A Rush And A Push And The Financings Of The Fortnight Is Ours

Meet us at the St. Francis, and bring your own damn water!

Happy Morgan's Eve, everyone. If you’re like FOTF, you’ve been preparing for the week ahead by breaking your day into 25-minute conversations. If our kids need to talk to us, we tell them to take the stairs to the tenth floor, run down the hall, squeeze past 120 people coming out of the bathroom, steal some bottled water left outside a partnering suite, and find Room 1450. Come in, sit down, just  wait while we finish a few emails on our phones. Yes? You can’t sleep? Not exactly an unmet medical need. We’ve also wondered a few times if a toddler’s point blank sneeze into one’s mouth counts as a new form of immunotherapy.

For those of you with older children, you might be practicing for JPMorgan this week when the conversation inevitably turns to financing. Hit your yard-work milestones to trigger the next allowance tranche. That’s the way it is as long as you live under my term sheet, er, roof. 

Whatever the year, there’s always a sensation of falling out of a holiday tree, or warm cozy bed, directly into the boiling JPMorgan cauldron. This year, organizers gave us a bit of a break, pushing the conference back one week, but the slight lag was immediately filled up by a breakneck filing of IPO documents: Six so far in the new year alone, adding to several that squeezed their paperwork through before the ball dropped on New Year’s Eve. (We have details on one of those filers, Flexion Therapeutics, in our roundup below.) A few of those, plus others still in the IPO queue after filing in the back half of 2013, have significant Phase II or Phase III clinical milestones. Yet others that haven’t declared publicly their IPO intentions also have big milestones upcoming, and we can’t help but think their S-1’s won’t be too far behind if a few companies currently in the queue make their debuts soon.

In the next Start-Up, our colleague Stacy Lawrence previews several private companies with upcoming late-stage clinical data, and one thing’s clear: There’s not a lot of 100% novel technology working up the pipeline. That’s not to say the companies in question aren’t doing important or technically difficult work. But many of the products due for data have an element of de-risking that made for faster development and a more reasonable investment thesis, especially worth noting when the company is making a push in an indication where approval has been an elusive target.

For example, Intarcia Therapeutics is delivering an off-patent diabetes drug, exenatide, via a subcutaneous pump that carries a year’s worth of treatment. Intarcia hasn’t filed an S-1 yet, not publicly anyway, but its deep roster of crossover investors makes one hear a ticking clock -- or is that the beat of the subcutaneous pump?

We can’t help but pump Start-Up's upcoming A-List, the annual roundup of the year’s top Series A financings. The 2013 winners include entrants from the fields of gene therapy, immunotherapy, epigenetics and food allergies, and a few have had very unusual financial backers. Learning who's who will be your reward for surviving next week.

And a year from now, perhaps the 2014 A-Listers will include a biotech that has launched with equity crowdfunding. That would be a first. One crowdfund platform that we’ve reported on before, Poliwogg, will try to make a splash in San Francisco next week, so stay tuned to our colleagues from "The Pink Sheet" and Start-Up for more on that. We regret to inform, however, that splashing is generally frowned upon these days in California. Unlike IPOs, raindrops are in short supply, and 2013 was the driest year on record. So we ask you out-of-towners to think twice before showering while you’re here, and if a stranger on the street looks longingly at your Evian, be kind. We’re parched. Better yet, you can save water by drinking your fill of 2014’s first installment of...

