2013 Alliance of the Year Nominee: Roche/Polyphor

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™.

If catching an early big wave together justifies an alliance nomination then Roche and Polyphor look like contenders. They’re hoping to get a long, lucrative ride using novel science and new US and European regulations aimed at speeding up antibiotic development and approval.

And by choosing Switzerland-based Polyphor’s investigational macrocycle antibiotic POL7080 for development and commercialization, Roche has given notice that it’s back in the antimicrobials space again. For the first time in 30 years. In other words Roche hasn't been interested in developing antibiotics since most of you were old enough to vote -- a development worth honoring with a DOTY nod.

last time Roche developed an antibiotic,
BTTF was in theatres

The pact gives micro-sized Polyphor a big pharma partner to help it punch above its weight. Its three drug candidates, developed using its protein epitope mimetics (PEM) drug discovery technology, are POL7080; POL6326, a CXCR4 antagonist currently in Phase II and ear-marked for several indications; and POL6014, an elastase inhibitor that’s in pre-clinical studies.

Are antibiotic development incentives working? The FDA Safety and Innovation Act aims to prod companies along through the Generating Antibiotic Incentives Now (GAIN) provisions that are intended to spur development of treatments for resistant pathogens. Products receiving the qualified infectious disease product (QIDP) designations are eligible for fast track and priority review, as well as an additional five years of marketing exclusivity upon approval. And new antibacterial drugs could be eligible for a streamlined development program even if they would not be the first approved in a particular disease, according to FDA draft guidance.

Meanwhile, new guidance from the European Medicines Agency means marketing approvals for antibacterials against multi-drug-resistant bugs could be granted in Europe on expanded Phase II clinical trial data.

It’s a regulatory path that multinational Roche and privately-held Polyphor will explore together as Roche, the world’s largest maker of cancer drugs, tries to diversify into other areas.

Under terms of their alliance, announced in November, Roche will pay Polyphor up to CHF 500 million ($548 million) for the experimental antibiotic, which has only just entered Phase II testing. Roche will make an upfront payment of CHF 35 million and milestone payments of up to CHF 465 million to the Swiss biotech.

Roche’s previous legacy in the field of antibacterials involved development of Bactrim (trimethoprim/sulfamethoxazole) in 1969, in collaboration with Wellcome PLC, and Rocephin (ceftriaxone sodium) in 1982.The success of Polyphor's drug would be the first new drug against gram-negative bacteria since the '60s, Polyphor CEO Jean-Pierre Obrecht says.

The two Swiss firms will be targeting the Gram-negative strain Pseudomonas aeruginosa, a bacterium found in hospitals and resistant to many antibiotic treatments, by a novel mode of action. It’s the first of a number of novel antibiotic candidate drugs being assembled by Roche’s pharmaceutical research and early development group pRED, which is now under the new leadership of John Reed.

“We’ve been rebuilding the infectious diseases area in pRED following the restructuring last year and we are now focusing on three areas of unmet medical need. These are hepatitis B, influenza and antibiotics – and this is our first demonstration that we’re back in antibiotics,” Janet Hammond, head of infectious diseases discovery & translational area in Roche pRED, told us when the alliance with Polyphor was announced.

Roche and Polyphor believe the timing of their alliance is good. Other big pharma companies have cut back in the antimicrobial space, 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.

Meanwhile there is rising alarm globally over the lack of new antimicrobials. Roche says P. aeruginosa accounts for one in every 10 hospital-acquired infections in the U.S. and is listed as one of the six most dangerous drug-resistant microbes.

2013 Alliance Of The Year Nominee: AstraZeneca/Moderna

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™.

This alliance deal of the year candidate featured an eye-catching price tag - $240 million upfront from AstraZeneca to privately held Moderna Therapeutics - and was unusually broad-based, carrying options for up to 40 programs in different therapeutic areas using the biotech's messenger RNA (mRNA) technology.

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.

"Soriot was struck by the technology
within 10 minutes... "

Heading into Soriot’s strategy review on March 21, AstraZeneca announced an organization-wide R&D restructuring that would consolidate the work in both small and large molecules within three strategic regional centers: Cambridge, U.K., Gaithersburg, Md., and Molndal, Sweden. At a time when some of its top sellers have faced patent expirations, the pharma has struggled to develop successful, innovative high-growth new drugs.

Shortly before his departure, outgoing R&D chief Martin Mackay vetted and introduced Soriot to the Moderna mRNA therapeutics technology and the two companies quickly came together around a significant collaboration, Moderna CEO Stephane Bancel said.

“When Mackay came in, he was very impressed with the data we showed him under a confidentiality agreement,” Bancel said. “In turn, he impressed us by coming back very quickly to see us with his entire R&D executive team. We quickly we got into a discussion about potentially partnering one or two drugs in cardiology.”

When Soriot joined the talks, plans for the deal expanded. “Soriot was struck by the technology within 10 minutes, he got it totally,” Bancel noted. Given AZ's ramp up of business development, we wonder what he's going to buy after a 20 minute browse.

AstraZeneca wanted multi-year exclusivity on Moderna’s entire cardiovascular program, which was fine with Bancel if he could structure a deal to hold back some of his firm’s oncology programs. In December, Bancel outlined a corporate strategy in which Moderna would seek to out-license large-scale therapeutic opportunities while keeping some rare disease opportunities in-house for development and commercialization.

What resulted was a deal under which AstraZeneca will hold options to select up to 40 mRNA drug candidates for preclinical and clinical development and commercialization. Beyond the $240 million upfront payment, Moderna also can earn up to $180 million in “technical milestones,” an arrangement Bancel described as almost a secondary, contingent upfront payment.

Moderna also could earn development, regulatory and commercial milestones for each drug candidate licensed by AstraZeneca, as well as sales royalties ranging from the high single digits to low double digits. Bancel said total remuneration under the deal could go well beyond $1 billion, as each product candidate will carry potential Phase I, Phase II, Phase III, NDA-filing, U.S. approval and ex-U.S. approval earn-outs.

Under the agreement, Moderna will perform discovery work against targets selected by AstraZeneca, but the pharma will be responsible for preclinical and clinical development for any candidate it then opts to license. This will leave Moderna with substantial opportunity to continue advancing its own proprietary programs, focused on niche opportunities within oncology.

Moderna’s selling point is that its mRNA candidates, based on research licensed from Harvard University and Massachusetts Institute of Technology, will enable the human body to restart or increase the production of endogenous therapeutic proteins inside a patient’s cells without triggering an innate immune response. In addition, while other RNA-based technologies such as RNA interference have faced significant drug-delivery obstacles, Moderna believes it can create injectable drugs for intramuscular, subcutaneous or intravenous administration. Evidently, AstraZeneca agrees.

2013 M&A Of The Year Nominee: Amgen/Onyx

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™.

Step right up and cast your vote. No reason to hem or haw. Amgen’s $10.4 billion acquisition of Onyx Pharmaceuticals deserves your vote for M&A of the year.

What’s that you say? The deal held no intrigue? No eleventh-hour white knight who stepped in and drove a nail-biting bidding war? No surprises that made you dribble coffee down your chin while reading the morning news?

Well, it’s not as though every deal can be shrouded in as much conspiracy as Roche’s takeover of Genentech, or done at a price that leaves you staggering to the water cooler ala Gilead’s acquisition of Pharmasset.

But what’s so bad about a straightforward acquisition that hedges for the buyer and still rewards the seller, one where the purchase price, at $125 per share, meets a middle ground? Remember how Amgen originally offered $120 per share, which was rejected by Onyx, which thought it could get more like $130 to $140 per share?

How civilized then that they settled squarely on $125 without dragging us through a drawn out campaign. Onyx’s investors still ended up receiving a hefty payout, with the final price representing a 43.9% premium over the stock’s closing price in June before Amgen’s original offer was disclosed.

And, $10.4 is nothing to shrug at either. Amgen’s acquisition of Onyx was the most expensive M&A of the year, reason enough to cast your vote in its favor.

Don’t forget the perfectly sensible strategic rationale behind Amgen’s decision to buy Onyx. The big biotech gains the proteasome inhibitor Kyprolis (carfilzomib) for multiple myeloma, and Nexavar (sorafenib) partnered with Bayer, for liver and kidney cancer, drugs that are already on the market in the U.S. and will immediately contribute to Amgen’s top-line. The company needs new drugs to fill a revenue gap. Before the acquisition it was expecting that sales would be lower in 2015 than in 2013.

