Financings Of The Fortnight Can't Tell if You're a Kingpin or a Pauper

In a still-dodgy fundraising arena, the question for biotechs looking for royalty-stream financing is this: How much will you have to give it away now?

We ask after noting several royalty deals of late. It's no flood, to be sure -- and we should pause to extend our thoughts and wishes to the good folks of Nashville and beyond -- but the rising tide caught our attention. The most recent example was the April 30 transaction in which NeurogesX transferred rights to future sales of recently launched pain-management drug Qutenza to Cowen Healthcare Royalty Partners (that's CHRP, not RHCP) in exchange for $40 million.

According to Elsevier’s Strategic Transactions Database, only one such deal occurred in 2007, when Enzon sold 25% of its worldwide PEG-Intron royalties to Drug Royalty for $92.5 million, but 10 have occurred since April 2008, including three in the past two months. (In addition to the NeurogesX/CHRP tie-up, April saw Dyax sell future royalties from Pfizer on hemophilia A drug Xyntha for $12 million, and in March DRI Capital obtained Asian royalty rights to hyperparathyroidism treatment Regpara from NPS Pharmaceuticals for $38.4 million.)

If it's the front end of a big wave, perhaps we should move our chairs to higher ground. Royalty deals are a non-dilutive source of funds, usually a good thing, but they're no sign of industry health, says Raghuram Selvaraju, head of healthcare research for Hapoalim Securities.

"Royalty arrangements are typically entered into by companies stuck between a rock and a hard place,” Selvaraju told the IN VIVO Blog. “Companies stuck in mid-stage development with no near-term prospect of revenues resort to equity lines of credit, which basically mortgage their futures and can be prohibitively dilutive because they have minimum draw-downs."

“[A royalty deal] looks cosmetically attractive because it’s not dilutive financing,” Selvaraju added, “but if a company is trading near its 52-week high, I always prefer to see it raise money in the public markets than do a royalty-based deal.”

Take NeurogesX. With no U.S. commercialization partner for Qutenza, it had to launch solo despite limited funds. Selvaraju believes NeurogesX could lose downstream revenues from Qutenza for many years, since there is wide disagreement on how big a market the drug will find. Estimates of its eventual annual sales range from $150 million to $700 million.

Everyone has a handful of betes noires that prove the world is slowly going to hell in a handbasket: dogs wearing sweaters, for example, or airlines charging for baggage. Selvaraju said we might want to add royalty deals to the watch list. “I don’t think they're going to increase in frequency unless we’re talking about the gradual demise of the biotech industry, which I hope is not going to be the case,” he said.

Are royalty arrangements inherently lopsided, even predatory, as Selvaraju suggests? We've talked to university tech transfer officers quite happy, for example, with a massive upfront bounty that can be spent right away on new buildings and faculty salaries, instead of waiting for a highly speculative stream of revenue royalties through the years. It's a rousing debate, and one for another day. We're just glad we went an entire two weeks without seeing any dogs in sweaters, unless you count some recent deals. But that's a matter for our DoTW friends. This red hot chili pepper is the latest edition of...

Lycera: Towards the end of last year, we noted here a flurry of “top-ups” to biotech venture rounds. A spin through Strategic Transactions shows that so far in 2010 nine companies have done additional tranches, including Lycera, which added $11 million to the $10 million it’s already raised in its Series A financing. It's already a decent figure, and the immunology biotech says it's working towards $36 million total, quite high for a Series A. The second tranche came with a new board member from Clarus Ventures and a new VP of preclinical development and program management, former Novartis and ArQule exec Robin Goldstein. Lycera said it's poised to move its first candidate into human testing in 2011. Rather than working with biologicals, which often require injectable administration, the 2006 start-up is focusing on small-molecule immunomodulators targeting two autoimmune pathways: ATPase (the cellular bioenergetics program) against pathologically activated lymphocytes and Th17 (ROR-gamma) inflammatory mediators. -- Amanda Micklus

