Once You Start Up Financings of the Fortnight, It'll Never Stop

Your faithful FOTF correspondent is in San Diego this week for the CalBIO conference, specifically to wax journalistic on a panel trying to look into the future – 2030! -- and opine sagely upon what we see. Some call this prediction; others call this pulling objects out of one’s nether regions, which thankfully doesn't require the Jagger-like calisthenics seen at the start of this week's video flashback.

What we can predict with near certainty is that the upcoming issue of Start-Up, arriving soon in print or electronic edition according to your subscription preference, will be full of timely topics. We’ll go inside Third Rock Ventures, which has raised more than $1 billion since 2007 to invest solely in early stage biotech. And not just invest; Third Rock creates many of its own companies, then puts its own partners into temporary executive roles in those companies once they launch.

Is it working? Hard to say yes, definitively, until they start truly reaping what they’ve sown. (Only two exits so far.) But Third Rock has a 28% stake in one of the companies in the IPO queue, bluebird bio, and a 24% stake in Agios Pharmaceuticals, which filed its S-1 a few days ago. More might be coming this year. LPs have enthusiastically bought into the Third Rock promise, that's for sure. But that’s not to say the group hasn’t hit snags or that there aren't adjustments to make. (You'll have to read Start-Up to find out what those are.)

Third Rock’s not the only VC growing their own. Flagship Ventures has been at it twice as long, in fact, and about five years ago – right around the time Third Rock rolled into town – it decided to put a brand on its in-house start-up brewery: VentureLabs. They’ve been busy lately, with big – dare we say “Third Rock-like”? – Series A rounds to launch two high-concept start-ups, Moderna Therapeutics and Syros Pharmaceuticals. The new Start-Up will also look at the early days of Moderna, and how the Flagship/VentureLabs folks helped push what was at first an advancement in the induced pluripotency of stem cells toward a new therapeutic modality that, despite many question marks, almost immediately attracted a major Pharma partnership and nearly a quarter of a billion dollars guaranteed.

If bluebird or Agios goes public, it will be Third Rock’s first IPO, but Flagship’s been around the block many times. In the current window, it’s already notched two IPOs since the start of 2012 – Receptos and Tetraphase Pharmaceuticals – and it owns 16% of Agios. Others have ushered even more biotechs public in the same time frame: As we note in the next Start-Up, New Enterprise Associates and funds associated with Fidelity top the charts with five IPOs apiece.

But as our colleague Stacy Lawrence reports, there’s been no rush to exit: Among all major shareholders (those with 5% stakes or higher)  that went through IPOs in 2012, less than one third have reduced their holdings. Thirty of 43 have held tight or increased their shares, often in the IPO as part of an agreement to get the deal done.

Just published in "The Pink Sheet" DAILY, Stacy also talks to several VCs about what seems to be a reinvigorated IPO appetite for early-stage biotechs – a good sign indeed for the likes of Third Rock and Flagship. And what of the growing number of early-stage biotechs with corporate investors providing the backbone of support? Once quite rare, we’re now seeing new companies out of the gate mainly backed by corporates, such as Protagonist Therapeutics, whose JJDC-led Series B we describe below. Another, ArmaGen Technologies, caught our attention when it made Start-Up’s 2012 A-List for its intriguing receptor-mediated technology that draws therapeutics through the blood brain barrier, and for its unusual Series A syndicate: Four corporate investors splitting evenly a $17 million round. Our colleague Paul Bonanos was even more curious, and in the story he’s penned for -- you guessed it -- the new Start-Up, he noted this telling quote from one of ArmaGen’s backers: “When you take away the worry about losing your money, great opportunities arise.”

In essence, at least a couple of ArmaGen’s investors consider exposure to the company’s technology just as important, if not more, than their financial return. Outlooks like that among corporate investors should make for very interesting strategy discussions when it comes time to ready a company for sale or for a public debut. Then again, not all corporate VCs embrace strategic return more than financial return. (For a rather brusque counterpoint, see this story about Novartis Venture Funds and chief Reinhard Ambros' decision to drop its strategy-oriented option fund: "Strategic means you pay money for something intangible, and you waste money.")

If we don’t get to the blurbs soon, this column will go past the point of no return. So let’s sum up: If you like the topics of conversation here at FOTF, you should love Start-Up, perhaps even enough to subscribe. That ends our shameless plug; now back to our shameless prose, often referred to as...

Avaxia Biologics: The therapeutic antibody firm topped off its Series B round with an undisclosed amount of cash from the venture arm of AbbVie, bringing the round to $11.4 million. It’s a fascinating case for several reasons. First, Avaxia’s lead product, an oral TNF inhibitor currently in a Phase Ib study in irritable bowel syndrome patients, goes after the same target as AbbVie’s superblockbuster Humira (adilimumab). That might lead one to believe AbbVie wants a closer look at what could make a potential replacement for Humira. But that outcome would be a rare occurrence, indeed. According to our Strategic Transactions data, from 2006 to 2011 only two private companies backed by corporate venture funds were eventually bought by the funds’ parents: Avid Radiopharmaceuticals (bought by Eli Lilly) and Avidia (Amgen). AbbVie does not gain any rights to Avaxia’s lead, AVX-470, or other products, but it does take a board seat. Another reason this is one to watch is Avaxia’s antibodies. They’re not monoclonal, like Humira and so many other key biotech products. They’re polyclonal, essentially a gemisch of antibodies strained from cow’s milk, and therefore quite capable of surviving a trip into the gut. Avaxia comes along just as a few companies, led by Symphogen, are dipping a toe into the possibility of antibody combinations. But those combinations are made from monoclonals, not polyclonals. Other than serum products, it’s hard to find precedent to what Avaxia is aiming for. Just as notable is how far Avaxia has gotten with its platform, funded to this point by angel investors. Its A and B rounds, totaling nearly $10 million before the AbbVie add-on, were led by angel groups. – Lisa LaMotta and Alex Lash

Clovis Oncology: Clovis took advantage of a strong clinical data release with a public offering that brought in $240 million, the third largest secondary offering of the year behind Onyx Pharmaceuticals and Ariad Pharmaceuticals. The firm is the best performer from the biotech IPO class of 2011, with a 445% gain as of June 13, thanks in large part to a mighty ASCO bump – that is, data it presented at the recent American Society of Clinical Oncology conference that took Clovis’ share price from $36.56 to $74.59 in one weekend. The company reported Phase I/II efficacy data for its non-small cell lung cancer drug CO-1686 in patients with the T790M mutation, which confers resistance to current treatments. Clovis has done well with its strategy of in-licensing candidates and companion diagnostics; it brought in CO-1686 from Avila Therapeutics in 2010, then partnered with Roche to develop a test for the T790M mutation a year later.  Clovis’ recent run-up also benefited from positive initial data at ASCO for its drug rucaparib in ovarian cancer. Rucaparib is an oral poly (ADP-ribose) polymerase (PARP) inhibitor that Clovis licensed from Pfizer in 2011, and subsequently partnered with Foundation Medicine to create a companion test to find patients most likely to respond to the compound. -- A.L.

Protagonist Therapeutics: The peptide development firm said June 4 it has raised a $14 million Series B round, led by Johnson & Johnson Development Corp. JJDC joined Series A investors Lilly Ventures and Australian firm Starfish Ventures. Protagonist spun out of the University of Queensland’s Institute of Molecular Biosciences and, while headquartered in the San Francisco suburb of Menlo Park, Calif., it maintains discovery operations in the Queensland capital of Brisbane. It’s the latest example of early-stage biotechs drawing most or all of their venture funding from corporate-affiliated funds, which are helping fill the gap left by traditional venture moving their limited resources toward the later stages. Protagonist says it has developed a platform to identify disulfide rich peptides, a more stable version of a molecule that has limited therapeutic availability. Also called constrained or stapled peptides, the area is looking to Aileron Therapeutics, which recently completed the first clinical trial of a stapled peptide and answered some questions about the compound’s ability to remain stable in vivo and avoid safety concerns. The preclinical Protagonist has signed deals with Zealand Pharma and Ironwood Pharmaceuticals; one of the firm’s pursuits is the development of orally-active therapeutics for inflammatory bowel diseases. -- A.L.