The addition of Kyprolis fills that void – and it gives Amgen some street cred in oncology, a therapeutic area it has targeted for future growth, though its marketed cancer portfolio mainly includes supportive care products, not cancer interventions.

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.

Wait, you’re still not sold? You’d prefer a deal that’s more high-risk, high-reward? Well, you can rest assured Amgen’s still has plenty of risk to absorb. Kyprolis made it to the market through an accelerated review, but Amgen needs the results of two ongoing Phase III trials, ASPIRE and FOCUS, to play out in the drug’s favor before it can secure full approval and expand into Europe.

In November, a Bank of America analyst issued a note citing reports of cardiovascular events with Kyprolis. That, understandably, has spooked some investors while they wait for the Phase III data to report out in 2014. Amgen called the whole flap a misunderstanding that stemmed from the analyst’s dinner meeting with Celgene management and clarified that event rates are no different from what is already included in the Kyprolis label. The data monitoring committee overseeing the study has not reported any specific safety concerns, Amgen added. There's your intrigue!

Still, these things do get you thinking about the $10.4 billion Amgen paid for Onyx and what could happen between now and when the company reaps a return. In the drug industry, things are never straightforward despite how they might appear. Are you happy now? Then step right up and cast your vote.

flickr image via Dr Colleen Morgan under creative commons

Deals Of The Week Looks At Pricing Conundrums

Some technologies are so unprecedented, so spanking new that they present hitherto unknown and formidable commercial hurdles.

Consider gene therapy and non-invasive vagus nerve stimulation. The pricing challenges remain significant, even as these therapies gather regulatory approvals, high-caliber partners and investors.

uniQure BV is the scrappy Dutch biotech that spun out of Amsterdam Molecular Therapeutics BV to win approval for the first gene therapy to be accepted by regulators in the major world markets. After several false starts and near-death experiences, Glybera (alipogene tiparvovec) got EU approval in November 2012 for the ultra-orphan disease lipoprotein lipase deficiency. LPD is a childhood genetic disorder in which a protein needed to metabolize fat molecules is missing, causing a large amount of fat to build up in the blood.

The company has partnered commercial rights covering Europe and selected major emerging markets for Glybera and a mid-stage hemophilia B gene therapy to Italy’s Chiesi Farmaceutici SPA. It has forged ahead with building U.S.-based manufacturing capacity, particularly in advance of an FDA filing for Glybera pending ongoing discussions with the agency. It has hired a CEO and preliminary staffing for its Boston-based U.S. operations, to build out clinical, regulatory, and commercial infrastructure. It’s busy planning launch strategy, identifying patients, and meeting with payers.

But there’s a problem. We asked uniQure’s CEO, Jörn Aldag, how he planned to price his gene therapies. Our discussion focused on the hemophilia B treatment, next in line for approval. Aldag noted that, unlike the long-acting factors being readied for market by Biogen Inc. and others, where patients may be able to infuse every other week, “we’re offering a one-shot treatment. The patient would not have to come back to the hospital for many, many years.”

Aldag said ten patients in the first hemophilia B Phase I/II trial, still ongoing at St. Jude Hospital in Memphis, TN, have been treated and required no or significantly reduced prophylactic treatment for up to three years.

This is truly wondrous news for patients with hemophilia B. The issue is that each gene therapy carries an unknown duration of effect.  Will those patients enrolled in the St. Jude trial require a booster next week? Or will they continue for another 3 years, 10 years, indefinitely?

Aldag is grappling with the same issue with Glybera, and now Chiesi is weighing in on the discussions. The options they’re considering boil down to whether to ask for a front-loaded “down payment, or do we ask for annuity payments,” says Aldag, describing a system of payments over time. He allows that the pricing paradigm will change when he moves beyond orphan monogenic diseases, for instance, into larger-population neurodegenerative disorders, such as Parkinson’s disease (uniQure has a Parkinson’s gene therapy which is currently in Phase I/II). “Those would not command as high a price.”

New-Jersey based electroCore LLC (which, like uniQure, was absent the day the teacher taught proper capitalization) is at the forefront of companies developing noninvasive vagus nerve stimulation (VNS) devices – DOTW is typically all-pharma, all-the-time, so forgive our excursion into the world of medical devices. These are small, hand-held devices that deliver a mild electrical charge to the cervical branch of the vagus nerve. VNS technology has been around for decades in implanted devices – some are even FDA approved for partial-onset epilepsy and refractory depression. But implanted VNS is expensive and carries the risk and inconvenience of surgery. And that has inhibited adoption of the technology.

But VNS has been validated as a safe and effective alternative to drug therapy in a broad range of indications, says Mir Imran, a device inventor and founder of InCube Ventures. Imran told us that, with regard to epilepsy, the efficacy of VNS is comparable to pharmacotherapy, with similar success rates of 30% to 40%.

So noninvasive VNS, electroCore CEO J.P. Errico believes, “is something that can compete [with drugs] at the front end of the continuum of care.” Merck & Co. Inc.’s Global Health Innovation Fund, which was attracted to electroCore’s technology because it can be used in the home setting, fitting in with the fund’s focus on technologies featuring flexible access to care, apparently agrees. Merck’s fund joined with two other private equity groups to fund electroCore’s $40 million series A round earlier this year.

electroCore is currently in four registration trials for indications including cluster and migraine headache. It expects to launch its first product, gammaCore, in the U.S. in the next two years. Besides headache, electroCore is developing gammaCore for anxiety, epilepsy, depression, as well as for inflammatory conditions like gastroparesis, COPD, and asthma.

But there’s a rub. Because essentially the same device would be used across all indications, patients using it for migraine who hear about a trial testing the device in, say, gastroparesis, might try to self-treat for gastroparesis. Patients using the device for one indication may also experience the unintentional resolution of symptoms in other indications. Patients could possibly even share devices. Any of these scenarios could cut into the commercial opportunity for electroCore.

Errico says electroCore might offer different products based on specific usage. “If the person’s going to use it only to treat acute headaches, there may be a cheaper entry point for them than if they’re going to need the device to last for a very long period of time and use it over a period of years,” he says. But usage could be further complicated by electroCore’s preliminary finding that the amount of required treatment is not so much dependent on the specific disease state or severity; it’s more related to individual patient response.

All of this informs how the company will model usage of its products, and therefore, how to appropriately price them.

Both uniQure and electroCore need to proceed carefully. A miscalculation could be costly. -- Mike Goodman

Here are some of the deals that caught our eye this week . . .

Celgene/OncoMed: Celgene Corp. struck again Dec. 3, inking its ninth deal this year and adding to its impressive roster of oncology partners. This time, the company will put up $155 million upfront in a six-program partnership with OncoMed Pharmaceuticals Inc. centered on a Phase Ib monoclonal antibody being tested in pancreatic and non-small cell lung cancer. Celgene will also make a $22.3 million equity investment in OncoMed. In exchange, Celgene will receive option rights on six novel anti-cancer stem-cell therapeutic candidates, including the lead asset, demcizumab (OMP-21M18), a humanized MAb inhibitor of Delta-Like Ligand 4 (DLL4) in the Notch signaling pathway.

The deal also covers five preclinical or discovery-stage large-molecule programs - Celgene gets full license to one of the preclinical programs, while OncoMed retains U.S. co-development and co-commercialization rights on the other assets. If Celgene options demcizumab, the companies will share global development costs, with Celgene covering two-thirds of the expense. If the drug is approved by FDA, they will co-commercialize it in the U.S., with 50/50 profit sharing. Outside the U.S., Celgene would develop and commercialize the antibody, with OncoMed eligible for milestones and tiered double-digit royalties.

Celgene also gets rights to OncoMed’s preclinical anti-DLL4/vascular endothelial growth factor bispecific antibody, as well as four preclinical or discovery-stage biologics programs that target other cancer stem cell pathways, including RSPO-LGR. Celgene’s exclusive license is to one of those four biologics programs. For the four programs not outright-licensed by Celgene, the Redwood City, Calif., biotech gets terms similar to those negotiated for demcizumab – two-to-one global development cost-sharing with Celgene covering the larger portion, 50/50 U.S. co-commercialization with profit-sharing, and mid-single-digit to mid-double-digit royalties on sales outside the U.S. For the licensed program, OncoMed can earn mid-single-digit to mid-double-digit royalties on worldwide sales. Total earn-outs could exceed $3 billion.-- Joe Haas

Forest/Merck: Forest Laboratories Inc. will acquire U.S. commercial rights to Merck & Co.’s antipsychotic Saphris (asenapine) for $240 million upfront and undisclosed sales milestones, marking CEO Brent Saunders first business development initiative since becoming CEO in October. The companies announced the deal Dec. 2, the same day Forest announced a $500 million cost reduction program intended to right-size the company and $1 billion in new financing to fund share repurchases and additional bolt-on acquisitions.