NeurogesX: We couldn't leave you hanging without the nitty-gritty details. The San Mateo, Calif.-based biotech obtained $40 million April 30 from Cowen Healthcare Royalty Partners to help finance the US launch of pain-management therapeutic Qutenza in the US. In exchange, CHRP gets ex-US royalties and sales milestones payable by Astellas Pharma, which bought ex-US commercial rights one year ago for $42 million. Qutenza, a dermal synthetic capsaicin patch, was approved by FDA to treat post-herpetic neuralgia last November and launched by NeurogesX in April. Qutenza also was approved last May in Europe. Both the royalties and milestones from the Astellas deal now go to CHRP until that firm recoups its capital plus a pre-determined amount of return on investment, said managing director Gregory Brown. Instead of an interest rate, CHRP is banking on ex-US sales of Qutenza to ramp up to deliver a return quickly. “The ‘interest rate’ really would depend on how quickly the capital comes in,” Brown said. “If you think of it as something in the high teens, that’s probably not unrealistic.” Once CHRP has recouped its investment and return, the ex-US rights revert to NeurogesX. US sales proceeds are not affected by the deal. -- Joseph Haas

Idenix Pharmaceuticals: We’re highlighting this antiviral drug developer’s FOPO not for its size. At $21.4 million net, or 6.5 million shares for $4.35 each, it’s piddling compared with FOPOs we’ve seen this year from Lexicon or AMAG. This is more about the rebound. Idenix was able to raise a decent amount of cash despite the hammer blow last year of its main partner and owner, Novartis, turning down an option on Idenix’s lead agent, HCV nucleotide prodrug IDX184. In a Roche/Genentech-like big-sibling structure, Novartis has options on all Idenix’s drug candidates after proof-of-concept as long as it maintains a 40% stake. Novartis owns 43% of Idenix post-FOPO, by the way. After the rejection last October, Idenix’s stock price tumbled to a low of $1.84. Thanks to favorable interim safety data from a Phase IIa of IDX184 in combination with pegylated interferon and ribavirin, the stock has recently gone back up as high as $4.76 a share. The company also announced positive Phase I results for another HCV candidate, IDX320. Meanwhile, the firm is broadly cutting costs and says that between the FOPO proceeds and milestones from GSK/Pfizer’s Viiv Healthcare (for the NNRTIs it partnered with GSK in 2009), it will have enough funds to sustain itself through the second half of next year. -- A.M.

MannKind: We usually don't discuss follow-ons in FOTF until the cash is in hand, but we couldn't help but note that MannKind, struggling to get its inhaled insulin through the FDA and onto the market, recently filed a shelf registration for up to $200 million. In the firm's most recent earnings call, MannKind CFO Matthew Pfeiffer disclosed it but said "currently, we have no plans to do an offering." "Currently" is such a useful word. Pfeiffer went on to clarify, kind of, by saying MannKind wanted the registration "in the event that an opportunity would arise such as financing or a strategic transaction, which would be in the company's interest to issue debt, equity, or warrants." Pfeiffer told analysts to expect MannKind first to draw down its line of credit from "Al" -- that is, Al Mann, the company founder. The line still has $145 million available. Not everyone is convinced. Oppenheimer & Co. analyst John Newman wrote in a note that MannKind will need more cash soon because the F.D.A. is likely to require new studies for Afrezza: "Although MNKD claims it has a line of credit that would negate the need for a cash raise, we note that the company raised cash in 2009, despite the credit line." -- Alex Lash

Production notes: Joseph Haas played bass and wrote the introduction this week, and Amanda Micklus (drums) and Maureen Riordan (mellotron) provided invaluable research help. The photo is courtesy flickr user mararie.

Notes from BIO: Green Revolution

We've survived BIO and most of us are home, ready to relax after a loooooong week. But before you sign off, enjoy our favorite off-topic anecdote from the conference.