Flexion Therapeutics: As its clinical candidates for treating osteoarthritis inch closer to pivotal studies, Flexion has joined the IPO parade. In case anyone’s knees hurt from all that marching, Flexion’s three compounds are formulated for long-lasting pain relief and injection directly into the knee joint. FX006, Flexion’s lead product for front-line use, is a formulation of a common steroid, triamcinolone, that in 2013 posted solid Phase IIb results, but the company still has work to do: it plans a second Phase IIb trial that is set to begin in the second quarter of 2014, to determine the drug’s optimal dose before Phase III. A second product, FX005, is a sustained-release p38 inhibitor; Flexion is positioning the product for end-stage (pre knee replacement) osteoarthritis pain. The company aims to file an IND for a third product, the TrkA antagonist FX007 for post-op pain, later this year. Both ‘005 and ‘007 were licensed from AstraZeneca PLC, in separate deals. Flexion’s founders, Michael Clayman and Neil Bodick, famously institutionalized “A-Team”-style rapid and inexpensive to-proof-of-concept drug development at Eli Lilly & Co. as creators of that company’s ‘Chorus’ model, and struck out on their own in 2007 to monetize POC assets as a stand-alone biotech. At the time, they anticipated that by licensing in pharma assets they could develop and flip them quickly. But the economics they were offered weren’t going to provide the kind of returns they originally anticipated. The company’s reinvention underscores the difficulty of timing biotech models to pharmaceutical tastes, and – at least during the comparably leaner years of 2011-12 – pointed to industry’s increased avoidance of clinical risk. Flexion’s private backers – Versant (~30%), Sofinnova (~19%), Pfizer (~17%), 5AM (~16%), and Novo AS (~11%) – surely hope that timing public investors’ enthusiasm for biopharma is an easier task. – Chris Morrison

AC Immune: When the big Alzheimer’s Phase III trials featuring anti-amyloid treatments failed in 2012, many eyes in the field turned to AC Immune. With arguably the deepest Alzheimer’s pipeline of any private biotech, the Swiss firm said January 9 it has raised a Series D round of 20 million Swiss francs ($22 million) from existing investors. It also said it has launched a Phase I trial of a vaccine to stimulate a patient’s antibodies against phosphorylated tau, a protein that accumulates in tangled formations within neurons. Tau tangles, along with amyloid plaques, are considered two signposts of Alzheimer’s disease, but much debate remains whether the pathologies are treatable or simply an effect of disease progression. Meanwhile, one of the world’s most closely watched Alzheimer’s trials has just begun dosing patients with AC Immune’s monoclonal antibody crenezumab. The trial is funded by Genentech, the Banner Institute, and the US National Institutes of Health, and it involves people in Colombia with high genetic risk of Alzheimer’s who have yet to show cognitive decline. If successful, it would be one of the first signals that anti-amyloid therapy has a preventative effect if administered before symptomatic onset. Dosing began in December, according to AC Immune. The firm has raised 84 million Swiss francs since its 2003 inception, all from individual investors. – Alex Lash

Receptos: Seven months after completing its IPO, Receptos turned back to public shareholders to raise more money, grossing $102 million in a follow-on public offering on January 8. The biotech sold 3.3 million shares for $30.75, a 120% increase from its $14-per-share IPO price. Days before the offer closed, Receptos started enrolling patients in the Phase III portion of its RADIANCE trial of lead candidate RPC1063 for relapsing multiple sclerosis. RPC1063 is being tested in a separate Phase II trial in ulcerative colitis, and Receptos plans to release top-line data on both indications in mid-2014. Recently the USPTO issued composition-of-matter patents on RPC1063, giving the compound patent coverage until at least May 2029. Receptos is busy with others in the pipeline too: it’s designing a Phase II study of RPC4046 in active eosiniphilic esophagitis. AbbVie partnered the anti-interleukin-13 antibody with Receptos in May. Once the study results are published, AbbVie has an option to enter into a worldwide co-development deal with Receptos, which would retain co-promotion rights and split US profits. In addition, this year Receptos expects to select a lead agent from its glucagon-like peptide-1 receptor small-molecule positive allosteric modulator program and start IND-enabling studies in Type II diabetes. -- Amanda Micklus

Blueprint Medicines: The Cambridge, Mass. biotech said January 7 it had secured a $25 million Series B round as it pushes its selective kinase inhibitors, aimed at specific mutations mapped through its platform, toward the clinic. It says its lead compounds should enter the clinic in 2015. They are an inhibitor of the mutation that drives both systemic mastocystosis, an overproduction of mast cells in various organs and tissues, and a subset of gastrointestinal stromal tumors; and an inhibitor of a mutation that leads to a specific type of hepatocellular carcinoma. The firm was initially funded by Third Rock Ventures and Fidelity Biosciences, but neither of those deep-pocketed groups has taken the lead for the B round. Instead, Swiss oncology investment specialists Nextech Invest led the round, with crossover investors Biotech Value Fund and Casdin Capital, Third Rock, and Fidelity, and other undisclosed investors joining in. The crossovers could be a sign that Blueprint is gathering itself for a run at the public markets this year. The firm has been led since last spring by an interim CEO, Third Rock partner Alexis Borisy, who took over for co-founder Chris Varma without an announcement. – A.L.

