participation from existing investors Fidelity Biosciences, ProQuest Investments, Rho Ventures and Harris and Harris Group. NEA's David Mott is the company's new chairman. -- Jessica Merrill

Merck Serono/Prexton: Surprise, Prexton's not a thoroughly modern name your neighbor gave to his newborn son. Actually it might be. But it's also the name given to Merck Serono's latest offspring, the Parkinson's disease-focused spin-out announced July 30. (Go on, send them a Pottery Barn Kids monogrammed seat.) Prexton emerges as the first entity from Merck KGAA's ongoing restructuring with a €2.1 million seed investment from Merck Serono’s Entrepreneur Partnership Program (EPP) and a remit to discover and develop drugs that target the metabotropic glutamate receptors mGluR3 and mGluR4. Prexton will work with preclinical compounds discovered at Merck Serono, says founder and CEO Francois Conquet, who estimated the company will start out about 18 months away from entering clinical development. Prexton hasn't had to go far to find shelter; it's currently setting up shop in the Geneva-based incubator Eclosion, which coincidentally shares an address with another mGluR specialist, Addex Pharmaceuticals (which Conquet co-founded a decade ago and which, it seems to us, would have been a logical home for those mGluR assets). Expect a Series A from the new biotech late next year, says Conquet. -- Joseph Haas & Chris Morrison

Idenix/Novartis: Idenix Pharmaceuticals and Novartis, after nearly a ten year relationship, have all but cut ties. Idenix management announced the changes to the agreement with Novartis on July 31, hosting a conference call with investors to clarify the situation. Under the new terms of the partnership, Novartis has given up all rights to license or develop any of the current or future development-stage drugs in the Idenix pipeline, including three hepatitis C (HCV) drugs currently being tested. Previously, Novartis had the first right to refusal to any of the drugs in the Idenix pipeline that had shown clear safety and efficacy in proof-of-concept trials. According to the original agreement, which was established in 2003, Novartis gained a 54% stake in Idenix for $255 million in cash, as well as the rights to the hepatitis B treatment Tyzeka/Sebivo (telbivudine), and two seats on the Idenix board of directors. Under the restructured agreement, Novartis will relinquish its corporate governance rights and reduce its board seats to just one as long as it retains at least a 15% ownership stake. Idenix will no longer receive any more royalty or milestone payments related to Tyzeka/Sebivo. Idenix also will be obligated to pay Novartis a royalty on any HCV drugs that are not used in combination with a Novartis drug. The restructured partnering agreement gives Idenix more flexibility with partnering discussions for its hepatitis C compounds, but may make other potential partners wary that Novartis didn’t jump on the opportunity. After a blow-up of Bristol-Myers nuc development program due to safety issues, Idenix may appear more attractive to potential partners.-- Lisa LaMotta

image from flickr user John K via creative commons

Deals of the Week Notes the Holiday Generosity

(Click for larger)

This week's Reata/Abbott deal with the monster upfront (as opposed to last year's Reata/Abbott deal with the monster upfront) got us thinking about the vague notion we get around this time each year: that up-front payments tend to get larger after the leaves have fallen off the trees.

Do buyers really get into the holiday spirit, or have we just had too much of a different sort of spirit to keep us warm? This year it seemed simple enough to dig up the data in Strategic Transactions, and so we have.

Above you can see that upfront payments really have trended upward (at least according to Excel's trendline tool). To create this chart and trendline it's important to note we didn't include every biopharma alliance. Rather we used our favorite dataset: alliances/licensing deals where the licensing partner or senior alliance partner was a commercial-stage pharma or biotech company (so that's Big Pharma, Big Biotech, the large Japanese and European players, and revenue generating specialty pharma companies of all stripes), and where we know the up-front payment. The data charted above ranges from 2007 through this week, and comprises 329 datapoints.

UPDATE: See below for Median (blue) and Mean (red) charted by month.

(Click for larger)

If the Reata deal described below does skew the results, it's only by the tiniest smidgen. And -- we went back and checked! -- looking at each year on its own, this upward trend is the case for every year individually, since 2007, even the years when Abbott doesn't throw down a multi-hundred million up-front. Some years the trend is more pronounced than others, but each year it's pointing in the same direction.