It was Monday evening, I believe, and half of IVB's BIO contingent was comparing notes from the day, not to mention the various lagers at a brewpub, and we had the good luck to sit next to an agricultural scientist from one of the large seed companies. Now, ag-bio is far afield from our various areas of expertise, but we know enough about monocultures, Michael Pollan and pollen drift to gin up a lively conversation. Even so, it took us a while to screw up our courage and ask the real burning question: How many ag-bio scientists grow their own? And we don't mean soybeans.

Our new friend, an avid home-brewer of beer by the way, thought about it for a few seconds, put on a straight face, and said, "Half probably know how. Thirty percent probably would give advice on the QT to those looking for it. And maybe five percent would actually do something to risk losing their jobs."

We all agreed that this was highly unscientific data. But seeing how the federal government has deprioritized prosecution of medical-marijuana cases, and a few Northern California municipalities have either decided to look the other way or move toward taxation of the medical marijuana dispensaries that have grown like, well, weeds, our interlocutor admitted looking forward to the day growing pot became a legitimate job in his home state. He might even consider a third career, brewing beer being the second. We know VCs are piling into green tech startups, but we're curious how, ahem, green they're willing to get.

Have a good weekend, everyone.

Photo courtesy of flickr user paraflyer.

Notes from BIO: Heal Thyself

The motto of the biotech industry's trade organization is "Heal, Fuel, Feed the World," and the group could start by getting us all a neck massage. Some genius decided to put the display screens in many if not all breakout sessions either far right or far left of stage, leaving audience members in their front-facing chairs to twist either their entire bodies or their necks to read slides. Sit through two or three breakouts a day, furiously scribbling notes, and it adds up to a lot of PowerPoint pain.

Oh, but we're not done. Normally IVB would be a great promoter of walking whenever possible, which at the McCormick conference center means marathon-length outings from one end to the other. But with so many attendees also toting laptops, binders full of presentation material, and pressing cell phones to one ear, the ergonomics of the long McCormick march are soon thrown out of whack.

Topping it off, we're in Chicago, which means various species of beef and booze are the mainstays of local cuisine. The most reliable food outlet in the McCormick Center, other than vending machines, is a McDonald's. (We, ahem, had a chicken snack wrap and fries.) We'd fret less about this if we could finish the day with a brisk walk back to the hotel. With the conference far south of the Loop and most hotels about four miles north as the crow flies, however, nearly all conferees grab cabs. Some even make fun of those who try valiantly to walk but give up half-way, sweaty outside Soldier Field and hopelessly late for a cocktail meet-up. We won't name names.

Next year, we're bringing our own neck pillows, jet packs, and salads.

Photo courtesy of flickr user paraflyer.

Notes from BIO: Take a Phase II Grant and Call Me in the Morning

One theme we keep hearing in Chicago this week is that early-stage startups, too young to attract serious pharma partnerships and struggling to get venture attention, need all the help they can get.

The National Cancer Institute's forward-thinking Small Business Innovation Research center is adding regulatory counseling to the list of a la carte services available to its grantees. Applications will be available in the fall, and winners will receive 30 hours with a Food and Drug Administration consultant.

We caught up with NCI SBIR director Michael Weingarten and program director Andrew Kurtz at BIO to hear about the program. We also buttonholed Joe Panetta, who runs the Southern California biotech trade group BIOCOM, who said the program "helps ensure that the money invested in basic research has a better chance of becoming products on the market, giving us a better long-term return on that investment."

Last year the NCI's SBIR center launched an award program that extends traditional SBIR funding closer to commercialization with "Bridge" grants, but it requires third-party matching, usually from an industrial partner. It has made six awards so far, with up to 10 more due by September. The center hosted a VC-like meet-and-greet at Boston University last fall to expose its portfolio companies to possible partners. This year it's headed west, with a meeting set for Nov. 9 at Stanford University. For that meeting the center will get help from the San Jose BioCenter and its director Melinda Richter. The San Jose incubator is "one of the best networked" the center has worked with, said Weingarten. -- Shirley Haley

“Authorized” Generics Will Owe Brand Discounts in Donut Hole, CMS Says

The Centers for Medicare & Medicaid Services is facing a bit of pressure to close a potential “loophole” in its implementation of the donut hole discount program. CMS’ draft policy for the program in 2011 basically says there is no penalty if manufacturers fail to offer the “mandatory” 50% discount.