Best of the Rest (Highlights of Other Activity This Fortnight): Alexar Therapeutics, the latest biotech to come out of asset-based financing entity NeXeption, closed on a $21.5 million Series A round led by New Science Ventures and Third Point Ventures to support work on a topical liver X receptor agonist for inflammatory cutaneous disorders…Auspex, which has a S-1 on file to go public, raised more venture dollars: the orphan disease-focused biotech received $20 million in Series E financing and $15 million in a venture loan...Neuralstem will advance cell therapeutics and small molecules, including lead spinal cord stem cell-derived NSI566 for ALS, thanks to a $20 million registered direct offering…after postponing its IPO in November, GlycoMimetics revived the offering and set terms at 5.75 million shares for $8…and GW Pharmaceuticals, maker of cannabinoid prescription drug Sativex, raised $88 million in a FOPO. -- AM

Stampeding wildebeests (heading to the Celgene presentation?) courtesy of t3rmin4t0r under Creative Commons license.

And The Roger Goes To ... Our Deals of the Year Winners!

To Claim Award: Ctrl-P, cut along border, tape to plaque (note: plaque not included).

M&A of the Year: Amgen/Onyx

Congratulations to Amgen and Onyx, who've won, with more than 62% of the vote, our M&A of the Year nod. The voters chose the biggest deal -- though there were other interesting nominees we aren't surprised -- and we'll all be watching Kyprolis to see whether the price was right.

Alliance of the Year: Celgene/Oncomed

This one was never in doubt. Celgene and Oncomed knew how to canvass, their Get Out The Vote strategy was clearly second to none (the alliance category tallied about 1000 more votes than the other categories). And even a late push from GSK/Community Care of North Carolina (no doubt helped by voters turning up to support GSK in its close race below) couldn't derail Celgene and Oncomed's cancer stem cell alliance from the top spot. It finished with about 63% of the vote.

Financing of the Year: GSK/Avalon

As of this morning the two leaders in this category -- Children's Hospital of Philadelphia funding Spark Therapeutics and GSK/Avalon -- were separated by only a few dozen votes out of thousands cast. Finally, a race worth watching 'til the end. Spark began to pull away, stretching its lead to a few percentage points with an hour to go. And then GSK/Avalon swung back, pipping them at the post in the waning moments of voting. GSK/Avalon 48%, Spark 47%. The achievement is even more impressive in light of the nature of the also-rans. Calico, Juno, and Editas were all noteworthy debuts in 2013. Ophthotech had possibly the best IPO in a crowded biotech IPO field. None of those four deals received more than a tiny sliver of the vote. 

As always our winners are welcome to make an acceptance speech in the form of a guest post here on In Vivo Blog. Winners, please reach out if you'd like to do so. Thanks everyone for voting again this year, and congratulations to our winners!

2013 Deals Review Finds Spec Pharma, Bolt Ons Dominated M&A

 

As the door shuts on 2013 and we reflect on the year’s biopharma M&A activity, what’s most noteworthy is the activity of specialty pharmaceutical and big biotech companies, which supplanted Big Pharma as the year’s most aggressive buyers. An optimist might argue that industry’s largest players are savvy avoiders of overvalued assets; another possibility is that they’re simply losing the battle to acquire tomorrow’s growth-drivers.

Amgen Inc.’s $9.7 billion (net of cash) purchase of Onyx Pharmaceuticals in October was the industry’s largest of the year. It reflected the value Onyx built up over years as it grew a successful R&D and commercial operation, and, most notably, the potential of its key asset, Kyprolis (carfilzomib), which gained U.S. approval for treatment of multiple myeloma in July 2012.  After receiving the offer in June 2013, the biotech tried for several weeks to push up Amgen’s original proposed price of $120 per share ($8.7 billion) and finally agreed to a price of $125 a share. Analysts had predicted that Onyx would get $10 to $30 more per share than the original offer, but uncertainty surrounding Kyprolis’ peak potential kept buyers’ enthusiasm in check.

