Financings of the Fortnight Gets Comfortable In Genes

Twenty-three years after the first gene therapy clinical trial began, investors are finally showing confidence in the sector. The field still isn’t without risks, but some of its most daunting challenges are being resolved as clinical data broadens, regulators show support, and manufacturing improves.

The promise of gene therapy, which entails replacing a malfunctioning gene with a properly functioning copy delivered by a viral vector, is that its treatments are administered once with long-lasting, potentially curative results. That has tantalized scientists since the first gene therapy trials began in 1990, even as clinical research endured a standstill in the early 2000s after the deaths of several trial subjects. Their first big payoff came late last year, when European regulators approved uniQure’s Glybera (alipogene tiparvovec) to treat the rare disease lipoprotein lipase deficiency.

Since April, VC syndicates have backed two new companies studying new gene therapy treatments. First, Novartis Venture Fund, Abingworth, Versant Ventures and Index Ventures committed €32 million ($41.4 million) in GenSight Biologics’ springtime Series A round. Then Versant doubled down last month, contributing to Audentes Therapeutics’ $30 million Series A alongside OrbiMed Advisors and 5AM Ventures. Ophthalmological treatment developer GenSight and muscle-wasting specialist Audentes join a field of private companies that includes Celladon, Finland’s FKD Therapies, and uniQure.

More notably, gene therapy developer bluebird bio took advantage of the appetite for biotech listings in June, blowing past expectations with a $116 million IPO. In the aftermarket, bluebird shares touched $35, more than double their opening value; they currently trade above $27, giving the company a market capitalization of about $620 million.

Why has interest been renewed? “In terms of the investment community, the barriers to gene therapy as a therapeutic modality are being erased,” Celladon CEO Krisztina Zsebo told “The Pink Sheet” last month.

The body of evidence has grown significantly since 2006, with proof-of-concept shown across a variety of diseases. The manufacturing process has been industrialized and, while still expensive, occurs at a scale that appears sustainable. And in the wake of Glybera’s approval overseas, U.S. regulators have revised their guidance for clinical trials on therapies, suggesting cautious procedures but implying a willingness to approve a product when the time is right. It may be soon, as uniQure pursues Stateside approval.

It’s not just investors getting into the act. Several pharmas have their own programs, and others are striking high-profile deals. Celgene paid bluebird $75 million up-front in May, as the two inked a cancer research partnership, while uniQure teamed with Chiesi Farmaceutici for a territorial rights deal. Novartis and Boehringer Ingelheim have also licensed vector-related technology that could lead to new products as well.

Some risks are still very present. Many therapies pose a danger of “insertional oncogenesis,” the accidental triggering of a nearby gene that leads to cancer, although the vectors most commonly used today (adeno-associated virus and Lentivirus) are believed to be safer than the ones that led to patient deaths more than a decade ago. For now, the trailblazing companies are mostly operating in rare-disease fields where alternatives are scarce; as data sets grow, the treatment modality could soon be used in broader areas.

And although bluebird’s investors have reached liquidity, it’s tough to assess the value of gene therapy companies because of unresolved questions around product pricing. uniQure appears to be targeting a price of €1.2 million ($1.6 million) per injection, payable over a period of five years. That could induce sticker shock, but Versant venture partner Tom Woiwode argues that it’s quite reasonable, since a single, potentially curative treatment could ultimately cost less than a lifetime of chronic pharmaceutical use.

In the longer term, it’s also unclear whether gene therapies will really be permanently curative, or will need to be re-administered periodically. Moreover, a handful of early successes in rare diseases won’t necessarily carry over to more widespread disorders. Payer relationships haven’t yet been established, nor is there a precedent for a high-priced, one-time treatment before uniQure’s market entry. But each additional step offers a little more clarity for investors willing to risk their money on a treatment modality that holds so much promise.

We can't promise you, dear reader, a curative therapy, but if you don't mind a biweekly dosing schedule, we're always happy to bring you...

Edimer Pharmaceuticals: The tiny Cambridge, Mass. firm said July 30 it has raised an $18 million Series B round to test its protein replacement therapy EDI200 in newborns with X-linked hypohidrotic ectodermal dysplasia (XLHED), a rare genetic disease that can lead to fatal hyperthermia, as well as loss of hair and teeth in older patients. The Phase II trial, scheduled for six to ten newborns, comes on the heels of a Phase I trial in adult patients. The final data are still under analysis, Edimer CEO Neil Kirby told our Pink Sheet colleagues. Kirby is unsure what Edimer’s strategy will be for Phase III if EDI200 is successful in Phase II study, but said a partnership would likely be necessary to commercialize the drug if approved. New Enterprise Associates led the round, with Sanofi-Genzyme BioVentures also a first-time investor. NEA gets a seat on the board, while Sanofi-Genzyme, which can offer considerable expertise in rare disease drug development, will provide a board observer. Third Rock Ventures and VI Partners, which funded Edimer’s $22 million Series A in 2009, also are participating. -- Joseph Haas

aTyr Pharma: The San Diego biotech pulled in a $49 million Series D round as well as $10 million in venture debt to fund clinical trials of treatments for rare immune disorders. aTyr is developing protein therapeutics based on physiocrines, which are extracellular fragments of the tRNA synthetase family of enzymes. (You can find a deeper discussion of aTyr here in a recent START-UP feature on companies pursuing more phenotypic inquiry in the drug discovery process.) The firm's work on physiocrines -- which were first called "resectins" -- spun out of Scripps Research Institute and was backed by Alta Partners, Cardinal Partners, and Polaris Ventures, all of which participated in the new Series D. Domain Associates, which led aTyr's Series C, also participated, as did an unnamed global investment fund. The $10 million loan comes from Silicon Valley Bank and puts aTyr's total cash raised through equity and debt past the $100 million mark. tRNA synthetases have been well known for decades as humble helpers with protein synthesis within cells. No one gave them much thought as disease-modifying agents. Scripps reseachers realized the synthetases were also getting outside cells and being cleaved; part of the outcome of that cleavage were physiocrines, and that these fragments have extracellular signaling function that might also have disease implications. aTyr's focus on rare immune disease is fairly recent; in 2011, it quietly shelved its previous lead candidate, a thrombocytopenia treatment. -- Alex Lash

Dicerna Pharmaceuticals: This alumnus of the 2011 A-List said August 1 it has raised a $60 million Series C round, its first venture round in three years. The Boston-area biotech was part of the wave of companies to launch last decade, led by Alnylam Pharmaceuticals, to pursue therapies based on the breakthrough of RNA interference. Alnylam has had early clinical success, but generally the field's high expectations have been tempered because of drug-delivery limitations and other problems. Dicerna, however, has attracted a roster of new backers generally regarded as "crossovers," or public investors looking to buy into private companies to gain a foothold in a pre-IPO round. Dicerna's Series C was led by RA Capital and included Brookside Capital, Deerfield, and Omega Funds, which often buys shares from venture investors looking to cash out. The round also included all five of Dicerna’s existing institutional investors: Abingworth Management, Domain Associates, Oxford Bioscience Partners, Skyline Ventures and SR One. -- A.L.

BioMotiv: The drug-development accelerator based in Cleveland said August 5 it has raised $25 million from Nationwide Mutual Insurance and other investors, bringing its total cash raised to $46 million. That's about half of the firm's goal of $100 million to bring to fruition an asset-centric development model that looks to in-license preclinical compounds, work them into the clinic, and sell them to pipeline-hungry buyers with Phase Ib or IIa data. The only previously disclosed investors, which provided BioMotiv’s first $21 million, are University Hospitals of Cleveland and the Harrington family. BioMotiv is one piece of a $250 million initiative – The Harrington Project for Discovery and Development – spurred by the family to accelerate biomedical research into new therapies. Like many asset-based schemes, the BioMotiv structure allows returns from individual projects to pass through to investors. But as CEO Baiju Shah told our sister publication START-UP, which featured BioMotiv in its June Capital Matters column, the for-profit's investors are not limited partners; they function as direct investors with a certain amount of operational control, just as would the shareholders in a corporation. So when a return from a project comes in, investors will decide whether to distribute those earnings to themselves and management in an 80/20 split, or to plow them back into company operations. BioMotiv has already brought in eight compounds: two in oncology, three autoimmune-related, and one each in inflammation, ophthalmology, and infectious disease. The goal is 20 projects in hand at any one time. To maintain that steady state, the firm will have to reach another goal: an "evergreen" flow of capital to pour back into projects from successful exits. Shah hopes to have the first in the clinic in 2014.  -- A.L.

