Red Rover, Red Rover, Let Financings of the Fortnight Cross Over

The Pacific Ocean has the Marianas Trench, the deepest place on Earth, more than six miles down. But Financings of the Fortnight has Crossover Canyon. And this fortnight, it went from zero to 210 million.

The zero was the number of dollars Radius Health raised trying to go public, and 210 million was the blockbuster financing for Intarcia Therapeutics. How fortuitous. As we noted in our previous column, our colleague Stacy Lawrence is working on a Start-Up feature about the return of crossover investors to biotech, and as if to punctuate her weeks of reporting that you’ll be able to enjoy just after Thanksgiving, Intarcia announced Nov. 15 a $210 million Series C, one of the industry's biggest rounds of private financing in memory, and it did so mainly by tapping crossover investors: the hedge fund Baupost Group, the diversified fund Farallon Capital Management, the multinational giant Fidelity Investments, and two other unnamed institutional investors. Existing venture backers New Enterprise Associates, New Leaf Venture Partners and Venrock also joined. The funding consists of $160 million in equity and $50 million in debt, and it’s all in one shot, Intarcia CEO Kurt Graves told our "Pink Sheet" DAILY colleagues. In other words, they don’t need no stinkin’ tranches.

The money will help push Intarcia’s lead product ITCA-650 in a set of Phase III trials. Intarcia has developed a formulation of the diabetes drug exenatide that can be implanted under the skin up to a year in a matchstick-sized delivery device. Exenatide, an analog of glucagon-like peptide-1, is marketed by Bristol-Myers Squibb and partner AstraZeneca as both Byetta and Bydureon, in twice-daily and once-weekly formulations respectively. The partners paid $7 billion to acquire Amylin, which previously owned the drugs, in June.

Meanwhile, Intarcia was once a whisker away from partnering ITCA-650 but backed off to keep full control. That helps explain the enthusiasm of the crossover investors, who have piled into to some of the year’s largest venture rounds, though none of course as large as the Intarcia deal. Crossovers want to take companies public; M&A is not their preferred exit. In fact, one factor in their resurgence is frustration as they’ve watched strategic buyers pick off the best biotechs before they, the public investors, can get a piece of the action. It’s worth mentioning that these days, those buyouts often happen in wildly favorable circumstances for the buyers – in structured deals with earnouts that only pay shareholders if the acquired company’s products hit milestones, as we explained in the March issue of Start-Up.

So when you see hedge and mutual funds featured in a biotech venture round, it’s a good bet that company will do its damndest to go public. With all that cash riding into Phase III, and a product that could address one of the world’s most burdensome diseases, don’t expect Intarcia and its new shareholders to jump quickly into a buyer’s arms.

The crossover road can be rough, too. Radius Health, with crossovers BB Biotech AG and Brookside Capital in the mix, raised $91 million in 2011 – also with a debt component – merged with a public shell, and pointed itself toward the public markets through a process known as Form 10, which lets a company list over the counter without the hullaballoo of a big IPO. It then opted to try for a big IPO, after all, and filed an S-1 in February. Those dreams were put on hold this week; the company said it would withdraw its S-1 because of general market conditions, and the stock is still not trading anywhere, even on the low-profile, low-volume exchanges.

Somewhere in between Intarcia’s $210 million and Radius’s zero is Ziarco, a new company that said Nov. 5 it received the first $6 million tranche of a potential $27 million Series A round. Consider it a small bite of Pfizer’s old Sandwich. Ziarco licensed four drug candidates that were developed at Pfizer’s now-shuttered Sandwich, UK labs, and part of the venture cash comes from Pfizer’s venture arm. But the lead financier is a very unlikely source: the hedge fund Biotechnology Value Fund, which typically invests in small- and micro-cap biotechs like this one. The crossover move is its first in five years, and it doesn’t seem inclined to make a habit of it. BVF partner Mark Lampert called the Ziarco deal opportunistic. Ziarco has four anti-inflammatory and anti-allergy drugs, on which Pfizer spent more than $100 million on R&D, said BVF’s Lampert. The most advanced is a histamine H4 receptor antagonist that has completed Phase I. CEO Mike Yeadon, who was VP and CSO of the allergy and respiration research team in Sandwich, told our “Pink Sheet” DAILY colleagues it could be a once daily low dose oral treatment for asthma, allergic rhinitis, pain, and inflammatory skin conditions. Pfizer Ventures’ stake is undisclosed, and it will receive milestone payments and royalties as the drugs progress.

Speaking of progress, we're almost to the blurbs. A quick programming note: This week we've added a new twist to FOTF. After the four blurbs, you'll find a lightning-round paragraph that takes you through the rest of the fortnight's financings. We hope you find it useful. Now on the count of three, let's all get a running start and jump headlong into...

Visterra: If the Cambridge, Mass. biotech has its way, Tamiflu will have competition. Visterra said Nov. 9 it closed a $26 million Series A round with $13 million from the Bill & Melinda Gates Foundation, Omega Funds, and its existing investors. The cash will help Visterra push its monoclonal antibody VIS410 into the clinic for seasonal and pandemic influenza. It’s a therapeutic, much like Tamiflu (oseltamivir), which is famously stockpiled whenever a new flu strain emerges amid whispers of “pandemic.” Visterra also sees it used as a prophylactic for first responders and others at near-term risk of flu infection. The infusion of cash from the Gates Foundation was undisclosed, but it’s significant nonetheless. Visterra is the third biotech in roughly a month, and fourth since March 2011, to sell equity to the Gates Foundation. In our previous edition we discussed the Gates investment in vaccine firm Genocea Biosciences. New head of global health Trevor Mundel said this summer the foundation would be more aggressive with its new investment strategy, and so far he’s right. (The upcoming issue of Start-Up takes a deeper look at the Gates biotech investment initiative.) So far, the foundation is targeting platforms, such as Visterra’s antibody discovery technology, so it can help point applications of the technology in directions beneficial to global human health. For example, roughly half of Gates’s Visterra investment is earmarked for a program in infectious disease (but not the flu). The other lead investor in the $13 million tranche, Omega Funds, usually buys shares of venture firms no longer able to hold positions in portfolio companies. But the Visterra investment is primary, not secondary, said Visterra CEO Steve Brugger. – Alex Lash

Abbvie: With a split from its parent company Abbott Laboratories imminent, the pharmaceutical unit AbbVie issued $14.7 billion in debt securities that will help it pay back cash to Abbott, as well as fund dividend payments to future shareholders. The debt issuance -- which included three-year fixed-rate, three-year floating-rate, five-year, six-year, 10-year and 30-year notes – was the largest dollar-denominated offering by a company in more than three years, and a sign that throughout market turmoil, health care reform, and other disturbances, Big Pharma has no problem convincing bond buyers of its seaworthiness. However, AbbVie did receive a slightly lower rating, Baa1, from Moody’s because of its untested independence and its overreliance on sales of rheumatoid arthritis drug Humira (adalimumab). Before AbbVie, the largest dollar-denominated debt offering was from Roche in February 2009 to help pay for its acquisition of Genentech. The company issued $13.5 billion in long-term debt, as well as $3 billion in commercial paper, a form of short-term debt. That same year Pfizer issued $13.5 billion in debt in conjunction with its acquisition of Wyeth. Amgen has also issued more than $10 billion in debt over several years to fund share repurchases. AbbVie issued $3.5 billion of 1.20% senior notes due 2015, $4 billion of 1.75% senior notes due 2017, $1 billion of 2.00% senior notes due 2018, $3.1 billion of 2.90% senior notes due 2022, $2.6 billion of 4.40% senior notes due 2042, and $500 million of floating rate senior notes due 2015. – Lisa LaMotta

Pearl Therapeutics: The Redwood City, Calif. company said Nov. 13 it has closed a $65 million Series D round to help move its combination chronic obstructive pulmonary disease drug, PT003, into Phase III testing by mid-2013. With four years of Phase II testing under its belt, Pearl Therapeutics wants to move into two pivotal trials and, it hopes, attract a partner for PT003. The Series D included the company’s four existing investors: 5AM Ventures, Clarus Ventures, New Leaf Venture Partners, and round leader Vatera Healthcare Partners. The company has raised a total of $167.5 million since 2007, including its $69 million Series C in 2010, which included the same four investors. Pearl expects to file for approval of its combo product, as well as each of the components in three separate New Drug Applications, by the first half of 2015. PT003 is a fixed-dose combination of glycopyrrolate, a long-acting muscarinic antagonist (LAMA), and formoterol, a long-acting beta-2-agonist (LABA). It uses a meter-dose inhaler (MDI) as a delivery device, and since MDI technology is already used with other medications, the company will not have to seek regulatory approval for the device, nor will it have to spend resources educating doctors and patients about the use of the device. – L.L.
 
