Deals Of The Week Tracks Obamacare

The pharmaceutical community, like much of the country remains divided about the Affordable Care Act and  its impact on healthcare and the industry, perhaps even more so than when the original law passed in 2010. The industry, of course, supported the initial legislation, and many people continue to believe it made the right decision. 

But as deadlines approach for the all-important next phase of the law, execution realities and uncertainty raise questions, many of which can’t be answered in the near term. Nonetheless, they have implications overall for the healthcare system and patients, and, more narrowly, for pharma commercial and business development strategy. This year, in particular, is important for the market access phase of the legislation, as the country prepares to get new health insurance exchanges running by the Jan. 1, 2014 deadline, and states decide whether and how to expand their Medicaid offerings to broader populations. As of Jan. 1, Americans must have individual insurance coverage or pay a penalty (modest at first); they can buy the coverage through insurance plans listed on health insurance exchanges which begin operations on that date. 

Overall, pharma industry support, officially, at least, seems high, even as executives worry whether their companies will ever make up for the tradeoffs they agreed to three years ago in the form of bigger rebates (for Medicaid and other government programs) and taxes through numbers of newly covered lives. They are concerned about less high-profile provisions of the act, such as its dramatic expansion of the 340b program to new categories of hospitals, and a provision that limits reimbursement companies can get for minor improvements to their product, as well as the federal and state governments’ ability to execute their plans on time. 

Many states are just now announcing which insurance companies are participating in the exchanges and those plans are identifying their basic options, but the industry in general does not yet have a good perception of what drug coverage will look like, how the new exchange plans or Medicaid expansion will be populated, or how the mandatory individual insurance provisions will be enforced. 

Because no one really has the answers, many in the industry expect companies to monitor the ACA’s progress closely but continue to operate status quo. They are not so much keeping their heads in the sand as monitoring cautiously,” says an executive at a firm that advises companies on market access issues. “From a tactical perspective, no one knows what will happen, so they are taking the path of least resistance. Top execs are asking me to come up with projections, and I don’t know them, so they are proceeding as though there is no effect.”

The uncertainty hasn’t stopped Wall Street from predicting winners and losers in the healthcare sector in general, or entrepreneurs form seizing opportunity in the midst of change. At the Jefferies investment bank conference on June 4, a panel of experts opined about investor beneficiaries, and all agreed that whatever else, managed care –perhaps by another name—will be the name of the game going forward. Past efforts to move populations into managed care failed, but what’s different now is the government support for such programs, as well as massive databases that able to monitor how the system is performing.

Meanwhile, the industry’s relentless search for innovation continues – if for no other reason than because without it, there’s not much of an industry – witness the struggles of specialty pharma companies such as Elan PLC, Endo Health Solutions, and Forest Laboratories, all laboring to move beyond the enormous success of an innovative drug but finding it hard to come up with a repeat act.--Wendy Diller

MorphoSys/GSK: MorphoSys has struck a development and commercialization deal with GlaxoSmithKline for its mid-stage rheumatoid arthritis antibody, MOR103, which targets the GM-CSF pathway that stimulates production of immune cells such as macrophages. The deal, announced June 3, gives MorphoSys near-term cash in the form of a €22.5 million ($29.5 million) upfront, plus development, regulatory and commercialization milestones that could add up to €425 million. GSK also will pay a double-digit royalty on all sales of the product. MOR103 has completed a Phase I study in healthy individuals, as well as a Phase Ib/IIa trial in 96 patients with mild to moderate rheumatoid arthritis. Patients in the drug arm of the study showed a significant effect compared to placebo at just four weeks. GSK will take over all development, but did not specify when it will begin Phase II studies. MOR103 has also been tested in patients with multiple sclerosis.

MorphoSys has been shifting gears for the last few months as it tries to move away from the partnership model that has made it profitable to concentrate more on its wholly-owned pipeline. MorphoSys has two drugs in its proprietary pipeline: MOR208, a Phase I asset which targets CD19 for B-cell malignancies, and MOR202, a HuCAL antibody against CD38 for multiple myeloma. – Lisa LaMotta

Pfizer/CytomX Therapeutics: After obtaining preclinical proof-of-concept last year for its approach to tumor-specific delivery of specially engineered antibodies, CytomX has struck its first alliance with a big pharma. Under an agreement announced June 6, the company will collaborate with Pfizer to discover and develop a variation on antibody-drug conjugates (ADCs) for cancer. Pfizer will pay the South San Francisco, Calif.-based biotech $25 million in combined upfront cash and milestones pegged to research and preclinical achievements. In addition, privately held CytomX could earn up to $610 million in regulatory and sales milestones, as well as tiered royalties into double digits on sales of any product reaching market. Because of the selectivity of candidates generated via its Probody Platform, CytomX says it can target broadly expressed tissues that are difficult to reach with other therapeutic approaches because of worries about off-target toxicity. CytomX uses its technology to generate ADCs that it calls Probody Drug Conjugates (PDCs), specially engineered antibodies or other approaches to drug delivery for cancer, inflammation and other unmet medical needs. PDCs will be safer and differentiated from other ADCs, CEO Sean McCarthy said, because they are engineered to combine cytotoxic payloads with Probodies that are masked to become activated only in the tumor’s micro-environment. Pfizer and CytomX are not disclosing the indications or specific targets on which they will work together, nor any timelines for the work, other than that it is an exclusive, multi-target alliance focused on oncology. – Joseph Haas