Saphris, which was approved by FDA in 2009, generated sales of $150 million in the 12 months ended September 2013, according to Forest. Forest expects its expertise in marketing drugs for central nervous system disorders will help to drive growth of the brand. The drug will be marketed by Forest’s existing commercial team, which already sells the antidepressant Viibryd (vilazodone) and expects to soon be selling Fetzima (levomilnacipran), a serotonin and norepinephrine reuptake inhibitor (SNRI) that was approved for depression in July.

Having the three CNS drugs together in one portfolio is a powerful proposition that creates upside without adding cost, Saunders said. It is not only more efficient, but it also improves the quality of Forest’s sales team, he added. “When our rep walks into a psych office, they are not just a one-product detail. They have a whole portfolio of products to talk about depending on what is on the physician’s mind, and it creates a much more relevant rep,” he said. That multi-product commercial strategy is one Saunders would like to carry over to areas like gastrointestinal disease and cardiovascular disease.-- Jess Merrill

The Medicines Company/Rempex: The Medicines Co. has lost no time enlarging its fledgling infectious disease franchise by acquiring Rempex Pharmaceuticals Inc. and its pipeline of assets targeting serious bacterial infections. For $140 million upfront and $434 million in development, regulatory, and commercial milestones, MDCO acquires several anti-infective assets in varying stages.  Chief among them is Carbavance, a Phase II-ready drug for IV treatment of hospitalized patients with multi-drug resistant gram negative infections. It will enter registration studies in 2014. MDCO will market Minocin IV (minocycline for injection) for resistant infections due to Acinetobacter, a pathogen that is especially prevalent in intensive care units. MDCO plans to submit for U.S. approval an improved formulation of Minocin IV in 2014. Finally, MDCO will continue Rempex’s discovery programs focused on beta-lactamase inhibitor-based combination products designed to overcome resistance mechanisms in gram-negative organisms. The Rempex assets complement MDCO’s oritavancin, which targets gram positive complex skin infections and which is slated to file for a late 2013 NDA and a first quarter 2014 MAA in Europe.

The acquisition gives MDCO high-caliber antibiotic discovery and development capabilities to supplement its own development and commercialization strengths. It also gives MDCO a marketed product to better leverage its infectious diseases salesforce, which is typical of the hospital specialist’s deal style, while continuing its interest in early-stage assets that first came to notice with its licensing last February of Alnylam Pharmaceuticals Inc.’s ALN-PCS, a PCSK9-targeting RNAi agent for dyslipidemias. -- Mike Goodman

Roche/Molecular Partners: Roche and the Swiss biotech Molecular Partners AG have signed a research collaboration and licensing pact to discover, develop and commercialize therapeutics using the privately-held biotech’s DARPin platform. DARPins are non-antibody-based small proteins engineered for target binding to hone in on and penetrate deep into solid tumors, making them ideal targeting vehicles to deliver toxic agents to tumors to kill cancer cells. Under the deal, Roche has rights to develop and commercialize several DARPin-based products. Molecular Partners will get a starting payment of $60 million, research funding to support the partnership, and potentially more than a billion dollars in milestone payments, as well as tiered royalties on any successes.

The alliance signals growing interest in the DARPins which, due to their ability to bind to different epitopes than antibodies do – and to bind to multiple epitopes or targets in parallel at the same time – might offer a higher selectivity for tumor cells compared to other biologics, including antibody-drug conjugates.  DARPins are based on a class of proteins found in the body called ankyrin repeat proteins, which contain specific amino acid sequences, including a repeated sequence, which bind to proteins. They are easy to manufacture in E. coli, and are highly soluble and stable, according to Molecular Partners. The strategy is similar to that of using armed antibodies to fight cancer, like Roche's antibody-drug conjugate Kadcyla (ado-trastuzumab emtansine). Molecular Partners has already established alliances with Allergan Inc. and Janssen Biotech Inc., among others. -- Sten Stovall

Theraclone / PharmAthene: Theraclone Sciences Inc. and PharmAthene Inc. have called off a merger, announced in August. Under the plan, privately-held Theraclone would have absorbed publically held PharmAthene in an all-stock, merger of equals. The surviving company, which would have retained the PharmAthene name, would have had a clinical-stage pipeline of four assets and several pre-clinical compounds, centered around infectious diseases. According to news accounts, PharmAthene opted out of the deal. Neither party disclosed reasons, but the decision came a week after the federal government’s Biomedical Advanced Research and Development Authority (BARDA) rejected TheraClone’s application for a grant for its pandemic flu program, TCN-032, which has completed a Phase IIa trial. TheraClone will pay PharmAthene a $1 million termination fee. [CORRECTION: PharmAthene will pay TheraClone the $1 million termination fee. Thanks to IVB reader David for pointing out the mistake.]

Theraclone’s pipeline is built from its antibody platform I-STAR (in-situ Therapeutic Antibody Rescue), which rapidly screens memory B cells for rare human antibodies that may be developed into next-generation antibody-based drugs. TCN-032, a recombinant, fully human monoclonal antibody, is also in development for patients severely ill with seasonal influenza. TCN-032 is partnered in Japan with Zenyaku Kogyo Co. Ltd., and the company is evaluating “opportunities to advance TCN-32 with other potential strategic partners for commercial markets,” CEO Clifford Stocks said in a press release disclosing the bad news about BARDA. In addition, the company has asked to meet with BARDA to gain further insight into the reasons for the decision. Theraclone also has an ongoing partnership with Pfizer Inc.  to identify three targets in infectious disease and / or cancer. 

Theraclone also has a recombinant fully human MAB for treatment and prevention of cytomegalovirus (CMV) infections.    PharmAthene, a biodefense company, is developing a recombinant protective anthrax vaccine, SparVax, which is set to enter Phase II trials, and a medical countermeasure for nerve agent poisoning.  It is also developing Valortim, a fully human monoclonal antibody for prevention of anthrax infection.  CEO Eric Richman said the company will continue to “seek to identify opportunities to maximize value for shareholders.” -- Wendy Diller

Technology Marches On, And Financings Of The Fortnight Is There!

Digital future? Sounds expensive.... and confusing! Instead, let's talk about the recent past. What stood out for us in this latest fortnight-plus – extended a bit to accommodate the Thanksgiving holiday and our expanded waistlines – were two vast sums of money for companies plying cutting-edge biomedical technologies that, despite some successes in previous permutations, are still high risk. 

We’ll start with the second, because it’s a more obvious case. The company is Juno Therapeutics, which has rounded up a few programs of cancer immunotherapy under one corporate roof. None of them use the infused-antibody paradigm of Yervoy (ipilumumab), the Bristol-Myers Squibb product approved for melanoma treatment, but the much more complicated dance of autologous cell therapy that Dendreon, with its prostate cancer treatment, showed a few years ago could make it to market. Dendreon also ran into trouble, however, because the dance – removing blood from patients, isolating T-cells, shipping them to a lab, re-engineering them, shipping them back, and re-infusing them into the patient – was more than just putting your feet on the floor in the right sequence. Juno’s backers, to the tune of $120 million and, soon, a lot more (see our blurb below), think the Seattle/New York startup has all the right moves, including improvements to the process and stunning (but small sample size) Phase I data from one of its programs. (Xconomy's Luke Timmerman got the early access and the jump on everyone this week for an excellent long-take on the company.)

The other technology-driven story is the second massive cash infusion for Moderna Therapeutics, the Flagship company that wants to inject modified messenger RNA into patients to spur them to produce their own therapeutic proteins. Moderna simmered sotto vocce within Flagship for a couple years until late 2012, when it emerged with a $40 million commitment. Still years away from clinical proof of concept, it almost immediately secured a licensing deal with AstraZeneca with a $240 million upfront that gives AZ rights to cardiovascular and metabolic programs that emerge from Moderna. 