All The Rest: To support a clinical study of icaritin in advanced hepatocellular carcinoma, Shenogen raised $30M in Series C funds…Imperial Innovations led a £13.5M investment in the newly merged PolyTherics/Antitope…antibody company Apexigen completed a $20M Series A…vaccine player Vaxart raised $20M in a Series C financing...Karyopharm added $19M on to its Series B round, bringing the total to $67.2M…developing a Pfizer-discovered compound for premature ejaculation, Ixchelsis raised $14M from TVM Life Science Ventures VII…Merck Lumira Biosciences Fund led a $13.2mm investment in enGene…Rhythm Pharmaceuticals completed a second $11M tranche on its Series B, which now totals $44M…to advance monoclonal antibody linker technology, Meditope Biosciences closed a $3.6M Series A…Sialix, which is researching the role glycans play in cancer and inflammatory diseases, raised $1M in Series B funds from angel investors…AuraSense Therapeutics added on an undisclosed amount of money to its $5.4M Series B…days after completing reverse merger with Marathon Bar Corp., Lipocine privately raised $37.8M…to pay for clinical trials of cancer candidates Validive and Livatage, BioAlliance Pharma completed a €8.7M PIPE…Transition Therapeutics grossed $11M, enough funding to finish three major Phase II studies…cell therapeutics company TiGenix closed a €6.5M capital increase….Aeterna Zentaris raised $7.8M in a private placement to advance its zoptarelin doxorubicin (AEZS108) program in prostate cancer…CNS disorder-focused Vanda Pharmaceuticals closed on a $52.3M FOPO…Organovo, developer of 3D human biological disease models, publicly raised $40.5M…Opexa Therapeutics grossed $18M in a FOPO and plans to spend the money on Phase IIb studies of immunotherapeutic Tcelna...to pay for Phase I trials of BCX4161 for hereditary angioedema, BioCryst completed a $17.6M secondary offering…synthetic biology company Intrexon priced its IPO at $16, the top end of its range, to gross $160M...small-molecule cancer drug developer Onconova grossed $89M in its IPO…Conatus, focused on hepatic diseases, raised $66M in its IPO…stem cell manufacturer Cellular Dynamics completed its $45.6M IPO…Sophiris Bio set IPO terms at 5M shares…Acceleron Pharma, Five Prime Therapeutics, and Foundation Medicine filed for their initial public offerings…Emmaus Life Sciences, Paratek Pharmaceuticals, and Iroko Pharmaceuticals withdrew their IPO filings…through the offering of three series of senior unsecured notes, Celgene grossed $1.5B…and Telegraph Hill Partners closed on a $310M fund dedicated to life sciences and health care. -- Amanda Micklus

Many thanks to Paul Bonanos, who authored this fortnight's introduction on gene therapy. 

Photo courtesy of Flickr user certified su, who also has cool pictures of Australia. 

Deals of the Week Looks At Illumina’s Roche Rebuff: There Will Be Time To Revisit This Deal

With the news this week that shareholders of Illumina had rebuffed Roche’s efforts to expand and stack its board of directors, the latter withdrew its hostile tender offer for the company.

No surprises there. Illumina’s management has been stalwart in its belief in the company’s positioning and prospects for rebounding from the dent in its earnings resulting from the global economic slowdown and cutbacks in government spending for its genome sequencing equipment.  That view is obviously shared by the institutions that own its stock, who were unmoved by Roche’s most-recent $51 per share ($6.8 billion) offer.  Roche, for its part, tried to use Illumina’s market-weakened position to highlight the risks of the business. As we wrote in IN VIVO in February, its interest in Illumina is strategic, but also opportunistic.

At one point during the parties’ back-and-forth letter writing to shareholders, Illumina alluded to its being called “the Apple of the genomics business.”  But while Apple’s products appeal to a “seemingly endless consumer base,” Roche replied, Illumina’s sequencing tools serve a much smaller and highly regulated market.  “Not even Illumina has projected any surge in revenues from its products in any specific foreseeable time period,” it said.  “As a standalone company, Illumina’s future is far from certain… Roche has the infrastructure, expertise, sales force, and market share required to successfully bring Illumina’s products to the broader Life Science and Diagnostics market and the combined capabilities of our two companies will accelerate the transition of Sequencing into clinical and routine diagnostics.”  Fair points.

As we’ve written, the how and when of applying sequencing to clinical diagnostics is debatable, especially when trying to show that complex patterns of genetic differences – the kind that rapid and inexpensive whole genome sequencing can uncover – can help guide therapy decisions (see here and here). But there’s no debating the research interest, nor that Illumina is the market leader and a continuing innovator in the field.  And while competitors are selling and developing small, fast next-generation sequencing instrumentation for smaller sequence read lengths, including Roche through its own 454 Life Sciences unit, it’s fair to think that large research and clinical labs will continue to invest in the workhorse machines Illumina has placed so successfully, especially as the costs of whole genome sequencing continue to fall.

Roche has called its $51 per share offer a starting point for negotiations, suggesting it would go higher once it has access to Illumina’s internal documents.  Illumina has resisted, presumably because it does not think Roche would pay what it would want as fair value – and that it will be in a much stronger negotiating position down the road.

That’s called being a true believer.  We think Roche is, too – in both the technology and in Illumina itself.  However the next year or so shakes out, Illumina should remain a good fit for Roche, to round out its genomics offerings and provide a channel for them to the clinical community.  The question is only at what price. (The discussion could also revert to some form of equity investment plus collaboration, which is what Illumina thought Roche’s intention was when it first came calling last November.)  The tender offer is set to go away at 6 pm tonight, but the two are still negotiating. – Mark Ratner

As one hostile saga wraps, another unfolds. Read all about it in this week's edition of ...

Adimab/Gilead and Adimab/unnamed partner: Antibody specialist Adimab has built a business on drug discovery partnerships over the past three years, while avoiding drug development of its own. Numerous pharmas have struck discovery deals in which Adimab uses its yeast engineering platform to identify antibodies against specific targets, allowing Adimab to build a cash-flow-positive business without taking on any development risk. This week, the venture-backed company struck two new deals, although it released fairly few details about either. First, Adimab will discover antibodies against two targets selected by Gilead Sciences in exchange for an undisclosed up-front fee plus preclinical and development milestones and royalties, if either is commercialized. The companies did not identify a therapeutic area, nor did they release any further financial details. For its other deal, Adimab didn’t even name the partner, only saying that it will discover bi-specific antibodies against two distinct targets selected by the partner, which can commercialize one or more in exchange for technical milestone payments, licensing fees, clinical development payments and royalties. The arrangements with Gilead and the other stealthy partner join a long list of Adimab deals, including agreements with Merck, Roche, Novo Nordisk, Biogen Idec, Lilly, Genentech and Pfizer. Adimab’s backers include SV Life Sciences, Polaris Venture Partners, Google Ventures, OrbiMed Advisors and Borealis Ventures. – Paul Bonanos