As we explain here, we suspect this will end up being a tempest in a teapot, and those discounts will be mandatory after all.

But was also noticed another loophole that CMS acted to cut off before it began: the implementation policy treats “authorized” generics as brand name drugs for purposes of the discount program. The agency’s definition of covered drugs includes “authorized generics,” defined as a drug that “is marketed, sold, or distributed directly or indirectly to retail class of trade under a different labeling, packaging (other than repackaging as the listed drug in blister packs, unit doses, or similar packaging for use in institutions), product code, labeler code, trade name, or trade mark than the listed drug.”

How big a deal is that? Well, consider the list of “authorized generic” launches likely for 2011: Seroquel, Zyprexa, Plavix, Lipitor…

That’s a lot of dough in the donut hole.

Donut Hole Discount Program Begins Jan. 1—Or Does It?

There’s a bit of buzz in Washington, DC about a “loophole” in the brand name pharmaceutical industry’s 50% discount for Medicare beneficiaries in the coverage gap (better known as the “donut hole”).

The discount is supposed to begin Jan. 1, offering some more-or-less immediate relief for the elderly and disabled Medicare beneficiaries who run up high prescription drug costs—a fact highlighted by the White House at every opportunity in selling the reform law.

Except that—um—it might not.

As we point out in “The Pink Sheet,” the Centers for Medicare & Medicaid Services issued a proposal for implementing the discount program last week, and the agency’s initial position is that there is no practical way to punish companies who fail to offer the discount next year. The bottom line, CMS says, is that Part D formularies are already submitted, while the 50% discount agreements won’t be done before this summer at the earliest. So it isn’t possible to exclude products that aren’t covered by the rebate from the program in 2011.

As CMS puts it: "This could mean that some of the brand-name drugs on plan formularies will not be discounted in the coverage gap unless all manufacturers of Part D drugs enter into agreements for 2011 by our deadline in 2010. If this situation occurs, CMS will provide clear public guidance on why discounts are not available for some formulary brand name drugs. Only applicable drugs with labeler codes identified by CMS as having manufacturer discount agreements in place for 2011 shall be discounted in 2011."

In other words, the “mandatory” discount is basically optional.

Okay, this has all the makings of a tempest in a teapot. After all, the 50% donut hole discount was the pharmaceutical industry’s idea, the centerpiece of the “deal” struck by the Pharmaceutical Research & Manufacturers of America on health reform last year.

Surely no company would decline to offer the discount—and risk the wrath of Congress and the White House that would ensue?

On the other hand, not every pharma company is a member of PhRMA. In fact, most are not. And wouldn’t a CEO that really believes the discount will adversely affect his company’s business have an obligation to refuse to sign an agreement?

Maybe. But now that the buzz has begun, we expect this matter to be resolved. One way or another, we expect CMS will find a way to make sure that every pharmaceutical company sees the discount as mandatory after all. It is just a draft policy, after all.

So we expect this “loophole” to be closed and quick. In our next post, though, we point out a different “loophole” that CMS anticipated and cut off before it began: “authorized” generics will be subject to the 50% discount.

Notes from BIO: Take Our Molecules...Please!

After hosting a steady stream of panels on biotech-pharma in-licensing over the years, biotech lawyer Barbara Kosacz put it in reverse at BIO Tuesday. The head of Cooley Godward Kronish's life science practice asked her usual lineup of big-pharma BD honchos about out-licensing, long considered a BD backwater -- "The Scarlett 'O'," as Kosacz put it in her blurb.