Dermira: The firm developing treatments for acne and other skin disorders said June 11 it has raised a $35 million Series B financing to move into a Phase I/II trial its lead program, lemuteprofin, a photodynamic acne therapy, and two preclinical programs. Dermira’s Series A investors Canaan Partners, New Enterprise Associates and Bay City Capital all re-upped and were joined in the round by Maruho, a 100-year-old Japanese firm that specializes in dermatology and typically keeps a low deal profile. Dermira has now raised more than $70 million in venture funding; its $42 million A round helped it purchase Valocor Therapeutics, at the time the owner of lemuteprofin after its spinout from failed Canadian biotech QLT. -- A.L.

All The Rest: To fund work on Phase II AKB6548 for anemia associated with CKD, Akebia Therapeutics raised $41M in Series C financing…ResearchGate, which is developing a platform to share and search for scientific data online, closed a $35M Series C…Edge Therapeutics collected $18M in Series C funds to support Phase II of EG1962 in preventing delayed cerebral ischemia…Prism Pharma, which has a lead compound for fibrosis, completed a $15M Series C…GSK spin-off Autifony Therapeutics topped up its Series A with an additional £5.5M from Pfizer Venture Investments and International Biotechnology Trust…in addition to adding Janssen as a new partner, Second Genome completed a second tranche on its Series A, which now totals $11.5M…concurrent with a $2.3M grant from the Norwegian Research Council's BIA-Program, Targovax raised $1.4M in equity…Arcturus Therapeutics, focusing on RNAi for rare diseases, closed a $1.3M seed round…Baxter Ventures came in as a new backer for Ocular Therapeutix…ARCA biopharma publicly sold $20M in Series A convertible preferred shares…StemCells received the right to sell Lincoln Park Capital Fund up to $30M in common shares…Oncothyreon raised $10M in an RDO to fund up-front payment in Array BioPharma co-promote…an undisclosed health care fund bought $9.8M in Celsion’s common stock…BioTime grossed $9.1M through a PIPE…epigenetics company Epizyme grossed $77M in its IPO…PeptiDream floated on the Tokyo Stock Exchange, raising $52M…Israeli firm Kamada completed a $52M IPO in the US…Kadimastem, which commercializes pluripotent stem cell-derived products, raised $5.5M in an IPO on TASE…Heat Biologics, PTC Therapeutics, bluebird bio, and Esperion all set terms for their IPOs…stem cell producer Cellular Dynamics International and Agios Pharmaceuticals, which is targeting inborn errors of metabolism, filed for their IPOs…Array BioPharma offered $115M in convertible senior notes…and Anacor Pharmaceuticals received a $45M three-tranche loan facility from Hercules Technology. -- Amanda Micklus

Merck's $500 Million Venture Bet -- Industry's Latest and Largest Attempt to Get Closer to VCs

Today in the newly released September issue of IN VIVO we're reporting that Merck & Co., until recently one of the few large pharmaceutical companies seemingly disinterested in playing venture capitalist, is placing a significant corporate venture bet.

Two bets, actually. We told you a little about the first one -- The Global Health Innovation Fund -- back in March, but back then details were thin. And since the Spring that fund, set up to invest in non-pharmaceutical health care spaces, has doubled in size to $250 million (and it may yet grow some more). It's led by ex-J&Jer Bill Taranto and has a remit to invest capital in service-oriented businesses like home health as well as health IT, and other so-called 'adjacencies' where Merck may see itself as a future player. Internally the GHIF strategy is referred to as 'Pharma Plus'; so far it has made a handful of (undisclosed) investments.

Meanwhile Merck has been quietly shopping a second initiative to prospective venture partners. And here's where it gets very interesting.

The Merck Research Venture Fund, also staked with $250 million, is an effort to partner up with traditional VCs to gain access to innovative companies early on in their life-cycles. Merck plans to invest in a handful of funds as a strategic LP (in the US, in Europe, in China, and elsewhere), provide 'advice and guidance' from Merck scientists to those funds' portfolio companies, and hope it secures an inside track on those biotechs or their programs when they mature to the point that Merck's business development group can step in. So far Merck has teamed up with one (undisclosed) venture fund.

The initiative has echoes of Lilly's Mirror Portfolio, though Merck SVP and head of worldwide licensing and knowledge management David Nicholson avoids the explicit comparison and notes that Merck isn't routinely taking options on nor contributing assets to the biotechs in which it invests. As Merck may sometimes invest in a side-car structure it has also drawn comparisons to the MPM Capital-Novartis tie up and others like it.

All of these structures are part of industry's efforts to access innovation earlier on in the value chain, externalize increasingly large portions of their own R&D efforts, and pump money into a venture community that has served as the lifeblood of its future product opportunities.

Response to the MRVF among venture capitalists we talked to has varied from deep skepticism to reluctant acceptance. No doubt there are plenty of life sciences venture funds out there that could use Merck's money and see the idea of guidance from Merck scientists as a plus. But the idea, voiced by Nicholson, that Merck's involvement would fundamentally enable greater financial returns for the funds' other LPs was uniformly questioned.

Will the best entrepreneurs want Merck poking around in their companies? Will Merck's early involvement put off other potential pharma investors or acquirers? Does the value of Merck's involvement -- again it's just 'advice and guidance' -- outweigh the potential drawbacks?

The fact that its first venture partner prefers to remain anonymous, for now, suggests to some that the answer to this last question is no, at least for venture firms who have fundraising options. "Only the funds that need their money will accept it," said one VC we spoke with.

That was a fairly common sentiment, but one Nicholson shrugs off and one that is hard to measure. The success of the MRVF -- and indeed the GHIF and other pharmas' initiatives to get closer to venture firms and their portfolio companies -- can't be gauged for years.

Only when Merck starts signing deals with these now-fledgling biotechs -- or failing to do so -- will we know whether its $500 million was money well spent.

You can read the whole feature here. Or come see us at next week's Pharmaceutical Strategic Alliances meeting in New York where we'll be discussing the MRVF and pharma's other R&D experiments.

image courtesy flickr user spaceyjessie used under creative commons license.

No Biosimilars on The Horizon, Says Sanofi's Viehbacher

He was talking about biosimilar Lantus, of course, which is the company's most important drug.

During a Q&A session following Sanofi's Sept. 6 'strategy and outlook' seminar for investors, Chris Viehbacher said he didn't expect biosimilars to have "a significant impact on our performance" before 2015.

On one level, he may be justified in brushing off biosimilar insulin, given this is a high-volume, (relatively) low -price play that's unattractive to most competitors -- particular those lacking significant production capacity.

What's more, the insulin market is increasingly about pens and peripherals -- precisely what Sanofi is pushing as it shifts "from Lantus brand-management to Lantus-based solutions," as SVP Diabetes Pierre Chancel put it (and described in this 2010 IN VIVO feature). Hence Sanofi's focus on the SoloSTAR pen (which accounts for 40% of new Lantus scrips in the US), the BGStar glucose monitoring devices, and a forthcoming integrated device for Lantus dosing with a patient-driven titration algorithm.

Such strategies show how biopharma companies are evolving to think beyond the drug -- a topic that will be discussed on September 22 on stage at the Millennium Broadway hotel, the first day of Elsevier's 21st annual Pharmaceutical Strategic Alliances meeting. (And Sanofi will be well represented, with Dennis Urbaniak, Chancel's US deputy in diabetes, weighing in.)

Still, it would be wrong to dismiss biosimilar insulin entirely, however. Lilly has two basal insulins (including a copy of Lantus) starting Phase III this year -- and that's a company, like partner Boehringer Ingelheim, with nothing to lose, but a lot to gain, by entering the basal insulin game.

And certainly biosimilars more broadly remain as hot as they were pre-summer; indeed, the season's continuing economic woes make the prospect of cheaper biologics even more relevant. FDA expects to have its biosimilars guidance in place by the end of 2011, thus paving the way for the second-generation wave of biosimilars, including copies of Enbrel and Rituxan. (Better late than never, we say, although who knows where the user-fee debacle will end up)

Will these more complex biosimilars succeed commercially where many of their first-generation brethren thus far haven't? And will they be just cheap copies, or are innovator-cum-biosimilar players like Merck justified in calling them an entirely new 'proposition', representing 'value and quality', and supported by a well-known brand? And just how abbreviated is FDA's new biosimilars pathway anyway?