Auspex Pharmaceuticals: Amid all our talk about public investors crossing over into the mezzanine rounds of private companies, we noticed that Auspex is having a different conversation. The San Diego-area company that makes deuterium-modified compounds has raised a $25 million Series D round that it hopes will fund its lead drug, an analogue of tetrabenazine, a treatment for chorea (involuntary spastic movements) associated with Huntington’s disease (HD). The original version, Xenazine, is marketed by Valeant Pharmaceuticals International through Lundbeck in the U.S. for the same indication. New investor Panorama Capital led the Series D round, with participation from existing investors Thomas, McNerney & Partners, CMEA Capital, and Sloan Biotech Fund. Gaurav Aggarwal of Panorama joins the board with the financing. Auspex has raised a total of $60 million since its 2007 inception. “We like the near-term nature of the product and the uniqueness of it,” Aggarwal told our friends at "The Pink Sheet". He was confident that Auspex could go public even if the syndicate can’t sell the company. Another deuterium modification company, Concert Pharmaceuticals, has advanced its lead candidate for diabetic neuropathy nephropathy into Phase II. Deuterium is an isotope of hydrogen, and substituting it for hydrogen bonds makes a molecule more able to withstand enzymatic breakdown and thus stay in the body longer. It also creates new chemical entities, their developers say. The patent office agrees: on Nov. 15 it granted a composition-of-matter patent to Auspex for its deuterium-substitute version of Pfizer’s JAK kinase inhibitor tofacitinib, which the FDA approved on Nov. 6. – A.L. 

The Best of the Rest: Shanghai Jingfeng Pharma’s venture round brought in $30 million led by Vivo Ventures…an OrbiMed-led Series B for Cardioxyl Pharma totaled $28 million…Roche Ventures and MedImmune Ventures participated in Ambit Biosciences’ $25 million Series E supporting quizartinib clinical trials… fellow diagnostics companies Metamark Genetics, Epic Biosciences, and Advanced Cell Diagnostics each raised Series B financings…STAR antibody platform play Alethia Biotherapeutics closed a $4.7 million Series B…Avexxin raised an undisclosed amount in Series B financing for chronic inflammatory disease development…Vivo Ventures and New Leaf Partners joined as new shareholders through MEI Pharma’s $27.5 million PIPE…Tavistock Life Sciences led a $Cdn26.1mm private placement for MethylGene…vaccine adjuvants developer Isconova raised SEK50mm through a rights issue…Idera Pharma completed a $7mm converted preferred stock and warrants sale…small-molecule cancer drug developer Array BioPharma’s FOPO grossed $65.7 million…in the only completed IPO of the fortnight, breast cancer testing company Atossa Genetics raised $6.5mm without taking a haircut…Enanta filed to go public, hoping to advance its anti-infectives…Cardiovascular diagnostics company Singulex postponed its IPO … AstraZeneca completed a $2 billion two-tranche bond issue… insurance provider Aetna raised $2 billion from the sale of senior notes to fund its acquisition of Coventry Health Care.

Photo courtesy of flickr user bumeister1 via a Creative Commons license.

Financings of the Fortnight Goes Around The Middle Man

This fortnight’s theme is DIY. That’s shorthand for “do it yourself,” in case you’re one of those people who has only used a hammer to pry open a beer bottle.

There’s a fancier word for DIY, often heard during the first dot-com boom: Disintermediation. Cutting out the middle man. If you want to get something done, don’t pay someone else to do it. Buy your pet food straight from the source, online! Some of those ideas didn’t go over so well at first, but more than a decade into the Internet age, people and businesses are catching on. (And some businesses have simply figured out how to be better middle men.)

The same might be said about life-science venture capital. VCs are, in effect, middle men and women (middlepeople?), standing between those who manage giant pools of cash and the businesses that need cash to make a go of it. The shakeout has left fewer middlepeople, er, VCs, standing. But there are still giant pools of cash, and people managing them. This past fortnight, we’ve had some indications of them taking matters into their own hands.

First up, an intriguing paper was published October 9 by a tag team from Harvard University and INSEAD, the top French business school, that purports to show LPs might do better investing directly than via an intermediary. “Direct investments generally outperform fund investments,” the authors write.

The study doesn’t specifically address the life sciences, and in fact there’s a caveat that might make it less relevant in our little corner of the world: “We also find that the outperformance is driven by deals where informational problems are not too great, such as more proximate transactions to the investor and later-stage deals, and by an ability to avoid the deleterious effects on returns often seen in periods with large inflows into the private equity market.”

“Informational problems” are a tough nut to crack, for sure, especially with early stage, cutting-edge R&D that’s years away from clinical trials, let alone the commercial markets. That’s why some VCs are going later stage; one such firm, Longitude Capital, made a successful pitch to LPs and has closed a new health-care fund. See our description in the round-up below.

One type of cash holder making more direct investments are drug companies themselves. Nearly every major firm – which, if nothing else, have plenty of cash to spare – has a venture group. And they’re getting bolder, investing in biotech firms earlier, even helping to shape company formation. That’s what happened twice this past fortnight, as we detail below in our roundup. First Roche, then Celgene, made sure they were present at the creation, or nearly so, of two firms related to the former Amira Pharmaceuticals. We’re seeing it more and more: Big pharmas and biotechs provide crucial early funding, either for equity or as non-dilutive R&D dollars, for an option to buy the company outright if all goes well. The company might be in fact a single asset, more or less, but that’s no coincidence. What passes as a biotech these days is often one product packaged in a way that makes acquisition as hassle-free as possible.

Another big group with plenty of cash is also making direct investments. The Bill and Melinda Gates Foundation’s new head of global health, ex-Novartis head of global development Trevor Mundel, said this summer his group would start taking ownership stakes in biotechs while it continued its bounteous grant-making largesse.

Its highest profile commitment to date was announced October 10, participating in a $30 million Series C round for Genocea Biosciences, a Cambridge, Mass. vaccine developer. Gates led the scientific due diligence, said Genocea CEO Chip Clark, and an affiliate of the Chicago family investment firm Henry Crown and Co. – not a name you see much associated with private biotech funding – led the financing.

It makes sense for The Gates Foundation, which knows vaccines perhaps better than any organization on the planet. Genocea has developed a platform to create vaccines from T-cell immune response, instead of B-cell response. The difference is that there’s genetic diversity of T-cell response in humans that to date has been impossible to capture in a vaccine, which by definition is broadly administered. Genocea’s discovery platform recreates human T-cell responses to pathogens in vitro and finds common targets on pathogens that, with a thousand or more proteins, are hard to investigate with traditional methods. That’s the aim, at least. The amount of the Gates investment is undisclosed, but Genocea CEO Chip Clark told FOTF that roughly half the cash is earmarked for Genocea’s malaria program. The malarial parasite Plasmodium falciparum has a huge proteome, and the Gates money will help Genocea interrogate it more thoroughly. “We think we’ll have one of, if not the most robust malaria antigen discovery efforts,” Clark said.

The financing is tranched but not dependent on hitting milestones in the malaria program to trigger future payments, Clark said. Gates does not have a board seat.

So far, the direct biotech investments from The Gates Foundation have targeted vaccine discovery technologies. In late September the start-up Atreca said the foundation would put in $6 million to push the firm’s antibody survey technology. Last year, the foundation invested $10 million in Liquidia Technologies, a North Carolina developer of particle engineering technology it hopes will improve vaccine delivery and manufacturing.

A Gates representative was not available for comment by press time, but it's worth noting the Big Kahuna himself has been a vocal advocate for a wide array of mechanisms, from a global tax on financial transactions to private investment in public infrastructure, to improve global health and education programs. As he said at the 2011 G-20 meeting in Cannes, France – a speech in which he advocated for a financial-transaction tax to fund anti-poverty programs -- "It’s important to keep experimenting with new business models, because impact investors could eventually bring a great deal of money into development.”

We hope to have more soon for you on the Gates Foundation, and of course whenever anyone experiments with business models, we'll have the breakdown for you in...