Janssen Biotech/Second Genome: Janssen Biotech and Second Genome Inc. announced a landmark research alliance on May 5th in which the latter will apply its microbiome discovery platform to characterize the role of human bacterial populations in ulcerative colitis. The goal is to translate the knowledge into therapeutic programs. The deal marks big pharma’s first commercial collaboration in microbiome R&D and may stimulate further deals and investment in the space. Interest in the therapeutic potential of the microbiome has been building over the past three years with the founding of several venture-backed companies focused on microbiome biology. Second Genome gets an upfront payment and milestones, both undisclosed. The upfront does not include equity. Janssen will fund the collaborative research through its Johnson & Johnson Innovation Center and the immunology therapeutic area within Janssen R&D LLC. Second Genome has preclinical programs in inflammatory bowel disease and type 2 diabetes, each about a year and a half from IND. It also has several discovery programs. On the same day, the start-up announced a $6.5 million third tranche to its series A financing, bringing the total raised to $11.5 million.—Michael Goodman

The Medicines Co./ ProFibrix: The hospital marketer The Medicines Co. is expanding into the hemostasis market, and has negotiated an option deal with ProFibrix BV that could improve its position there. The company announced June 4 it has agreed to pay $10 million upfront for an option to acquire ProFibrix later this year after Phase III clinical trial results read out on the company’s lead biologic, Fibrocaps. The dry powder topical formulation of fibrinogen and thrombin is being developed to stop bleeding during surgery. If the results of the single Phase III trial testing Fibrocaps are positive, The Medicines Company would pay $90 million to acquire ProFibrix outright. It also would be on the hook to pay $140 million in regulatory and sales milestones. ProFibrix’s ongoing Phase III trial, FINISH-3, has completed enrollment of 719 surgical patients with mild to moderate surgical bleeding, and the results are expected in the third quarter. The Medicines Company already markets the recombinant thrombin Recothrom, to which it recently gained rights through an earlier option arrangement with Bristol-Myers Squibb Co. The Medicines Company plans to combine the 60-person hemostasis group it gained from Bristol with the ProFibrix team. Both are based in Seattle, although ProFibrix’s leadership and headquarters are in The Netherlands. Plans call for CEO Jan Öhrström to stay on with The Medicines Company and head the company’s efforts in the hemostasis market. – Jessica Merrill

Novavax/Isconova: Eager to add adjuvant technology to its clinical and preclinical recombinant vaccine candidates, Novavax is making a $29.2 million bid to buy Swedish firm Isconova. Spun out of the Swedish University of Agricultural Science, Isconova produces saponin-based, immune-modulating adjuvants. In October 2012, Rockville, Md.-based Novavax, which has vaccines in clinical development for seasonal influenza, pandemic influenza, respiratory syncytial virus and rabies, reported successful Phase I data testing its pandemic flu vaccine boosted with a third-party saponin-based adjuvant. In a release, Novavax said based on those data plus Isconova’s own data, it believes the Swedish biotech’s technology can complement and strengthen its vaccine programs. Novavax announced a public offer June 4 under which it would issue 15.45 million new shares of common stock and swap 1.2388 shares of its stock for each Isconova share. The deal would represent a 26.7% premium over Isconova’s share price at the close of trading June 3 and would result in Novavax shareholders owning 91.1% of the new combined company. Isconova shareholders would control the remaining 8.9%. Novavax said if the deal goes through, it will offer Isconova management “positions subject to their commitment to the combined company,” and it does not plan to seek changes regarding the Swedish firm’s headcount, employment terms or business location.--JAH

Arno/Veridex: Cancer-focused Arno Therapeutics signed an agreement June 3 with Veridex, a subsidiary of Johnson & Johnson, to develop a diagnostic test for seeking optimal patients for its oncology candidates. Based in Flemington, N.J., Arno is developing cancer therapeutics that target the PI3 kinase/Akt pathway, as well as HDAC inhibitors and camptothecins. The two firms will team up to use Veridex’s proprietary CELLSEARCH platform to develop a diagnostic to detect the presence of activated progesterone receptors as a biomarker of anti-progestin activity in circulating tumor cells, those that have detached from a solid tumor and are found in the bloodstream. Arno is developing onapristone, an oral, anti-progestin type 1 progestin receptor antagonist. Now in preclinical development, onapristone is slated to begin clinical study during the second half of 2013.--JAH

AstraZeneca/ Rigel: AstraZeneca pulled out of its three-year partnership with Rigel Pharmaceuticals on June 4 after the companies announced lackluster results of the Phase III program for rheumatoid arthritis drug fostamatinib, an oral spleen tyrosine kinase (SYK) inhibitor. The drug did not show the levels of efficacy that many other drugs in the category have in clinical trials, prompting AZ to pull the plug. Rigel intends to evaluate the data from the Phase III program, which AZ conducted, and make a decision by end of the summer regarding its next steps. Rigel executives believe that fostamatinib could still find a place in the crowded RA market, even if the indication is just for a small subset of patients. Rigel potentially will seek approval of the drug on its own, but said it will not commercialize the drug without a partner. 