In case Urbaniak and other Sanofi execs responsible for Lantus are interested in the answers to such questions, they should stick around for the second day of PSA, which kicks off with a panel that's a veritable who's who of biosimilar experts. Not only will the discussion feature the biosimilars chiefs at Merck and Pfizer (Michael Kamarck and Diem Nguyen respectively), but add in Sandoz's Mark McCamish, FDA's Janice Soreth and Momenta's CMO James Roach and there will be insights into every facet of the biosimilar biz.

Indeed, the companies these panelists represent make up a big chunk of the competition that will determine whether the $50 billion biosimilars opportunity becomes a reality -- and whether Viehbacher's right not to be concerned.

See you there!

Image courtesy of flickrer Old Shoe Woman used with permission under a creative commons license.

Financings Of The Fortnight: Give Me An A

For START-UP's annual A-List (and effort, too).

Yeah, this blogger is well aware it's only July and that loyal readers have grown used to reading our annual analysis of biotech financing trends in January. But retailers big and small have long created a little marketing heat with post-Independence day sales. In that same spirit, surely IN VIVO Blog can take a quick peek at the health of early-stage biotech financings? Think of it as our version of Christmas in July. Or if you prefer, akin to the top-line clinical trial analysis drug companies do before releasing the final presser on a compound's efficacy.

Thus, midway through 2011 we pause to measure Series A commitments year-to-date, using the data as a metric for the health of VC investment in innovative new cos. How are we doing?

Much better than 2010, according to Elsevier Business Intelligence's Magic 8 ball, the Strategic Transactions database. Year to date, early stage biotechs have raised roughly $375 million in 24 Series A deals, with the average financing pulling in $15.6 million. And activity in June has been particularly robust, with announcements tied to rare disease plays UltraGenyx and Lotus Tissue Repair, and the computational drug discovery platform play, Nimbus (see below). Indeed, the Series A dollars announced in June alone total $129.8 million, about a third of the total raised so far in 2011.

It was, of course, hard to get much worse than 2010's stats. Last year, the total biopharma Series A dollars were a dismal $650 million with the number of Series A the lowest we've seen in at least five years. And when VCs were putting money to work, they were making smaller bets: the average biopharma Series A in 2010 was just $10.5 million.

The obvious uptick across three different metrics -- total Series A dollars, average raise, and number of deals (if the trend continues, we should see close to 50 Series As before 2011 closes out, well above the 42 observed in 2010) -- seems to suggest a renewed sense of optimism in the VC community. (Maybe all those dollars following tech start-ups like Zynga and LinkedIn will slosh into health care! Natch.)

In reality, the situation is more nuanced. For VC firms that have successfully raised money in the past couple of years (think Third Rock, OrbiMed, Essex Woodlands, and NEA among others), it's good times indeed. Lots of innovation needs funding and competition for deals has dropped as struggling firms baby existing portfolio companies. Indeed, according to a survey currently being conducted by START-UP (full results will be published in our September issue), 42% of VC respondents have a negative outlook about the future of venture (only 23% were positive). And, 100% of current respondents predict that three years from now the roster of VC firms will be shorter than it is today.

In other words, rising Series A averages and investment dollars don't change the fact that many believe the traditional biotech financing model doesn't work anymore. Time lines are too long and the returns are too poor for limited partners who back VCs. Thus, numerous venture groups are trying to avoid the zombie label by experimenting with new models, which all loosely comply with the single unifying theory for biotech company development know "capital efficiency".

Think Atlas's toe-dipping experiment with project-based financing or CMEA's new Velocity Development Corp. or willingly separating discovery from development ala Adimab/Arsanis & Versartis/Diartis.

The other strategy at play involves finding new ways to forge ties with the primary end buyer, pharma, a major topic at last week's BIO meeting in two separate finance-track panels. But how close is too close? Is syndicating with corporate venture a smart strategy? Do you really need multiple strategic investors in a syndicate to generate optimal returns? What about pharma as an LP? CMEA has clearly reconsidered the wisdom of having a big pharma as an LP, officially pulling out of Lilly's Mirror Fund, in what might be a danger sign for other pharmas considering similar experiments.

So many questions. (And for START-UP/IN VIVO subscribers, answers -- or at least data.) Until then, it's time for your biweekly bolus of biotech finance, brought to you by the letter A and the numbers 24 and 15.6.

Nimbus Discovery: In addition to the letter A, two other letters --L and C-- are critical to the success of Nimbus, a platform play seeded by Atlas Ventures in 2009 that aims to perfect computer-based drug discovery. The start-up has gone from stealth to acclaim in recent months, not just for its high profile investor, Bill Gates, but also for its limited liability company structure, which makes it possible for the biotech to return cash to its investors without taking a tax hit. As executives converged on the Washington Convention Center last week came news that Nimbus had pulled in a sizable $24 million Series A, with new investors SR One and Lilly Ventures helping lead the round. Between its recent financing and its effort to pull in multiple strategic investors, Nimbus has become the new case study for how certain VCs think nascent biotechs should be built. As we told you in this Start-Up piece, Nimbus differs from traditional discovery ventures in that it explictly aims to separate drug discovery and development tasks. The discovery efforts are kept in the platform LLC holding company, which acts as an umbrella over target- or molecule-specific C-corp subsidiaries. Thus, each time a candidate drug is licensed, that transaction is effectively an acquisition of a company, and includes just the IP and the particular data package associated with the relevant compound. Nimbus is currently focusing most of its efforts on two drug discovery programs targeting the proteins ACC, which may play a role in cancer and obesity, and IRAK4, inhibitors of which may be important in treating diffuse B cell lymphomas as well as inflammatory diseases like rheumatoid arthritis and gout. The new money is slated to go toward both programs.--EFL

Redwood Bioscience: The San Francisco Bay Area start-up said June 27 it's received an undisclosed amount of capital from Takeda Ventures (corporate venture!) to develop its chemical engineering platform for drug-conjugate development. The cash builds on Redwood's prior also-undisclosed infusion of cash from Mission Bay Capital, a new seed-stage venture firm that targets University of California spin-outs. Redwood is based on technology from the laboratory of Cal-Berkeley professor Carolyn Bertozzi, who last year was the first woman to win the Lemelson-MIT Prize. Redwood's "aldehyde tagging" allows site-specific modifications of proteins for drug conjugation or other functional enhancements. The funding news comes as antibody-drug conjugates (ADCs) are on the cusp of commercial relevance after three decades of work. Seattle Genetics is expected to win FDA approval for its Hodgkins lymphoma treatment Adcetris (brentuximab vedotin), which would earn bragging rights as the only ADC on the market. Outside the US and Canada, Millennium Pharmaceuticals, the oncology division of Takeda, owns rights to Adcetris. Also in late stage is T-DM1, a conjugated version of breast cancer treatment Herceptin that Roche's Genentech division is developing with technology from ImmunoGen. As we explained in this IN VIVO feature, Takeda's antibody researchers -- headquartered a few miles away from Redwood -- and many other drug developers are looking seriously at ADC technology now that Seattle and Genentech/ImmunoGen have paved the way with clinical validation. -- Alex Lash