Of 92 biopharma-related M&A deals that closed in 2013, nearly 15% – including half of the top ten deals by upfront price – involved specialty pharma buyers. Of these buyers, Valeant International Inc., Endo Health Solutions Inc., Opko Health Inc., and the much-reconfigured Elan Corp. PLC were particularly active, with each pursuing two or more acquisitions. 

Valeant, Perrigo Co. and Actavis PLC were the top three spenders, while Valeant’s acquisition of privately held Bausch & Lomb for $8.7 billion came in as the industry’s second largest acquisition of the year. B&L will continue to operate as a separate subsidiary within Valeant, which has led the way within the industry in favoring financial efficiency over R&D innovation as a driver of M&A. Valeant in April also acquired the mid-sized dermatology-focused pharma Obagi Medical Products Inc. for $418.4 million.

Deals Of The Year

Our editors have selected what they view as the most significant and intriguing deals of 2013 in three categories – in addition to M&;A, we’ve included alliances and financings – and invite readers to vote on their favorites. Please view profiles of our nominees at http://pages.elsevierbi.net/DOTY/2013.  Polls are open until noon ET on Jan. 7.

Perrigo and other less traditionally visible buyers also reflected the strength of specialty pharma companies. Gastroenterology-focused Salix Pharmaceuticals Ltd. is in the process of buying specialty pharma Santarus Inc. for $2.1 billion, while the latter, in a surprise move, bought Elan for $8.3 billion. 

Also notable was the complete absence from M&A of some of the industry’s biggest companies; Merck & Co. Inc., Forest Laboratories Inc., Novartis AG, and Pfizer Inc., among others, were nowhere to be found among buyers. Those that did surface didn’t make huge waves. Bayer AG’s $2.4 billion proposed acquisition of its Xofigo (radium-223 dichloride) partner Algeta ASA in December consolidates ownership of a potential blockbuster;  AstraZeneca PLC’s smaller acquisitions of fish-oil specialist Omthera and respiratory company Pearl Therapeutics were so-called ‘bolt-ons’ that added near-market but me-too products to its portfolio.

About 10% of acquisitions, or nine, involved rare disease companies. In one of the year’s biggest deals, Shire PLC announced in November that it is buying rare disease company ViroPharma Inc. for $3.3 billion on ambitions of becoming a leading rare disease player. In January, Shire also acquired LotusTissue Repair, which focuses on wound care and dermatology, for $49.3 million upfront and another $275 million in potential earnouts.--Wendy Diller

Credit to the PAXsims blog by Rex Brynen for the image

Three Polls, One Page: Vote for IVBs Deals of the Year

We've set up a single page where you can vote on M&A, Financing, and Alliance of the Year. Polls open til January 7. Good luck to the nominees! VOTE HERE.

And the Nominees for IVB's 2013 M&A of the Year Are ...

We've nominated five 2013 Deals for M&A of the Year. It's time for you, esteemed readers of The In Vivo Blog, to decide the winner. It's an eclectic bunch this year -- we can't wait to see what you'll choose. Our polls will stay open through the New Year, until Noon ET on Tuesday, January 7. Good luck to the nominees! VOTE BELOW! IF YOU ARE VIEWING VIA EMAIL AND CAN'T SEE THE POLL, CLICK HERE.

Valeant/B&L: The May 2013 deal was a big win for private equity owners Warburg Pincus. It put some extra shine on the reputation of then-B&L CEO Brent Saunders, who has moved on to Forest to work his Hassanian brand of turnaround-magic in the world of primary care. And it again highlighted ophthalmology -- and B&L's diversified pharma/device/consumer approach to the field -- as an industry hotspot. But the main reason we've nominated Valeant/B&L for the M&A Roger this year is that it underscores the increased activity on the big deal front of specialty pharma over its supposedly deeper pocketed Big Pharma rivals. Read the full nomination here.

McKesson/Celesio: McKesson’s purchase of German drug wholesaler Celesio for $8.3 billion is one of the largest deals of 2013, but that is not what puts it on the In Vivo Blog Deal of the Year map. More to the point, and the reason it should be on the radar of everyone in the biopharma industry, is its likely impact on pharma and the drivers that led it to consolidate in the first place. Although the deal focuses on distribution and supply chain management, some of the duller aspects of an industry prone to flaunt its contribution to saving lives, it is every bit just as important to pharma’s health as the next big deal in cancer immunotherapy. Read the full nomination here.