There has been movement toward making it legit -- Merck said at our PSO meeting in February that its group was formally open for business -- but plenty of hurdles remain. For one, said Kosacz, there's "about a postage stamp" of common ground between pharma outlicensers and the venture capitalists who want to extract assets on the best possible terms.

Indeed, the panelists -- the heads of BD or licensing at Merck, GlaxoSmithKline, Bristol-Myers Squibb, and AstraZeneca -- were happy to blame VCs, who weren't around to defend themselves. (Here's a sample quote from GSK chief of worldwide business development Adrian Rawcliffe on whether pharmas should take equity in startups that form around outlicensed assets: Take equity, he said, but only if you follow on with your investment in future rounds, "or else you get shafted by the VCs.")

Merck chief licensing officer Barbara Yanni had a different lament. Just as Merck finally decided to put things up for sale, she said "isn't it ironic" that biotechs that normally might seek pharma assets have no cash in this tough environment. (Alanis Morrissette was not around to defend herself.) AstraZeneca global head of transactions Shaun Grady summed up the general big-pharma attitude quite well when he said, "Outlicensing isn't our raison d'être, and it's not going to move the needle, but we recognize now that it's a source of value."

Funny, though, that the crowds of biotech BD execs who typically come to see the same folks at in-licensing panels and ply them with business cards only half-filled the room this time. Perhaps it was the "Big O" that scared them away.

Photo courtesy of flickr user paraflyer.

Notes From BIO: Pim's Cup Runneth Over

Greetings from Chicago! Fantastic weather for early May, an economy on the upswing, not to mention a certain conference that's in town, make the City of Big Shoulders particularly lively this week. One way to take the temperature of a conference -- and last year's BIO in Atlanta barely broke a sweat -- is to check in with the folks scrambling for deals and having hushed conversations in discreet corners.

Before BIO got fully underway Monday morning, it was already hard to find a quiet place to sit. One of our first chats was with Willem "Pim" Stemmer, the inventor of the DNA shuffling technology that underpinned Maxygen, which last year transfered most of its assets into a joint venture with Astellas Pharma, and the recently-IPO'ed biofuel firm Codexis. (Maxygen also birthed the next generation protein play Avidia, which Amgen bought in 2006 for $290 million plus earnouts.)

Stemmer's latest endeavor also aims to squeeze several companies from one. The parent, Amunix Inc., is working on two things. The first is an ion-channel research program, with Pfizer as the first customer. The second, which started as a side project, is a half-life extension technology called XTEN that adds a recombinant polypeptide chain to known molecules, without the manufacturing and safety concerns of pegylation. That's the claim, anyway, and it was enough to convince European VC Index Ventures to solely fund a spin-out, Versartis, charged with developing Amunix's lead compounds, the first of which is an XTEN-enhanced version of the diabetes drug exenatide.

Now comes a second spin-out called Ios, so newly dubbed that it doesn't have a Web site. Ios will hold Amunix's ion-channel program, which Stemmer told IVB he wants to become a "research hub" with several pharma partners and a goal of being acquired in the next two to four years. For drug leads, it is testing venom toxins against ion channel targets, using XTEN for half-life extension. Stemmer was in Chicago this week unfurling the Ios banner and scouting for discovery deals to replace or supplement the existing three-year deal with Pfizer that expires at the end of the year.

Unlike Versartis, which is strictly a product development company, Ios will include Amunix's microprotein platform technology, Stemmer said.

Photo courtesy of flickr user paraflyer.

Prolia is the Most Valuable R&D Asset, Humira the No. 1 Drug

Evaluate Pharma is one of numerous pharma consulting firms to publish its own sweep of the biopharma industry in conjunction with BIO; in this case, it's a world review of the biopharma market now and in 2016, based largely on Wall Street analyst consensus figures. It's projecting that Humira, the anti-inflammatory made by Abbott and Eisai, will be the top selling drug worldwide in 2016. A year ago, Avastin, Roche/Genentech's cancer drug, seemed likely to rule the roost. Both drugs currently have global sales of about $5.6 billion, but demographics – that aging population – are playing a big role in boosting Humira and other biological anti-inflammatories. It's not an accident that Enbrel, Rituxan, and Remicade (also anti-inflammatories) are also among the top 10. 2016 is also the year Humira's US patent expires, by the way, so Avastin should have clearer sailing after that, at least until 2018, when its patent expires and barring that other competitors don't come to the fore.