Zafgen: This week the letter A has to also share the spotlight with the letter C, which in the case of Cambridge, MA-based Zafgen stands for capital. The start-up announced a $33 million Series C round July 7, led by returning investors Atlas Venture and Third Rock Ventures. The two venture capital firms, which also led a $14 million Series B in 2008, were joined in the round by a handful of unnamed individuals, Zafgen CEO Thomas Hughes said. Zafgen will use the funds to advance its MetAP2 inhibitor, ZGN-433, for severe obesity through Phase II, with new trials slated to begin next year. Last month, the biotech unveiled Phase Ib data showing that ‘433 yielded significant improvement in cardiovascular risk markers, such as LDL cholesterol levels and C-reactive protein levels. Hughes believes his candidate can succeed even though the obesity space is a littered with failures (including Vivus' Qnexa, Arena Pharmaceuticals' lorcaserin, and Orexigen Therapeutics' Contrave), because ‘433 is intended to provide significant benefit to severely obese patients, many of whom have co-morbidities such as diabetes or heart disease. The Phase II program will test ‘433 in patients with a body mass index of at least 35 plus a co-morbid condition or patients with BMI of 40 or above without a co-morbidity, Hughes said. The trial will treat patients for a minimum of 12 weeks, with endpoints of body weight, glycemic control (for participants with diabetes) and cardiovascular risk factors. Thus, since '433 will be studied in a patient population of greater medical need, Hughes argues it will offer a substantially better benefit-to-risk ratio than other previously tested drugs. Given the skyrocketing obesity numbers -- 38% of states now have obesity rates exceeding 25%-- if Zafgen's drug is safe and even mildly effective, it's pretty likely some pharma will pony up a fat check to own rights to the product. —Joseph Haas

Clovis Oncology: Maybe this week's FOTF should have been sponsored by the letters I, P, and O. Investors are waiting to see if Clovis can follow through with an initial public offering despite a lackluster IPO environment. The Boulder, CO.-based biotech filed an S-1 with the Securities and Exchange Commission on June 23 proposing an IPO of up to $149.5 million. The prospectus explains that the financing would go toward advancing its pipeline of oncology drugs through commercialization as well as adding to that pipeline through further in-licensing. (Remember the deal with Pfizer for the PARP inhibitor?) According to its prospectus, Clovis plans to differentiate its products by pairing them with companion diagnostic tests that will help determine the proper patient population, a strategy payers will be more likely to espouse. While Clovis’ intentions are good, and its founder Patrick Mahaffy has delivered in the past (he was CEO at Pharmion when it was bought by Celgene for $2.9 billion), the IPO strategy has been tough to execute over the last few years. There have been only 43 biotech companies that have successfully completed an IPO since the beginning of 2008 according to the Elsevier Strategic Transactions database; that includes 10 biotech IPOs so far in 2011 earning a total of $378.85 million. And many of the biotechs in the 2009 -2011 couldn't even get out without taking massive hair cuts, making it tough for venture backers to get an actual return.--Lisa LaMotta

Image courtesy of flickrer Peter E. Lee used with permission through a creative commons license.

DOTW: Save The Date

Miss the crowds? BIO’s just around the corner. This year there’s an added je ne sais quoi to the trade event as deal makers and execs converge on the regulatory swampland that is our nation’s capital. Amidst discussions of the state of the industry -- the strengthening IPO market (?), the venture financing climate, and the impact of both on deal making -- all eyes will be on FDA as it holds forth on Provenge and Avastin.

But while there’s no question BIO is a must-attend event, here at IN VIVO Blog, we’re admittedly biased in believing there’s another networking opportunity that is de rigueur for the industry’s top deal makers. That’s right: IN VIVO’s annual Pharmaceutical Strategic Alliances meeting, taking place September 22 and 23 in New York City at the Millennium Broadway Hotel.

Yes, we’re tooting our own horn, but once you’ve checked out our stellar line-up you’ll understand why. Key notes by Biogen Idec’s George Scangos and Bristol’s Lamberto Andreotti kick off the meeting. Then there’s an all-star discussion of biz dev on day 2 with help from Pfizer’s Kristen Peck, BMS’s Jeremy Levin, J&J’s Tom Heyman, Roche’s Joe McCracken, and Glaxo’s Ian Tomlinson.

You want deal making? We have it in spades. And not just at PSA. As we head into a summer time Friday, we bring you your weekly wrap up of the deal making headlines…

Boehringer Ingelheim/Zealand: Surprise! The Danish biotech Zealand pharma inked a deal this week for its Phase I-ready dual-acting GLP-1 and glucagon agonist for type 2 diabetes and obesity, ZP2929. But the partner, Boehringer Ingelheim, probably wasn’t the one folks expected given Zealand’s previous tie-up with Sanofi (the pharma formerly known as Sanofi-Aventis). This week’s deal, which includes a research collaboration, is worth €20 million in committed funding to the Danish biotech during 2011, and up to €41 million in the first two years. Zealand will conduct the first Phase I study with ZP2929, but Boehringer will pay for the research, development and commercialization of the compound, as well as any other additional GLP-1/glucagon agonists that eventually. Total biobucks for ZP2929, hailed by its inventors as a “next-generation GLP-1 agonist that improves on Byetta and Victoza, could reach €376 million. According to “The Pink Sheet” DAILY, Zealand, which raised nearly $60 million via the public markets in October 2010, had plenty of suitors for the compound. But with Zealand's most advanced compound, the GLP-1 agonist Lyxumia (lixisenatide) an increasingly important asset within partner Sanofi's diabetes pipeline, "we felt... it was better to diversify its partnership base," CEO David Solomon explained. Boehringer is a relative newcomer to diabetes, only unveiling its interest in the therapeutic area in 2008. Still it has moved rather quickly, and boasts a newly expanded late-stage pipeline thanks to the broad-ranging, risk-sharing deal it signing with Lilly in January of this year. As part of that tie-up, the two drug makers agreed to co-develop and co-commercialize up to five diabetes drugs, including Boehringer's DPP-4 compound Tradjenta (linagliptin), which FDA approved in May 2011, and a Phase III sodium-dependent glucose transporter-2 inhibitor. – EL

Vertex/Alios: Less than a month after FDA approval of its protease inhibitor for hepatitis C Incivek, Vertex Pharmaceuticals is looking to bolster its ability to offer potential combo therapies. Thus, it’s tie-up this week with Bay Area-based Alios Biopharma. The worldwide license to a pair of preclinical polymerase inhibitors, ALS-2200 and ALS-2158, is worth $60 million upfront to the privately-held Alios. In addition to the licensing agreement, the deal includes a research collaboration between the two companies: Vertex will provide undisclosed funding to Alios for discovery of additional polymerase inhibitors and retains an option on compounds unearthed via the collaboration. The bio-bucks owed Alios aren’t insignificant either: the biotech could earn up to $715 million in research and development milestones related to these two nucleotide analogs. Vertex has plans to move both molecules into Phase I trials during the fourth quarter of 2011. Longer-term, the big biotech intends to test the two molecules in varying combinations with telaprevir and VX-222, its Phase II non-nucleoside polymerase inhibitor, in an effort to find and develop an all-oral combo of drugs to treat HCV. Vertex said it expects to pay out $35 million in milestones this year, when both programs are scheduled to enter the clinic, but would not specify whether that also might cover other milestones to be met this year.—Joseph Haas

Sanofi/Audion: Sanofi has signed a two-year research agreement with Amsterdam-based Audion Therapeutics to discover and develop small molecule treatments for age-related hearing loss. Financial terms of the agreement weren’t disclosed, but Sanofi will have the option to license any compounds resulting from research done under the collaboration. Audion, a regenerative medicine play, aims to stave off deafness via developing compounds that protect and resurrect the inner ear hair cells, which are responsible for the amplification and transduction of sound waves to the auditory nervefor relay to the brain. As might be expected, Audion will work with Sanofi’s Aging unit, one of five new therapeutic strategic units established in the past year under the pharma’s revamped R&D model. Sanofi’s Early-to-Candidate Unit will also be involved. Paul August, U.S. head of the Early-to-Candidate unit, said his team aims to provide the Aging unit with a clinic-ready candidate by the end of the two-year collaboration. As this Start-Up feature noted, big pharma generally has stayed out of hearing loss, which has been dominated by med-tech firms providing hearing aids and, more recently, cochlear implants. Many venture capital firms and other investors see hearing loss as a potentially lucrative space, similar to ophthalmology, because of unmet medical need and demographic trends. The Sanofi/Audion tie-up is the first drug development partnership for hearing loss since Novartis licensed rights to a group of preclinical hearing loss and balance disorder programs from GenVec in exchange for a $5 million upfront payment and a $2 million equity investment last year.—JH