GlaxoSmithKline/Human Genome Sciences: It's not quite a deal yet, but it looks like there might be a silver lining for GlaxoSmithKline from the weak sales of Benlysta (belimumab) for lupus. The big pharma now has the chance to buy its Benlysta commercial partner, Human Genome Sciences, and gain full ownership over Benlysta and two other drugs the two have in development. GSK disclosed an unsolicited bid for HGS April 19, offering $13-per-share, or roughly $2.6 billion. HGS’ board of directors promptly rejected the unsolicited bid, saying it does not reflect the inherent value of the company, and hired the investment banks Goldman Sachs & Co. and Credit Suisse Securities to explore strategic alternatives for the firm. The $13-per-share cash offer represents an 81% premium over the company’s closing share price of $7.17 April 18. It also represents a 66% premium over the 30-day trading average closing price of $7.83 and a 58% premium over the ninety-day trading average, according to GSK. Nonetheless, while HGS investors may be relieved to see an offer on the table that represents immediate and certain value, $13-per share is a far cry from where the stock was trading a year ago. Last April, the stock was trading close to $29, riding high on the FDA approval of Benlysta for systemic lupus erythematosus March 2011. But it’s not likely a white knight is going to step forward. GSK splits rights to Benlysta with HGS, and owns rights to two other pipeline assets: albiglutide, a once-weekly injectable GLP-1 agonist for type 2 diabetes, and daraplatib, an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2) in development for cardiovascular disease. That’s likely to deter a competing bidder and limit HGS’ negotiating power. The history between HGS and GSK is long, dating back to the SmithKline Beecham days. SmithKline Beecham partnered on with HGS in 1993 on rights to a gene sequencing technology. The companies expanded on that original alliance several times over. In 2006, GSK paid HGS $24 million for rights to belimumab. --Jessica Merrill

Cell Therapeutics/S*BIO: With an EU regulatory approval potentially on the horizon for Pixuvri (pixantrone) and Phase III trials ongoing for that drug as well as tosedostat, Cell Therapeutics might appear to have more than enough activity at the moment. But on April 19, it paid $30 million upfront to S*BIO Pte. Ltd. for global rights to JAK2 inhibitor pacritinib, giving the Seattle-based biotech three Phase III candidates in blood cancer. CTI will pay S*BIO $15 million in cash and issue $15 million in unregistered preferred stock convertible to common stock – giving the Singapore firm nearly a 5% interest in its partner – and could pay milestones up to $132 million and single-digit sales royalties in exchange for the Phase III-ready myelofibrosis (MF) candidate. S*BIO could realize approval milestones based on regulatory outcomes in the U.S., Europe and Asia, along with sales milestones pegged to reaching amounts such as $200 million, $400 million and $500 million in a calendar year. CTI is not the first company to partner with S*BIO on pacritinib. In 2009, Onyx Pharmaceuticals paid $25 million upfront to acquire an option to the compound, then known as SB1518, as well as another preclinical JAK2 inhibitor, SB1578. With the potential for up to $525 million in milestones, it was among the most lucrative biotech deals seen in Asia to that point. However, in 2011, Onyx declined its option on both compounds, returning all rights to S*BIO. CTI believes pacritinib, as a selective JAK inhibitor, should have a better safety profile than the only FDA-approved drug for myelofibrosis, Incyte Corp.’s Jakafi (ruxolitinib), a JAK1/JAK2 inhibitor launched in late 2011.—Joseph Haas

Eli Lilly/Vanda: In its first in-licensing transaction since 2004, Vanda Pharmaceuticals has acquired development and commercialization rights to a Phase I-ready neurokinin 1 receptor (NK-1R) antagonist from Eli Lilly & Co. for an upfront payment of $1 million and up to $99 million in milestones. The 2004 deal with Novartis gave Vanda worldwide rights to iloperidone, which FDA approved for schizophrenia in 2009; it is now on the market as Fanapt, though sales have been weak. Vanda, focused on central nervous system therapies, has only one other clinical candidate in its pipeline, tasimelteon (VEC-162), in Phase III study for circadian rhythm sleep disorders. In its deal with Lilly, announced April 16, Vanda acquires VLY-686, an NK-1R antagonist that demonstrated proof-of-concept for controlling alcohol dependence in an NIH study. The company said it will complete technology transfer related to ‘686 this year and examine the oral compound’s clinical profile, to determine potential indications for an early-development clinical program. In addition to the upfront fee, Lilly could earn up to low double-digit royalties on sales, up to $4 million in pre-NDA milestones and up to $95 million in regulatory and sales milestones under the deal.—JH

GSK/Aspen: GSK wraps up its final bulk OTC portfolio divestiture, selling 19 international brands to Aspen Pharmacare Holdings Ltd., leaving only the troubled weight-loss drug alli as GSK’s last non-core brand. For £164 million in cash ($263 million under the April 20 exchange rate), Durban, South Africa-based Aspen gets the rights to Dequadin sore throat lozenges, Phillips Milk of Magnesia, Solpadeine analgesics and Zantac antacids, among others, outside the U.S., Canada and Europe. Glaxo said April 20 the non-core OTCs divested to Aspen generated about $95 million in 2011 sales, or a little over 1% of GlaxoSmithKline Consumer Healthcare’s total business of $8.20 billion. GSK declined to provide a full list of the brands included in the Aspen deal. Aspen, Africa’s largest drug maker with a $145 million consumer products business, split the GSK transaction in two: its South African subsidiary acquired the products sold in Africa for about $32 million, while Aspen Global Inc. acquired the rest-of-the-world brands for about $231 million. Aspen CEO Stephen Saad praised the OTCs’ established brand equity and said they “will also provide impetus in territories where Aspen is seeking to grow critical mass, such as Latin America and Southeast Asia.”Full coverage of the deal is in "The Tan Sheet". -- Dan Schiff

Sanofi/Michael J. Fox Foundation: Sanofi has tapped the Michael J. Fox Foundation to run a Phase Ib clinical trial of a potential treatment for cognitive deficits in Parkinson’s disease. MJFF VP if Research Programs, Mark Frasier, said the situation was a unique one. “Sanofi approached us about this molecule that, for internal business reasons, they were not pursuing, but that they thought may have promise for Parkinson’s disease patients,” he added. MJFF will be responsible for costs associated with the trial, but Sanofi will provide the drug at no cost to the foundation, clinicians, or patients. The trial is expected to launch in the latter half of 2012 and data will likely be available in early 2013. MJFF will have all rights to the data and will be able to disseminate that information as they see fit. Sanofi will retain the intellectual property surrounding the molecule and will have the first right of refusal in further development of the compound, based on results of the study. Cognitive deficits like a shortened attention span, trouble multi-tasking, and problems with planning affect 60% to 80% of Parkinson’s disease patients. There are currently no treatments available to help patients with these symptoms. - Lisa LaMotta

Crucell/Royal DSM: Vaccine-maker Crucell N.V. and Netherlands-based Royal DSM have chosen to abandon biosimilar development through their joint venture, Percivia LLC. A spokesman for DSM tells us that "the Shareholders and Board of Managers decided on the restructuring following the lack of agreement on further joint investment in the Company." Crucell is part of Johnson & Johnson, and others have speculated that J&J was simply not interested in financing the JV, which was launched in 2006 and headquartered in Cambridge, Mass. The initial focus of Percivia was to combine DSM’s manufacturing technology with Crucell's PER.C6 cell line for the production of proteins and antibodies within the protein therapeutic and diagnostic field, but the company changed direction in early 2011 to pursue a PER.C6 technology-based biosimilars product development strategy for emerging markets. According to Crucell, all biosimilar work will be terminated. According to a report in BioSpace, thirty employees of Percivia have already been let go and another 10 will remain for the next 30 to 90 days while operations are wound down. Percivia will remain a legal entity for the purposes of continuing the existing PER.C6 technology licensing business, says DSM. –LL

Deals Of The Week Goes To The Oscars

It's that time of year. The science of bracketology has yet to enliven talk around the water cooler, the official start to the 2011 baseball season is still a month away (no, spring training doesn't count), and all the backchecks, forechecks, and stick-checks are about as meaningless as the top shelf or the five hole. (Yes, this blogger admits she's a philistine.)

Which leaves us with Oscar drama. The Black Swan or The King's Speech? Sorry, not The Social Network. An Oscar nod to a film about a 26-year-old and a company that stands to raise a gazillion dollar IPO is a little like giving a 40-something president in his first term the Nobel Peace Prize. (Oh, wait a minute.)