The failed program is just the most recent in a string of failures for the British pharma, which has ended programs in cardiovascular and oncology as well. It has also faced a slew of setbacks with its diabetes program, partnered with Bristol.--LL

Under One Roof: Roche Talks Up In-House Advantages In Cancer

Roche had a number of pithy taglines to splash around its oncology business review at ASCO: "we take cancer personally," or with a slightly more ominous tone, "doing now what patients need next." But the more powerful refrain may have come from execs' repeated mention of how much Roche has "under one roof."

With so many companies targeting oncology and talking up their strategies to move up the leader board, the onus is on the market leader to maintain its position. That may not actually be a large internal priority at Roche, as their acquisition of Genentech gave them a comfortable lead. Roche oncology sales in 2012 were almost three times as much as its nearest competitor, Novartis--$19 billion, versus $6.6 billion, respectively for the full year, according to IMS Health.

Karl Mahler, Roche's head of investor relations, cited the HER2 franchise as the model of how Roche is differentiated from other companies, changing standard of care, building lines of therapy and moving towards combinations. That's what Roche is looking to do in hematology, moving from the rituximab base to new drugs like GA101. "We have a number of scenarios that can help us both extend the franchise and potentially replace and extend the franchise," Roche Pharma COO Daniel O'Day said. 

There was an underlying theme in the firm's annual ASCO presentation: how well their model works, how they can repeat that success, and how big their position in oncology actually is. Part of the success is positioning and building off their existing business, where O'Day touted the firm's in-house capabilities - especially in the growing field of rational anti-cancer combinations.

The foundation for Roche's oncology business are the three pillars of the anti-HER2 franchise, the anti-CD20 franchise and the anti-angiogenesis franchise. "Obviously we want to continue to improve upon those," O'Day told the June 2 meeting in Chicago, "but we'll be adding that the many, many new targets that we have and new pathways, things like our MetMAb, PI3 kinase, Bcl-2, others." There's also the antibody-drug conjugate platform, which beyond the recently launched Kadcyla includes 20-25 new compounds. "Add to that the immunotherapy and I think it gives you the richness of the combination therapies being able to really come to play."

"Of course, you can do that across companies in different ways," O'Day added, "but we think there are significant strategic advantages to do that within one organization." And Roche has the "diversity and mass ... in each one of these areas" that can make that doable within one company.

There's a similar situation with companion diagnostics, he added, "because often the value on these combination therapies is obviously more obtained on the pharma side than on the diagnostic side, and that's one of the advantages of the Roche Group strategy that's allowed us to move diagnostics ahead very aggressively, as well."

O'Day returned to the pharma side in 2012 after a seven year stint heading the diagnostics division. He played up how his "good relationship" will help the company as it considers strategies to optimize the pharmaceutical pipeline in oncology.

An early test of these beliefs comes from the PD-1/PDL-1 inhibitor class, the promising immune checkpoint area that has been a hotbed at ASCO. Roche has its own version, but it remains to be seen if its or Merck's or Bristol's or anyone else's emerges as the optimal partner - though execs argued that Roche's PDL-1 is looking good. The company also has an assay that could have a pivotal place as the field takes off.

The shift to two or more agents combining in immune checkpoint "really does highlight how valuable it might be to have many of these reagents under one roof, because the collaborations across companies are always challenging," Hal Barron, Roche's head of global pharmaceutical development, said. "We would always pursue them if that's where the biology went, but we have an opportunity to define how the future looks by having these."

It also means not having to share the value. Companies can do that, "but I do think it gives us a tremendous competitive advantage to have as many products within one company as possible, because it allows us to look at a global pricing strategy where we have set out a certain range," O'Day said. (And with new combinations will come the need for an evolving pricing strategy, O'Day admitted. We'll have more to say on that in the next issue of "The Pink Sheet".)

Though Barron rebuffed a question about the company's wishlist for opportunities it doesn't have in its own pipeline - not wanting to tip its cards - the exec revealed part of its business development strategy:  "Our approach is, oftentimes, to ask ourselves is there a way of improving on those within that pathway? I won't go into great detail about that, but we are constantly looking at drugs that are active and saying, not just do we wish we had those, but could we then take those and that pathway and make it better? I think our strategy is to really have as many things as we could."

Most companies looking to build their oncology presence talk up the importance of expertise. Roche spread that around the (very crowded) room -- during the Q&A, it became clear that many company experts were seeded throughout the space, ready to impress.

Mahler laid it out from the start of the meeting. Over half of Roche's R&D budget is dedicated to cancer care. "And we are not currently only in the lead, but we also intend to stay in the lead by spending appropriate money for this," he promised.

As long as Roche is willing to put money where its mouth is, it very well may wind up in the end just as it started -- in the lead.

Deals Of The Week Watches Crowdfunders Multiply Like Rabbits

That giant sucking sound you hear is investors pulling their money out of early-stage drug and device research. As we’ve chronicled here and in our other publications, big pharma has valiantly stepped in to fill the breach, whether through corporate venture or academic tie-ups, but that won’t be enough to budge the gathering volume of biomedical discoveries stalled between lab and clinic.

Some investors, thinking the JOBS Act and its provisions governing general solicitation will usher in a sea change in how biomedical ideas get funded, have pointed to crowdfunding as a solution. We’ve written about a number of these entities, including MedStartr Inc., Poliwogg LLC, and most recently, HealthiosXchange.