Pfizer/pSivida: Is Pfizer in or out of ophthalmology these days? This week’s amended deal between the big pharma behemoth and drug delivery play pSivida makes it clear Pfizer is willing to do what it must to protect its once daily glaucoma eye-drop Xalatan, which generated $1.75 billion in revenue in 2010 but lost key patent protection in March. Still, as Pfizer continues to redefine its innovative core (without, one hopes, experiencing a breach), it’s not so interested in ophtho that it wants to consider a broader deal with pSivida any longer. The Watertown, MA-biotech pSivida originally aligned with Pfizer in 2007 under a far-reaching deal that gave the big drug maker exclusive world-wide rights to its implant technology, as well as a 10% ownership stake. Under the revised agreement announced June 14, Pfizer will pay the biotech $2.3 million upfront for an option, which can be exercised at the end of Phase II, on an implant device that bathes the front of the eye with a sustained-release version of Xalatan. If Pfizer options the product, it will pay pSivida an additional $20 million and up to $146.5 million more in clinical and regulatory milestones. Despite Xalatan’s ability to effectively lower intra-ocular pressures without terribly onerous side-effects, compliance is a problem. (One main reason: Administering drops on a daily basis is a pain in the…er, eye.) As a result, there’s a lot of effort in the start-up community to develop implantable devices that improve adherence by obviating the need for daily administration. The 2007 deal revision provides significant potential upside for pSivida since it can now solicit partnerships with other drug makers. Among the most active deal makers in ophtho: Merck (which took out Inspire earlier this year), Novartis (via its Alcon group), Roche/Genentech, and of course specialty players like Allergan and Baush & Lomb. This wasn’t the only ophtho deal to be revised this week. On June 16 came news that Alcon was pulling out of its he collaboration with NovaBay, returning all rights to the first-in-class anti-infective Aganocide and back-up compounds. -- EL

Merck/Hanwha: Merck vaulted to the pole position in the race to bring a low-cost version of Pfizer and Amgen's rheumatoid arthritis blockbuster Enbrel to market this week, gaining rights to a late-stage biosimilar version of the biologic developed by South Korea's Hanwha Chemical. According to the June 13 partnership, Merck will develop and commercialize a biosimilar form of Enbrel, HD203, in all markets except Korea and Turkey, where Hanwha has retained marketing rights. In exchange, Hanwha receives an undisclosed upfront payment, and is eligible for milestones as well as tiered royalties on sales. Although financial terms of the deal were not disclosed in the official release, Hanwha Chemical spokesman Kwon HyukBum confirmed to PharmAsia News that the total potential cost of the collaboration to Merck is $720 million. Although Merck declined to confirm that figure, Merck BioVentures President Michael Kamarck said in an interview with “The Pink Sheet” DAILY that the deal is heavily back-end loaded. Nonetheless, the financial arrangement is "symbolic” of the huge opportunity for Enbrel biosimilars, he said. Merck has assembled a pipeline of biosimilar drugs since announcing the formation of Merck BioVentures in December 2008. Still, the company has revealed plans only for a couple of products, including a granulocyte colony-stimulating factor referencing Amgen's Neupogen and a pegylated version of Neulasta. Earlier plans to develop a biosimilar version of Amgen's Aranesp were scrapped in 2010, given emerging safety issues with the class. Merck continues to stand by its goal of having five biosimilars in Phase III by the end of 2012 and says it is mainly interested in harder-to-replicate monoclonal antibodies. – Peter Chang & Jessica Merrill

Deals of the Week's Thanksgiving Day Massacre (In 4-Part Harmony, Of Course)

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why I called the post Deals of the Week.

Now it all started four Thanksgivings ago; it was four years ago on Thanksgiving, when Chris Morrison and I started writin' a blog about deals, but not every day, just once a week. And writin' about deals once a week, you know it's a lot of work. (Hint. Hint.)

And there's a lot of garbage you gotta sift through, but we decided it would be a friendly gesture on behalf of readers. So we trolled around the Internet with our shovels and rakes and other implements of destruction (a.k.a. EBI's Strategic Transactions database) looking for deals to analyze. But then a big bad editor (also known as Officer Roger) said why are you doin' that? We are closed on Thanksgiving.

And we had never heard of a blog closed on Thanksgiving before (we don't get out much) so with tears in our eyes we drove off into the sunset looking for another place to dump our garbage -- I mean our deals.

We didn't find one. So we wrote our post anyway, went back and had a Thanksgiving Day that couldn't be beat, went to sleep, and didn't get up until the next morning when we got a call from Officer Roger... And it's been a recurring feature here at IVB ever since.

But fortunately, not another case of American blind justice since we always arrive at the truth of the matter and it doesn't even require 27 eight-by-ten color glossy pictures with circles and arrows and a paragraph on the back of each one.

In honor of the day, we hope you consider joining the IN VIVO Blog Movement. All you've got to do is walk into the office wherever you are, just walk in and say ,"You can get anything you want at IN VIVO Blog." And walk out.

You know if one person, just one person does it, they might think he's really sick and they won't take him... And can you, can you imagine fifty people a day, I said fifty people a day (okay, we'd really like 1000) walking in, quoting a line from IN VIVO Blog and walking out?

And friends, they might think its a movement. And that's what it is, the IN VIVO Blog Movement.

Remember Deals of the Week? (This is a post about Deals of the Week.)

Without further ado, we bring you this week's installment. Feel free to sing along in four-part harmony. With feeling. Cuz'...

You can get anything you want at IN VIVO Blog.
You can get anything you want at IN VIVO Blog.
Log right in, it's a click away.
Just a finger tap. You don't have to pay.
You can get anything you want at IN VIVO Blog. (Excepting Roger.)

Convergence/Selcia: Barely more than a month after it was spun out of GlaxoSmithKline, CNS-focused Convergence Pharmaceutical bagged its first drug discovery collaboration, with Essex, UK-based CRO Selcia Ltd. No financials were disclosed, but Convergence isn’t short of cash, having raised $35.4 million on inception in one of Europe’s largest A rounds. Run by CEO Clive Dix, of PowderMed fame, Convergence already has two clinical-stage assets and six earlier-stage programs targeting ion-channels involved in chronic pain. In this deal, the partners will hunt further molecules for chronic pain, with Convergence applying the ion channel biology, medicinal chemistry and preclinical development expertise it inherited from GSK, and Selcia contributing synthetic chemistry and chemistry support services. The collaboration shows that Convergence, like its parent GSK (and indeed many other Big Pharma), is willing to embrace others’ drug discovery approaches, and to tap into drug discovery resources and technology on a flexible basis.--Melanie Senior

Medtronic/Ardian: Back in the summer of 2008, Ardian sought out corporate investors to participate in the company’s targeted $30 million Series C financing, thinking some corporate oomph and expertise would help drive clinical testing of its Symplicity Catheter System, used for treating hypertension and related conditions. The following spring Medtronic led a $47 million round, acquiring 11% of the company in what was – and still is - a rare up round. Now, Medtronic is going all in, announcing that it will acquire the rest of Ardian for $800 million up front, setting a record purchase price for a medical device company that doesn’t have an FDA-approved device. (Medtronic topped the mark it set in 2009 with the $700 million of CoreValve Inc., a percutaneous heart valve company.) Medtronic also agreed to pay commercial milestones equal to the annual revenue growth through the end of Medtronic’s fiscal year 2015. Ardian’s system allows doctors to deliver radiofrequency energy to the renal sympathetic nerves surrounding the renal arteries. Decreasing conduction of these nerves is seen as a way of triggering the body’s own regulation mechanisms to lower blood pressure. For the past six months, Ardian has been releasing positive results from its ongoing clinical trials with the most recent bit of good news at the American Heart Association meeting this month.--Tom Salemi