Far from Hollywood's glitterati, there's been plenty of drama in the biotech industry this week and a couple of Oscar- (er, Roger?) worthy performances. Roche's Genentech continues to challenge FDA, trying to position itself as David against a regulatory Goliath in the ongoing brouhaha surrounding Avastin's use in breast cancer and the FDA Oncology Drugs Advisory Committee's decision to rescind accelerated approval.

On Feb. 24 Genentech said a hearing to review the decision will go forward, but within ODAC itself. That's not what the drugmaker wanted; it was pressing for "an objective advisory committee with substantial breast cancer expertise," arguing that the recent ODAC session was underpowered in this indication. But FDA will use its ODAC to make the decision, with Commissioner Margaret Hamburg's designee Karen Midthun arguing the rules don't allow FDA to substitute a different advisory committee. (Recall Avastin use in this indication was shot down 12-1 in the December meeting.)

Moreover, FDA won't be adding additional consultants to the current ODAC panel, arguing that the controversial nature of Avastin's breast cancer approval makes it difficult to find additional unbiased panelists. "We must face the reality that many experts in this area have already expressed a view on this issue and/or might be considered as having conflicts of interest because of their association with one of the parties to the hearing or competitors to Genentech," said Midthun.

To add to the excitement, the biopharma community won't just be watching, it will actually be in town when the ODAC convenes. The meeting coincides with BIO's national wheeling and dealing event in DC in late June. No word on whether FDA will roll out a red carpet in advance of the event, but we're guessing it's not in the regulatory body's budget.

Other biopharma events worth a call-out this week? For best stoic performance, the leading candidate has to be David Bredt, Eli Lilly's beleaguered head of neuroscience, who unexpectedly resigned this week. And for best comedy of errors, in a sequel to the Bad News Bears, Johnson & Johnson is clearly the leading nominee. The big pharma continues to hamstring its own R&D advances with manufacturing slip-ups. This week came news of problems with its Simponi injector and a recall of more than 660,000 Sudafed packages due to a 'not'-ty typo in the label that reminds consumers the following: "do not not divide, crush, chew, or dissolve the tablet." That's got to be a nomination for worst proofreading in a major consumer product label, not to mention an affrontery to the King's English.

We don't have the envelope yet, but odds are the winner for most insightful deal analysis is going to be...


Gilead Sciences/Calistoga: For the DOTW Oscar for best performance in a competitive space, with a nod to a separate category -- risk-sharing -- look no further than this week's tie-up between Gilead and privately-held Calistoga. Gilead announced February 25 it would pay $375 million in upfront cash, plus another $225 million in potential milestones, to take out Calistoga, one of the most closely watched entities in the PI3K inhibitor space. The on-the-table dollars represent a 4.6x increase over the $81 million the four-year-old start-up has raised from its venture investors, which include Frazier Healthcare, Alta Partners, and Three Arch. It's also one of the richest deals yet in the PI3K space, an arena big pharmas are eager to enter because the signaling pathway involved is implicated not only in oncology, but also inflammatory disease, cardiovascular disorders, and neuro-degenerative conditions. The acquisition gives Gilead a Phase II asset and a basket of interesting, highly specific but early-stage PI3K blockers. It also deepens the big biotech's commitment to oncology, building on its 2010 acquisition of CGI Pharmaceuticals and that firm's kinase discovery engine. Gilead's decision to make Calistoga its base of oncology expertise via the creation of a stand-alone Seattle division is probably smart but could be tricky to execute. Recall Gilead's commercial strength remains squarely in the anti-infective space and the strategy to acquire oncology capabilities is one other biotechs have tried and failed to replicate in the past. Biogen (via the Idec merger), for example, never grew into the dominant oncology player it planned to be and has since jettisoned that half of its business, betting that focus not diversification will be the greatest path to shareholder value. The onus on Gilead is to ensure the Calistoga team, especially its R&D and early clinical development execs, stay on board; the earn-out structure may help in that regard. -- EFL

TiGenix/Cellerix: Belgium-based regenerative medicine player TiGenix and Spanish cell therapy firm Cellerix propose to combine forces via a share exchange to create “a new European leader in cell therapy." The enlarged company will have two marketed products in Europe (including the first ever cell-therapy product to be approved by the European Medicines Agency, TiGenix’s ChondroCelect), two stem cell platforms (TiGenix’s allogeneic one, and Cellerix’s autologous one), and at least €33 million in cash that will last two years minimum. Indeed, both sides have concurrently secured additional financing from their shareholders, signaling investors’ general support for the deal. TiGenix has secured €10 million of a planned public rights offering, while Cellerix’s investors have committed the final €18 million of a €28 million round that began in late 2009. The hope is the newly enlarged group will provide investors a better shot at getting a return. Since its inception Cellerix has raised about €60 million as one of Spain’s first biotechs, and this deal values the Barcelona-based group at about the same. In the short term, the combined group may be better placed to lock in an interested big pharma partner. Importantly, Cellerix’s platform, based on expanded adult stem cells extracted from adipose tissue, creates off-the-shelf products that are less complex and expensive to create and administer than TiGenix’s ChondroCelect, which requires harvesting a patient’s own cells. Signs that big pharma is no longer running away from cell therapies? Think Cephalon’s December 2010 deal with Australia’s Mesoblast, GlaxoSmithKline’s toe-dipping with Harvard Stem Cell Institute, and Sanofi-Aventis’ tie-up with the Salk Institute. -- Melanie Senior

Forest Labs/Clinical Data: Much of the buzz around this week’s merger agreement between Forest and Clinical Data was around valuation. Forest is paying $30 per share, or $1.2 billion, plus up to $6 per share in contingent milestones to get ClinData’s antidepressant vilazodone, which was approved in January in the US for major depressive disorder. The price was less than ClinData’s prior Friday closing price of $33.90 and only a 6.6% premium over the volume-weighted average trading price since the vilazodone approval. But there’s considerable risk attached to vilazodone; hence the contingent payout to shareholders, which begins to kick in at $1 per share if trailing four-quarter sales exceed $800 million within five years. The drug label looks “clinically undifferentiated to us,” Leerink Swann noted, adding that the lack of an active comparator in trials “makes it difficult to tease out any meaningful benefits.” That said, it also believes Forest can get solid formulary coverage for the drug based on its track record with payors with its existing medicines -- Celexa and Lexapro -- and the strength of the new brand in a category that’s become genericized. (Lexapro, for example, goes generic next year. ) Vilazodone’s development is a true success story for ClinData, which got the drug via its 2005 acquisition of Genaissance Pharmaceuticals for $55 million, and ultimately for the Genaissance team, which had licensed vilazodone from Merck KGAA in one of its early pharmacogenetics programs. But like Vanda and its schizophrenia drug iloperidone, ClinData did not fully execute on the original premise for the development of vilazodone: i.e. its initial evaluation using pharmacogenetics would lead to a drug approval in parallel with a biomarker that would direct the drug to an enriched patient population for which it would show a more favorable risk/benefit profile. Indeed, for psychiatric drugs, that kind of targeting still seems a long way off. -- Mark Ratner

Kyowa Hakko/ProStrakan Group: Best foreign drama has to be the evolving Prostrakan/Kyowa Hakko tie-up. Three months after putting itself up for sale, U.K.-based specialty pharma ProStrakan might be teaming up with Japan's Kyowa Hakko Kirin. The 130 pence-per-share deal, announced Feb. 21, values the company at about £292 million ($475 million). If finalized, ProStrakan would provide Kyowa a commercial presence and regulatory expertise in Europe and the U.S. that would be useful as it looks to commercialize its pipeline assets outside of Japan. The two companies are already familiar biz cronies: Kyowa is a licensee for two of ProStrakan's products in Japan and other Asian countries. The price represents a 41% premium to ProStrakan's share price one day before its offer period began in November 2010, and it's supported by more than 47% of the specialty pharma's shareholders. But most analysts believe it undervalues the U.K. group. ProStrakan suffered a series of regulatory and manufacturing setbacks in 2010, sending its shares to an all-time low of barely 40 pence in September. That led to an unsolicited offer from privately held pan-European Norgine (which, when rejected, went on to buy a 12.6% shareholding), and, subsequently, ProStrakan's decision to put itself up for sale. The logic behind the move: fix ProStrakan's internal commercial and regulatory issues and then secure a reasonable sale price. The first has happened, but the second hasn't, according to some. "A fair price would have been 160 pence per share," Nomura Code analyst Samir Devani told sister publication "The Pink Sheet" DAILY. The current deal values ProStrakan at about 2.7 times revenues, less than the 3.5 times revenues paid by Meda for U.S.-based specialty pharma Alavan Pharmaceuticals in August 2010, and well below the (admittedly punchy) 4.5 times revenues paid by Biovitrum for orphan-diseases focused, pan-European player Swedish Orphan in November 2009. -- Melanie Senior