PharmAria: The six-month-old start-up announced Oct. 15 that Celgene has provided its seed funding, will help fund its Series A round and has taken an option to buy the company. Celgene’s equity stake in the new company is undisclosed, but the deal structure hews to the big biotech’s philosophy in recent years of finding early science, partnering deeply with the company, and having its own cash riding on the outcome. For example, Celgene and Versant Ventures are the only backers of Quanticel Pharmaceuticals, which we wrote about here. Funny we should mention Versant. PharmAria was started by three former executives of Amira Pharmaceuticals, which Bristol-Myers Squibb bought in 2011 for $325 million. One of Amira’s biggest backers was Versant, and the West Coast venture firm helped turn Amira’s post-acquisition assets and talent into new enterprises with new business models. (See Inception 3, below.) The connections don’t stop there: One of the ex-Amira executives now at PharmAria, Jilly Evans, worked for Celgene as consultant after the Bristol buyout. The start-up, which plans to develop small-molecule therapeutics for cancer and fibrotic diseases, would not discuss the amount of money it is seeking or other terms of the deal. The goal, however, will be to raise enough money for PharmAria to advance its first candidate through Phase I, president John Hutchinson told “The Pink Sheet” DAILY. -- Joseph Haas

Inception 3: PharmAria is not the only new company to rise recently from the Bristol buyout of Amira in 2011. Amira investor Versant Ventures and former Amira CEO Peppi Prasit have formed Inception Sciences, an incubator and drug discovery platform, with the intent of spinning drug candidates out into satellite companies. The candidates could come from Inception’s own “drug hunters,” as they like to call themselves, or from outside sources. The latter has provided Inception with its first public deal. It has created a subunit – called Inception 3 – to discover and develop small-molecule drug candidates for sensorineural hearing loss based on technology licensed from Stanford University. Versant is Inception 3’s sole equity financier for now, and Roche is the development partner. Roche will fund Inception 3’s work with milestone-based R&D payments, and the Swiss firm will hold an option to acquire the program upon filing of the first IND based on the Stanford technology. “The reason we didn’t go for a straightforward collaboration with academia here … is that the fact that it brings in a team of drug-hunters with a great track record of discovering drug candidates for intractable targets and then driving those to the IND stage,” explained Shafique Virani, head of neuroscience partnering at Roche. The various parties are not disclosing any financial details about the collaboration nor providing a timeline for a potential IND filing. However, Clare Ozawa, chief business officer at Inception and a former officer at Versant, said the combined capabilities of Inception and Roche should result in rapid progress toward a clinical candidate. -- J.H.

Longitude Capital: The expansion-stage investor said October 10 it has closed its second health care-only fund, Longitude Venture Partners II L.P., with $385 million in new capital. The fund exceeded Longitude’s $325 million goal, which would have matched the size of its 2008-vintage first fund, and it bumps the Connecticut firm to the top of Start-Up’s gas tank chart, which we most recently published here. Longitude plans to target both biotechs and device companies, with emphasis on mid-to-late-stage opportunities as well as what it calls “special situations”: spin-outs, recapitalizations, investments in public companies and structured transactions. Managing director Juliet Tammenoms Bakker told “The Pink Sheet” DAILY that Longitude received renewed commitments from many limited partners in its first fund, but also retained Probitas Partners as a placement agent for the new vehicle. She declined to discuss exits from the first fund, but said Longitude has received partial liquidity in two companies and full liquidity from another. The firm typically invests between $10 million and $30 million over time in each portfolio company, and expects to make about 20 investments from the new fund; about 30% of the money will be deployed in public companies, Tammenoms Bakker said. Longitude Venture Partners I L.P. invested in public companies such as Amarin Corp., Jazz Pharmaceuticals, Corcept Therapeutics, and Cadence Pharmaceuticals, and private drug developers such as Civitas Therapeutics, Collegium Pharmaceutical, InfaCare Pharmaceutical and Xanodyne Pharmaceuticals. – Paul Bonanos

Kythera Biopharmaceuticals / Intercept Pharmaceuticals: We’re putting these two together because they’re twins, of a sort. They both emerged into the publicly-traded world on the same day, October 11, with initial public offerings that raised $70 million with a $278 million post-money valuation for Kythera, and $75 million with a $225 million valuation for Intercept. It’s an odd occurrence at a time when biotechs aren’t going public much at all; analysts predict the count, now at 11, could hit 15 or 16 by the end of the year. Both also priced at the top of their ranges; no haircuts this fortnight. Kythera, which makes a cosmetic treatment that breaks down the fat in a double chin, sold 4.4 million shares at $16 per share, after aiming for the $14 to $16 range. Intercept sold 5 million shares at $15 per share; its range was $13 to $15 per share. The firm has a compound to treat primary biliary cirrhosis, a condition that can lead to liver failure. It expects Phase III data in 2013 from the drug, which is a bile acid analog it acquired from the University of Perugia in Italy. And that makes for another odd coincidence: Kythera’s treatment, for a vastly different indication, is a formulation of sodium deoxycholate, a component of human bile that breaks down fat. As of this writing, both companies’ investors have no reason to spew bile. Kythera shares closed October 17 at $23.41, up nearly 50% from the IPO. And Intercept closed at $19.78 a share, up nearly a third. There’s a long way to go however until investors, including Versant, ARCH Venture Partners and Prospect Venture Partners (for Kythera) and Italian investment firm Genextra (for Intercept), can reap gains. Even if share prices stay buoyant, investors have a lot to recoup. Both firms raised more than $100 million in private capital before going public. – Lisa LaMotta

Deals Of The Week: Vaxxas To Help Shape The Next Generation Of Vaccines

Australian/U.S. biotech Vaxxas came out of stealth mode Oct. 8, announcing a deal with Merck & Co. in which the biotech’s proprietary Nanopatch technology will be tested with Merck vaccines as a delivery vehicle offering potential advantages for ease of administration and potency.

Based on technology developed in the lab of Dr. Mark Kendall at Australia’s University of Queensland, Nanopatch, a patch delivery system said to induce robust immune system activation by targeting vaccine to immunological cells just below the patient’s skin surface, may offer Vaxxas a string of licensing deals, including milestone payments and royalties, similar to a biotech offering small- or large-molecule drug candidates to bigger companies.

“As a vaccine-delivery mode, Nanopatch is capable of delivering a very potent immunogenic response that in some respects is akin to what you’d see in using an adjuvant. We call it a physical adjuvant,” Vaxxas CEO David Hoey told Deals of the Week. “Even though our business model is to partner with companies that are producing vaccines, we believe that use of the patch actually can provide a lot more than simply a delivery vehicle can by making vaccines more potent and perhaps opening new windows for use of vaccines in development.”

Merck and Vaxxas are not disclosing which vaccine will be tested with the technology. The agreement calls for Merck to make an undisclosed upfront payment and R&D funding and then pay potential development and approval milestones plus royalties on commercial sales for a vaccine which Vaxxas will test with the Nanopatch system. Merck gets an option to an exclusive license to produce a vaccine using Nanopatch, meaning that Vaxxas will not partner its technology with another company selling or developing a vaccine for the same indication.

The pharma also gets the option to expand the agreement to two additional vaccine types, although Hoey said exclusivity for additional indications will have to be negotiated between the two companies. “The structure of the initial vaccine candidate agreement is exclusive and has been defined, and the subsequent vaccine candidates have the potential to be exclusive but have not been defined yet,” he said. “At present, we have a landscape of opportunity minus the vaccine field that we’ve licensed under this arrangement with Merck.”

While R&D will continue in Australia at Kendall’s labs, Vaxxas also has opened an 18-person office in Cambridge, Mass., which  will focus on business development. The Boston area was chosen because it offers numerous potential licensing partners for the Nanopatch technology, added Hoey, previously the VP of business development at PathoGenetix.

Vaxxas raised a $15 million Australian (about $16 million) Series A in August 2011 backed by Australian venture capital firms OneVentures and Brandon Capital, U.S. VC firm HealthCare Ventures LLC and an Australian non-profit, Medical Research Commercialisation Fund. It was the largest venture round for an Australian company since anti-infectives biotech Avexa raised $12 million Australian in 2004.

Nanopatch is a stamp-sized device designed for painless vaccination over a period of two minutes. Providing direct access to immune cells in the skin, the self-administered, needle-free vaccine delivery system contains a nano-projection array patch to which the drug is dry-coated, so there is no need for refrigeration. It was tested in animals to deliver a flu vaccine at 1/150 the dose compared with syringe administration and also has been evaluated for vaccines for human papillomavirus, human simplex virus, Chikungunya disease and West Nile virus.

The patches are produced in the same facilities that manufacture chips for cell phones and computers, Hoey said. They are coated with projections a micron in length using a high-density array that can apply thousands to tens of thousands of projections to a single patch. A dry, needle-free delivery system, Hoey said he is confident the technology can work with many different companies’ vaccines without great formulation challenges.

“Most vaccines today are derived as liquids because needles and syringes are the predominant delivery method, however, the work that has been done by Kendall shows that by a pretty standard set of steps you can prepare a vaccine to be deposited and dried down on a patch,” he explained. “There’s a series of excipients that can be added to existing vaccines to make them adaptable in a format suitable for use in conjunction with the patch. So there’s no specific formulation required of the vaccine provider.”

In searching for partners, Vaxxas is not prioritizing certain indications but trying to position itself by sharing data with vaccine makers showing the technology’s potential to increase vaccine potency and offer the possibility of easier dosing, possibly even self-administration. And Vaxxas will not compete with its partners, Hoey said; the firm has no plans to develop its own vaccines using the Nanopatch technology.