Biogen/Elan's Half of Tysabri: Elan’s move to sell its share of Tysabri (natalizumab) to long-time partner Biogen Idec was the ball that set the Rube Goldberg device in motion, precipitating its endgame and eventual sale to Perrigo, and landing it on the 2013 shortlist for M&A deal of the year. Ultimately, this sale gave Elan the thing it needed to become appealing to virtually any acquirer – lots of cash. Tysabri fits right into Biogen’s sweet spot; alongside Avonex (interferon beta-1a) and Tecfidera (dimethyl fumerate) Biogen's locked down about 40% of the total MS market. Read the full nomination here.

Amgen/Onyx: Onyx serves as a leg up for Amgen as it looks to establish itself as a major oncology innovator and bring forward a pipeline of oncology drugs it has cobbled together partly through acquisitions. Despite the possibility of drama, the deal wound up as a straightforward acquisition that hedges risk for the buyer and still rewards the seller, one where the purchase price, at $125 per share, meets a middle ground. Read the full nomination here.

The Ibrutinib Royalty: Royalty deals have long been the provenance of more conservative private-equity vehicles. And so it was odd not just to see two venture firms join the royalty deal but also to hear how much each was putting up. Aisling Capital and Clarus Ventures said in August they had paid $48.5 million to acquire a tiny slice of sales royalties from ibrutinib, a cancer drug that hadn't been approved yet. Read the full nomination here.

And The Nominees for IVB's 2013 Financing of the Year Are ...

We've nominated six 2013 deals for Financing of the Year. It's time for you, esteemed readers of The In Vivo Blog, to decide the winner. From Series A to IPO, from twinkle-in-the-eye science to Phase III drug candidate, we've got it all. Our polls will stay open through the New Year, until Noon ET on Tuesday, January 7. Good luck to the nominees! VOTE BELOW! IF YOU ARE VIEWING VIA EMAIL AND CAN'T SEE THE POLL, CLICK HERE.

Ophthotech's IPO: In a year filled with impressive public market debuts when public market debuts of biotechs were one of *the* top stories, Ophthotech's IPO hauled in $192 million and rightfully sits atop a heap of newly public biotech offerings. And Ophthotech might need every bit of that cash, and maybe more, for an ambitious Phase III program. Read the full nomination here.

Editas' Series A: Polaris, Third Rock, and Flagship more often than not will work in stealth on new potential breakthrough technologies on their own. Not the case with Editas, where the trio have teamed up to turn one of the hottest research tools around into a new wave of therapeutics. One might call it gene therapy, version 2.0: the technology known as CRISPR/Cas9 allows researchers working with cells or model organisms to delete genes or replace them with new ones, but in ways considered more precise than other gene-editing systems currently in use. Read the full nomination here.

Google backs Calico: Just Google, Art Levinson, and a small handful of drug discovery and development luminaries getting together to combat diseases of aging. Anyone else out there planning to 'solve death'? Read the full nomination here.

CHOP backs Spark Therapeutics: Spark sprung nearly fully formed (with a Phase III asset) from CHOP this year, with $50 million in funding. That's enough to carry its lead program to market, a gene therapy for an inherited form of blindness. In doing so it is riding a wave of recent high-profile investment in gene therapy. Read the full nomination here.

Juno Therapeutics' Series A: Juno unites researchers from three different institutions: Fred Hutchinson Cancer Center and the Seattle Children’s Research Institute in Seattle, and Memorial Sloan-Kettering Cancer Center in New York to pursue multiple avenues of cancer immunotherapy, and its $120 million Series A instantly sets the Seattle-based company up to become a major player in the rapidly evolving sector. Read the full nomination here.

GSK/Avalon Ventures: Pharma needs innovative pipeline candidates. VCs need faster, cheaper and easier exits. The partnership between Avalon Ventures and GlaxoSmithKline aims to accomplish both. The model sees up to $30 million from Avalon and up to $465 million from GSK come together to fund up to 10 new companies, each built around a single drug candidate. Read the full nomination here.