Roche/Transgene: And finally, the DOTW Oscar for best performance in the face of adversity goes to Transgene, which this week announced its big pharma partner Roche was pulling out of a collaboration to develop the smaller company's TG4001, a Phase 2b therapeutic vaccine for lesions caused by Human Papilloma Virus infection. The good news (also known as the spin): Roche's decision won't have a significant impact on Transgene's financial situation, at least in the short term. Also, the termination won't slow down the ongoing Phase IIb trial, which is structured to test the vaccine in over 200 patients. Transgene already has 195 patients enrolled in its mid-stage study, and anticipates interim data by the end of the year or early in 2012. In addition, Transgene "regains full and unencumbered development and commercialization rights to the product" according to the press release announcing the news. That means when the licensing deal officially concludes this summer, Transgene can look for another deep-pocketed partner to help prepare a registrational trial. Will another pharma bite? Specialty products and especially vaccines are all the rage these days, and Trangene emphasized in its press release that the "no deal" was the result of a strategic decision by Roche, and "is not data driven." The question is who might have greater strategic interest in HPV than the Swiss pharma, which via its diagnostic business is developing its cobas HPV test to individually detect HPV-16 and HPV-18, the two HPV genotypes causing 70% of cervical cancer cases. (Interestingly, the Swiss pharma published new positive data about the test this week in the American Journal Of Clinical Pathology.) -- EFL

DotW: From Russia With Love

It's the end of an era--or maybe just the end of the beginning. This week saw the WYE ticker officially disappear, as behemoth (Pfizer) gobbled up the merely big (Wyeth). Two small firms--La Jolla Pharmaceuticals and VaxGen--also entered Biotech's Bermuda Triangle to the surprise of few.

It also appears to be the end of the beginning for the "FIPNet" strategy as the industry continues to pursue the "virtual is the new reality" approach to drug discovery. Thus, Big Pharma's focus these days is on externalization, especially the ability to sign partnerships that put the onus on the ally. In exchange for taking on a greater proportion of both the risk and cost of development, a smaller partner gets the chance to take a bigger chunk of the downstream economic reward if said research pans out.

Nowhere has the strategy been more evident than in Asia, where Big Pharma hopes to tap into the increasingly high quality research available in India and China--countries that also should prove to be a major source of future customers. Merck and Lilly in particular have been active, signing deals with Advinus (Merck), Glenmark (Lilly), Nicholas Piramal (both), and Hutchison MediPharma (Lilly). (Speaking of Asia, don't forget about our PharmAsia Summit in a couple weeks ... )

Now the FIPNet action--or something similar, anyway--is moving to another closely watched emerging market: Russia. This week Roche announced an interesting licensing deal with Viriom, a Russian biotech founded earlier this year. As it turns out, Viriom was formed specifically to develop and commercialize (in Russia, Ukraine, Belarus and Kazakhstan) Roche's pre-clinical non-nucleoside inhibitors of reverse transcriptase (NNRTI) for the treatment of HIV/AIDS--although it's free to develop and license other targeted medicines in HIV too.

We're not quite talking Roche's FIPNet initiation here, mind you; "we don't believe this is the same kind of deal," asserts Roche Pharma Partnering's Peter Sandbach; "the intention was not a risk-sharing one." Roche didn't intend to develop the compounds internally--so it's more about leveraging de-prioritized assets than pulling in partner to share development risk--although granted, the Swiss pharma will be allowed to use Viriom-generated clinical data for its own use and retains rights in all other territories. Viriom will pay Roche royalties on sales of any resulting treatments in its territories.

For the Russian start-up, this deal brings close involvement of an experienced HIV drug developer, given that Roche personnel will participate on Viriom's board. Indeed, Roche reckons this deal is a first for Russian biotech, given that Viriom will take the assets all the way to market.

For Roche--which isn't paying a dime--the deal provides a useful catalyst for building up a presence in a growing market. It provides the Swiss group with a nice 'in' with the Russian government, keen to create home-grown 'bioclusters' and to encourage innovation. "The compounds licensed to Viriom will help to create a Russian BioCluster/Incubator," noted Tuygan Goeker, Roche's regional head of Central & Eastern Europe, the Middle East, Africa, and the Indian sub-continent in the PR.

It wasn't all Ruskies and FIPNets all the time, of course. There was progress on the health care reform front, the DOW hit 10,000 and deal-makers shook (not stirred) things up, just in time for us to decode them with our special LEKTOR device.



Onyx/Proteolix: In an attempt to fill a mid-stage pipeline gap, Nexavar maker Onyx announced Oct. 12 plans to acquire privately-held Proteolix for $276 million in upfront payments and another $585 million in milestones. The deals give Onyx a promising Phase II multiple myeloma medicine, carflizomib, which has been billed as a next-generation version of Takeda/Millennium's first-in-class proteasome inhibitor, Velcade. The acquisition positions Onyx to expand into the global $16 billion hematological cancer market with a potential blockbuster--if carflizomib proves more effective than Velcade, which last year raked in over $1 billion. (Carflizomib is touted as being more specific, so troubling off-target effects, especially neurotoxicity, should be limited.) The deal structure is heavily weighted towards milestones, with most on Wall Street favoring the tie-up. VCs are likely happy too--it is an exit, albeit not one of the richest ones we've seen in the industry. Since its founding in 2003, Proteolix has pulled in more than $125 million in financing, including a whopping Series C of $79 million last July. That means the return on the upfront money is only a little over 2x for Proteolix's investors, which include Delphi Ventures, Nomura Phase4 Ventures, and Advanced Technology Ventures. Of course, if carflizomib is a major success and the earn-outs are realized (and you know where we stand on the odds of this happening), that return will jump to around 7x, which sounds a whole lot more venture-like.--EFL

Novartis/Heptares: Another week, another Novartis Option Fund deal. This time, the investment, a $30 million Series A in Heptares, a UK biotech that specializes in stabilizing GPCRs so they can be poked and prodded after being removed from the cell membrane, was announced months ago. NOF, Clarus Ventures and MVM Life Science Partners invested equally in the round. Why the delay on the option component of the deal (which we should note again is distinct from Novartis' venture investment)? The companies simply took their time deciding which GPCR target to work on, Heptares CEO Malcolm Weir told IN VIVO Blog. And after lots of discussions with various therapeutic area groups at Novartis, Heptares is now getting to work, "starting from scratch on a GPCR we wouldn't have otherwise been working on," he said, though details of the target are thus far kept under wraps. The deal, with undisclosed upfront payments and milestones that could reach $200 million before royalties, sees Heptares driving drug discovery programs around the target and follows Novartis' stated M.O., avoiding Heptares' key assets in favor of a less-advanced program. For more info on Heptares check out this Start-Up profile of the company from earlier this year.--Chris Morrison

GlaxoSmithKline/Prosensa: In another sure sign of Big Pharma's recent embrace of specialist diseases, GlaxoSmithKline announced a four-compound deal this week with Holland's Prosensa, which is focused on RNA-modulating therapeutics for Duchenne Muscular Dystrophy. The deal hinges on a straightforward license component--Glaxo takes an exclusive worldwide license to lead compound PRO051, in exchange for a £16 million up-front payment. And far more typical for Glaxo, the drug maker also gets exclusive options to license three further RNA-based compounds. The total development and commercial milestones across all four candidates could reach £412 million, and Prosensa may also receive double-digit royalties. It isn't completely fair to call drugs for DMD specialist. They're actually ultra-specialist. PRO051, for instance, is designed to treat just 13% of the DMD population--a small proportion of an already highly niche disease. Indeed, the small market size was just one reason Prosensa's CEO Hans Schikan told "The Pink Sheet" DAILY, he didn't "in the beginning, honestly expect GSK to be interested" in the programs. But apparently niche is the new blockbuster (especially when meeting high unmet medical need practically guarantees reimbursement from payers). Schikan confirmed that GSK wasn't the only company sniffing around Prosensa's platform.--Melanie Senior