Elsewhere, it was a busy week in biopharma deal-making, as we detail in our latest edition of  …

AstraZeneca/Ardelyx: In its first deal under new CEO Pascal Soriot, AstraZeneca is licensing a Phase IIb-ready kidney drug from privately held Ardelyx. Announced Oct. 7, the deal brings AstraZeneca worldwide rights to oral NHE sodium transport inhibitor RDX5791, as well as other compounds in Ardelyx’s NHE3 inhibitor program. The Fremont, Calif.-based biotech receives an upfront payment of $35 million and can earn up to $237.5 million in development and commercial milestones, along with potential double-digit royalties on product sales. NHE3 is sodium-hydrogen antiporter 3, a protein essential to absorption of sodium by the intestines. The two companies believe these compounds can address end-stage renal disease, chronic kidney disease and other disorders related to sodium and fluid overload. Ardelyx has evaluated ‘5791 in a Phase IIa trial in constipation-predominant irritable bowel syndrome as well as a pair of Phase I studies in healthy subjects to determine the compound’s ability to divert sodium absorption from the gastrointestinal tract. The deal gives Ardelyx an option to co-promote ‘5791 in the U.S. AstraZeneca will assume development costs for the drug, while the biotech will conduct Phase IIb studies. - Joseph Haas

Roche/Inception: A drug-hunting venture borne out of the Bristol-Myers Squibb/Amira Pharmaceuticals buyout in 2011 has resulted in a new opportunity for Roche. Under a novel collaboration structure involving big pharma, venture capital and biotech, Inception Science will create a third company – called Inception 3 – to discover and develop small molecule drug candidates for sensorineural hearing loss based on technology licensed from Stanford University. Roche, which will fund Inception 3’s work with milestone-based R&D payments, will hold an option to acquire the program upon the filing of the first IND based on the Stanford technology. Inception’s backer Versant Ventures, meanwhile, will provide the equity financing for the new company, under an agreement announced Oct. 10. Inception, which consists of two current small biotechs (Inception 1 and Inception 2) focused on neurology and oncology, arose from assets spun out by Bristol after it acquired Amira for $325 million upfront in July 2011. Bristol’s focus was on idiopathic pulmonary fibrosis candidate AM152, and it spun out much of Amira’s remaining intellectual property into Inception, backed by Versant and led by former Amira CEO Peppi Prasit, known around the biopharma industry for his “drug-hunting” acumen. The various parties are not disclosing any financial details about the collaboration nor providing a timeline to the potential IND filing at FDA. However, Clare Ozawa, chief business officer at Inception and a former officer at Versant, said the combined capabilities of Inception and Roche should result in rapid progress toward a clinical candidate. “Because we’re combining capabilities across both Roche and Inception, we think we have the fastest ability possible to get to IND stage as quickly as possible,” she said in an interview. - JAH

GlaxoSmithKline/Aeras: The joint development of a tuberculosis vaccine, expected to be of use in addition to BCG vaccine to prevent pulmonary TB, is the aim of a collaboration also announced Oct. 10 between GlaxoSmithKline and Aeras Global TB Vaccine Foundation, the Rockville, Md.-based non-profit TB vaccine development organization. BCG vaccine prevents some forms of TB in infants, but does not prevent pulmonary TB, which accounts for the majority of infections and deaths among adolescents and adults. A new TB antigen, M72, a fusion protein which is compatible with adjuvant containing Agenus Inc.’s QS-21 Stimulon adjuvant, has been developed by GSK, and found in initial clinical trials to induce an immune response and offer an acceptable safety profile. GSK and Aeras have agreed to each provide resources in order for a Phase IIb clinical study to be conducted in Kenya, India and South Africa next year, in healthy adults aged between 18 and 50. Aeras is supporting the development of half a dozen TB vaccine candidates, the most advanced of which is Oxford University’s MVA85A, a candidate vaccine using a modified vaccinia virus as a vaccine delivery system and two other candidates initially developed by Crucell (now Johnson & Johnson) and Sanofi. Aeras is funded by the Bill & Melinda Gates Foundation and other private foundations and governments. - John Davis

UCB/Harvard University: In the third research collaboration to be set up under an alliance forged in 2011, the Belgian mid-sized pharma UCB is to work with Harvard University researchers on exploiting the human intestinal microbiome for therapeutic molecules. The microbiome comprises the 100 trillion bacteria found in each person’s gastrointestinal tract. These bacteria influence the well-being of individuals and their immune systems, and UCB will provide up to $4.5 million to fund the microbiome-related research of three professors of immunology at Harvard: Christophe Benoist, Dennis Kasper and Diane Mathis. They will systematically mine and classify any new species they find in the microbiome, evaluate the impact of the microbiome on the immune system, and look for new immune-modulating molecules with potential therapeutic applications, UCB announced Oct. 10. Several companies, including VC-backed start-ups, already are looking to exploit the microbiome to develop new therapies. In total, UCB expects to spend $6 million in a multi-year agreement to fund specific research projects at Harvard in the fields of central nervous system disorders and immunology. The first project funded was with Prof. Gokhan Hotamisligil, to identify antibodies against an undisclosed target in metabolic diseases. The second, concluded in June 2012, was with cell biology professor Junying Yuan, who was to develop small molecules which induce autophagy. This is the process in which cells ingest intracellular components and offers potential in the treatment of neurodegenerative diseases. - JD

Sanofi/Massachusetts General Hospital: Sanofi is expanding its presence in the Boston research community through a translational medicine collaboration with Massachusetts General Hospital. MGH will work with Sanofi’s oncology division on two preclinical molecules that were discovered in Sanofi’s labs. The teams will include scientists from both organizations and will be “highly collaborative.” Financial terms of the deal were not disclosed, but it will encompass a two-year period during which the compounds are expected to enter the clinic. The deal terms are flexible enough that other molecules may be added to the collaboration in the future and the timeframe of the collaboration may be extended. The focus of the collaboration will be on translational medicine solutions in oncology. “Sanofi Oncology takes a dedicated and integrated translational medicine approach by understanding the problems that doctors and patients are facing, both from the perspective of a pharmaceutical company and that of a diagnostic company,” said Donald Bergstrom, head of translational and experimental medicine at Sanofi Oncology. Bergstrom added that finding biomarkers will be a key part of the collaboration. The researchers will be focusing on which patient groups will benefit best from the drugs being developed and how to design the clinical program to achieve successful results. - Lisa LaMotta

Roche/Lilly/Washington University: Roche and Eli Lilly will see their investigational drugs tested in a large-scale Alzheimer’s disease trial run by Washington University in St. Louis. Roche’s amyloid beta antibody gantenerumab and Lilly’s solanezumab have been chosen by the university’s School of Medicine for testing in a clinical trial to study if the drugs can prevent the loss of cognitive function in people with inherited mutations that cause early-onset Alzheimer’s disease, the university announced Oct. 10. A third drug, a beta secretase inhibitor also developed by Lilly, is under consideration as well. The trial, expected to begin in early 2013, will be conducted by the university's  Dominantly Inherited Alzheimer’s Network Trials Unit , which is funded in part by NIH, the Alzheimer’s Association, and the DIAN Pharma Consortium composed of 10 pharmaceutical companies. The Roche and Lilly drugs were selected from more than a dozen nominations, with each offering a unique approach to counter the effects of amyloid beta, which builds up in the brains of patients with Alzheimer’s disease. All three drugs have been tested in earlier clinical trials to evaluate safety and efficacy. Gantenerumab is in a Phase III trial testing the drug in early-stage Alzheimer’s patients who have not yet experienced symptoms of dementia. Solanezumab has been making headlines recently; it failed in two high-profile Phase III trials in patients with Alzheimer’s disease, but did show signs of efficacy for slowing cognitive decline in a secondary analysis of pooled data. Roche and Lilly will make the treatments available at no cost and provide supporting grants. The Alzheimer’s Association provided a $4.2 million grant. The trial will enroll 160 people with inherited mutations for Alzheimer’s at a point when they would be within 10 to 15 years of the anticipated age when symptoms of cognitive decline and dementia would appear. An additional 80 participants who did not inherit the mutations also will be monitored. - Jessica Merrill

MedImmune/Cancer Research Institute/Ludwig Institute for Cancer Research: MedImmune, the biologics arm of AstraZeneca, has set up a collaboration with two non-profit research organizations, the Cancer Research Institute and the Ludwig Institute for Cancer Research, to collaborate on clinical trials to test combinations of three novel monoclonal antibodies from MedImmune’s pipeline. The partners also said they are open to including promising non-MedImmune novel compounds in the trials. The agreement, announced Oct. 9, calls for Ludwig and CRI, with input from MedImmune, to conduct the trials using yet-to-be determined combinations of the three compounds, and/or other compounds the partners are working on, or other potential partners might offer up. One of the compounds is tremelimumab, which Pfizer gave up on several years ago and which belongs to the same class as Bristol’s successful melanoma treatment Yervoy (ipilimumab), but MedImmune and its collaborators insist that the problem with tremelimumab was due to the clinical trial design, not the compound itself. CRI’s Cancer Vaccine Acceleration Fund, a two-year-old venture philanthropy group set up to invest in and facilitate innovative cancer immunotherapy trials, is funding the trials. MedImmune is supplying the drugs and, depending on results of the clinical trials, plans to commercialize them and make milestone payments to its backers. The biotech also is continuing to develop the compounds separately, based on its original plans. - Wendy Diller

Picture credit: Nano-structure geometry

Deals of the Week Takes Time to Travel

Like any conscientious time traveller, a biopharma needs to tread carefully around iterations of its current, past and future deal-making self. (Spoiler alert!) In the new sci-fi flick Looper, the younger version of Bruce Willis does a terrible job cultivating his present while tending to his future and reconciling himself to his past. But this week Celgene proved a bit more adept than the action hero at tending to its past and future self. The biotech bellwether disclosed a pair of early stage deals, while putting out positive data that helps justify its largest acquisition to date.