Sales estimates for the anti-inflammatories are based on already approved indications, so their exposure to clinical development and regulatory risk is limited, an EP analyst says. That's not so with Avastin, which is still a work in progress: recent clinical trial setbacks (pancreatic, prostate, etc., cancers) dampened its long term prospects, although positive data in ovarian and the potential of its use in other cancers are part of the reason it is hanging on to the number 2 spot.

EP's list of the top 20 "most valuable R&D projects (ranked by net present value)," also caught this blogger's eye. Amgen's Prolia, a new osteoporosis drug, which has a PDUFA date scheduled for July 25, is number one, with expected sales of $5 billion by 2016. Following- though not closely behind-is Dendreon's Provenge, which last week--to the vast excitement of Wall Street, prostate cancer groups and immunotherapy advocates of all stripes--became the first cancer immunotherapy to get FDA approval (EP says analyst consensus figures are for $1.7 billion by 2016). Also up on the list was Benlysta, the Human Genome Sciences/GSK drug for lupus, with projected sales of $2.7 billion by 2016.

All this data is based largely on consensus forecasts of the top investment banks, supplemented in some cases by EP's own analysis. And while analyst forecasts need to be taken with a grain of salt, the moreso the further out they go, they do provide food for thought.

DotW: Earn, Baby, Earn

What, you thought we’d go all Sarah Palin on you? We're guessing the phrase “Drill, baby, drill!” is about as popular as that oil slick inexorably spreading toward the Gulf Coast right now. Anyone out there scrambling to remove a certain bumper sticker?

In case you were partying with the Dendreon crowd or locked up in a dark room practicing the pronunciation of what used to be an obscure Iceland volcano -- for the record, it’s ay-uh-fyat-luh-yoe-kuutl -- you must have tweaked that it was another heavy earnings week in biopharma land.

And yes, the handwringing over costs tied to healthcare reform continues, at least if you are BMS, which reported one of the most significant hits on its first quarter earnings call this week. Meanwhile, the EU-based pharmas seem a bit blasé about the issue, or at least they're good at hiding their concern. Execs on GSK’s, Sanofi’s, and AstraZeneca’s earnings calls all sounded the same theme: forecasts already bake in the impact of US healthcare reform.

Of course, the U.S. was a problem territory for many of the multinationals long before health care reform, which is why companies like GSK and Sanofi have been on such a tear in the emerging markets. As the week ended, Pfizer looked to pull a page from Sanofi’s playbook: the world’s biggest pharma is rumoured to be sniffing around the Brazilian generics maker Teuto. Perhaps nabbing Teuto will make up being on the losing end of the RatioPharm deal. (Or maybe Pfizer CEO Jeff Kindler just needs an excuse to visit Brazil.)

Here at IVB, we do our best to earn our keep with a regularly occurring column loaded with insight and levied with snark that we like to call….



Charles River/WuXi AppTec: As top pharmas look to China to outsource more and more of their early stage R&D, the contract research organization, Charles River Labs, deepened its presence in the country this week with its proposed purchase of WuXi for $1.6 billion. The proposed tie-up would create a CRO with end-to-end capabilities, marrying WuXi’s chemistry expertise with Charles River's in vivo biology business. At a 28% premium to WuXi’s closing stock price on April 23, the deal has the blessing of both companies’ boards. To become a reality, however, it must also win approval from shareholders and China’s Ministry of Commerce. Ge Li, WuXi’s founder, and a rock star in the Chinese biopharmaceutical community, will continue to play a key role in the combined company post-merger as an EVP and president of global discovery and China services. As our sister publication PharmAsia News points out, Charles River/WuXi, if approved, represents the third major acquisition of Chinese CRO in recent month following PPD’s buy-outs of smaller players BioDuro and ExcelPharma Studies. Analysts generally hailed the deal but cautioned that even as the combined company provides one-stop shopping, it could face increased price competition from Chinese CROs capable of greater pricing flexibility. -- Kevin Holden and EFL