Which brings us to the week before Thanksgiving, when Moderna added to the pile with a $110 million Series B round from Flagship and a raft of undisclosed backers. We’re a long ways from learning if Moderna’s ambitious idea works, but if it does, it will have to overcome a hurdle that has bedeviled many other companies – often extremely well-funded, too – using RNA-based therapeutics. Those oligos don’t hold up well in the body. Delivery is hard. 

When two researchers won the Nobel Prize in 2006 for their discovery of RNA interference, the biotech world seemed well on its way to developing therapeutics based on the gene-silencing technique. Two companies in particular, Sirna Therapeutics and Alnylam Pharmaceuticals, seemed poised to battle for years. Not quite. Merck & Co. bought Sirna for a cool billion dollars, and it was never heard from again. Alnylam’s rich alliances with Big Pharma came to a crashing halt at the end of last decade.

Alnylam was left to clean up the mess with a big restructuring, but it has steadily rebuilt value, and it recently scored notable Phase I data for a program based on its subcutaneous delivery technology. Its share price has rebounded and at $62.98, it’s nearly twice as high as it flew in the heady days of the ‘00s, before its pharma partners abandoned ship. 

So what to make of these new blockbuster financings? Juno is building upon the rollercoaster experience of Dendreon, even hiring Dendreon's former COO as its CEO. Its investors apparently think nothing short of a full financial blitz will make autologous cell therapy 2.0 a winning version. And Moderna has enough cash now to hand-deliver every dose to every patient on a gold-embossed platinum serving tray. And to get into patients' bodies, they might be able to use a subcutaneous approach, too. 

What will be the next frustrating biotechnology to spur a new round of hopeful spending? When the money flows, you'll certainly be able to read about it in....

Juno Therapeutics/Argos Therapeutics: Hello, cancer immunotherapy. The big Series A financing news this week – this year? – was Juno’s $120 million haul to help the company develop and commercialize not one, not two, but three autologous immunotherapy platforms from two rival research institutions. Autologous is like the high-profile Dendreon: T-cells are removed from the patient, genetically souped up in a lab to recognize and kill cancer cells, then re-infused into the patient. The top-line investors in Juno are ARCH Venture Partners and the Alaska Permanent Fund, which invests that state’s oil revenues. Which means Juno – perhaps a clever way to give Alaska and its capital city naming rights? – is cashing in on former Governor Sarah Palin’s successful campaign to raise taxes on oil companies. That tax hike is now the subject of a major political battle, by the way. But we digress. Alaska’s fund managers won’t have a Juno board seat, which means ARCH’s Robert Nelsen is the main money man to herd cats as Juno’s riches are disbursed to folks at Memorial Sloan-Kettering Cancer Center, the Fred Hutchinson Memorial Cancer Center, and Seattle Children's Research Institute. Nelsen tells us that the groups will continue to run their own cancer immunotherapy programs under Juno’s roof, and “may the best data win.” (The Sloan-Kettering folks are unveiling at ASH this weekend a study that brings the percentage of Phase I patients treated with MSKCC’s CART-19 immunotherapy who had a complete response to 88%, or 15 of 17: basically their cancer disappeared.) What’s more, Nelsen says a Series B round “larger than the Series A” is about six months away. We’ll have more on Juno in this week’s issue of "The Pink Sheet", and in the upcoming Start-Up magazine. Meanwhile, at the other end of the funding rainbow, Juno competitor Argos Therapeutics, which has been plugging away at autologous immunotherapy for more than a decade, also had funding news. It topped up its Series E round to $60 million as it continues a pivotal trial in renal cell carcinoma. The first tranche of the E round came in August and included warrants. Argos withdrew an IPO bid in 2012 and instead brought in a Series D round. Other than both working on autologous immunotherapy systems, Argos and Juno have another connection: Argos’ recent backers included Russian and South Korean pharma companies, which mean Juno’s investors can see Argos’ investors from their kitchen window.  – Alex Lash
 
Xencor: Dilution was the headline for the IPO of antibody company Xencor. It priced December 3 at one-third of the mid-point of its original range, and to compensate it doubled its shares sold, and then some. It first filed to raise $75 million by selling 5 million shares at a mid-point of $15 each; it actually raised $70 million by selling 12.7 million at $5.50. That’s despite existing investors, which include MedImmune Ventures and HealthCare Ventures, committing to buy about $20.5 million, or 29%, of the IPO. Investors are demanding deep discounts as the biotech IPO market has softened this fall, so much so that it was a bit of a surprise Xencor made it out at all. Before it got the deal done, Xencor postponed its IPO, as did at least five other biotechs leading up to Thanksgiving. The Xencor offering was originally slated for Nov. 14. The worry for investors is that bankers are now scraping the bottom of the barrel. Perhaps the typical momentum of January’s JPMorgan conference can breathe a bit of life back into IPOs – if the right companies come along. (For a detailed look at the 2013 IPO strategies of OncoMed Pharmaceuticals, bluebird bio, and Ophthotech, check out this Start-Up feature.) At least for Xencor, the immediate investor upside of a deep discount is the potential for money left on the table. In its first day of trading on Dec. 3, Xencor got a 52% bounce, to $8.64 per share. Longer term, Xencor’s fate likely hangs on lead candidate XmAb5871 to treat rheumatoid arthritis, which won’t see a significant milestone until Phase Ib/IIa data due in the second half of 2014. A Phase IIb proof-of-concept trial would follow in the first half of 2015, with partner Amgen Inc. having data in hand in 2017 to determine if it will exercise its option. – Stacy Lawrence
 

Sitari Pharmaceuticals: The joint venture that Avalon Ventures and GlaxoSmithKline announced this spring hatched its first company November 22. The two staked Sitari, which will focus on developing a drug therapy for celiac disease based on research at Stanford University, to a $10 million Series A financing. The $10 million is not a straight cash investment, Avalon Managing Director Jay Lichter told "The Pink Sheet" DAILY. Avalon provides $3 million in cash, while GSK will provide up to $7 million in both cash and in-kind services. Using intellectual property licensed from the Stanford lab of Chaitan Khosla, Sitari will attempt to address celiac, an autoimmune digestive disease caused by intolerance to gluten, by inhibiting the transglutaminase 2 (TG2) pathway. Avalon will transfer tools from the Stanford labs to Sitari’s La Jolla, Calif., location where the GSK chemical libraries will be screened for potential TG2 inhibitors. That will be the starting point of the discovery work, along with considering compounds discovered by Khosla’s team, to determine which chemical scaffold might work best along with other pharmacodynamic factors, Lichter said. The company is years away from selection of a clinical candidate, however. At the time of selection, GSK will have the option to acquire the company or let Avalon take it forward on its own, said Pearl Huang, GSK’s global head of Discovery Partnerships with Academia (DPAC) unit. Huang said $10 million likely will be the standard A round for the companies co-founded by GSK and Avalon, based on both partners’ experience of what it takes to get to candidate selection. – Joseph Haas
 
5am Ventures: The San Francisco Bay Area firm said December 3 it has closed a $250 million fund, its fourth. It’s 20% larger than the group’s third fund, which closed in 2009. Four years between fund closes isn’t bad for an early-stage investor, although as managing partner Andy Schwab told Start-Up last year, “We’re realistic that not all of our companies can be two professors and an early-stage idea.” The firm has reached exits through investments in new companies that were vehicles for mature technologies, such as the Alza pain patch that was spun out and re-jiggered by Incline Therapeutics. 5am cashed out when The Medicines Co. bought Incline in 2012. It’s also had success extending a franchise. It sold Ilypsa in 2007 for $420 million to Amgen, which wanted the startup’s phosphate binder to treat chronic kidney disease. 5am and its syndicate partners spun out of Amgen some of the extra Ilypsa assets into a new company called... Relypsa. (They’re not called 5am for nothing; you’ve got to get up early to be that clever.) Amgen eventually shelved the Ilypsa program, but Relypsa made steady progress and raised north of $150 million in venture cash. It went public this fall, six years after its spin out. Relypsa also dampened its IPO ambitions, going out at $11 a share instead of $16 to $19, and raising $80 million (with insiders buying about a quarter of the shares) instead of roughly $120 million. (Shares closed at $19.60 on Dec. 5.) The new fund keeps the same managing partner lineup of Andy Schwab, Scott Rocklage, and John Diekman.  – Alex Lash
 
Best of the Rest (Highlights of Other Financing Activity This Fortnight): Continuing its focus on drug assets, Versant Ventures will create the biotech incubator Blueline Bioscience, which will spin off start-ups to which Celgene holds an option to buy... Versant also funded the latest Inception spin-off, Inception 4, an ophthalmic company that secured a joint research and option agreement with Bayer...Visterra added $8.1M to its Series A, which now totals $34.2M, and concurrently in-licensed dengue fever IP from MIT…Despite losing GSK as its Fabry disease partner, Amicus Therapeutics was busy: the company restructured its financial and corporate structure, announced $40M in new equity and debt financing, and acquired a lead ERT for Pompe disease in its takeover of Callidus Biopharma…Horizon Pharma netted $144M in a private senior notes sale, $35M of which will fund the purchase of exclusive US rights to AstraZeneca’s pain drug Vimovo…and Gilde Healthcare closed a $200M third fund dedicated to home- and digital-health, diagnostics and medtech, and pharmaceuticals. -- Amanda Micklus

Coming Soon ... DEALS OF THE YEAR 2013!