The biotech added two cancer deals, one to develop a Phase I immunotherapy with VentiRx and the other a research partnership with the Leukemia & Lymphoma Society (LLS). Celgene has now disclosed six partnerships this year, the most since 2007 when it inked 10.

Celgene will pay VentiRx $35 million upfront to develop Toll-like receptor 8 (TLR8) agonist, VTX-2337, in cancer indications. The two companies will advance the compound in a pair of Phase II trials in ovarian and head-and-neck cancer over the next few years under an exclusive, worldwide partnership. Celgene also gains an option to purchase the company. VentiRx is eligible to receive additional funding during the option period, including a potential equity investment by Celgene.

In-licensed from Array BioPharma in 2007, ‘2337 is an immunotherapy that directly activates human myeloid dendritic cells, monocytes and natural killer cells to produce high levels of mediators which orchestrate the integration of a patient’s innate and adaptive anti-tumor responses, according to VentiRx.

Celgene included a similar option to purchase in its deal late last year with genomics start-up Quanticel, which got $45 million upfront and sold an undisclosed amount of equity to Celgene. The biopharma gained exclusive third-party rights to Quanticel's platform, which conducts single-cell genomic analysis of tumor samples.

Likely even more long range than the VentiRx deal, the LLS partnership seeks to identify and fund blood cancer research projects. The idea is to use the patient advocacy group’s connections with academic research centers to advance the scientific and medical understanding of hematological malignancies. The partners will also work with biotech companies to help develop of novel treatments for blood cancer.

Defining its present and past, Celgene also helped make the case this week for its $2.9 billion acquisition of Abraxis BioScience, which was met with skepticism when announced in 2010, with the disclosure of positive Phase III data for Abraxane in melanoma. The company’s share price climbed nearly to $80 on the news. That’s close to its 52-week high, but Celgene still hasn’t broken out of the roughly $50-$80 range it’s been in for about six years.

Now that Abraxane has hit some milestones and has a slew of upcoming catalysts Celgene may not wish it could go back in time to undo the deal, although there were plenty of investors who wished it could do so in the deal’s aftermath.

Abraxane (paclitaxel protein-bound particles for intravenous suspension) has an Oct. 12 PDUFA date for the treatment of non-small cell lung cancer (NSCLC). An approval in NSCLS would be the first new indication for the drug since Celgene acquired Abraxis. At the time, Abraxane was already approved as a second-line treatment for metastatic breast cancer.

If it can successfully add NSCLC, along with melanoma and pancreatic cancers, Celgene is expected to build Abraxane into its next blockbuster franchise. Just modelling sales for second-line breast cancer and NSCLC, Jefferies analyst Thomas Wei expects Abraxane could hit more than $1 billion in sales by 2016 or 2017.

Still, Abraxane may be little help when it comes to Celgene’s long-term patent issues. The drug comes off patent in the U.S. next year, but newly approved indications would have five to seven years of protection, said ISI Group’s Mark Schoenebaum in a note this week. He expects Abraxane IP to hold up through 2020 in the U.S. Revlimid (lenalidomide) starts losing IP protection as early as 2019; it accounted for two-thirds of Celgene’s $4.7 billion in net product sales last year.

But as sci-fi aficionados know, when time travel is involved current and future selves often end up at odds, if not at outright war. Celgene needs to hit a lot of milestones including next week’s Abraxane PDUFA date and Phase III pancreatic data for the drug this quarter.

Celgene isn’t the only one working to get a glimpse of a rosier future. See who else is partnering up to do so in this week’s installment of . . .

Sanofi/Genfar: Sanofi chief executive Chris Viehbacher seems as good as his word when it comes acquisitions. Three weeks after identifying Colombia as an attractive emerging market to be in, he bagged the country’s second-biggest generics maker, Genfar. While in China last month at the World Economic Forum, Viehbacher identified Colombia, Vietnam and Indonesia as emerging markets that look attractive in terms of growth. On Oct. 2 Sanofi announced it was buying Genfar, which had total sales last year of $133 million, some 30% of that from outside Columbia. The purchase builds on Sanofi’s previous forays into Latin America comprising the $662 million purchase of Medley Pharmaceuticals, the big Brazilian generics maker, in April 2009, just days after the French company bought Mexico's Kendrick Farmaceutica. Genfar does business in Venezuela, Peru, Ecuador and 10 other countries. No financial terms were announced. Viehbacher has been diversifying the group since he took control in 2008 by acquiring small or mid-sized companies in areas including vaccines, over-the counter drugs and generics, especially in fast-growing emerging markets, such as Eastern Europe, Latin America and Asia. So, does the Genfar purchase mean Viehbacher – who has said Sanofi is open to “bolt-on” transactions of as much as €2 billion ($2.6 billion) this year – will soon announce deals in Vietnam and Indonesia? It would seem a safe bet. – Sten Stovall

Janssen/Astellas: J&J-owned Janssen Biotech beefed up its autoimmune pipeline by acquiring rights to Phase II Janus kinase inhibitor ASP015K from Astellas Pharma. Horsham, PA-based Janssen paid $65 million up-front in the Oct. 1 deal, which also includes development, regulatory and commercial milestones that could add $880 million to its value. Janssen would also pay double-digit royalties if the drug is commercialized. The deal covers the entire world except for Japan, where Astellas retains rights. Astellas has already conducted a Phase IIa study of the drug in moderate-to-severe plaque psoriasis patients, and will complete three Phase IIb trials already underway in rheumatoid arthritis. Janssen will assume all further development costs outside Japan after those studies are completed. The drug could be an eventual successor to Janssen’s top-selling Remicade (infliximab) and Simponi (golimumab), both of which are approved in RA, psoriatic arthritis and ankylosing spondylitis. No JAK inhibitor has yet been approved for rheumatoid arthritis, but FDA is soon expected to rule on Pfizer’s tofacitinib, with a PDUFA date of Nov. 21. – Paul Bonanos

Takeda/LigoCyte: The Japanese pharma is making good on its commitment to make vaccines a priority. Takeda will acquire vaccine play LigoCyte for an upfront payment of $60 million, with additional undisclosed contingent development payments. Late last year, Takeda announced the establishment of a Vaccine Business Division. To run the new division, Takeda hired the former director of vaccine delivery in the Global Health Program at the Bill & Melinda Gates Foundation, Rajeev Venkayya. Prior to the Gates Foundation, Venkayya was the special assistant to the President for Biodefense at the White House. With the Ligocyte acquisition, Takeda will gain a Phase I/II vaccine to prevent norovirus gastroenteritis, the only norovirus vaccine in clinical trials, according to the company. Novovirus is the most common cause of gastroenteritis and food-borne illness in the U.S. and the cause of about 200,000 deaths annually, mostly in developing countries. The norovirus vaccine uses LigoCytes proprietary vaccine-like particle (VLP) technology. Takeda will also gain LigoCyte’s preclinical vaccines against respiratory syncytial virus, influenza and rotavirus. LigoCyte management will join Takeda’ Vaccine Business Division and continue to operate in Bozeman, Montana. - Stacy Lawrence 

Evotec/Bayer: Two European pharmas forged a multi-target alliance to develop clinical candidates to treat endometriosis. Bayer Pharma paid €12 million ($15.5 million) up-front to enter a five-year collaboration with Hamburg-based Evotec, with a goal of discovering up to three clinical candidates and jointly bringing them through preclinical research. Bayer will assume development costs related to the drugs upon their entry into the clinic, and could owe Evotec up to €580 million in preclinical, regulatory, clinical and commercial milestone payments, plus low-double-digit sales royalties, if the drugs advance and are commercialized. Bayer already markets Visanne (dienogest), a once-daily oral tablet that treats pain and lesions associated with the disorder, as well as a variety of other women’s health products including contraceptives. Endometriosis, which most frequently afflicts women between 25 and 35, is said to affect 176 million women worldwide, including about 10 percent of women of reproductive age. – P.B.