Boehringer Ingelheim/f-star: Boehringer's R&D collaboration with f-star this week is yet more proof that the privately-held German drug maker is ramping up its large molecule capabilities. This is the fourth antibody deal Boehringer has done this year alone according to Elsevier's Strategic Transactions, building on collaborations with 4-Antibody, Micromet, and most recently MacroGenics. Financial terms of the latest transaction weren't disclosed, but f-star, a former Series A-list all-star that has pulled in more than $25 million in venture dollars, will receive an initial technology access fee, research-based funding, and of course the potential for downstream regulatory and commercial milestones. In return, f-star will use its modular antibody technology to develop novel therapeutics against up to seven targets nominated by Boehringer that span multiple therapeutic areas. Biobucks for each of the seven targets, to which BI of course holds worldwide rights, could total up to €180mm ($247mm), excluding royalties. (Prompting unintentionally hilarious headlines about the "$1.7 billion" deal.) f-star's technology allows it to introduce additional binding sites into antibodies or antibody fragments, engineering large molecules that can target multiple proteins in a single molecule. Note this isn't the first time BI has signed an alliance focused on antibody fragments (that honor goes to Ablynx back in 2007) or bi-specific antibodies (MacroGenics' DART technology competes with f-star). Such second-generation approaches are a means of circumventing established IP claims for successful traditional antibody therapeutics and may advantages over Mother Nature's molecules, as they are potentially easier to manufacture and can have greater tissue penetration.--EFL

GlaxoSmithKline/Dr. Reddy's: GlaxoSmithKline's deal with Dr. Reddy's for the big pharma's United States oral penicillin facility and product portfolio is an interesting spin on regional deal making. Under the terms of the agreement, GSK transfers ownership of its penicillin manufacturing site in Tennessee and U.S. rights to Augmentin and Amoxil brands to Dr. Reddy's for an undisclosed sum. That GSK would opt to sell out of the US penicillin market isn't too surprising. Back in 2008 the drug maker announced plans to lay off the 200+ workers employed at the 400,00-square-foot manufacturing site by fall 2009 in preparation for sale of the plant because of declining sales of Augmentin stateside as a result of generic competition. Thus, the deal makes everyone happy, allowing GSK to downsize in a market no longer deemed valuable, while still allowing the drug maker to preserve ownership RoW, where GSK sees the potential for growth via its branded generics strategy. Dr. Reddy's, meanwhile, has been angling to scale up its generics business in North America. Thus, this deal gives the India-based giant entree into the US penicillin-containing antibacterial segment and a physical footprint to boot.--EFL

Roche/Ligand: Around the same time Roche decided to close out its R&D work in RNA interference, the Swiss pharma also notified Ligand Pharmaceuticals that it was ending a partnership to develop RG7348 (formerly MB11362) for hepatitis C. This no-deal officially ends the circuitous relationship between La Jolla, Calif.-based Ligand and the Swiss pharma. The tie-up began in August 2008, when Roche paid $10 million upfront to initiate a two-year collaboration with Metabasis Therapeutics to apply the latter firm’s HepDirect platform to Roche’s lead nucleoside candidates for HCV. In June 2009, the two companies chose ‘7348, which had since advanced to Phase I, as their lead candidate, with Roche paying a $2 million milestone to the biotech. Fast-forward to October 2009, when Ligand bought out Metabasis, inheriting the HCV deal. Since Ligand/Metabasis, Roche has paid up another $6.5 million in milestones; for the bean counters in the audience, $2.7 million of that went to Metabasis shareholders who had received contingent value rights in the original sale. Ligand, which says it learned of Roche’s decision on Nov. 19, also completed a one-for-six reverse stock split that same day, reducing current outstanding shares of common stock from 117.7 million to 19.6 million. Despite the no-deal, Ligand still boasts partnerships a plenty, boasting of ongoing alliances with Pfizer, GlaxoSmithKline, Merck, and Bristol-Myers Squibb, among other.—Joseph Haas

HAPPY THANKSGIVING FROM IVB!

PharmAsiaSummit: Emerging Markets Are Growth, Growth, Growth, But Where's The Beef?

Windhover's PharmAsiaSummit is October 25-26 in San Francisco. For a more information and a complete PharmAsiaSummit agenda, visit our website or email Josh Berlin to learn more. We hope to see you in San Francisco. What follows is an advertisement for the meeting.

A recent forecast by IMS Health demonstrates much of what we've been hearing in emerging markets over the last several years. The market research firm forecasts 15-17% growth next year in the 17 countries designated as "pharmerging" markets, which includes the usual suspects (the BRIC countries), as well as fast followers ranging from Turkey to Indonesia to Mexico.

To be sure it's off a smaller base, but the base is growing, and next year IMS predicts revenue will reach $170-$180 billion. In other words, it isn't peanuts.

In 2011, pharmerging markets will equal roughly half the size of the US market ($320-$330 billion), which will grow at a comparatively paltry 3-5%, IMS says.

China, of course, is the Big Kahuna, with a pharma market set to reach $50 billion next year, making it the third largest. With a growth rate of 25-27% - fueled by demographics (a rapidly aging population and urbanization, for instance) and a massive government push to extend basic health insurance to China's 1.3 billion population - it is no wonder that IMS recently raised China to its own tier as part of its analysis, essentially separating the C from the BRI.

Although much of the growth will come from local manufacturers selling branded generics, there is plenty of growth to go around. Pfizer, for instance, is the largest foreign pharma in China, yet it's captured only 2% of the market, Morgan Stanley notes in a recent report. In India, Abbott is the top dog following its acquisition of Piramal earlier this year, yet it commands only 6% of India's famously fragmented market.

It's no wonder that pharmas from Pfizer to Abbott to Merck to AstraZeneca have jumped into the branded generics space, looking to sell off-patent medications in emerging markets and in some cases partnering with Indian generic companies to expand their offerings.

The editors of our sister publication, PharmAsia News, which has boots on the ground in China, India and elsewhere in Asia, like to talk about the excitement they hear from sources and friends in the industry - excitement about growth opportunities, new models for R&D, commercial strategy, China healthcare reform and so forth.

But one thing we often find missing in the discussion is specifics. What, specifically, are the right commercial strategies for China, or India or Korea? What, specifically, should biopharma companies do to take advantage of China health care reform? What, specifically, are the opportunities for partnerships or outsourcing in China? What specifically, should you do to protect intellectual property in India?

Who should you talk to? What case studies are relevant? Where should you place your bets?

Specifics are hard to come by via channels we use in the West - the media for instance or trusted websites. In Asia, most important lessons are discussed offline, and things change so quickly in markets like China and India that what worked last year might not work today.

In short, you need a strong, local network to understand the rapidly changing market.

That's the idea behind our PharmAsia Summit. We've decided to bring some of our Asia network to San Francisco this month to talk about specifics - what works, what doesn't, and what you need to know to succeed. If you're based in the U.S., it's a great chance to meet face-to-face with Asia pharma leaders.

We won't have all the answers - no one does. And what works today might not work tomorrow. But what you'll have is a forum where industry leaders - from Biogen Idec's Gunther Winkler to Merck's Ramesh Subrahmanian to Onyx's Tony Coles - will discuss Asia case studies on dealmaking, commercial strategy, outsourcing, regulatory risks, IP protection, and pricing and reimbursement.

We'll have leading Asia investors like OrbiMed's Jonathan Wang, top China analysts like Piper Jaffray's Hongbo Lu, commercial gurus like MSD's Sanjiv Navangul - a key figure behind Merck's groundbreaking strategy for Januvia in India - and IMS Health Asia VP Jan Willem Eleveld, who will provide the latest Asia data and trends.

And as policies are changing so quickly in Asia, we also have a few regulators making the trip, including Shanghai FDA's Yi Chengdong, Korea FDA's Hong Soon Wook, and U.S. FDA country directors from China and India, Chris Hickey and Bruce Ross.

DotW Talks Pickles

With all due respect to our FOTF brethren, DOTW may take the occasional vacation from writing intros to our columns, but we somehow manage to put out a weekly edition with astonishing regularity. (In other words, none of that every-other-week stuff, you slackers.)

We do find ourselves in a bit of a pickle this week, with deadlines looming for IN VIVO, START-UP, and our annual Pharmaceutical Strategic Alliances meeting. (You’re coming, right?)

Mmm, pickles. In an ideal world we would simply be referring to a piquant condiment perfect for enlivening pedestrian burgers and dogs in what may be one of the last opportunities of the summer grilling season. But a whole lot of folks found themselves in a barrelful of briny situations this week. Let us dive in.