And the Nominees for IVB's 2013 Alliance of the Year Are ...

We've nominated five 2013 deals for Alliance of the Year. It's time for you, esteemed readers of The In Vivo Blog, to decide the winner. From medication adherence to geographic diversity to hot new technologies, there's something for everyone. Our polls will stay open through the New Year, until Noon ET on Tuesday, January 7. Good luck to the nominees! VOTE BELOW! IF YOU ARE VIEWING VIA EMAIL AND CAN'T SEE THE POLL, CLICK HERE.

GSK/Community Care of North Carolina: The deal may seem like a small marketing alliance between a big pharma company and a local provider of health care services in the medication adherence arena. But in reality it is much, much more. The alliance tackles critical challenges that are clearly on top of executives’ minds, in pharma and elsewhere in the health care system. Given the difficulties of closing deals between a pharma company and non-traditional commercial partners, notably like providers or payers, GSK certainly has pulled off a coup.Read the full nomination here.

Celgene/Oncomed: The deal once again put Celgene at the forefront of early-stage oncology dealmaking and added to the already impressive smorgasbord of drug candidates and technologies to which it holds rights or options. This is not to say the complicated deal with OncoMed was business as usual, for it was one of the most complicated agreements of the year in biopharmaceuticals, necessitating a term sheet that might have resembled a Rube Goldberg machine, and quite lucrative for OncoMed -- potentially very lucrative. Read the full nomination here.

Amgen/Astellas: In announcing a strategic alliance with Astellas Pharma in May, Amgen has placed an economic bet on Japan. It is also, indirectly, a bet on economic recovery in the U.S. and Europe, Japan’s two biggest export markets. The partners will co-develop and co-commercialize five Amgen drugs for the Japanese market, as well as establish a joint venture that is 51% owned by Amgen, opened in Tokyo in October. Operating as Amgen Astellas BioPharma KK, the JV is structured to allow Amgen to turn the operation into a wholly-owned Japanese affiliate as early as 2020, and a direct channel into Japan for any molecule in its portfolio including its six biosimilars in development.Read the full nomination here.

Roche/Polyphor: Roche has given notice that it’s back in the antimicrobials space. For the first time in 30 years. Roche and Polyphor believe the timing of their alliance is good. Others have cut back, including onetime leader Pfizer, which closed its antibiotic R&D center in Connecticut in 2011, as well as Bristol-Myers Squibb Co. and Eli Lilly & Co., leaving only a few players, such as AstraZeneca, GlaxoSmithKline and Merck & Co. Read the full nomination here.

AstraZeneca/Moderna: Shortly after unveiling a revised R&D strategy and organizational restructuring, AstraZeneca made a massive bet on an early-stage platform that suggested the big pharma has taken to heart new CEO Pascal Soriot’s directive to be more willing to embrace risk. The deal boasts $240 million upfront from AstraZeneca to privately held Moderna Therapeutics and is unusually broad-based, carrying options for up to 40 programs in different therapeutic areas using the biotech's messenger RNA (mRNA) technology. Read the full nomination here.

2013 M&A of the Year Nominee: Valeant/B&L

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

Valeant Pharmaceuticals -- the seemingly insatiable embodiment of growth-by-acquisition in modern pharmaceutical times -- has been party to more than a dozen significant M&A deals since acquiring Biovail in 2011. Its biggest move in 2013, earning an M&A-of-the-year nod from us, is the $8.7 billion takeover of ophthalmology specialist Bausch & Lomb.

The May 2013 deal was a big win for private equity owners Warburg Pincus. It put some extra shine on the reputation of then-B&L CEO Brent Saunders, who has moved on to Forest to work his Hassanian brand of turnaround-magic in the world of primary care. And it again highlighted ophthalmology -- and B&L's diversified pharma/device/consumer approach to the field -- as an industry hotspot.

But the main reason we've nominated Valeant/B&L for the M&A Roger this year is that it underscores the increased activity on the big deal front of specialty pharma over its supposedly deeper pocketed Big Pharma rivals.  In fact a look at the top biopharma deals by dollar value this year suggests none of the 'big' deals -- the recent exception of BMS selling its stake in its diabetes JV to AZ notwithstanding -- were Big Pharma deals.