Novartis/Vanda: Vanda Pharmaceuticals' unlikely success with its once-maligned antipsychotic iloperidone continues. This week the biotech sold back US and Canadian development/commercialization rights to its newly approved lead asset to one-time owners Novartis, for $200 million up-front, plus milestones and royalties. Our full take on the deal is here.--CM


Wyeth/Progenics: Big Pharma mergers don't just create disarray for the integrating parties; they can be very stressful for smaller biotech partners, especially if their assets aren't central to the newly merged company's strategic endeavors. Thus, one of the hallmarks of mega-mergers is the unwinding of smaller deals. Just one day before Wyeth officially became part of Pfizer, it announced it was paying $10 million for Progenics to take back all development and commercialization rights to its opioid-induced constipation medicine Relistor. The two companies originally teamed up in 2005 in a deal that gave Progenics $60 million up-front, plus the potential to earn another $356.5 million in downstream milestones and royalties. But the injectable medicine, approved by the FDA in 2008, hasn't been a big earner--it garnered just $3.2 million in global net sales in the second quarter of '09. Although revenue was increasing substantially--up 74% from the first quarter--it seems Wyeth wanted to shed a low-earning asset prior to the Pfizer merger. And Progenics wasn't complaining. "Progenics has become increasingly aware that our objective of advancing the Relistor franchise was not aligned with the near-term priority of integrating these two large pharmaceutical organizations," Progenics CEO Paul Maddon said during an Oct. 14 investor call. The revised agreement leaves Progenics free to partner the medicine outside of Japan, where Ono Pharmaceutical locked up rights in 2008 for $15 million. In addition to the $10 million, Wyeth will also continue to provide manufacturing, marketing, and sales support for Relistor during a 12-to-15 month transition period, and will fund completion of an ongoing 1,000-patient Phase III safety study for the drug in chronic pain.--EFL

Vanda/Novartis: ... And the Circle of Life is Complete

The surprise approval of iloperidone (Fanapt) earned back in May by Vanda Pharmaceuticals had a lot of people (OK maybe just us?) scratching their heads to come up with comparable instances of molecules that were dumped by pharma and eventually made it to market. Like our lion king friends here, they also had to crane their necks to see where Vanda's stock price went.

Sure there are some ex-pharma molecules that wind up getting on the market (you helped us come up with half a dozen or so), but there aren't a lot. And that's a fact that biotechs eager to in-license discarded pharma assets needed to reckon with.

Vanda's unlikely success with iloperidone continues. Last night the biotech announced it was selling US/Canadian development and commercialization rights to Fanapt back to Novartis, for $200 million, plus milestones and royalties. It's the circle of life!

Novartis is now responsible for the drug's development in the US and Canada, "including the development and commercialization of a long-acting injectable (or depot) formulation of Fanapt," says the release. Vanda keeps rights to both formulations outside of those territories and will pay Novartis a royalty, though Novartis has an option to negotiate for those rights. Vanda investors like the deal--the company's stock is up again (this time only 35% or so).

As a reminder, here's the molecule's long and colorful business development history: In January 1997, Hoechst licensed the drug to now-tiny Titan Pharmaceuticals. Titan turned around later that year and licensed the drug to Novartis. Novartis and Titan ran into trouble in Phase III when the drug was shown to cause QT prolongation; Vanda took on development of the drug in 2004, and received the Not Approvable letter from FDA last July. The FDA's 180-degree shift to APPROVED came in May 2009.

Has Novartis pulled off the old don't-want-it-oh-wait-actually-we-do-want-it before? Yes, with Speedel Group's Tekturna renin inhibitor for hypertension. That deal was a little bit more straightforward, and certainly designed with the claw-back in mind (Novartis eventually bought out Speedel for nearly $900 million, so it was more expensive too).

Iloperidone may not be the kind of asset that pushes Novartis to snap up all of Vanda in the same way. But after this drug's twists and turns, you'd be crazy to rule it out.

Vanda's Iloperidone: Not Something You See Every Day

The recently and some-say miraculously approved iloperidone (Fanapt) from Vanda Pharmaceuticals is certainly a rare bird. (Full coverage of the approval in today's Pink Sheet ($), here.)

Rare in that, in just nine months, it went from not-approvable to FDA-approved.

But also rare because it is one of only a handful of unapproved assets out-licensed to a small biotech by a Big Pharma and which eventually found its way to the market. (This phenomenon was pointed out to us by eagle-eyed IVB reader and COO of Versant's EuroVentures incubator Tom Woiwode. In fact, iloperidone was out-licensed by TWO pharmas, but we'll get to that in a minute.)

In any case, we agree: despite the interest among VCs in backing ex-Big Pharma assets and spin-outs, and Big Pharma's seemingly increased willingness to part with shelved assets, few have so far meandered their way to market a la iloperidone.

Of the ones that have there have been some doozies, though.

Cubist has built its anti-infectives business on the back of the success of Eli Lilly's unwanted antibiotic daptomycin (now sold as Cubicin), for example. Actelion's bosentan (Tracleer)--a blockbuster on the market to treat pulmonary arterial hypertension--began life at Roche. And Novartis' first-in-class renin inhibitor aliskiren (Tekturna) was championed by Speedel Group founder Alice Huxley. The drug's clinical successes led Novartis to pick up its option to market the drug and eventually to buy Speedel in July 2008 in a deal valued at nearly $900 million.

Surely we're missing some, so please let us know in the comments. But we think the point remains: few drug candidates, once abandoned by their original Big Pharma developers, go on to reach the market. At least so far.

There have however been other pharma-to-biotech success stories (or qualified successes, like Adolor/GSK's alvimopan (Entereg) which was originally developed by Lilly). Some deals involved geographically restrained smaller pharmas without the urge or wherewithal to compete in every market. For example Cephalon licensed modafinil in 1993 from French pharma Groupe Lafon and wound up acquiring the pharma in 2001 on the back of Provigil's success. And after all, a drug doesn't need to be approved to spark a solid return for a biotech in-licensor.

Just ask Vicuron's investors. That company's pipeline included the antibiotic dalbavancin and the anti-fungal anidulafungin, the delayed promise of which helped spur Pfizer to buy the biotech in 2005 for a whopping $1.9 billion. Anidulafungin had been licensed by Lilly (Lilly again!) to Versicor, one of Vicuron's predecessor companies, in 1999. Pfizer eventually launched anidulafungin in 2006 under the Eraxis brand -- but the acquisition was a bust for the Big Pharma. Eraxis sales in 2008 were microscopic. Dalbavancin, which originated in a unit of Hoechst Marion Roussel and was spun off into Vicuron's other predecessor company, Biosearch Italia, remains disappointingly unapproved.

Domain Associates has made a business out of in-licensing development assets from pharma (usually Japanese companies), creating companies around them, developing the assets further -- and then selling them to Big or Mid-Sized Pharma pre-approval (as it did, for example, with Peninsula, Cabrellis and NovaCardia).

But back to iloperidone, and what a long strange trip its been. In fact two separate pharmas have out-licensed the compound. In January 1997, Hoechst licensed the drug to now-tiny Titan Pharmaceuticals. (Titan, still kicking around and trading as a penny stock, was up an insane 1500% on the approval news.) Titan turned around later that year and licensed the drug to Novartis. Novartis and Titan ran into trouble in Phase III when the drug was shown to cause QT prolongation; Vanda took on development of the drug in 2004, and received the Not Approvable letter from FDA last July.