2013's IN VIVO Blog Deals of the Year competition is right around the corner ... nomination posts will begin this week and as always our readers will vote for the winners in three categories: M&A, alliance, and financing. Who's got what it takes to win this year?

Happy Thanksgiving from Deals of the Week!

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why the post is called Deals of the Week ... (cont.)

As always, thanks for reading. Happy Thanksgiving!

Bayer/Algeta: Not quite a deal just yet, but we give thanks for the heads up this slow holiday week: On Nov 25 details began trickling out about Bayer's NOK14.8 billion ($2.4 billion) bid to buy Xofigo partner Algeta. The companies have high hopes for Xofigo, the recently launched prostate cancer therapy, and it's unsurprising that Bayer might move to control 100% of the potential blockbuster. The NOK336 per-share bid represents a 27% premium to Algeta's price before the brouhaha. Analysts expect Bayer to sweeten the bid for the Norwegian biotech -- of course they do! -- with which it has been partnered since 2009. For now, neither company is talking (someone's leaking, of course, but talking? Not so much). Not about the potential and probable deal anyway. Algeta's been out talking to analysts and investors during its recent Capital Markets days, pointing out its technological prowess and pipeline of assets beyond Xofigo. All that chatter might be helpful especially if Bayer decides it only wants Xofigo (sometimes the Bayer gets only part of you? Sorry). We'll have more in next week's issue of "The Pink Sheet". -- CM

Merrimack/Actavis: Merrimack Pharmaceuticals’ stock got a boost Nov. 26 from back-to-back announcements including encouraging Phase II data on one of its lead cancer drugs, the HER3 blocker MM-121, and a drug delivery technology deal with Actavis Inc. The stock closed the day up about 11% at $3.50, though that's only half what it debuted at in March 2012. Still that's some trick, considering one of the announcements was for a trial that didn't meet its primary endpoint. Most of the bump probably came from that Phase II data, which only trended in favor of MM-121 in patients with ER/PR+ and HER2- breast cancer, but suggested even better results in a subpopulation of patients with an undisclosed biomarker. That asset is partnered with Sanofi, which has seen its share of bad luck in its oncology pipeline lately, so the silver lining is particularly welcome. Meanwhile, the deal with Dublin-based Actavis offers revenue upside, the company said. Under the arrangement, Actavis will pay the cancer specialist $2 million upfront. In exchange, Merrimack will use its nanoliposomal technology platform to develop and manufacture various drugs for Actavis. It already uses the technology in some of its own drug candidates. Merrimack is eligible to receive another $13.5 million in funding and milestone payments tied to development, regulatory and sales milestones related to the first product to come out of the collaboration. It will also receive a double-digit share of profits on future sales of any commercialized products. -- Jessica Merrill

Egalet/Shionogi: Egalet Corp. will get access to cash ahead of a planned IPO in a deal with Shionogi & Co. Ltd. announced Nov. 26. The Danish specialty pharma will receive $10 million upfront from Shionogi, which has also agreed to buy approximately $15 million in common stock in a private placement to close with the IPO. In exchange, Shionogi gets rights to multiple oral abuse-deterrent hydrocodone opiod product candidates in preclinical development. Egalet specializes in abuse-deterrent technology and has developed two drug delivery systems that can be applied to multiple drug candidates. The deal will give Egalet some cash and breathing room as it prepares for the IPO while still allowing the company to retain its priority assets, two abuse-deterrent formulations, one morphine and one oxycodone, both in clinical development. In its registration statement filed with the Securities and Exchange Commission Oct. 16, Egalet said it had just $3 million in cash. Egalet could also receive $300 million in development and regulatory milestone payments and tiered royalties on sales, as well as $100 million in sales-based milestones. For Shionogi, the deal builds on the company’s existing presence in pain. The company manufactures the hydrocodone product Xodol, the oxycodone product Magnacet and several other pain therapeutics it acquired from Victory Pharma Inc. in 2011. On Nov. 19, Shionogi announced a licensing deal with Mundipharma International Ltd. under which Shionogi would sell Oxycontin Neo tablets, a tamper-resistant version of oxycodone, and an oxycodone/naloxone combination product in Japan. -- JM

SillaJen/Jennerex: The Korean CRO SillaJen is buying the cancer vaccine company Jennerex for up to $150 million (no specifics on the breakdown of payments have been disclosed). News of the deal came Tuesday from the french biotech Transgene, which is both a Jennerex shareholder as well as its partner in development Jennerex's lead vaccine Pexa-Vec, which did not meet its primary endpoint in a Phase IIb study in advanced liver cancer earlier this year. Transgene said that the companies' Pexa-Vec development and commercialization deal will "remain intact," with SillaJen taking over Jennerex's end of the bargain, and the companies plan to continue development of the GM-CSF vaccine in multiple other indications. SillaJen has been a partner and "major investor" in Jennerex since 2006, according to the latter company's web site.  -- CM

Myriad Genetics/Crescendo Bioscience: On Tuesday, Myriad Genetics expressed its desire to merge with fellow molecular diagnostics maker Crescendo Bioscience, under a three-year option it obtained as part of a $25 strategic debt investment in Crescendo in 2011. (We wrote then about how the deal strengthened Myriad’s expertise in protein-based testing and would potentially help diversify its revenues beyond oncology [Crescendo launched its Vectra DA rheumatoid arthritis test in November 2010].) The move by Myriad, which is subject to completion of due diligence, was triggered by Crescendo’s having reached a minimum revenue milestone set under the 2011 agreement: as noted in a November 27 Myriad 8-K filing, the purchase price will be based on a multiple of revenue determined by the revenue growth rate of Crescendo at the time of option exercise. If Myriad ultimately declines the option, Crescendo might opt for an initial public offering, an event that would allow Myriad to convert the debt to equity at the IPO price. An IPO would be tempting given the recent IPOs of several standout molecular diagnostics firms including Veracyte and Nanostring. -- Mark Ratner

Deals Of The Week Wonders: Will Pharma Ever Pay More For Companion Diagnostics?

 

Two deals this past week between pharmas and diagnostics developers put a spotlight on the ever-growing focus on the importance of companion diagnostics in drug development.

Eli Lilly & Co. and Qiagen NV announced a deal Nov. 18 to develop and commercialize a companion diagnostic for a novel undisclosed Lilly lung cancer compound. BioMarin Pharmaceutical Inc. announced a collaboration with Myriad Genetics Inc. Nov. 20 to use Myriad’s Homologous Recombination Deficiency test to identify tumors that might be sensitive to its investigational PARP inhibitor BMN 673.

In the last five years, pharma’s acceptance of companion diagnostics has gone from a lukewarm handshake to full embrace, with pharma acknowledging that the tests are useful tools that can help speed drug development, increase the chance of getting a new drug to market and support commercial reimbursement. As a result, deal-making in the space is moving earlier-stage and increasingly into therapeutic areas outside of oncology, areas such as autoimmune disease, neurological conditions and anti-infectives.

But there is still little in the way of hard evidence to show pharma’s softer side is showing up at the deal-making table. Given the increasing importance of a companion diagnostics to the success of a drug, it would seem intuitive that pharma might need to share more risk or give up more of the long-term financial reward or so its friends on the diagnostic side might argue. But, so far, that doesn’t seem to be the case, in part because it can be difficult for diagnostics companies to demonstrate they’re providing something unique to a pharma partner.