For starters, how about Jazz, Immunogen/Roche, and EpiCept, which all woke up on the wrong side of the FDA regulatory bed? Throw in Novartis, which still has to woo those pesky independent Alcon shareholders to its cause without shelling out an additional bolus of cash. And squirt on a little Sanofi-Aventis, which not only lost the first round in its fight to stop a Lovenox biosimilar but also can’t seem to seal a deal with Genzyme.

Better add Inspire Pharmaceuticals to that mix as well. This week Inspire amended its partnership deal with Allergan for late-stage dry eye therapy Prolacria. No surprise, really; back in January the company reported Prolacria failed to show efficacy in a Phase III clinical trial, and it's no secret revised deal terms typically follow in a partnership that suffers a clinical setback.

But the revision is a little more complicated since the Prolacria failure also triggered an amendment in the two companies' ongoing relationship for Allergan’s Restasis. To summarize some ancient history, Allergan and Inspire first teamed up in 2001 to develop dry-eye treatments in a deal that gave Inspire the right to co-promote Restasis. In 2008, Inspire withdrew from the co-promote, but still received royalties on the Allergan medicine at the same rate as before. But there was a very big hook.

The royalty rate was good only as long as Allergan and Inspire continued to work on Prolacria. Now ith no new plans for a study, Inspire will get less of the revenue pie from sales of Restasis and “any other human ophthalmic formulations of cyclosporine owned or controlled by Allergan." The upshot? Look for Inspire to focus instead on its denufosol and Azasite programs.

To avoid your own deal-making pickle (or even a jam), we bring you another edition of...

Roche/BioImagene: In a bid to keep locking up capabilities in personalized medicine, Roche, via its Arizona-based Ventana Medical Systems, this week took out the privately-held digital pathology start-up BioImagene in a deal worth $100 million. The take-out comes just two years after BioImagene investors put $26 million to work in a Series D financing, the small company’s only disclosed fund raising since its inception in 2003. Backers of the company include Burrill and Co., Ascension Health Ventures, Artiman Ventures, and Siemens Venture Capital, the corporate venture arm of industrial giant and competitor to General Electric. Indeed, that Roche won the small firm, known as a leader in pushing pathology into the digital realm, was somewhat of a surprise. Given Siemens’ involvement in the 2008 financing, its presence in imaging markets and its ambition to become a one-stop-shop for medical testing, the odds in Vegas probably didn't favor Roche as the buyer. Still, the deal is a strategic fit for the pharma, since it complements the pathology offerings already in-house as part of Ventana. Moreover, it enhances the Swiss company’s cancer workflow offerings, providing a service element that’s become increasingly of interest to imaging companies, diagnostic players, and even life science tools providers.—Ellen Licking

Procter & Gamble/Somaxon Pharmaceuticals: Somaxon is finally ready to launch the insomnia drug Silenor (doxepin) now that it has a co-promotion partner, Procter & Gamble. The San Diego specialty pharma announced the commercial arrangement Aug. 25, five months after Silenor received FDA approval. Under the agreement, the two companies will launch Silenor in September with a combined U.S. sales force of about 215 reps. P&G will provide about 105 reps who will promote Silenor to targeted primary care physicians and pharmacies, while Somaxon’s team will market to specialists and "top-decile physicians who treat insomnia," the firm said. For its efforts, P&G will receive a combination of fixed fees and royalties on U.S. net sales of the drug. In a same-day conference call, Somaxon CEO Richard Pascoe estimated P&G's take would amount to no more than 15% of the drug's annual net sales. The deal seems like a win for P&G, which made no upfront payment, and also gained an interesting downstream perk -- the right of first refusal to develop and commercialize Silenor as an over-the-counter product.—Joseph Haas

Roche/Aileron: On August 23, Roche announced it would collaborate with privately-held Aileron to use the biotech’s proprietary stapled peptide Pepducin technology to develop drugs against five unnamed targets, some of which have yet to be chosen. At north of $1 billion, the bio-bucks are eye-popping, but the specific deal terms don’t exactly break new ground the way Alnylam’s non-exclusive licensing deals with various pharmas or Celgene’s partnership with Agios have done. The five-target arrangement, centered around oncology and other therapeutic areas, is heavily back-end loaded, worth just $25 million upfront. It does, however, provide Aileron with additional validation and could be the prelude to a larger deal. As such, the deal provides Aileron with always welcome additional undiluted capital, and preserves its exit options. Aileron, which has raised around $60 million, wasn’t exactly hurting for cash. The company has commanded attention not only for its high concept science and platform capabilities, but also for its roster of four corporate backers, once again illustrating the importance of strategic investors in funding early-stage science.—Paul Bonanos and EL

Cypress Bioscience/Alexza; Cypress/Marina Biotech: Even as it continues to fight a public battle with hedge fund operator and minority shareholder Ramius, Cypress Bioscience inked a pair of small deals this week. The specialty player announced it would acquire rights to Marina Biotech’s autism drug for $750,000 upfront, plus milestone payments. It also licensed a preclinical smoking-cessation product from aerosolized CNS drug maker Alexza Pharmaceuticals. The agreement is worth $5 million upfront plus a $1 million milestone-based tech-transfer fee and includes a carried-interest fee in the event of a future acquisition of rights to Alexza’s Staccato technology for nicotine, an inhalable delivery system with electronic dosing controls intended to help smokers kick the habit. In the case of the Alexza alliance, Cypress will also pay for Phase I trials of the medicine, anticipated to commence next year. Back in June, Cypress, which markets fibromyalgia drug Savella (milnacipran), paid $30 million upfront to license an anti-psychotic drug candidate from Israel-based BioLineRx in a deal that also includes milestones. That partnership prompted a hostile takeover attempt last month by Ramius, which harshly criticized Cypress’ management and its acquisition strategy while offering $4 per share to acquire the company.--PB

Isotechnika/3SBio: Isotechnika announced an agreement Aug. 24 with 3SBio covering sales of Isotechnika's lead candidate voclosporin, a Phase III compound that helps suppress the immune system's rejection of transplanted organs. 3SBio will pay $1.5 million upfront to license voclosporin for transplant and autoimmune indications in mainland China, Taiwan and Hong Kong. The Chinese firm also will invest $4.5 million in Isotechnika via a three-year convertible debenture and will be responsible for clinical development, registration and commercialization in China. Interestingly, 3SBio also got the right to develop voclosporin products in other indications (including presumably ophthalmology where troubled Lux had worldwide rights via a 2006 deal.) 3SBio CEO Lou Jing said his company would work with Isotechnika to apply for approval from the Chinese State FDA for a Phase III trial inside China. 3SBio has become one company biotechs can look to for China-only licensing deals. Previously, 3SBio licensed Chinese development and marketing rights to AMAG’s chronic kidney disease drug ferumoxytol.--JH
Image courtesty of flickrer gadgetgirl used with permission through a creative commons license.

UPDATED TUESDAY 08.31.2010. Due to an editing error, IVB inappropriately referred to Aileron's peptide technology via the proprietary trademarked name of Anchor Therapeutics.--EL

DOTW Examines Paraskevidekatriaphobia And Other Aspects of Numerology

DOTW isn't superstitious. Nah, it takes more than yet another freak Washington DC-area thunderstorm and a power outage on deadline day to instill paraskevidekatriaphobia in this hardy crew. Then again, we did go out of our way not to walk under any ladders or cross paths with black cats. And thank G-d the main office only has 6 floors.

More sensitive souls should take heart. After a paranoia-inducing 2009 in which there were nine Friday the 13ths, today's combination of Friday and 13 is the only one of the year. (Turns out the number depends on the vagaries of the Gregorian calendar.)

Numbers figured more prominently in the biopharma news than in the actual deals that went down. Perhaps triskaidekaphobia is the reason financials went undisclosed in roughly half of deals outlined in this week's edition.

Back to the news. For Genzyme, 4 could be the crucial number, or the years it will take to right its troubled Allston Landing plant. News that Genzyme was taking a $6.5 million charge and a loss for the second quarter surfaced as industry wags and Vegas are still trying to figure out the odds of a Sanofi-Genzyme tie-up. Unnamed sources revealed to major news outlets that the French pharma had made an offer in the $67 to $70 dollar-a-share range.