On May 17, VentureHealth LLC threw its hat into the ring. VentureHealth is the creation of Mir Imran, who founded and manages its sibling companies InCube Ventures LLC and InCube Labs LLC, an incubator and collaborative research lab that spins out one or two companies each year. InCube Ventures typically invests in start-ups out of InCube Labs as well as in external companies. Mir himself holds more than 200 issued patents, is the inventor of numerous devices, and has founded more than 20 medical device companies, 15 of which have had successful exits via trade sale or IPO.

There is some debate about whether crowdfunding threatens VC by accessing a new and better idea flow and a broader base of investors. Greg Simon, CEO of Poliwogg, sees it as potentially disrupting the traditional investment supply chain, knocking out investment banks and venture, along with their bloated fees.

Simon told us that venture would probably not be interested in crowdfunding because the numbers are too small and, besides, venture’s business model is based on investing other people’s money.

Mir and his colleagues at InCube think otherwise. VentureHealth embodies the idea that the best of venture can be blended with the best of crowdfunding, to the benefit of venture investors, citizen LPs, entrepreneurs, and biomedical technology.

The potential of linking venture to crowdfunding was unwittingly demonstrated by an early pioneer. MedStartr, a crowdfunder of low-tech health and wellness products to non-accredited investors, operates on what amounts to a donation model. Investors see no return except for the warm glow that comes with contributing to a good cause. But an interesting thing about its crowdfunding model is that venture, angel, and other kinds of investors are on the sidelines watching. And every so often, when they see a good idea, they swoop in and fund it. MedStartr, sadly, is unable to participate in those exits.

But VentureHealth is.

For starters, VentureHealth takes a carried interest fee on what it earns in a sale or other liquidity event, much like a VC would. Mir’s partner, Andrew Farquharson, claims that this model aligns the interests of VentureHealth with its investors. Unlike some other crowdfunding portals, VentureHealth has no plan to become a registered broker-dealer.

VentureHealth’s plan is to only go out to accredited investors. In fact, it will be quite selective in the investors it brings in – physicians, researchers, individuals who understand the technology being offered and the market it’s targeting. As long as they meet those criteria, they can be experienced accredited investors or novice accredited investors who meet the minimum financial requirements set by the SEC but have traditionally been excluded from investing in private companies. Mir told us that VentureHealth is not interested in going out to non-accredited investors. It can raise all the money it needs from its accredited base, with additional support from InCube Ventures and, where warranted, from other venture co-investors.

It’s refreshing to find a crowdfunder who rejects the populist cant that many of its peers go in for. That’s not to say that VentureHealth isn’t opening up ground floor investment opportunities for investors who would otherwise be excluded. But it’s not exactly democratizing the process for all comers.

VentureHealth will focus on devices, drugs, diagnostics, and mobile health. In many cases, says Mir, InCube Ventures will co-invest alongside VentureHealth. The crowdfunding entity will likely have broader a remit for the deals it pursues than its venture sibling, but where they intersect, there will be co-investment. Venture health will be able to draw on the traditional venture strengths of screening deals, doing the diligence, managing companies, and providing follow-on funding.

The two exits listed on VentureHealth’s website illustrate the flexibility and potential of the venture/crowdfunding model especially when managed by industry insiders with extensive relationships and know-how.

Nfocus Neuromedical Inc. is a developer of a neurovascular device with an initial indication in brain aneurysms. The company was founded by Mir and co-inventor Martin Dieck. It was acquired in February by Covidien PLC in a structured acquisition for $51 million upfront and a $21 million earn-out payment. VentureHealth raised $1.49 million. Oxford Bioscience, DFJ e-Planet Ventures and others participated in financing rounds.

In the other exit, BodyMedia Inc., a developer and marketer of wearable body monitors that communicate with mobile devices, was acquired by Jawbone for $100 million in May 2013. VentureHealth raised $469,000. InCube Ventures, Comcast Ventures, and others participated in financing rounds.

Mir acknowledges that there’s an incestuous element to these early exits in which he wears the hats of company founder, venture co-investor, and crowdfunder. That might change over time. But he underscores another advantage of VentureHealth’s tight association with its VC sibling: “When Incube Ventures makes an investment from our fund, we keep a sizeable amount of dry powder on hand for follow-on rounds.” His point is that most angel investors – Mir says crowdfunding is organized angel investing – can’t look that far into the future and reserve capital for follow on fundings.

VentureHealth’s raises currently range between $500,000 and $1.5 million. Mir expects that number to rise as his accredited investor base gains experience. VentureHealth lists one “active investment” on its site: Channel Medsystems Inc. is developing an office-based, cryoablative technology to treat excessive menstrual bleeding. It raised $9.7 in an April B round led by Boston Scientific, toward which VentureHealth contributed $875,000.--Mike Goodman

While the crowdfunding space gets more crowded, deals and acquisitions this week continued their torrid pace.

Valeant/Bausch & Lomb: M&A-focused Valeant Pharmaceuticals International Inc. announced its biggest acquisition yet on May 27, agreeing to pay $8.7 billion to acquire privately held eye care company Bausch & Lomb Inc.  The transaction will increase Valeant’s eye care portfolio substantially: B&L offers a suite of prescription and over-the-counter drugs, contact lenses and lens-care products, as well as ophthalmologic surgical devices and instruments.