It’s hard to know for certain because the economics of companion diagnostic deals are rarely disclosed, but most if not all diagnostic companies are being paid by their pharma partners to develop the test in a fee-for-service style arrangement or through fixed milestone payments. Diagnostic companies also would like to receive royalties on sales of the drug or sales-based milestones as a way to share some of the long-term value of the product.

Qiagen appears to have established a valuable partnership with Lilly, through what it deems a “master agreement,” under which Qiagen will develop companion diagnostics for multiple drugs across all of the pharma’s therapeutic areas. The two previously were partnered on the KRAS test for Erbitux (cetuximab), which was approved in 2012, and partnered in 2011 to develop a test for a clinical-stage Janus kinase 2 inhibitor for blood cancer. They broadened their partnership to include the master agreement in February, and the Nov. 18 collaboration was the first to come out of that framework.

But during an investor meeting the same day, CEO Peer Schatz acknowledged the company depends on securing strong pricing and reimbursement for companion diagnostics to get a return on its investment.

“We make money off the development process, but not really a lot,” he said. “We are more focused on the kit coming forward.” The hope is that FDA-approved companion diagnostics will be able to secure better reimbursement than those that don’t go through the rigorous process, important because tests are easily reproduced and often have limited intellectual property protection.

In an interview, Myriad’s Mark Capone, president of Myriad Genetics Laboratories, said most companion diagnostics deals include development milestones and require the diagnostic company to obtain reimbursement once the product is commercialized to receive a return.

“We know there are discussions of pharmaceutical companies compensating diagnostic companies in the commercial phase, and that could come either in the form of royalties or direct reimbursement in the case that the pharmaceutical company wants to distribute the diagnostic, but I think most of those discussions are theoretical in nature,” he said.

He declined to discuss the financials of any deals Myriad has to develop companion diagnostics. It has several non-exclusive deals, primarily for its BRACAnalysis test to identify patients with BRCA-mutated breast and ovarian cancer, with partners including BioMarin, AstraZeneca PLC and AbbVie Inc.

“We have seen some baby steps,” diagnostics consultant Kristen Pothier said during a panel at IN VIVO’s very own PSA: The Pharmaceutical Strategy Conference in September. That includes some instances in which pharma companies have agreed to foot the bill for a voucher program to cover the cost of the test once it is on the market to alleviate some of the risk if the test does not get reimbursed at a high price.

But as for royalties, she said that remains a “dream” of diagnostic firms. What, we wonder, will it take to make that wish come true?

Clovis/EOS: Boulder, Colo.-based Clovis Oncology Inc. enjoyed a June bump in its share price, after it received positive data on two compounds. Now, the company is putting its Street strength to work by making an acquisition. The company agreed to buy Italian cancer drug developer EOS SPA for $200 million upfront, netting Clovis territorial rights to lucitanib, a Phase IIa inhibitor of fibroblast growth factor and vascular endothelial growth factor tyrosine kinases that has shown promise in breast cancer and other cancers. Most of the purchase price was paid in stock, as EOS shareholders received $190 million worth of Clovis shares and $10 million in cash. If lucitanib is approved in the U.S., Clovis will pay an additional $65 million in cash; EOS shareholders will also receive an additional €115 million ($155 million) in cash based on further milestones, under an existing agreement with Servier SA. Clovis shares have kept most of their recent gains, and the company has been planning to make moves for some time. EOS licensed lucitanib’s rights in Europe and most of the world to Servier in a 2012 deal; the acquisition gives Clovis full rights in the U.S. and Japan, and Clovis plans to collaborate with Servier on development and commercialization in other territories. Servier is obligated to pay for the first €80 million in lucitanib’s clinical development costs, and the two will share further costs. Clovis also stands to receive €350 million plus royalties from Servier if the drug achieves downstream milestones. -- Paul Bonanos

Versant/Celgene/Bayer: Two deals announced this past week demonstrate Versant’s willingness to develop drug assets, instead of full-blown companies, with single buyers holding options to acquire each one. On Nov. 19, Versant unveiled plans for a biotech incubator in downtown Toronto to draw from the neighboring medical research community. If all goes well, the incubator, which Versant has named Blueline Bioscience, will spin out at least two single-asset companies by the end of 2014. And if all goes really well, those companies will be bought by Celgene Corp., which already has agreed to fund the incubator in exchange for option rights. Versant and Celgene are familiar partners. In 2011, the two firms launched genomic analysis firm Quanticel Pharmaceuticals Inc., with Celgene holding a series of time-based options to acquire the company outright. Celgene will invest an undisclosed amount, but will not receive equity in Blueline or, initially, in the companies it incubates. The second deal Versant announced this week is the spin-out of a new single-asset company from Versant’s wholly owned drug-discovery group, Inception Sciences Inc. The spin-out is simply named Inception 4 Inc., and it houses an ophthalmology program; Bayer AG has an exclusive option to acquire it down the road at undisclosed milestones. Inception Sciences is a hybrid of a drug-discovery firm and holding company. The company discovers drugs with a team of scientists and spins each program into a separate corporate entity, typically with $5 million to $10 million in initial funding. The numbered spin-outs are positioned for eventual sale, while the discovery engine remains housed within Inception Sciences. -- Alex Lash

Vertex/Janssen: It’s not a new deal but the end of a long-existing one. Vertex Pharmaceuticals Inc. announced Nov. 20 it had sold its royalty rights for sales of protease inhibitor telaprevir outside of North America to Janssen Inc., the company that holds marketing rights to the hepatitis C drug, branded as Incivo, in Europe, South America, the Middle East, Africa and Australia. Janssen acquired those rights in a 2006 co-development agreement under which it paid Vertex $165 million upfront along with annual royalties in the mid-20% range. Under the revised arrangement, Janssen will pay Vertex $152 million during the fourth quarter of 2013, then cease paying any further royalties on Incivo sales beginning in 2014. Vertex’s decision is in line with planning outlined on its Oct. 29 third quarter earnings call as the Cambridge, Mass., firm, which markets telaprevir as Incivek in North America, decreases its emphasis on the HCV space to focus more on its cystic fibrosis franchise and other pipeline projects. In a Nov. 20 note, analyst Geoff Meacham of J.P. Morgan said the move made sense for Vertex and should help bolster the company’s finances. He forecast royalty revenue of $115 million this year for ex-North American sales of telaprevir, falling to $25 million in 2014 and $11 million in 2015. -- Joseph Haas

Pfizer/GSK: Pfizer Inc. and GlaxoSmithKline PLC are making good on industry promises to test cancer drugs in combination, even across big pharma’s research halls, with a research collaboration announced Nov. 21. The companies have agreed to test GSK’s MEK1 and MEK2 inhibitor trametinib, approved in the U.S. as Mekinist for melanoma, in combination with Pfizer’s investigational palbociclib, an inhibitor of cyclin dependent kinases 4 and 6 in a Phase I/II study in patients with BRAFV600 wild type advanced metastatic melanoma. The open-label trial is designed to determine a recommended combination regimen and also will study the effect of the combination on tumor biomarkers and anti-cancer activity and safety. GSK will run the study and the terms of the deal were not disclosed. Palbociclib is a cornerstone of Pfizer’s cancer pipeline and is being developed for the treatment of breast cancer after demonstrating significant improvement in progression-free survival in patients with ER+, HER2- breast cancer.