There are a few other ex-Pharma assets coming up to their days of regulatory reckoning before too long. Cadence's Acetavance (from BMS), Movetis's prucalopride (from J&J), and Basilea/J&J's (those lovebirds!) ceftobiprole (originally from Roche) are all before or about to be before FDA and/or EMEA. VCs remain eager to back in-licensing based companies--Versant, for example, is involved in Cadence, Flexion (a POC play modeled on Lilly's Chorus division), and Synosia (CNS assets from Roche and others).

The dearth of Big-Pharma-to-Biotech asset successes may be a reflection of smart moves by pharma pipeline pruners or just the difficulty of drug development no matter a drug's provenance. But with Big Pharmas like Pfizer making for the past couple years an ever-bigger deal about its spin-off and out-partnering activities, nine months on from the iloperidone Not-Approvable, perhaps we're on the brink of something different.

Fanapt may be an outlier, for several reasons. But it may also be a reason for biotechs to be hopeful.

Dodo image from flickr user kevinzim used under a creative commons license

DotW: Stress Test

'Tis the week for stress testing. The IN VIVO Blog is pleased to provide readers with a chance to gauge their own inner angst with this simple diagnostic test.

It's rapid, non-invasive, and can be administered in the point-of-care setting (office or home). (And since it's free, we don't even have to address the potential business model difficulties continuing to dog companion diagnostics, especially in the wake of CMS's proposed decision memo not to cover warfarin testing.)

Please scrutinize the picture above, which shows two identical dolphins joyously leaping out of the water. In a closely monitored, highly scientific study, scientists discovered that in spite of the fact that the dolphins are identical, study participants under stress found differences between the two mammals. The results were statistically significant. Moreover, the number of observed differences closely corresponded to an individual's stress levels. Which leads to this obvious question: what, dear, reader, do you see?

(Pfizer, Forest, and Biovail, we interrupt this post to suggest this could be brilliant marketing for Xanax, Lexapro, Celexa, or Ativan.)

This wasn't exactly the stress test Geithner and group administered to the 19 bank holding companies deemed "too big to fail" when the economy began to unwind last fall. (Too bad--think of the cost and time that could have been saved in what ended up being a weeks'-long endeavor for 150 regulatory officials.) Had Geithner done so, however, it's likely 10 of the 19 companies would have reported perceiving some kind of discrepancy, with Bank of America and Wells Fargo seeing cows and Citigroup some dolphin-related species.

In our own industry, Vanda, Roche-Genentech (at what point will Roche drop the hyphen?), and VeroScience all would have passed with flying colors given the FDA's decision to approve their respective drugs Fanapt (iloperidone), Avastin (for glioblastoma), and Cycloset. As we noted yesterday, Vanda was the big winner with FDA doing an abrupt u-turn on its 2008 decision on the atypical antipsychotic. Shares of the company jumped from less than $1 to over $9 in after hours trading and ended the day Thursday at a healthy $7.84.

Dendreon, too, seems to be in clover (or is that dolphins?). Fresh off positive news from Provenge, the cancer vaccine company hauled in $230 million Thursday night, the second largest follow-on stock offering in 2009. Demand for the for now successful Provenge maker is high with institutional investors (many of whom likely cashed out of Genentech and have money to commit to other life science companies). We're just amazed it took Dendreon this long post-data release to do the raise.

As we transition from APORKALYPSE NOW to APORKALYPSE NOT (yet), state and local health officials can take comfort in the fact that the animal on the right is not--and never has been--a pig. So can VaxInnate, which this week came up with a $30 million Series D, with backing from (among others) The Wellcome Trust. Did VaxInnate take advantage of the highly infectious A(H1N1) hysteria to pull in the additional funds? Probably, given the press release highlights the biotech's work on "a prototype swine flu vaccine that could be available for preclinical animal studies in as early as six weeks". CEO Alan Shaw also notes that the additional money--the company has raised more than $90 million in venture capital if you are tracking--will be used "to support the application of our technology platform to vaccines for other infectious diseases, among them HPV, RSV and the emerging swine flu.”

Who in our industry might fail this stress test? Ipsen and Solvay might be reeling given yesterday's announcement that Testim and AndroGel have been slapped with black box warnings and will require risk evaluation mitigation strategies (ah, the dreaded four letter acronym rears its ugly head again). Renovis also comes to mind. This week parent company Evotec announced it was shuttering the South San Francisco biz, probably by mid-August. And of course there's Targeted Genetics, which revealed during its earnings call that bankruptcy could be in its near future if it can't raise more capital by June.

Do you need dolphin goggles? Then it's most certainly time for...

Chiesi/Cornerstone Therapeutics: IVB thinks it will be a whole lot easier to get great Italian food in Cary, North Carolina in the near future. That's because relatively unknown--at least to us insular U.S.-based folks--Parma, Italy-based Chiesi Farmaceutici is buying a 51% stake in Cary-based Cornerstone Therapeutics. (We'll spare you our cheesy jokes.) In exchange for giving up majority ownership, Cornerstone will gain $15.5 million along with U.S. rights to Chiesi's marketed pig-derived lung surfactant Curosurf for 10 years. While cash was an important part of the hybrid licensing deal, it was the access to products that really made the deal of interest to Cornerstone's executives. Indeed, via this transaction, Cornerstone gets the first right of offer on all other Chiesi drugs intended to be commercialized in the U.S., including a synthetic version of surfactant currently in Phase I studies, Nymusa, a drug to treat sleep apnea in newborns which garnered a positive opinion from European regulators recently, and late stage products in asthma and cystic fibrosis. As a result, the deal continues to move Cornerstone in the direction of becoming a respiratory-focused specialty heavyweight. Last year Cornerstone set itself on that path, reverse merging with Critical Therapeutics and gaining access to Zyflo CR for asthma. With Curosurf, Cornerstone becomes a dominant player in the neonatal space, in part because there is no near term competition to rival the compound. Discovery Laboratories certainly hopes its own synthetic surfactant, Surfaxin, will give Curosurf a run for its money, but given the FDA issued the Warrenton, PA-based Discovery its fourth complete response letter tied to Surfaxin near term approval of that product seems like a long-shot. Investors didn't necessarily get Chiesi/Cornerstone's novel deal structure, sending the stock down initially to a low of $5.60 from $7.80 on May 7. (The company's share price subsequently rebounded closing Thursday at $7.25. The deal reflects that at least some in our industry are thinking about new deal structures that go beyond the more straightforward licensing arrangements that have dominated the news flow. Certainly the deal recalls, imperfectly it's true, last year’s arrangement between Infinity and Mundipharma and the Roche/Genentech tie-up of the nineties. Last November, the privately held pharmaceutical group Purdue (of which Mundipharma is the European affiliate) took a sizeable equity position in Infinity, gaining ex-U.S. rights to Infinity's oncology programs in exchange for covering the biotech's R&D expenses. Another similarly modeled deal was the one between Ipsen and Tercica. The former owned a 25% stake as part of their partnership on Somatuline Autogel. Ipsen went on to acquire Tercica in a three-company buying spree last summer. As Ipsen and Roche’s eventual purchases of their smaller partners shows, these deal structures create an unavoidable tension that often results in outright acquisition at some future date. Whether that is Cornerstone’s eventual fate remains to be seen—and likely depends on the company’s abilities to increase Curosurf sales.