CEO Michael Pearson said the deal would create a global eye care platform within Valeant, retaining the B&L brand name,that will provide pro forma net 2013 revenue of roughly $3.5 billion. Of the $8.7 billion price tag, $4.5 billion will go to B&L’s owners at Warburg Pincus, while the remainder will retire B&L’s outstanding debt. Valeant, which had $414 million cash on hand at the end of the first quarter, said it will finance the transaction mainly through debt, while also raising between $1.5 billion and $2 billion in new equity. The Canadian specialty pharma projects $800 million in cost synergies from the transaction by the end of 2014.

The deal, unanimously agreed upon by both companies’ boards and expected to close during the third quarter, follows Valeant’s recent and apparently unsuccessful courtship of Actavis Inc. Acquiring B&L will enable Valeant to balance its revenue mix from both a geographic and therapeutic perspective. After closing, about 50% of Valeant revenue will stem from the U.S., with Eastern and Central Europe comprising 15%, Western Europe and Japan 13%, and Latin America, Canada, Australia, Southeast Asia and South Africa rounding out sales. In terms of therapeutic areas, dermatology and aesthetics will contribute about 34%, eye health about 32%, neurology and “other” about 12%, and consumer and oral health about 11%.--Joe Haas

GlaxoSmithKline/Okairos: GlaxoSmithKline PLC has done the biggest takeout of a private, clinical-stage European biotech so far this year with the acquisition of Okairos SRL for that company’s Phase I RSV vaccine and T-cell stimulating technology. for the biotech’s VCs nabbed roughly a 10x return on their €23.2 million invested capital.

Vaccines are a core therapeutic area for GSK. With Okairos, it hopes to have the basis of a first-in-class blockbuster. RSV is a common virus that presents with cold-like symptoms. In infants under one year old in the U.S., the disease is the most common cause of bronchitis and pneumonia and can require hospitalization or occasionally be fatal. Okairos’ vaccine provided “complete protection” against RSV in preclinical testing on rats and calves; the biotech started a Phase I trial in 40 healthy volunteers in February. MedImmune Inc.’s Synagis (TK) is a monoclonal antibody used as a preventative in premature and other high risk infants, but there is no RSV vaccine or post-infection therapy on the market.

In addition to RSV, Okairos has four clinical stage vaccine programs for malaria, HIV and hepatitis C (prophylactic and therapeutic). The Okairos platform and much of the management came out of Merck & Co. Inc. Okairos co-founder and CEO Riccardo Cortese was the founder and head of the Istituto di Ricerche di Biologia Molecolare (IRBM) in Rome, which later became a subsidiary of Merck. He departed Merck, taking much of his original IRBM team with him, and in-licensed the technology from the pharma in 2007.--Stacy Lawrence

AstraZeneca/Omthera: In its quest to reshape its cardiovascular pipeline, AstraZeneca PLC bypassed commercial-stage fish oil pill maker Amarin Pharmaceuticals Inc. announcing plans May 28 to acquire Amarin’s rival Omthera Pharmaceuticals Inc. instead. By acquiring Omthera, AstraZeneca accepts more risk, but gains an NDA-ready asset for dyslipidemia for considerably less than it would have cost to acquire Amarin ([A#14130528004]). AstraZeneca will pay Omthera $12.70 per share, or approximately $323 million, an 88% premium over Omthera’s closing price on May 24. The enterprise value of the deal is lower, about $260 million after incorporating Omthera’s cash balances of roughly $63 million, the company said.

In addition to the upfront cash from AstraZeneca, Omthera shareholders will receive contingent value rights of up to $4.70 per share, about $120 million, tied to milestones for Omthera’s lead product Epanova. The product, a mixture of polyunsaturated free fatty acids derived from fish oils, namely EHA and DHA, has demonstrated efficacy in Phase III studies for reducing triglyceride levels, as well as non-HDL cholesterol in combination with a statin, in patients with hypertriglyceridemia.

It is an indication for mixed dyslipidemia, a broader patient population, that both AstraZeneca and Amarin hope to pursue, and there, Amarin is ahead. Its product, Vascepa, is already on the market, and the company is awaiting action from FDA on an sNDA for mixed dyslipidemia. But, with a market capitalization of close to $1 billion, Amarin would have been a more expensive takeout.--Jess Merrill
 
ThromboGenics/Eleven Biotherapeutics: Following the recent U.S. and European launches of its first product, the macular adhesion therapy Jetrea (ocriplasmin), Belgian biotech ThromboGenics NV now wants to build on that success by developing a range of ophthalmic products. As part of that strategy, it has licensed technology from U.S. company Eleven Biotherapeutics to design a new protein therapeutic targeted at diabetic eye diseases such as diabetic macular edema.

ThromboGenics has identified a biologic target involved in diabetic eye diseases, and will use Eleven's AMP-Rx protein design technology to create a novel product, the companies announced May 28. Eleven has received an undisclosed upfront payment, and will receive development, regulatory and sales milestones plus royalties on any protein developed using the technology. Eleven argues it has already validated the technology by developing its own lead protein therapeutic, EBI-005. The product is being evaluated in a Phase Ib study for the treatment of dry eye disease.

ThromboGenics is a European biotech success story. In addition to launching Jetrea in the U.S. on its own at the beginning of 2013, it has also received a total of €90 million ($117 million) in milestone payments from ex-U.S. Jetrea licensee Alcon (a division of Novartis AG), after that company gained EU approval and subsequently launched the product in the U.K. and Germany. The biotech expects "significant" royalties from Alcon's net sales of Jetrea.--John Davis

Amgen/Astellas: Amgen Inc. took a second stab at the Japanese market with an alliance and joint venture with Astellas Pharma Inc., five years after selling off its Japanese affiliate and portfolio to Takeda Pharmaceutical Co. Ltd.