Servier/Ethical Oncology Science: French drug maker Servier is again moving to bolster its oncology pipeline through a deal with the Italian biopharma Ethical Oncology Science, its second in-licensing deal in as many weeks. In the latest agreement, Servier has acquired rights to an early clinical-stage antitumor drug targeting Fibroblast Growth Factor Receptor 1 and Vascular Endothelial Growth Factor Receptor 1-3, the company announced Oct. 1. In exchange Servier will pay €45 million ($57.5 million) upfront for rights outside the U.S., Japan and China. In those territories, EOS will retain rights. EOS also stands to receive clinical and registration milestones as well as royalties. The focus of the development of the drug will be mainly on breast cancer, where it has demonstrated promising results in early human trials, according to the company. In an earlier deal, announced Sept. 20, Servier partnered with MacroGenics Inc. for an option to develop and commercialize Dual-Affinity Re-Targeting (DART) products from its bi-specific antibody platform directed at three undisclosed tumor targets. Servier paid $20 million upfront for an option to obtain licensing rights in markets outside the U.S., Canada, Mexico, Japan, Korea and India. - Jessica Merrill

Leo Pharma/Charité: The Charité, which started out in the 1700s as a plague hospital for the poor but now incorporates Berlin's university hospitals, one of the largest medical organizations in Europe, is to collaborate with Denmark's mid-sized company, Leo Pharma, to discover and develop new treatment options for patients with skin conditions like psoriasis and actinic keratosis. It’s a bold step for Leo Pharma, which has previously not been particularly active in forging scientific collaborations, and can be viewed as the next move in the company's quest to search for future growth opportunities. The partners will test treatment solutions that no one has explored before, and identify new therapeutic areas within dermatology for Leo Pharma, the company announced Oct. 3. The collaboration is billed as the first of five long-term research relationships that Leo Pharma wants to set up with external partners in four countries – the U.S., Germany, France and Australia - by the end of next year. The research will supplement Leo Pharma's own internal R&D activities.- John Davis

Theravance/Alfa Wassermann: Mid-sized Italian company Alfa Wassermann is continuing to focus its research on all things gastrointestinal by collaborating with San Francisco-based Theravance on the development of that company's Phase II 5HT4-agonist, velusetrag (TD-5108), in gastroparesis. There are few therapeutic options for the disorder, which is characterized by delayed gastric emptying leading to bloating, nausea and vomiting. Velusetrag has already shown significant prokinetic activity after once-daily dosing in 400 patients with chronic idiopathic constipation. Under the agreement, Alfa Wassermann will fund the velusetrag research program in gastroparesis until the end of Phase II, and at that point will have an exclusive option to license the product for further development and commercialization in the EU, Russia, China, Mexico and certain other countries. Theravance will retain full rights to velusetrag for the U.S., Canada, Japan, and certain additional countries. If Alfa Wassermann exercises the option, Theravance will receive a $10 million fee and could receive further development, regulatory and sales milestone payments totalling up to $53.5 million, the two companies announced Oct. 2. Theravance could also receive royalties on net sales ranging from the low teens to 20%. Alfa Wassermann, a private Bologna-based company with revenue of €335 million ($434 million) in 2011, is best known for its gut-selective antibiotic, Xifaxan (rifaximin), which is marketed in more than 30 countries. It also markets a low molecular heparin, Fluxum (parnaparin), and a heparinoid, Vessel (sulodexide), and has ambitions to extend its direct presence in the EU and emerging markets. Theravance markets the injectable antibiotic, Vibativ (telavancin) in the U.S., and is collaborating with GlaxoSmithKline on the development of a combination COPD product which has completed Phase III clinical studies.- J.D.

BioSante/ANI Pharmaceuticals: In perhaps a last-ditch effort to derive value from development-challenged, female sexual-dysfunction drug LibiGel (transdermal testosterone gel), BioSante is undertaking a reverse-merger with specialty branded and generic pharmaceutical company ANI Pharmaceuticals. Each company’s board of directors has approved the proposed all-stock transaction in which ANI shareholders would end up owning 53% of the combined company and BioSante shareholders the remaining 47%. The deal, announced Oct. 4, also includes a contingent value right tied to the potential sale, transfer or licensing of LibiGel that could yield up to $40 million for existing BioSante shareholders. After Phase III trial data were clouded by a higher-than-expected placebo response, BioSante was left to design new pivotal studies for LibiGel, intended to address female hypoactive sexual disorder, that would ameliorate the placebo effect. In July 2011, the Illinois-based firm raised $45.1 million in a follow-on public offering, selling 16 million shares at $3 per share to fund continued development of LibiGel. The new company will be called ANI Pharmaceuticals, Inc., with existing ANI President and CEO Arthur Przybyl at the helm. Przybyl also will hold a seat on the board of directors, along with four current ANI directors and two from BioSante. The new company will seek to out-license LibiGel and put BioSante’s cash toward ANI’s niche branded and generic drug business, which generated net sales of $16 million in 2011. BioSante also brings a pipeline of cancer vaccines being investigated in 17 Phase I and Phase II trials to the new entity, while ANI has a contract manufacturing organization. - Joseph Haas

Flashing back to 5AM? Trippy alarm photo courtesy of loopoboy 2.0.

"The Trenton Patient"

In Tuesday's New York Times, biotech writer Andrew Pollack has an overview of the work in progress to reach a cure for HIV, a story that we covered in the October issue of Start-Up.

Our favorite part of the story is Pollack's quotes from the anonymous HIV-positive patient whose early-stage clinical results were highlighted in September by Sangamo BioSciences. Sangamo's treatment SB-728-T aims to replace an HIV-positive person's immune cells with versions that lack the CCR5 receptor, the virus's main avenue of infection, and render them resistant to HIV.

The patient, who participated in a Phase I trial of SB-728-T at the University of Pennsylvania, was a lively interview. Identified only as "the Trenton patient," he told Pollack that the Sangamo treatment has made him feel both "like Superman" and "like Oliver Twist," the Dickensian orphan who held out his empty bowl and asked for more, please.

He might get his wish. As we explained in Start-Up (excerpted below), the Trenton patient's results were remarkable enough to encourage two more clinical trials, including one in patients who carry the same genetic quirk: 

The Penn trial also included a three-month interruption of the patients' HAART regimens to see if the gene therapy had any effect on viral load. In one patient, viral load went down until the virus was undetectable and stayed that way until the end of the treatment interruption. That patient turned out to be heterozygous; one of his two CCR5 genes was already mutant, which means the treatment resulted in a higher amount of biallelic modification in the patient – in other words, mutations to both copies of CCR5 genes. It's what [Sangamo CEO Edward] Lanphier calls "an important clue" that biallelic modification could have a strong correlation to reduction of viral load, and it will be the basis for Sangamo's next two studies scheduled to start in the first half of next year, with their clinical phase not yet determined. One study will focus on heterozygous patients specifically to see if results from the Penn trial patient can be repeated; the second study will use engraftment enhancement techniques already in use for cancer treatments to boost biallelic modification and make SB-728-T potentially applicable to a much broader HIV-positive population, not just heterozygotes.

For more on the revival of hope in HIV treatment, as well as some hard questions about who will fund the important work, read our story and let us know what you think.

Image courtesy of flickr user Sully Pixel via a Creative Commons license. 

FDA Pronounces Rotavirus Vaccine Safe After All: Will FDA Leadership be More Cautious Next Time?

It’s official: FDA has given the all clear to resume use of GlaxoSmithKline’s Rotarix despite evidence of contamination with porcine circovirus. (Read the official announcement here.)

That outcome was something of a foregone conclusion after an advisory committee discussion of the issues last week—and especially after the discovery that Merck’s RotaTeq may be similarly contaminated. After all, it is one thing to suspend use of a vaccine when there is a readily available alternative; it is another to suspend vaccination for a disease altogether. (Read our coverage in “The Pink Sheet” here.)

There are interesting and important implications for manufacturers here, especially as you think about standards for cell-culture based flu vaccines in the future. More generally, any biological product is vulnerable to advances in analytic technology that make possible detection of the previously undetectable.

But we wonder what if any implications this will have on FDA’s newly installed leadership team. We doubt there will be much call to revisit this episode from Congress—as there would have been, if, say, Andrew von Eschenbach were still the commissioner and this were 2007. As you may recall, that was a time when seemingly every decision made by FDA came in for scrutiny on the Hill.