AZ/Jubilant: We aren't sure how many times we have to say it, but FIPCOs are so old school. FIPNets are where it's at, baby. Not to go all Vince Vaughn on you but they are "so money" these days. At least that's what companies like Lilly and Merck are hoping given the early stage R&D alliances they've struck in India and China. And now AstraZeneca, which has built an enormous R&D presence of its own in China, is joining the FIPNet party. This week came news that the multinational was teaming up with Jubilant Biosys, the Bangalore-based research arm of Indian pharma company, to develop novel drug candidates in the neuroscience area. Financial details of the transaction were light. But as is typical of these deals, the emphasis will be on "shared risk-reward." AZ is putting up research funding for five years. In exchange, it will own worldwide development and commercialization rights to the compounds the Jubilant group develops. Of course, to further incent Jubilant, the Indian company will get development-based milestones, as well as royalties in what could be a very theoretical future. In the press release, AZ's global discovery EVP Jan Lundberg made all the right noises when it comes to FIPNets. The collaboration "complements out internal activities" and "provides a concrete example of the innovative approaches we are taking to deliver a sustainable discovery pipeline with a lean and agile organization," he said. He even managed to sneak in the "more shots on goal" analogy that is now de rigeur from pharma heads of R&D. (Sadly no reference to skating where the puck is going to be.) We totally understand why AZ would want to strike this kind of deal. Depending on the undisclosed economics, it sounds like yet another way to potentially get innovation on the cheap. We aren't so sure about the shared risk-reward mantra, as it looks to us as if it's pretty one-sided. Yes, Jubilant gets some up-front R&D costs covered, but the real money is still on the come and the company won't even have control of the molecules post preclinical. Which is probably why this kind of deal was done in India. As bad as things are in the US and Europe, biotechs here are trying to engineer better terms if they can. And certainly, Jubilant, which has signed a number of deals in recent months including a J/V with Lilly for drug development services last October, is thinking strategically about validation on the world stage.

ZymoGenetics/Seattle Life Sciences: It’s not exactly a spin-out, but if the nascent biotech Seattle Life Sciences looks like a “cousin” of ZymoGenetics, there’s good reason. In a deal announced May 4, ZymoGenetics transferred eight preclinical programs to SLS for future considerations but no upfront cash, in a deal bird-dogged by the startup’s chief science officer, a former ZymoGenetics executive. Seattle-based ZymoGenetics cut its staff by one-third last month and wants to focus on building up its one approved product Recothrom (topical recombinant thrombin), as well as its partnership with Bristol-Myers Squibb to develop the novel peg-interferon lambda for hepatitis C. In seeding the pipeline of previously unknown SLS, whose Web site is currently under construction, ZymoGenetics hopes to eventually monetize parts of its patent estate that it no longer plans--or can afford?--to develop itself. The eight programs – which could yield drugs for oncology and diabetes – will bring ZymoGenetics unspecified milestones and royalties, plus an equity stake in SLS when the new firm completes its initial funding round. SLS Chief Science Officer Steve Jaspers said his company can more aggressively seek financial backers – likely to be venture capital firms or angel investors – now that it has some assets to build with. In 15 years at ZymoGenetics, starting as a bench scientist and moving his way up, Jaspers said all of the molecules acquired in the deal had crossed his desk in at one time or another. During ZymoGenetics’ first-quarter financial call May 5, CEO Douglas Williams said the asset transfer to SLS was a deal that had been in the works for some time and reflects the company’s decision to end R&D in oncology and focus on “selected immunology programs, which is the core strength of the company.” He added that, “we think this is a great way of unlocking some value in IP estate … [and] take what I characterize as non-performing assets and potentially create the opportunity to generate some value there.”
Under the deal, SLS receives platelet derived growth factors and their antagonists (PDGF-C, PDGF-D, PDGF-C Antagonist, PDGF-D Antagonist), a prokineticin 2 molecule and its antagonist (PROK2 and PROK2 antagonist), human beta defensin 3 (HBD-3) and CTRP-1. Jaspers said that instead of targeting one or two specific therapeutic areas, SLS wants to take a flexible approach and develop the molecules in whatever direction appears most promising. The antagonists all have demonstrated vascular angiogenesis activity in animal models, suggesting they have potential as oncology products, he added. In terms of timelines, Jaspers said which program advances and how soon will largely depend on funding. In addition to seeking equity investors, SLS, currently self-financed with a headcount of five, will explore other options like partnerships with biotechs and pharmas, he said. – Joseph Haas

Biovail/GlaxoSmithKline and Biovail/Acadia: Biovail earns Deals of the Week's twofer award, inking two different but related deals in its attempt to become a neurology powerhouse. On Monday, the company plunked down $30 million upfront for rights to Acadia's Phase III Parkinson's disease psychosis drug pimavanserin. Acadia could reap an additional $160 million in milestone payments, should the new chemical entity be approved for PDP and Alzheimer's disease psychosis. On Biovail's May 6 earnings call, CEO Bill Wells made clear that when it comes to partnering he prefers back-end loaded deals like Acadia. "Wherever possible, we'll limit our upfront payments and structure the aggreement such that additional funds are provided as the product meets certain milestones and presumably the risk profile improves," he told investors and analysts. Maybe the desire for derisked assets explains why the specialty pharma was willing to shell out $510 million to GlaxoSmithKline for U.S. rights to the generic Wellbutrin XL (bupropion). But there's development risk and then there's marketing risk. GSK and Biovail have had a long and complicated partnership concerning this particular anti-depressant; the two first teamed up in 2001 in a product swap deal that gave GSK worldwide marketing rights to Wellbutrin (with Biovail continuing to manufacture and supply the product) in exchange for the topical antiviral Zovirax. Wells tried to make the case on the earnings call that this second deal is all about strengthening the base and increasing cash flow via a product that noone can argue Biovail doesn't know well. "The incremental cost associated with bringing in this product is minimal, practically nil, so almost all of the revenues of this product drop to the bottom line in terms of cash flow. So it's extraordinarily efficient," he told analysts on the call. Still sales of the drug have been hit hard by the introduction of generic versions, slumping 70% last year to $68 million. Thus, it's hard to understand why Wells believes Biovail can expect yearly "incremental cash flows of $80 million to $90 million, growing to $120 million to $130 million in year 2010" for Wellbutrin especially when he made very clear that Biovail is unlikely to spend much effort marketing it. "The product is a genericized product, so there is no sales effort that goes with it," he said. Analysts clearly didn't get the logic of the Wellbutrin deal. GMP Securities analyst Cosme Ordonez called the forecast "difficult to understand". We can see the logic of adding Wellbutrin to an existing basket of goodies, especially given that it would be an easy sales call to make while pushing Aplenzin, a once daily alcohol-resistant form of bupropion that launched in April. Only problem is Biovail partnered U.S. rights to Aplenzin to Sanofi Aventis in December so this deal doesn't give it sales and marketing synergies. Instead it seems to create additional competition, with the renewed success of Wellbutrin potentially stealing market share from Aplenzin or vice versa. But should Biovail be able to generate revenues in the realm it forecasts, its certainly true Wellbutrin will smooth out earnings. Something else that will surely help: drastically cutting the quarterly dividend from 37.5 cents to just 9 cents.

Covidien/VNUS Medical Technologies: Cross off buying a Toddler 2T outfit for Covidien, the soon-to-be two-year-old already bought its own gift. The former Tyco Healthcare company stepped up with an acquisition of publicly traded VNUS Medical Technologies for $440 million. Device watchers--hello self--have been naming Covidien as one of the most likely mid-tier device companies to step up and take the load off Medtronic, which has done the bulk of the buying this year. Covidien, afterall, is an amalgamation of several high profile acquisitions completed over the past decade, so it's no stranger to growing by buying. And it's made some big buys in recent years including deals for Scandius Biomedical, Confluent Surgical and Vivant Medical. But more importantly, Covidien officials have made it clear that they want to grow through both internal and external development. To help with the former, the company established a corporate venture unit to help. But Covidien didn't have to look far or wide for the publicly traded VNUS. The San Jose-based company makes products that treat vericose veins and venous reflux disease, which can cause swollen veins and discoloring of the skin. Covidien will roll the VNUS Closure device into its growing vascular business (which is still digesting the purchase of Covidien's quiet acquisition of venture-backed Bacchus Vascular completed in March.) With VNUS, Covidien didn't stint, paying VNUS at $29-per-share, a 36% premium to the Thursday closing price. Covidien expects the deal to be completed by June 30, one day after Covidien celebrates the second anniversary of its split with the once troubled Tyco. Count us as relieved. We already gave Covidien the gift of an IN VIVO profile last year. We weren't quite sure how we could top that one.--Tom Salemi

(The In Vivo Blog would like to reassure readers that no dolphins--or cows--were harmed in the writing of this post. Many thanks to flickr user tidewatermuse who provided the image under a creative commons license.)