Warner Chilcott went to Actavis for $8.1 billion. Shire bought ViroPharma for $3.3 billion. Onyx went to Amgen (OK we're splitting hairs there, but we'll call Amgen a 'big biotech'). The remains of Elan went to Perrigo. Big Pharma --  its stated penchant for bolt-ons be damned -- bolted on very little of substance this year. On the other hand, Spec Pharma has the firepower, as our friends at Ernst & Young reminded us this year. And it is using it.



Valeant in particular has been using it to diversify. At the time of the deal, CEO Michael Pearson said Valeant has made no secret of its interest in durable specialty sectors with low R&D risk such as eye care and dermatology (last year's big buy was derm specialist Medicis, for $2.8 billion). Acquiring B&L will enable Valeant to balance its revenue mix from both a geographic and therapeutic perspective, he added. Post-B&L, about 50% of Valeant revenue stems 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 contributes about 34%, eye health about 32%, neurology and “other” about 12%, and consumer and oral health about 11%, the CEO said. (Consumer businesses are absolutely on Valeant's radar since adding B&L's consumer brands, the company has said more recently.)

So vote Valeant for its personification of specialty pharma's growth ambitions, particularly in comparison to Big Pharma's 'hey everybody let's get small' religion. For the way it represents the shifting firepower available for the big deals (buybacks and dividend hikes aren't free -- and that's where a lot Big Pharma's money has gone over the past few years). And for its kid-in-a-candy-store, shopping-spree approach to building a large, specialist pharma player: think of it as a vote not just for Valeant/B&L, but for Valeant/Solta, Valeant/Obagi, Valeant/Medicis, and all the rest and what's to come.

Artillery photo via flickr/Paul Campy // cc

2013 M&A Of The Year Nominee: McKesson/ Celesio

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

McKesson’s purchase of German drug wholesaler Celesio for $8.3 billion is one of the largest deals of 2013, but that is not what puts it on the In Vivo Blog Deal of the Year map. More to the point, and the reason it should be on the radar of everyone in the biopharma industry, is its likely impact on pharma and the drivers that led it to consolidate in the first place.

Although the deal focuses on distribution and supply chain management, some of the duller aspects of an industry prone to flaunt its contribution to saving lives, it is every bit just as important to pharma’s health as the next big deal in cancer immunotherapy.

Logistics, scale and geographic reach are increasingly critical competitive advantages as unprecedented pressures put margins under the microscope, and R&D productivity  is too inconsistent to provide protection. In short, the onus is on industry to become more financially efficient. Germany-based Celesio is a leader in pharmaceutical wholesaling, with a presence in key markets in Europe and Brazil and an extensive network of several thousand retail pharmacies in those regions. McKesson is one of the world’s largest wholesalers, with a particularly strong presence in the United States, and $122 billion in annual sales. The combined company will have sales of more than $150 billion, and employ more than 81,500 workers worldwide. How's that for efficient positioning?

Quickly, the deets: McKesson is to acquire 50.01% of Celesio’s stock for €23 per share in cash from the Haneil group and acquire the rest of remaining publicly traded shares and convertible bonds through a parallel tender offer. Among other benefits, the deal will enable McKesson to recognize synergies of $275 million to $325 million by the fourth year. It will be accretive from Year One, which, because of certain German takeover laws, is likely to be fiscal year 2015, which begins April 1, 2014.

Upon completing the deal, McKesson should have the scale to provide its customers with a more efficient global supply chain and, as McKesson’s executives repeatedly have noted, global sourcing, as well as additional business services. The aim is to be a “one-stop shop for people to create global partnerships,” McKesson CEO John Hammergren told analysts on the day of the announcement in October. In pharma, the most obvious impact will therefore be on generic drug sourcing and distribution, since McKesson’s leverage over which generic version of a drug it distributes to customers will increase. Wholesalers do not have nearly as much control over brand pricing.

McKesson says it ranks number one in generic drug distribution in the U.S. The deal is the biggest and broadest of several initiated this year by drug wholesalers looking for more efficient ways of distributing and negotiating with generics suppliers. The trend started late last year, when the U.K’s Alliance Boots GMBH, Walgreen Co., and the U.S. wholesaler AmerisourceBergen Corp. struck a three-way partnership around cooperative purchasing of generic drugs. Walgreen already owns 45% of AllianceBoots and has an option to buy the rest of the company over the next three years; these two companies have an option to purchase up to 23% of AmerisourceBergen.