The alliance with Astellas, announced May 29, provides Amgen a co-development and co-commercialization partner for five products. The furthest in development are AMG 145, a PCSK9 monoclonal antibody  in global Phase III trials and in Phase II in Japan with a lead indication of hyperlipidemia; and romosozumab, a sclerostin mAb in global Phase III and Phase II/III in Japan for osteoporosis. Anti-HGF mAB rilotumumab is in Phase I in Japan for gastric cancer, and MET inhibitor AMG 337 for gastric cancer and blinatumomab for hematological tumors are still in preclinical.
The alliance for the five products will last through 2032 at the latest. Astellas would pay undisclosed royalties to Amgen for any products that reach market, but the companies will otherwise share development costs and profits 50-50.

Astellas and Amgen also formed a joint venture, Amgen Astellas BioPharma KK, which is structured to allow Amgen to turn the operations into a wholly owned Japanese affiliate as soon as 2020. The JV, 51% owned by Amgen, 49% by Astellas, will open Oct. 1 in Tokyo and will comprise seconded employees from Astellas, transferred employees from Amgen and new hires. However, a source close to Amgen’s previous Japan operations said Amgen may have trouble with recruitment after exiting the country.

At a May 29 press conference in Tokyo, Amgen CEO Robert Bradway said, “This is the alliance we expect to create a platform for Amgen to have its own operations in Japan.”--Dan Poppy

Pfizer CTI/UCSF: Pfizer Inc.’s Centers for Therapeutic Innovation (CTI) has broadened its scope through a deal with the University of California San Francisco that will focus on small molecule research – a first for CTI. Until now, the Pfizer initiative had focused only on biologic projects. Under the new collaboration, CTI will provide UCSF with funding and scientific expertise to support preclinical and clinical development of the compounds. The therapeutic areas and number of compounds included in the collaboration were not disclosed, but UCSF is eligible for milestone payments and royalties should any of the compounds advance through commercialization. CTI is expected to engage some of its other partners in small molecule research.

CTI was set up by Pfizer in late 2010 to allow the Big Pharma to better engage scientists on medical campuses and in research institutions. Pfizer set up hubs in San Francisco, New York, and Boston and has committed hundreds of millions to the projects. CTI is expected to expand to as many as eight cities.
The first initiative under the CTI banner was a collaboration set up between CTI and UCSF in November 2010. At the time, Pfizer committed $85 million of funding over a five-year period.--Lisa Lamotta

Financings of the Fortnight Battles the Bull Run

Since when did biotech’s epicenter move to Pamplona? The bull run has lasted quite a while now, after having gotten an extra goose, if you don’t mind mixing barnyard metaphors, around the time hepatitis C treatment developer Pharmasset became the $11 billion target of Gilead Sciences in November 2011.

Once they scraped their jaws off the floor, analysts decided the deal wasn’t really so shocking despite the price tag. We’ll soon find out how well it pays off for Gilead. The HIV leader has put the main compound it acquired in that deal, sofosbuvir, through a battery of Phase III tests and applied for a marketing license.     

One could argue that the acquisition has already paid dividends not just to Gilead but to nearly every other biotech company with a pulse. Since the deal was announced in November 2011 the two major biotech indices from NASDAQ (NBI) and the NYSE (BTK) are up 97% and 93%, respectively. That's vastly outstripped the tech-heavy  NASDAQ Index, which is up a tidy 35%. You could slice and dice the good times in other ways, too: In the last five years, the NBI is up 138% and the BTK 170%, compared to 37% for the Nasdaq writ large.

Or, microcosmically, you could point to this morning's Epizyme activity. The epigenetics company, which our In Vivo colleagues profiled a year ago, sold IPO shares at $15 each, raising $77 million, and the stock began trading this morning at $20. (As of this writing it's up to $21.02.) That's a lot of enthusiasm for a company in a cutting-edge area of biomedical R&D with just a few months of a Phase I trial as the sum of its clinical experience (and the drug in that trial, to boot, is partnered to Celgene).  

The majority of the gains have come in the past year and a half. Whichever cut of the steak you prefer, it’s been an unusually long run for the sector, which tends to see run-ups for six months, perhaps a year, then lose much of the ground it has gained. Much of the fervor is driven by large-cap biotechs: Since November 2011, Biogen Idec, Vertex Pharmaceuticals, Celgene, Gilead Sciences, and Amgen have all outperformed the biotech indices (Gilead by a ton, the rest by a few percentage points). As ISI Group analyst Mark Schoenebaum pointed out recently,  the NBI has soared (and even surpassed in March the high water mark that the genomics bubble left in March 2000), all while the median price-to-earnings ratio of large cap biotech has deflated like a forgotten balloon for years.

Many mid-cap biotechs are making hay, too. Onyx Pharmaceuticals is up 125%, Isis Pharmaceuticals 156%, Clovis 166%, Alnylam Pharmaceuticals 249% -- yeah, Alnylam, whose partners abandoned its RNAi platform a few years ago, and which made a sharp right turn as a slimmed-down clinical-stage company in 2010 – and speaking of rising from the ashes, Medivation, they of Dimebon infamy, are up 451%, all since November 2011.