Now, FDA’s leadership has some breathing room: a Democratically controlled Congress has no reason to undercut a Democratically appointed FDA commissioner.

Still, there may be some internal lessons learned that will have implications for how the Hamburg team operates from here on out. There is an old maxim routinely cited by career staff at FDA: “absence of evidence is not evidence of absence.” The leadership team’s response to the circovirus contamination issue appears to be open to some significant second-guessing on that score.

Here is how FDA Commissioner Margaret Hamburg explained the suspension during an address at the Food & Drug Law Institute annual meeting April 22. She cited Rotarix as a classic public health dilemma facing the agency. On the one hand, there was an unexpected contaminant in a vaccine, one that is not known to pose safety risk but still clearly not an acceptable finding. On the other hand, the vaccine is for a disease that is generally mild in the US, but a significant public health threat globally.

Hamburg cited FDA’s actions as an example of “creativity” in applying legal tools in the context of emerging issues where there is no black-and-white answer.

“Our decision was based in part on the fact that an alternative rotavirus vaccine without the extraneous viral material is widely available in this country. But we did not recall the Rotarix vaccine or state that it is unsafe. We also made it clear that other countries could and should make different judgments based on their local assessment of benefit versus risk. Our recommendation was based on an effort to balance science and data with a certain level of uncertainty and also a recognition that this was really the first example of an application of new technologies that allowed us to learn more about a vaccine product.”

Sounds reasonable enough. But read that first part again: “Our decision was based in part on the fact that an alternative rotavirus vaccine without the extraneous viral material is widely available in this country.”

That turns out not to be a “fact” after all, since Merck’s product ultimately showed signs of viral DNA (albeit apparently not the virus itself.) It is one thing to “suspend” use of a product due to an uncertain risk and encourage patients to choose a product free of that risk. But it turns out that FDA, in effect, encouraged doctors and parents to use Merck’s product even though it has a similar risk.

It isn’t just Hamburg who highlighted Rotarix as emblematic of the agency’s new “public health approach to the law.” Chief Counsel Ralph Tyler cited Rotarix as an example of how the Chief Counsel can and should enable FDA’s leadership to meet its public health objective (as we noted here).

Tyler took on New York Times reporter Gardiner Harris, quoting his March 23 article on Rotarix and taking issue with the assertion that FDA’s action “demonstrates that lawyers have lost considerable power at the FDA” since “neither statutes nor agency rules allow the commissioner to ask doctors to pause in their use of a medical product because the agency does not regulate the practice of medicine.”

“This breathtakingly incorrect view of the proper role of the agency’s lawyers is exactly backwards,” Tyler declared. “Contrary to the view expressed by Mr. Harris, empowering a client to act empowers, rather than diminishes, the lawyer.”

“The frequency with which a lawyer says ‘no’ is most assuredly not the measure of a lawyer’s power,” Tyler concluded.

Those remarks were addressed rhetorically to Harris, but the real target was the past approach of the Chief Counsel’s office under the Bush Administration, and most notably under former Chief Counsel Dan Troy. Troy was the first official appointed at FDA during the Bush Presidency, and set a tone of limiting FDA’s actions to those he viewed as soundly based in explicit legal authority. Troy argued that FDA was in danger of losing credibility with the courts, which would potentially eliminate its ability to protect the public health altogether.

Troy, incidentally, happens to be chief counsel for GSK.

So did FDA try a little too hard to find an opportunity to declare a new doctrine for protecting the public health? Should the agency have waited for more data before, in effect, giving the rotavirus vaccine market to Merck?

Those questions are all too easy to answer with the benefit of hindsight. As Hamburg said at FDLI: “We had to operate within shades of gray and I think managed to do so. And the law supported us.”

The real question is whether Hamburg may decide to be more cautious next time …

image from flickr user ~K~ used under a creative commons license

DotW: Noble Pursuits

It's Nobel week and the rewards and riches went to experts who've spent their careers ferreting out the secrets of telomeres (medicine), ribosomes (chemistry), and fiber optics (physics). And then there was Barack Obama, who took home the much vaunted--and in this case highly controversial Nobel for Peace. Who needs Chicago when you have the Swedes and Norwegians, eh?

When their blackberries started buzzing, Obama aides reportedly thought they'd been punk'd--it's not April 1, for the record. It ain't hard to see why. Obama is only the third sitting president to win the award and he hasn't been in office long enough to resolve the Middle East conflict, the war in Afghanistan, or the ongoing conflicts in Iraq. What's more, those rumors keep swirling about an invasion of Canada...OK, we're kidding, but it's hard to parse the logic behind the award. Perhaps they meant to give him the Peas Prize in honor of Michelle's bounteous organic White House garden.

Whatever the reasons, we wonder if the political capital of the Nobel will give Obama the domestic leverage to push through meaningful health care reform. Another noble pursuit, the public option, which was given up for dead after weeks of debate, showed new signs of life this week. In an effort to get to 60 (it sounds like some self-help title aimed at lowering cholesterol and increasing dietary fiber, doesn't it?), Senate Dems have unveiled a compromise. (And this doesn't include the trigger option Senator Snowe is mulling.)

The plan is simple: establish a strong national public option for insurance coverage but give individual states the right to opt out. Such a solution, in theory, assuages the more liberal members of Congress afraid of losing their, ahem, moral compass, while pacifying the more conservative denizens. How this proposal would actually be implemented is a mystery. (Hey, this is a free publication. You want real solutions, go read The RPM Report or "The Pink Sheet".)
But enough dithering. It's time to check our moral compass--wait, it's here somewhere. Hark, the arrow is pointing straight toward...


Novartis/Paratek: A clearer, if not necessarily easier, pathway to FDA approval for antibiotics may have spurred Novartis' Oct. 8 purchase of exclusive worldwide rights to Paratek Pharmaceuticals' Phase III broad-spectrum antibiotic PTK 0796. Specific financial terms of the deal weren't disclosed, but Paratek said it could earn up to $485 million during the life of the deal, including an upfront payment and potential milestones. The privately-held Boston biotech also would receive undisclosed royalties on sales if PTK 0796 reaches the market.

The companies tout the compound as a first-in-class aminomethylcycline--basically a next-generation tetracycline--with the potential to become the first broad-spectrum antibiotic given once daily by I.V. or as an oral tablet to treat infections caused by drug-resistant bacteria such as methicillin-resistant Staphylococcus aureus (MRSA) or multi-drug resistant Streptococcus pneumoniae. Currently being tested in a Phase III trial in complicated skin and skin structure infections (cSSSI), '0796 has demonstrated ability to work as a single agent against a number of infectious diseases. A second Phase III trial in community-acquired bacterial pneumonia (CABP) is planned, Paratek CEO Thomas Bigger told "The Pink Sheet" DAILY. Paratek will continue to participate in clinical study and manufacturing, while Novartis will take care of worldwide marketing.--Joseph Haas

Genentech/SurModics: Genentech inked a small deal--$3.5 million upfront and $200 million in donwstream milestones--with drug delivery specialist SurModics to develop a sustained release version of Lucentis this week. But don't let the small upfront fool you. Age-related macular degeneration remains a hot area of investment for VCs and biotechs in part due to the success of Lucentis. In 2008 it totaled $875 million in U.S. sales, and with the recent CMS decision it's unlikely Avastin will steal its market share anytime soon.

Despite Lucentis's effectiveness--it stops loss of vision in more than 90% of patients and restores some sight to about a third of that population--it's far from a perfect drug. The regular monthly injections are a burden to patients and physicians and costly to the healthcare system. New options to reduce the injection frequency would be a welcome step forward. News of the partnership sent SurModics' stock soaring nearly 20%, but there's plenty of competition to worry about. A number of companies are developing competing delivery or device solutions, including Neurotech Pharmaceutical, Buckeye Ocular, NeoVista, and Oraya Therapeutics.--Ellen Foster Licking

Arigene/Trimeris: South Korean medical equipment maker Arigene's acquisition of Trimeris marks the official end of a once high-flying biotech. Trimeris discovered the HIV fusion-inhibitor class of drugs and partnered its Fuzeon treatment with Roche back in 1999 for $10 million upfront. (The Swiss pharma has since paid out milestones totalling at least $24.75 million during the life of the deal.) But the two firms abandoned development of a follow-on fusion inhibitor, T-1249, in 2004, and a next-generation compound that offered the possibility of less-frequent dosing and a better safety profile didn't pan out either. Roche returned all rights to that program to Trimeris in 2007 in exchange for a nominal royalty on future sales.It's been tough going ever since. Enter Arigene, a South Korean firm that markets a line of medical instruments under the Ubiquitous Healthcare Systems label. Arigene is offering $3.60 a share in cash, a 40% percent bump over Trimeris's closing stock price on Oct. 1, to expand its operations into "the broader biotechnology industry."