And the expanded network of retail pharmacies also is important in an era in which the pharmacy, both in the U.S. and abroad, is not just dispensing medicine, but also becoming more of a care provider as a lower-cost alternative to the emergency room or other providers. That may seem peripheral to business development priorities of innovative drug makers right now, but such an impression is misguided. Just ask vaccine producers and makers of diabetes drugs.

thanks to flickr user Jeremy Brooks for McKesson photo // cc

2013 Alliance of the Year Nominee: GSK/ Community Care Of North Carolina

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

GlaxoSmithKline PLC’s tie up with the non-profit Community Care of North Carolina calls for the drug company and the care network to develop health information technologies that help providers identify patients with medication management problems and determine how best to aid them.

Ostensibly the deal, announced Sept. 18, seems like a small marketing alliance between a big pharma company and a local provider of health care services in the medication adherence arena. But it is not that at all and, in reality, it is much, much more. And while no money is changing hands – definitely a deficit on the awards circuit – it tackles critical challenges that are clearly on top of executives’ minds, in pharma and elsewhere in the health care system.  Given the difficulties of closing deals between a pharma company and non-traditional commercial partners, notably like providers or payers, GSK certainly has pulled off a coup.

CCNC coordinates care across roughly 1,000 health care providers, including 110 hospitals and more than 1,700 primary care practices, serving 1.5 million people in North Carolina. The nonprofit has multi-year expertise in optimizing resources for medication management, a goal that is increasingly on the minds of everyone involved in health care, given growing systemic resource constraints and emphasis on pay for performance. GSK has data analytics, IT capabilities, and broad scientific expertise that could be of value in reaching CCNC’s network.

The partners are banking on internally developed predictive analytics and algorithms to create customized approaches that allow doctors or other caregivers to determine, sometimes in advance, what a patient’s specific barriers are to adherence, enabling them have meaningful conversations with patients on the spot.

Providers will have access to select information such as patient prescription fill history and hospital data. Importantly, the system also is designed to work in a range of different settings, across multiple IT systems, avoiding integration and interoperability issues that have been a drain on many big data approaches.  That said, the initiative, from GSK’s perspective, is strictly about learning – there’s no marketing component, it is not tied in any way to GSK’s portfolio, and any business opportunity will be a secondary benefit and entirely independent of GSK’s core drug business.

So, how does this deal fit into GSK’s big-picture agenda? It will enable compilation of information that health care system participants are keep to collect in the face of changing customer dynamics. As the system shifts its reimbursement emphasis from volume to paying for value, biopharm has been working hard to incorporate data on the cost effectiveness and systems-wide savings benefits of its drugs into its R&D and commercial portfolios.  But getting accurate data to support those efforts is a struggle, particularly post-approval. For a variety of reasons, ranging from business priorities to legal constraints, pharma has to date largely been edged out of risk-sharing arrangements now gaining traction among users and payers.

It will provide GSK with a ‘window’ to learn about medication adherence and population management – two interrelated trends that are shaping health care decision making down the road. To drive home the point, McKesson Corp.’s president of specialty health, Marc Owen, noted at an investor meeting in June that the size of the U.S. market for pharmaceuticals could double if medication adherence was 100% enforced, adding that “It costs a lot less to get a patient to take a medication than to treat him in the ER.” As he observed, within the health care world, “you either change the dialog to include value or you’ll end up in a discussion on pricing for service” – in other words, negotiating around discounts. While he was referring to his own neck of the woods, specialty pharma distribution, he could well be signaling a warning to pharma in some of its crowded categories.

This new initiative places GSK in a different role entirely. Although it is a small endeavor, it has the endorsement of senior management, and demonstrates GSK's interest in learning from new health care delivery systems and payment models. It is one pharma’s creative way of broaching the divide, without running into regulatory, legal or historical hurdles that all too often stump even the best-intentioned deal makers and strategists.

Velcro close-up from flickr user Marie Janice Yuvallos