There are others, and the list of billion-dollar market caps is getting a little heavy. We’re not saying that Sarepta Therapeutics, which has been grinding away at a novel approach to treating Duchenne’s muscular dystrophy for several years after shifts in focus, top management, and company name, is the life sciences equivalent to Pets.com; or that Acadia Pharmaceuticals, a 20-year-old firm working toward approval of its Parkinson’s psychosis treatment, is this year’s Webvan. But talk of a bubble is, well, bubbling up, and one wonders if it will pop in the summer heat. It’s conventional wisdom that the down time after the annual American Society for Clinical Oncology (ASCO) conference, gearing up right now in Chicago, is also profit-taking time.

Until now, though, it’s been a seller’s market. To date, biotech follow-on sales have raised $4 billion this year. That’s nearly two-thirds of last year’s $6.5 billion total in just under five months, according to Elsevier’s Strategic Transactions database.

Put another way, there have been 18 follow-on sales of $75 million or more so far in 2013. That nearly equals last year’s total of 21. And it’s not just the high flyers raising barrels-full. As we describe below in our round-up, Ironwood Pharmaceuticals ginned up a cool $136 million by selling 10.5 million shares. Shares of the constipation-relief developer have appreciated only modestly while the male bovines have cavorted. Starting at the November 2011 "goose" mark, Ironwood has only risen 7%. Or, if you prefer a somewhat less arbitrary start date, Ironwood is up 23% since its February 2010 IPO, while the Nasdaq has risen 63% and the biotech indices have more than doubled.

So with the likes of Ironwood raising more than $200 million in equity and another $175 million in debt since the market’s gone nuts, we’re going to speculate that companies below the large-cap range are having little problem getting the cash they need. (In Ironwood’s case, it’s to help with the launch of their first commercial product, Linzess, aka linaclotide, which the FDA approved last August.)

According to Strategic Transactions, since November 2011 biotechs with market caps of $1 billion or more have raised $3.89 billion over 24 sales, an average of $162 million. Companies with market caps between $500 million and $1 billion have raised $2.59 billion over 26 sales, an average just under $100 million. And sub-$500 million cap companies have raised $4.67 billion over 142 sales, an average of $34 million.

It all reinforces the urgency for private firms to get through the IPO window, because the grass really is greener on the other side of the fence. And for now, there's plenty of pasture to graze. The upcoming Start-Up will have fewer bovine puns and more on the current IPO landscape – who’s getting to exits might surprise you -- so stay tuned. And before you exit, make sure you profit from the rest of our column. Sharpen your horns, it’s time for…

  
Ophthotech: The legacy of Eyetech continues. Its successor Ophthotech has raised $175 million to fund a huge Phase III trial for its wet age-related macular degeneration (AMD) candidate, Fovista. Announced May 29, the transaction comprises a $50 million Series C round for the privately held biotech, plus $125 million from long-time investor Novo AS in exchange for royalty rights to Fovista. The financing is the latest in a web of transactions involving the now-defunct Eyetech, Novo AS and other players in the ophthalmology space, including venture firm SV Life Sciences. New York-based Ophthotech was created and is led by Eyetech co-founders David Guyer and Samir Patel. Following the sale of Eyetech to OSI Pharmaceuticals, Guyer was a principal at SV Life Sciences, which focuses much of its investment on eye care companies. The Series C investors were Novo AS and Ophthotech’s other prior investors: SV, Clarus Ventures and HBM BioVentures. The same four participated in Ophthotech’s $30 million Series B round in 2009, and Novo, SV and HBM were the investors in the biotech’s $36 million Series A in 2007. But Novo AS also is ponying up $125 million against future royalties on the sale of Fovista, an anti-platelet-derived growth factor (PDGF) drug slated to start a 1,900-patient, 200-site Phase III study during the third quarter. The company declined to provide specifics on the royalty agreement, such as percentage of sales or whether the royalties would be capped by dollar amount or a certain date. – Joseph Haas

Effector Therapeutics: Effector closed a $45 million Series A round of funding, announced May 20, with commitments from seven venture firms including three tied to Big Pharma. The backers are GlaxoSmithKline’s venture firm SR One, Novartis Venture Funds, and Astellas Venture Management, as well as Abingworth, Osage University Partners, U.S. Venture Partners and Mission Bay Capital. The company plans to develop and commercialize new drugs based on discoveries at the University of California, San Francisco, concerning the process of translation, or protein synthesis. Effector believes it can create compounds that affect multiple oncogenes simultaneously, halting a key mechanism that leads to tumor growth. The company will target so-called “effector mechanisms” selectively, aiming for an upstream process that can activate more than one cancer gene at the same time. San Diego-based Effector believes that newly-discovered methods of disrupting certain malfunctioning effector mechanisms can sever a key lifeline upon which cancer cells depend. For CEO Steve Worland, Effector is a chance to build a new company from the ground up. He was CEO of publicly traded hepatitis C specialist Anadys until its sale to Roche for $230 million in October 2011.  Worland told our Pink Sheet colleagues that his involvement with Effector’s VCs “was like being an entrepreneur-in-residence at three or four firms simultaneously” as he built the syndicate. The corporate investors’ parent firms received no special rights, options, or ties to the programs Effector has underway. According to U.S. Venture Partners’ Larry Lasky, the four firms with board seats – USVP, Abingworth, SR One, and Novartis -- were the “main investors,” while the other firms contributed smaller amounts. – Paul Bonanos