GSK/Jiangsu Walvax Biotech: In its second vaccine-related collaboration with a Chinese company this year, GlaxoSmithKline announced Oct. 6 it's creating a joint venture with Jiangsu Walvax Biotech to develop and manufacture pediatric vaccines in China. The firms will build a new manufacturing facility for Priorix, Glaxo's three-in-one pediatric vaccine for mumps, measles and rubella, and they will develop vaccines beyond MMR. The deal also involves a technology transfer to let the JV make the vaccines locally, according to Glaxo. (FYI, Walvax is a recently created affiliate of China's second largest producer of the haemophilus influenzae type b (Hib) conjugate vaccine, Yunnan Walvax Biotech.) The two companies will invest a total of £41.2 million ($65.6 million) in the joint venture, with Glaxo initially providing more than half the money and owning a 65% stake in the JV. This is the second vaccine-related JV Glaxo has signed in recent months. In June, the Big Pharma inked a five-year deal with China's Shenzhen Neptunus to make seasonal, pre-pandemic and pandemic flu vaccines.--Joseph Haas

Our final deal of the week is actually a...



Ipsen/Spirogen: Partners since 2003 on a cancer compound, Ipsen this week gave worldwide rights back to Spirogen, which now takes the reins on future development and commercialization with help from a new financial backer. In the original deal, Ipsen gained rights to SJG-136, a DNA minor groove binder, and took a 20% stake in Spirogen. Six years later with the compound entering Phase 2 to test against ovarian cancer and blood-borne malignancies, Spirogen takes over, and Ipsen becomes eligible for commercial milestones and royalties. Spirogen will also tap private-equity firm Celtic Therapeutics Holdings, which invests in projects instead of companies, for up to $15 million to help development of the compound, now renamed SG-2000. "Up to..." can mean lots of things, of course, but the firms didn't say how much of it was guaranteed.--Alex Lash

(Image courtesy of flickrer niznoz used with permission through a creative commons license.)

DotW: Straight To It

There's no time this week for snark or clever themes, since the IVB team is also busy pulling together the October issues of START-UP and IN VIVO. (You can rail all you want in the comments section about our slacker attitude.) So we'll get straight to what you all really want: write-ups of the week's most interesting M&A and licensing deals. Herewith your regular analysis...

Sanofi/Fovea: Sanofi-Aventis announced Oct. 1 it would purchase its fellow French company, Fovea, an ophthalmology biotech, for a reported total deal value of €370 million (about $538 million). Fovea CEO Bernard Gilly says his firm will receive a “significant chunk” of the money upfront, with the remainder designed as earn-outs. Fovea will have three years to meet specified clinical milestones in order to obtain the rest of the cash. An increasingly popular characteristic of big pharma acquisitions recently, the earn-out structure also is expected to provide significant incentive for Gilly and the rest of Fovea’s management to stay on. Fovea essentially will become the ophthalmology unit of Sanofi, with Gilly saying his company will have the flexibility to run its programs, but with a reliable source of funds and other resources.
After deciding to get into ophthalmology, Viehbacher and company reportedly scouted out nearly 100 biotechs, many of which were working on vascular endothelial growth factor inhibitor programs. But it selected Fovea, which is not working in VEGF at all. In addition to continuing its own work, Fovea, whose top programs are in-licensed, will be tasked with growing the ophthalmology unit through potential asset acquisitions. It also may get involved with the gene therapy-based ophthalmology programs Sanofi licensed from Oxford BioMedica this past April--Melanie Senior.

Sanofi/Merrimack: The same day as the Fovea acquisition, Sanofi paid $60 million upfront to Merrimack Pharmaceuticals for exclusive, worldwide development and co-commercialization rights to MM-121, a Phase I (yes, Phase I!!!) monoclonal antibody that potentially fights a broad range of cancers by blocking signaling through the ErbB3 receptor. Merrimack CEO Robert Mulroy said his team and Sanofi will spend the next few weeks determining the best cancer indications to pursue with ‘121. Preclinical studies showed the compound inhibited ErbB3 phosphorylation in lung, ovarian, prostate, renal, breast and colon cancer. Meanwhile, in the coming weeks, the Cambridge, MA-based biotech also plans to launch a Phase I/II study of ‘121 in combination with Tarceva in non-small cell lung cancer. The deal specifies that Merrimack will continue clinical development through Phase II proof-of-concept at which point Sanofi will take over development. Better yet from Merrimack's point of view, from this day forward the big pharma is footing the bill for the clinical work. (An enlightened view of alliances, don't you think? Either that or others were competing for the compound.) In addition to the generous upfront payment, the deal also includes significant bio-bucks – Merrimack could earn up to $470 million in milestones plus tiered double-digit royalties on product sales and retains U.S. co-promotion rights to the drug--Joseph Haas.

Johnson & Johnson/Crucell: Taking a plunge into vaccines, J&J will collaborate with Dutch biotech Crucell to develop and commercialize flu-mAB, a monoclonal antibody intended to protect against multiple strains of influenza. Under the deal announced Sept. 28, J&J purchased 14.6 million newly issued shares of Crucell for €301.8 million ($441.8 million), giving the pharma an 18 percent stake in Crucell. (Have you noticed J&J seems to be one of the few companies embracing the partial minority stake ownership model? It's deal with Elan also involved in 18% solution.) With the “swine” H1N1 pandemic strain re-emerging for the Northern Hemisphere’s fall flu season, a combination of public fear, government funding and increased private investment have re-invigorated the influenza market. The U.S. government recently approved and order batches of four H1N1 vaccines, with first doses due this month. J&J’s choice of universal flu vaccine as its first entry into the vaccine arena is viewed as a longer-term play. Crucell, which already manufactures and sells vaccines for a variety of diseases, will retain commercial rights to a majority of European markets for any product resulting from the collaboration. While only preclinical work has been done on flu-mAB so far, Phase IIa proof-of-concept trials are expected to begin in 2010.--Carlene Olsen

Merck/CSL: Merck waited a while to get back into vaccines but on Sept. 28 signed a six-year deal to market Australian firm CSL’s Afluria in the U.S. starting next year. Approved by FDA in 2007 for immunization of adults against virus subtypes A and B, Afluria is a non-adjuvanted trivalent seasonal flu vaccine sold in two different formulations – thiomersal-free pre-filled syringes and multi-dose vials. Previously partnered on the human papillomavirus vaccine Gardasil since 1995, neither Merck nor CSL disclosed the deal’s financial terms. Under the transaction, CSL Biotherapies, a subsidiary of CSL Limited, will supply Afluria to Merck, which will be responsible for all aspects of U.S. commercialization. Marketed in 27 countries, Afluria produced sales totaling $108 million during CSL’s most recent fiscal year, which ended June 30. CSL is one of four firms approved by the U.S. government to provide vaccine for H1N1 influenza this year, and through August it also had sold nearly 4 million doses of standard flu vaccine for this season in the U.S. market.--Emily Hayes

Abbott/Solvay: Abbott has seen the future and the future is Advanced Medical Optics, Visiogen, and now Solvay too. The week's deal winner--in terms of dollar value--was clearly Abbott's $6.6 billion acquisition of Solvay, a company that's been rumored to be up for grabs for months. The deal broadens Abbott's geographic footprint, paves its entry into vaccines and strengthens its ownership stake in the blockbuster TriCor /TriLipix cholesterol-fighting franchise. It also adds more than $3 billion to Abbott's annual sales and will be accretive near term. (Hey, isn't that more important than innovation)? Solvay won't be a complete salve, however. Buying its Belgian business partner increases Abbott's exposure to near-term generic competition, as TriCor loses patent protection in 2011. And the deal doesn't eliminate Abbott's dependence on the anti-tumor necrosis factor Humira, a franchise that is facing increased competition from rival brands. It didn't necessarily satisfy analysts either. "While a Solvay acquisition would likely be accretive to EPS, we would prefer to see Abbott pursue more strategic assets that would add better long-term growth," Credit Suisse analyst Catherine Arnold said in a Sept. 27 research note, ahead of the announcement. Convinving naysayers was a big part of Abbott's strategy in announcing the deal. The focus on the conference call wasn't so much on TriLipix, or Certriad, a fixed dose combo of TriLipix and Crestor that seems likely to be the future growth driver within Abbott's cholesterol franchise. No, Abbott's management played up Solvay's international abd branded generics offerings instead. "We recognized many years ago that growth comes in different forms," CEO Miles White said. "It comes from strong branded franchises in developed economies, as well as from branded generics in fast-growing emerging markets." The focus on high-growth areas such as emerging markets and branded generics is hardly surprising. It's a pattern that has been adopted across the pharmaceutical industry as the U.S. drug marketing landscape has become more challenging and shows again that in the on-going debate about whether to be big or small, most pharma execs say bigger is better.--Jessica Merrill