So what to make of this fourth quarter generosity? It probably has something to do with buyers wanting to get deals done under the year-end budget wire. Or maybe it's a holiday miracle. Also miraculous? 2011's penultimate ...

Abbott/Reata: Another financial record in biopharmaceutical deal-making tumbled as Abbott Laboratories Inc. agreed Dec. 12 to pay Reata Pharmaceuticals Inc. $400 million upfront in exchange for a worldwide license to co-develop and co-commercialize the biotech’s preclinical antioxidant inflammation modulator (AIM) compounds. Reata has discovered and developed AIM compounds to treat central nervous system, respiratory and autoimmune diseases. The previous recorded high amount paid upfront for a preclinical biopharmaceutical asset was Celgene Corp.’s 2010 deal with Agios Pharmaceuticals Inc., in which Celgene paid $130 million upfront for a three-year exclusive option on Agios’ cancer candidates based on “metabolic rewiring." With Reata’s upfront take more than tripling the previous record, recent weeks also have seen deals in which Gilead paid the highest buyout fee for a clinical-stage biotech in its $11 billion tender for Pharmasset, while Janssen Biotech NV paid the largest single-asset upfront this year less than a week ago for the right to co-develop Pharmacyclics’s Phase II hematological cancer candidate PCI-32765. Reata is extending an existing relationship with Abbott, which previously filled its coffers in a 2010 licensing agreement for bardoxolone methyl, considered to offer the potential to become the first treatment to reverse the progression of chronic kidney disease. Reata is funding Phase III development of bardoxolone under its partnership with Abbott, but the big pharma will play a much larger development role in the AIM programs. The global agreement covers a broad range of molecules in several therapeutic areas, with the two companies slated to split development and commercialization costs, as well as profits, equally, except for rheumatoid arthritis and other autoimmune indications. In those categories, Abbott will cover 70% of costs and also take 70% of any profits.—Joseph Haas

Bristol-Myers Squibb/Simcere: Bristol-Myers Squibb Co. and Simcere Pharmaceutical Group have inked a second collaboration to develop a BMS drug candidate in China. The companies said on Dec. 13 that they will co-develop the CETP (cholesteryl ester transfer protein) inhibitor BMS-795311, with Simcere holding exclusive development and commercialization rights in China. Simcere will pay all development costs. The arrangement in essence is an out-licensing deal involving a drug candidate that BMS stopped working on in preclinical development because of “portfolio reasons,” although it “continues to believe in the scientific promise of the compound.” At least three multinationals have CETP inhibitors already in clinical development in Western markets, making BMS a late-comer. Moreover, the class was notoriously set back by Pfizer’s catastrophic experience with torcetrapib, which dramatically increased the rate of cardiovascular events in a Phase III trial. Nevertheless, initiating development in China could be a good option for a high risk project because of the lower trial costs and the country’s large, treatment-naïve population. Simcere is becoming the go-to local company for MNCs. BMS and Simcere say the business model is similar to a deal they signed in Nov. 2010. That deal involves the preclinical MET-VEGFR-2 inhibitor GMS-817378. Under that deal, Simcere is responsible for obtaining clinical trial approval in China and conducting those trials through proof-of-concept Phase IIa. BMS’ involvement with the drug in later stage trials is yet to be determined. –Dan Poppy

Intarcia/Quintiles: Diabetes treatment developer Intarcia Therapeutics says a pharma partnership is imminent for its implantable pumps that deliver the GLP-1 analog exenatide. But first, Intarcia has worked out a deal with Quintiles, the world’s largest contract research organization, to conduct six Phase III trials on its product. Specific financial terms weren’t released, but Quintiles revealed that it made two simultaneous investments in privately-held Intarcia. One is non-dilutive, designed to bring returns as the product, ITCA-650, reaches unspecified milestones. Quintiles also took an equity stake, although finance group global VP Chip Gillooly said that investment was smaller than the product investment. Intarcia CEO Kurt Graves said the company is in late-stage discussions with two “finalist” pharma partners, with the aim of retaining 50% of U.S. rights. Negotiating both a CRO deal and a pharma partnership simultaneously saves several months’ worth of time on ITCA-650’s development clock, he added. The devices, which can be implanted for up to a year, delivers a controlled-release formulation of exenatide, the compound in Amylin’s Byetta and Bydureon that’s known for regulating insulin and glucagon production in the pancreas. Graves said that Amylin has no composition-of-matter patent on the drug, leading Intarcia to believe it has freedom to sell the drug in another form. – Paul Bonanos