Patheon/DSM Pharmaceutical Products: Consolidation is afoot in the CRO market, with news that Canada’s Patheon Inc. is merging with Royal DSM NV’s pharmaceutical division, DSM Pharmaceutical Products (DPP), to create a whole new company that will aim to product full-service outsourcing for the pharma industry. “Our customers have indicated a strong desire to streamline their outsourcing network, at the same time, increasing their outsourcing,” said Jim Mullen, current CEO of Patheon. “They want to work with fewer companies with broader capabilities and capacity.” The new company, which will be based in Durham, N.C., will have a global footprint of 23 sites across North America, Europe, Latin America and Australia. Mullen, who held the top slot at Biogen Idec Inc. for seven years prior to joining Patheon, will be CEO. Patheon shareholders will receive $9.32 per share in an all-cash transaction that is expected to close within three to four months. The deal is subject to approval of various regulatory authorities in several countries, including the U.S., Canada, Turkey and Mexico. The per-share price values the deal at $2.6 billion and is a 64% premium to Patheon’s closing price on the Toronto Stock Exchange on Nov. 18, the day before the deal was announced. Private equity firm JLL Partners will own a 51% stake in the new company and DSM will own the remainder. JLL currently is the largest shareholder of Patheon with a 66% stake in the company. The deal requires the majority approval of Patheon’s minority shareholders to proceed. -- Lisa LaMotta

Unilife/Hikma: Unilife Corp. which specializes in the production and sale of injectable drug-delivery systems, announced a 15-year commercial supply contract with Jordan-based Hikma Pharmaceuticals PLC Nov. 20. Under the agreement, Unilife will supply Hikma with customized prefillable delivery systems from its Unifill platform. Hikma, focused on the production and sale of a range of branded and non-branded generic products principally in the Middle East and North Africa, as well as in the U.S. and Europe, will use the syringes with a range of generic injectable drugs, beginning with an initial list of 20 generic injectables. The deal reflects the growing market preference for prefilled syringes over vials. Unilife CEO Alan Shortall sees the deal with Hikma as an entrée for his products into the fast-growing market for generic injectables. Unilife will begin product sales to Hikma in early 2014, and going forward, will supply Hikma with a minimum volume of 175 million units/year following a rapid, high volume ramp up period. In addition to an undisclosed share of product sales, Hikma will pay Unilife $40 million in staggered upfront payments beginning with $5 million immediately and $15 million during 2014; the final $20 million will be paid in milestone-based installments in 2015. In return, Hikma gets exclusive global rights to Unifill’s prefilled syringes. Unilife can use the payments: It has been in the red for the past 11 years. In fiscal 2013, the York, Pa.-based company made $2.74 million in sales and reported a net loss of $63.2 million. -- Mike Goodman

Amicus/Callidus: In what it is calling a “highly synergistic strategic combination,” rare-disease focused Amicus Therapeutics Inc. has acquired privately held Callidus Biopharma Inc. for $15 million in Amicus common stock plus earn-outs pegged to Phase II development of Callidus’ enzyme-replacement therapy for Pompe disease and to late-stage development, regulatory and approval milestones related to three products. Shareholders in Callidus, which raised a $4.6 million Series A round from undisclosed investors in May, can earn up to $10 million for the Pompe disease Phase II work and up to $105 million related to that program and two others being added to the Amicus pipeline. The deal was announced on the same day that Amicus said GlaxoSmithKline PLC would give back rights to its lead drug candidate (see below); the biotech also simultaneously announced a $15 million private placement, a planned $25 million debt financing and a staff cut down to 91 employees that is expected to save the biotech $4 million next year. -- JAH

Amicus/GSK: Amicus and partner GSK are parting ways, kind of, but the biotech didn’t describe its new relationship with GSK as a “highly synergistic strategic no-deal.” We’ve done that for them. Instead, also on Nov. 21, New Jersey-based Amicus described the handover as a “revision” of its partnership with GSK around the pharmacological chaperone program migalastat (monotherapy and co-administered with enzyme replacement therapy), which was focused on Fabry disease. During a same-day conference call with analysts, Amicus CEO John Crowley noted a $3 million equity investment by GSK in Amicus (it had made two prior equity purchases, giving it a 19.9% ownership stake) and called the company a “passive partner” in migalastat. So GSK isn’t entirely gone – for now, it remains an Amicus shareholder. But it’s a shareholder that clearly sees its own future in the rare diseases space a lot differently than it did only a couple years ago, a view that should have other GSK partners on alert. Nevertheless, the big pharma retains some upside potential around migalastat: GSK is entitled to a mix of royalties and commercial milestone payments on monotherapy and combination products in certain territories. Crowley described the family of transactions as a culmination of events that will re-make the biotech into a “better resourced” firm focused more sharply on biologic therapies for rare disorders. -- JAH

image via flickr user Jordan Colley Visuals used under creative commons license

Deals of the Week Gets Disruptive

One needs to look no further than today’s pharma industry to prove that “necessity is the mother of invention.” Acute challenges swamping the sector are forcing previously insular players to abandon their silo thinking and engage customers, employees, payers, providers, and even suppliers and competitors to make strategic leaps.

That seemingly inevitable evolution was the theme at the 5th INSEAD Healthcare Alumni Summit held in late October in Zurich, Switzerland. Participants discussed these kinds of disruptive collaborations, examining how co-operation can help overcome insularity in health care, and what structural and cultural factors characterize successful collaborations.

A keynote interview session put two pharma CEOs on the spot: to sustain healthy businesses, what approaches and deal-making strategies were they considering today that were unavailable or unappealing to them only a decade ago?

Roberto Gradnik, CEO of Stallergenes SA, is attempting to launch his France-based company – which develops treatments for allergy-related respiratory diseases – out of its regional European orbit and take it global. The group currently devotes around 20% of its annual gross sales – which in 2012 totaled €240 million ($323 million) – to R&D, a large proportion for a company Stallergenes’ size.

Gradnik told the INSEAD conference that it’s crucial to change a small-to-mid-sized company’s mindset to be successful at expansion – a process that’s clearly disruptive and necessitates big change on the inside and often demands untried approaches. “Sure, if I don’t go down this path then I would avoid a cultural clash – but I would also not be able to build a successful company,” he told the conference. “At the same time, we need to find new commercial and development models, and be increasingly creative in our partnering ideas,” he added.

Riccardo Braglia heads his family’s Swiss drug and device business, Helsinn Group, which began life in his grandfather’s garage in the late 1940s but today operates in 90 countries with 63 partners using a core business model of what he terms “integrated in-licensing” of late-stage pharmaceutical compounds, medical devices and nutritional supplement products. He told the conference that Helsinn’s business model is based on three pillars: in-licensing, developing products and obtaining marketing authorization on international markets, and out-licensing products through a network of partners worldwide. Its main business areas are cancer supportive care, pain and inflammation, and gastroenterology.

Braglia, who has been at the helm of Helsinn for a decade, recounted a recent cultural challenge he faced when Helsinn took over U.S. biotech Sapphire Therapeutics in 2009, to expand the group’s pipeline in therapeutic areas, notably in cancer care, and give it a foothold in the U.S. But the takeover quickly presented problems that he hadn’t foreseen and which took him more than two years to put right.

“We figured, ‘well, they speak English there so what’s the problem?’ But oh boy, it was a nightmare to implement our culture, that of a family-business, our strategy, our products, and reconciling their biotech culture within the pharma industry. It was really tough, partly because I didn’t want to have any expats running the show there, because I always want to work with local people, because the culture of a country is very important. So what I did was spend half of every month in the United States to make it work – and it eventually did.”

Braglia said his integrated in-licensing business model means his company is essentially a virtual corporate entity with limited infrastructure. “It also means that half of my 500 employees are not in the office but rather in airplanes on business trips.” He said that in the last decade, Helsinn was focused increasingly on licensing alliances, manufacturing alliances, scientific alliances and commercial alliances. An example is an injectable manufacturing joint venture using a plant owned by Pierre Fabre Group of France but paid for by Helsinn.

Gradnik’s company has just secured a U.S. partner – Greer Laboratories Inc. – for its key grass allergy vaccine Oralair, which he hopes to launch there in early 2014, pending FDA approval. Under the deal, announced Oct. 31, Greer will lead the sales and marketing of Oralair, a grass pollen sublingual immunotherapy tablet that includes five grasses -- sweet vernal grass, orchard grass, perennial rye grass, timothy grass, and Kentucky bluegrass -- while Stallergenes will be responsible for manufacturing and supply. Stallergenes will receive regulatory and commercial milestone payments totaling up to $120 million, plus royalties. Oralair will be reviewed by FDA’s Allergenic Products Advisory Committee Dec. 11.

Both Braglia and Gradnik said CEOs of small to mid-sized biopharma companies need to be involved in such collaborations.

“I need to know that the other CEO shares the same philosophy and vision,” Helsinn’s Braglia said.

Gradnik said it should also be the chief executive’s role to know when collaboration has gone sour and take remedial action. “It’s best to cut your losses and end it. I have one like that currently going but will refrain from saying who that’s with,” Stallergenes’ CEO told the conference.

Perhaps a topic for a future “No Deal of the Week.” Until then, enjoy our takes on the not-yet-sour ...