Aton Pharma/Bristol-Myers Squibb: Advancing its strategy of acquiring underappreciated mature products, Aton paid an undisclosed upfront to BMS April 26 for the US commercialization rights to the off-patent Parkinson’s disease drug Lodosyn. “Our strategy is [to] assume ownership of a product that does not have great awareness within the marketplace,” Aton’s CEO Michael Wells said in an interview with “The Pink Sheet” DAILY. This tactic isn’t exactly new, and it isn’t without risks. ViroPharma employed exactly the same logic when it in-licensed Vancocin from Eli Lilly in 2004 and quickly grew sales of the product. But once it demonstrated a demand for the C. difficile drug, generic competitors quickly piled in, putting pricing pressure on the medicine. For Aton, this deal represents another step in its evolution from oncology-focused biotech to specialty firm. Purchased by Merck in 2004 due to its work in HDAC inhibitors, Aton was bought out by Wells in 2006 (backed by Cerberus Capital Management and his own Princeton Pharma Holdings). Until the Bristol deal, Aton’s entire suite of products, including the Timoptic line of glaucoma drugs in-licensed last year, were originally Merck products. -- Joseph Haas

Merck/Nycomed: Days after Nycomed's Daxas, a potential first-in-class phosphodiesterase 4 enzyme inhibitor for COPD, got a positive nod from the European Medicines Agency, the drug landed a new commercial partner. On April 26, Merck and Nycomed announced a co-promotion agreement for the medicine in Canada, and certain European countries, including France and Germany. (Merck gets exclusive commercialization rights to Daxas in the UK.) The financial terms of the deal were not disclosed, but Nycomed will receive an undisclosed upfront and is eligible for regulatory and commercial milestones. Daxas already has a U.S. commercial partner in Forest Labs, which acquired rights to the drug for $100 million upfront in August 2009. At this juncture it looks like Merck, in the near-term, may have gotten the better deal. Daxas’s regulatory path to approval in the US is far less certain; earlier this month, FDA’s Pulmonary-Allergy Drugs Advisory Committee recommended against approving the medicine due to the drug's apparent modest efficacy and serious side effects. It’s possible FDA still could approve the drug, which has a May 20 PDUFA date. -- Jessica Merrill

Therabel/BioAlliance Pharma: BioAlliance Pharma of Paris announced Monday that privately-held European specialty pharma Therabel is taking an undisclosed equity stake in the company. The ownership stake isn’t unexpected. Therabel and BioAlliance announced an alliance April 6 around the European commercialization of the biotech’s Loramyc, an antifungal drug for use in immunocompromised patients, and Setofilm, an anti-nausea medication for the prevention and treatment of chemotherapy, radiotherapy, and post operative-induced vomiting. The deal includes a €6.5 million upfront and up to €48.5 million in milestone driven payments, and at the time BioAlliance hinted an equity stake worth €3 million was on the table. It's worth noting the April 6 deal holds one of the first examples of a trend we’ve long been predicting would materialize: milestones tied not to a drug’s sales but to its reimbursement. The press release clearly states, “additionally €3 million will be linked to Loramyc reimbursement in three EU countries.” The prospect of a reimbursement driven milestone was a subject of much debate at our recent Pharmaceutical Strategic Outlook meeting, where some dealmakers argued that the hedge was already included in sales milestones. What do you think, IVB reader? Are more reimbursement milestones on the way? -- EFL

Image courtesy of flickrer TW Collins through a creative commons license.