Enlight Biosciences/ AstraZeneca and Enlight/ Novo Nordisk: Enlight Biosciences announced on Dec. 15 the identities of its two newest partners: AstraZeneca, and Novo Nordisk. The Pink Sheet previously wrote about the formation of the partnerships, but at the time, Enlight could not reveal the companies’ identities. Terms were not disclosed, but the deals give each drug company an opportunity to participate in Enlight's novel business structure in which pharma companies collaborate at a pre-competitive stage to exchange ideas about unmet medical needs, contribute to the evaluation of technology solutions, and select and guide early development of novel technologies, with opportunities to make investments in commercialization. To fund these endeavors, each pharma “member” pays an upfront fee (the figure for its first six members was $13 million, according to its website). Once an opportunity is identified, Enlight proposes an idea for launching a start up company around the technology and members have the option to invest at varying levels. They will, in exchange, have opportunities to participate in any returns that accrue. So far, Enlight has launched two companies, Endra (molecular imaging) and Entrega (oral delivery of proteins). For AstraZeneca, and its biologics arm, MedImmune, it’s an opportunity to collaborate with peers and contribute to development of novel tools, the company said in a statement. Novo Nordisk expects to apply its expertise in protein engineering and expression, formulation and delivery to bring new therapies to market. – Michael Goodman.

Eli Lilly/TransPharma: In a "No Deal" signaling just how tempting - and how hard - it is to improve osteoporosis treatment, Eli Lilly & Co. has dropped its options and licensing agreement with Israel’s TransPharma for a transdermal patch formulation of Forteo (teriparatide), Lilly's well-established injectable parathyroid hormone analogue. The companies formed the collaboration in June 2008, when Lilly committed $35 million upfront to development of TransPharma's ViaDor-PTH1-34, a then-Phase II-ready patch-formulation of teriparatide. The Big Pharma chose not to pursue its option on the product after the drug failed to meet its primary endpoint in a Phase II trial, despite showing strong efficacy and safety results in a Phase Ib trial. Forteo has a niche in osteoporosis, for difficult to treat cases, because it is the only drug on the market with bone building properties, despite a black box warnings. But its sales -- $830 million in 2010 -- are flattening. The race to create a more convenient version of Forteo is hotly contested, with California-based Zosano Pharma Inc. also competing to get transdermal delivery systems for PTH approved. Lilly is also developing a nasal spray version of the drug. Zosano recently secured an Asian partner to market their drug and is preparing for a phase III trial. Both companies have planned to seek shortcut approval via the 505(b)(2) pathway, so the distinctions between their technologies – and how well they work-- will be crucial in the long run. -- Lisa LaMotta, Malorye Branca.

Actelion/ Trophos: Lilly isn’t the only company to pass on an option this week; Swiss biotech Actelion Pharmaceuticals Ltd. decided not to exercise its option to acquire privately held Trophos SA, after the French company reported Dec. 13 that its lead compound, olesoxime, had not reached its primary endpoint in a Phase III study in amyotrophic lateral sclerosis, better known as Lou Gehrig's disease. Actelion and Trophos paired up in 2010, providing Trophos with a $13 million upfront and Actelion with the option to buy the company for $163 million. --John Davis

Takeda/Affymax: And Takeda Pharmaceutical made a no-go decision on a regional deal, by deciding to pass up on the opportunity to market partner Affymax's anemia drug Hematide, in Japan. The companies are partnered elsewhere in the world, including in Europe and the United States. Takeda said in a statement that the drug was not a good fit for its strategy in Japan, although it has survived most of the final-phase trials there. The partners plan to explore other options for the drug in Japan. --Wendy Diller