Karyopharm Therapeutics: After raising more than $30 million in its initial financing, oncology biotech Karyopharm is adding to its cash runway with a $48 million Series B. The Natick, Mass. company will use the new funds to push its lead cancer asset forward in multiple indications. Karyopharm, which was founded in 2008, has been financed largely by a private investor until now. In November 2010, the biotech attracted the attention of deep-pocketed Chione, an investment vehicle that is backed by Polish oil and gas baron Slava Smolokowski, who has also put some of his considerable fortune into Broadway. With Smolokowski’s backing, Karyopharm raised $20 million in its initial round and then added another $10 million during a follow-up offering in 2011. Chione once again has contributed to the most recent round of financing and been joined by a group of private investors, as well as one venture capital firm. Delphi Ventures now has joined the company’s investment syndicate in the latest round of financing and Deepa Pakianathan will join its board to represent Delphi’s interests. Karyopharm also has received $1 million in funding from the Multiple Myeloma Research Foundation and the founders brought in $1 million from other angel investors prior to the Series A. CEO Michael Kauffman said the company largely has avoided including venture capital investors due to the constraints that often come with VC money – particularly more rigid timelines. He said the leeway afforded by private investors was a better fit for the company. – P.B.

Ironwood Pharmaceuticals: The developer of constipation treatment Linzess (linaclotide) netted nearly $130 million in a secondary sale of 10.5 million shares of its Class A common shares at $13 a piece, a 6% discount to the previous day’s closing price. The firm could boost its proceeds if underwriters led by JP Morgan and BofA Merrill Lynch sell an additional 1.575 million shares, cash that will help the company build the recent launch of Linzess, which FDA approved in August 2012 and the EU in November 2012.  Ironwood shares US marketing duties with Forest Laboratories, a deal that was inked in 2007, and Laboratorios Almirall has exclusive European rights. It’s also brought on AstraZeneca to help sell Linzess in China and Astellas Pharma in Japan and other Asian countries. Using both debt and equity sales, the firm has raised nearly $400 million since the start of 2012. The secondary share sale is for Class A stock, notable because Ironwood long ago instituted a dual-class share structure to ensure that pre-IPO shareholders have a disproportionately large say in potential change-of-control scenarios. Holders of Class B stock get 10 votes per share in such matters. Class A holders get 1 vote per share. Starting in 2019, the dual-class structure could disappear if Class B shares total less than 25% of all outstanding Ironwood shares. According to the firm’s regulatory filings, the recent stock sales put the Class A share count at 92.9 million and Class B at 26.4 million.  – Alex Lash

All The Rest: Cardeas Pharma raised $34M in Series B to fund work on inhaled antibiotics for hospital-acquired infections… Jennerex Biotherapeutics closed on $21.6M to support lead oncolytic immunotherapy Pexa-Vec…Trinity College spin-off Trino Therapeutics raised an €9M Series A…TheraCoat, focused on bladder infections, completed a $7M round led by Pontifax…neurodegenerative disease drug developer Oligomerix raised $2.6M in a Series B…concurrent with an $850k grant from Austria’s Research Promotion Agency FFG, antisense company ugichem raised €1.4M…Sofinnova led an undisclosed Series A for First Aid Shot Therapy (FAST), which is developing OTC single-serve liquid products…autoimmune and viral disease firm Kineta received funding from Hydra, an LP formed by retired oil traders…BTG completed a £106M private placement to help pay for acquisitions of interventional device companies Ekos and Nordion’s Targeted Therapies…for a total of $4.6M, Aeterna Zentaris may sell MLV & Co. up to 2.5M shares  in an "at-the-market issuance"…in a convertible preferred stock and warrants offering, Guided Therapeutics raised $2.6M…Rare disease-focused NPS Pharmaceuticals closed on an $87M secondary offering…Stemline Therapeutics, which is investigating oncology therapeutics that target cancer stem cells and tumor bulk, publicly raised $60M…in a follow-on, Cyclacel Pharma grossed $20.5M to fund completion of the Phase III SEAMLESS trial for AML candidate sapacitabine…male and female sexual health company Apricus Biosciences closed a $17.1M FOPO…in the second-highest grossing IPO so far in 2012 behind Quintiles, Portola went public raising $140M... Israeli firm Alcobra completed a $25M US IPO…Regado set terms for their IPOs…PTC Therapeutics, Prosensa, and Evoke Pharma all joined the IPO queue and filed S-1s...Speranza Therapeutics raised $90M in funding and concurrently spun off from Elan to continue work on Phase II ELND005 for CNS indications… ElsaLys Biotech spun off from Transgene with a €2.1M Series A to support development of antibodies for cancer and infectious…Pfizer raised $4B in a five-tranche notes sale…to fund several acquisitions, Elan completed an $800M debt offering…ImmuPharma received a £50M loan from Darwin Strategic to support Phase III studies of lupus candidate Lupuzor…and VentureHealth set up an equity crowdfunding portal to improve clinical outcomes. -- Amanda Micklus

Many thanks to Stacy Lawrence for help with this week's column. 

Photo courtesy of Flickr user Stephan Andrej Shambora.