Genzyme execs reportedly believe the company is worth around $80-a-share, which would drive up the deal's price tag by more than $2 billion to around $20.4 billion. According to Bloomberg, there's a high-stakes game of chicken being played, leading IN VIVO Blog to wonder if the lure of $23 million -- CEO Henri Termeer's golden parachute if a merger transpires -- might lead to some rapid eye movements.

Don't blink. You might miss hedge fund Ramius' sweetened offer for Cypress. Last month Ramius offered to buy 90% of Cypress it doesn't already own for $4-a-share, but the company rejected the offer as too low. Blasting Cypress' strategy, Ramius apparently might raise its offer if fruitful takeover talks occur and the division of Cowen Group has the ability to do diligence.

Another number to keep in mind: 100, or if you prefer, $100 million. That's the amount of sales Leerink Swann analyst Seamus Fernandez reckons Lilly will lose this year thanks to an August 12 court ruling invalidating a patent on its ADHD best-seller Strattera. With generic competition imminent, the drum beat for a deal grows ever louder. So much for the company's smaller efforts to buy time with investors.

IVB's favorite number? Try 20, as in this year is the 20th anniversary of our Pharmaceuticals Strategic Alliances conference. (You're going to be there, right?) As the countdown to PSA's uber-networking begins, rest assured IVB's got the available numbers and the analysis all wrapped up in another edition of...



Merck/Alectos: As we note in the July/August issue of START-UP, developing Alzheimer’s drugs ain’t for the faint of heart. Big Pharma is far from opting out the space, but given the difficulties and the very high profile failures we reckon pricey deals a la Pfizer’s tie-up with Medivation for Dimebon will be the exception going forward. Case in point: Merck’s deal this week with Alectos of Vancouver, BC. The two groups will identify new drugs that modulate O-linked N-acetylglucsaminidase (O-GlcNAcase), an enzyme implicated in the development of Alzheimer’s. Alectos, which spun out of David Vocadlo’s lab at Simon Fraser University, could receive up to $289 million, including an undisclosed upfront payment. The majority of the money is biobucks based on downstream research, development, and regulatory milestones. (There are also tiered royalty payments on sales of any products that result from the collaboration—when or if that happens.) Compare those deal terms, especially the undisclosed upfront, with what Medivation garnered in 2008 for Dimebon: $225 million just to seal the deal and another $500 million in milestone payments in a co-development, co-promotion arrangement that had Pfizer and Medivation sharing costs 60/40. Medivation’s drug was much further along at the time of partnering: Phase II versus Alectos’ preclinical molecules. But with the high failure rate of late-stage Alzheimer’s assets, it seems pharma has realized it’s no less risky and much cheaper to partner early and retain 100% of the development rights. Moreover, it’s easier to shrug off an undisclosed upfront than an eye-popping $250 million down payment if development doesn’t exactly go as planned. -- EL

Emergent BioSolutions/Trubion: Emergent said late Thursday, Aug. 12 it would buy the struggling Seattle biotech for nearly $97 million in cash and stock immediately with up to $39 million in possible milestones. The move gives the biodefense specialist, best known for its BioThrax anthrax vaccine, access to Trubion's clinical autoimmune and oncology programs, as well as its alternative protein platforms. The deal comes after a couple years of turbulence for Trubion, whose lead program TRU-015 stumbled in Phase II rheumatoid arthritis trials in 2007. The compound was left deeper in limbo by Pfizer's acquisition of Trubion's development partner Wyeth in early 2009. Pfizer dropped the program this June, but Trubion had since identified another promising candidate, TRU-016, for chronic lymphocytic leukemia. Trubion partnered it with Facet Biotech, which was later acquired by Abbott Laboratories, in August 2009 for $20 million upfront. Adding the the upheaval, Trubion's chairman, president and CEO Peter Thompson resigned in November with one of its investors, Steven Gillis of ARCH Venture Partners, taking the helm. For each Trubion share, Emergent will pay $1.365 in cash and 0.1641 shares of Emergent common stock, which comes to $4.55 a share or $96.8 million. Emergent will pay up to $39 million in cash if TRU-016 or other programs reach various milestones, such as the start of the first Phase II trial for TRU-016. The milestones expire after 36 months. -- Alex Lash

Endo/Penwest: In a deal that will bring it full control over its second-biggest seller, Opana, Endo Pharmaceuticals will buy drug delivery technology partner Penwest Pharmaceuticals for $5 a share, for a total of about $168 million. Endo also announced the filing of an NDA for a new crush-proof formulation of the extended-release version of Opana on Aug. 9. The specialty pharma’s acquisition apparently was driven largely by the opportunity to maximize the company's interest in Opana and Opana ER, indicated for relief of moderate to severe pain in patients who require continuous, around-the-clock opioid treatment for an extended period. The announcement came weeks after a settlement with generics challenger Impax Laboratories over the key patent protecting Opana ER. As a result, Opana ER won't face generic competition until January 2013, enough of a window for Endo to commit more resources to it. While its purchases in the past two years of Indevus and HealthTronics helped the company expand into the area of pelvic health, the acquisition of Penwest indicates Endo also recognizes the need to support its area of greatest success, pain therapeutics (See this recent IN VIVO feature for more.) -- Joseph Haas

PregLem/Merck Serono: This week’s tie-up between privately-held PregLem and Merck Serono for the mid-sized pharma’s Phase II-ready Jun kinase inhibitor bentamapimod shows companies are still willing to walk the outlicensing talk. PregLem’s priority these days is its Phase-III selective progesterone receptor modulator Esmya, in development to treat systemic uterine fibroids. But it turns out several of PregLem's 23 employees had at one time worked at Serono and been involved in the discovery and early development of bentamapimod. Their knowledge helped catalyze the deal, said PregLem’s CEO Ernest Loumaye in an interview with “The Pink Sheet” DAILY. Bentamapimod will move into proof-of-concept trials next year in prevention of post-surgical adhesions. The companies did not disclose financial terms when they announced the deal on Aug. 11. Founded in 2006 and backed through two venture rounds totaling $64.4 million by Sofinnova Ventures, Sofinnova Partners, MVM Life Science Partners and NeoMed Management, PregLem prefers to in-license clinical compounds that focus on women's reproductive health. -- JH

Topcon/Optimedica: As venture firms struggle to fill their own coffers, execs at private companies have been sharpening their pencils and streamlining their portfolios. The most recent example? OptiMedica, a privately-held biotech developing ophthalmic devices and best known for the development of the PASCAL laser technology for the surgical treatment of cataracts. This week the company announced it had partnered its glaucoma and retina assets to Topcon, a Japanese manufacturer of ophthalmic, optometric, GPS and positioning control devices. Terms of the deal were not disclosed but it is apparently the largest acquisition to date for Topcon’s medical division. OptiMedica, which has pulled in close to $55 million in funding from the likes of Kleiner Perkins Caufield & Byers and Alloy Ventures since its 2005 founding, will use the money to support the global launch of its laser cataract surgery system and sharpen its R&D efforts in the same space. Earlier this year the firm revealed the development of a proprietary femtosecond laser designed to improve cataract surgery by automating the most technically demanding steps. -- EL

Epitomics/Apexigen: With the follow-on biologics pathway still murky, many VCs and private biotech execs are pinning their hopes on developing bio-betters, large molecules that hit well validated targets but offer an improvement in efficacy, dosing, or route of administration than existing therapies and don't infringe on existing IP. (This despite the obvious travails of companies such as Trubion [outlined above] and AstraZeneca's MedImmune, whose Synagis follow-on has suffered a set-back with regulators .) On August 12, privately-held Epitomics, which has a proprietary rabbit monoclonal technology, announced it was spinning out to existing shareholders a new biotech company, Apexigen, which aims to develop and commercialize mABs for treatment of cancer and immuno-disorders. The move seems to leave Epitomics, a Chinese/U.S. biotech hybrid backed by Sycamore Ventures, Amkey Ventures, and Kenson Ventures, largely a discovery/fee-for service play, with Apexigen taking on the riskier, more expensive development work. According to the company, Apexigen inherits bio-better programs already initiated by Epitomics, including mABs against VEGF and TNF. No word whether Epitomics or its investors have pitched in with cash to get Apexigen off the ground. -- EL