Helsinn/Chugai: In its latest partnership, Helsinn has chosen Chugai Pharmaceutical Co.'s U.K.-based European marketing subsidiary to help sell its ghrelin receptor agonist anamorelin in Europe.
Under the deal announced on Nov. 12, Chugai will get rights in certain major European markets to commercialize the oral drug for anorexia-cachexia syndrome related to advanced non-small lung cancer. Financial details were not disclosed. The pact follows Helsinn's agreement in January with Mexican pharmaceuticals company Especificos Stendhal SA de CV for anamorelin's development in selected Latin American markets. Anamorelin is a first-in-class, once-daily drug previously studied in around 500 patients, including four completed Phase II trials. It is currently being tested in two Phase III studies, ROMANA 1 and ROMANA 2, for the treatment of anorexia-cachexia syndrome in patients with advanced NSCLC.
Chugai will distribute and commercialize the product in Germany, France, the U.K., Ireland, Belgium, the Netherlands and Luxembourg. Chugai's European subsidiary already has direct operations in the U.K., France and Germany, marketing products there from Chugai or Swiss parent Roche. Helsinn retains responsibility for all product development activities including clinical trials and regulatory affairs and will supply the drug to Chugai, which will carry out all work related to commercialization. Phase II results of the drug presented to this year's European Cancer Congress in Amsterdam showed a significant rise in body weight from baseline in patients receiving the medicine compared with placebo, and a favorable overall safety/tolerability profile. Cancer-associated anorexia-cachexia is a muscle wasting and weight loss condition that occurs in around a third to half of cancer sufferers. There are as yet no approved therapies for the condition. Ghrelin, also known as the "hunger hormone", is secreted by the stomach and is targeted by anamorelin to stimulate multiple pathways involved in regulating body weight, appetite and metabolism. -- Sten Stovall

Roche/immatics: People have begun to sit up and take notice of immatics biotechnologies GMBH after the company announced on Nov. 13 a cancer vaccine collaboration with Roche that could lead to the German immunotherapeutics biotech receiving research and milestone payments of up to $1 billion, in addition to a relatively modest up-front payment of $17 million. The high “biobucks” figure takes into account the multiple products and indications likely to be explored in the collaboration, the second announced by Roche in the immunotherapy field in the past two months. Immatics, a Tubingen-based firm with strong backing from local German entrepreneurs and VCs, has developed a technology, XPRESIDENT, to identify cancer antigens recognized by T lymphocytes, and has a tumor-associated peptide (TUMAP)-based cancer vaccine targeting renal cell carcinoma, IMA910, already in a Phase III study. Roche is keen to evaluate preclinical TUMAP vaccines alone and combined with checkpoint inhibitors and other modulators of the immune response, specifically in the areas of gastric, prostate and non-small cell lung cancer. Immatics' Phase I-ready gastric cancer vaccine candidate, IMA942, is the most advanced product covered by the agreement, and Roche will be responsible for clinical development and commercialization of this and other immunotherapies generated in the research collaboration.-- John Davis

Oncodesign/UCB: French drug discovery and pharmacology services firm Oncodesign SA is to collaborate with European mid-sized biopharma UCB SA on identifying selective kinase inhibitors with potential in the treatment of neurodegenerative diseases, in a deal announced Nov. 13. Oncodesign’s Nanocyclix technology generates potent and highly selective kinase inhibitors based on macrocyclization of small molecules, and the two companies will collaborate on identifying such inhibitors that cross the blood-brain barrier and interact with a UCB-selected kinase target. UCB will have an exclusive option to license the joint program, with worldwide development and commercialization rights, upon successfully reaching certain discovery milestones. Oncodesign will, in turn, get research funding, and upon exercise of the license option, research, regulatory and commercial milestones involving the development of molecules in two or more indications, and tiered royalties on net sales. Dijon-based Oncodesign was set up in 1995 and has previously forged collaborations with several other pharmaceutical companies including Sanofi and Ipsen to apply its drug discovery technology in various therapeutic areas, including tissue repair and Parkinson’s. -- John Davis

Novartis/Immunogen: ImmunoGen Inc. announced on Nov. 11 that Novartis AG has taken its third license to use the biotech’s antibody-drug conjugate technology on an undisclosed cancer target. It is the fifth license around Immunogen’s ADC targeted antibody payload (TAP) technology this year by a major drug company.
The Novartis license dates back to a 2010 deal in which the Swiss Pharma licensed exclusive rights to use Immunogen’s TAP technology to develop antibodies against a predetermined number of oncology targets.
For each license, Immunogen receives an up-front payment and is entitled to receive milestone payments potentially totaling some $200 million plus royalties on the sales of any resulting products. Novartis is responsible for the development, manufacturing and marketing of any products resulting from the license. Immunogen’s pipeline consists of four wholly owned ADC programs and eight partnered ADCs in 10 different cancer indications. The best known partnered ADC is Roche’s Kadcyla (ado-trastuzumab emtansine), which was approved by FDA in February as a second-line option after Herceptin (trastuzumab) and a taxane, but labeling left a window for broader use in some first-line patients. A safety signal in a Phase II trial of the biotech’s lead asset, IMGN901 for NSCLC, was disclosed last April, followed by its discontinuation on Nov. 5 on the recommendation of the trial's independent Data Monitoring Committee. -- Mike Goodman

Merck KGaA/BeiGene: Big pharma is increasingly in-licensing compounds from Chinese companies, and the biopharma arm of Merck KGAA, Merck Serono SA, inked a second global licensing, co-development and commercialization deal with BeiGene (Beijing) Co. Ltd. for oncology compound BeiGene-290.
BeiGene-290 is in preclinical development and is expected to enter the clinic in 2014. Under terms of the agreement, announced Nov. 13, BeiGene will be responsible for developing and commercializing the poly (ADP-ribose) polymerase (PARP) inhibitor in China first and Merck will be responsible for the development and commercialization of the compound for the rest of the world. In return, BeiGene will receive an undisclosed up-front payment and is eligible to receive further payments of up to €170 million ($232 million) for clinical development milestones and potential commercial milestones in both China and globally, as well as royalties on net sales. Specific indications for the oncology compound were not disclosed. Both deals, while global, have been structured to ensure BeiGene leads development in China, which should enable the companies to take advantage of regulatory consultations with China FDA as part of the agency’s accelerated approval pathway. The new agreement signals a milestone for biotech innovation in China, said BeiGene Co-founder Xiaodong Wang during the signing ceremony in Beijing. Wang is also the director and architect of China’s National Institute of Biological Science. -- Brian Yang

Shire/ViroPharma: The big M&A news this week was London-listed Shire PLC’s agreed takeover of ViroPharma Inc. for an eye-watering price of $4.2 billion cash, which would give the Ireland-based specialty drug maker access to the U.S. target’s C1 esterase inhibitor Cinryze for treating Hereditary Angioedema, a genetic immune disorder. The proposed acquisition may attract anti-competition resistance from regulators, given Shire’s possession of HAE treatment Firazyr (icatibant injection), but the acquirer says it is confident that these two products are in two different marketplaces. If allowed to proceed, Shire expects the marriage to generate annual cost synergies of around $150 million by 2015, over and above the improved operating leverage already being driven by the ongoing One Shire reorganization.-- STS

Cell Therapeutics/Baxter International: Beleaguered oncology company Cell Therapeutics Inc. has inked a deal for its Phase III mylefibrosis asset pacritinib that it sees as a vote of confidence. CTI announced Nov. 15 that it has signed an agreement with Baxter International Inc. for full commercialization rights outside the U.S., as well as joint commercialization rights in the U.S. The $60 million up-front payment will include a $30 million equity investment in the Seattle-based biotech company, which may also receive clinical and regulatory milestones up to $112 million, including $40 million in clinical milestones that are expected in 2014 and another $27 million expected in 2015. Baxter will handle 75% of costs through submission. CTI acquired pacritinib, an oral tyrosine kinase inhibitor that acts on the JAK2 and FLT3 pathways, in April 2012 from Asia’s SBIO Pte. Ltd. CTI paid $30 million upfront and is on the hook for a total of $132 million in regulatory and sales milestones. Prior to CTI getting the rights to pacritinib, the drug was licensed to Onyx Pharmaceuticals Inc., which opted not to development it in 2011. Pacritinib is CTI’s latest hope after two late-stage pipeline failures – first FDA shot-down non-Hodgkin’s lymphoma treatment Pixuvri (pixantrone), followed by a clinical hold for the blood cancer drug tosedostat. -- Lisa LaMotta