A Precision Move

We couldn't help but find a few interesting tidbits regarding the announcement that diagnostics maker Precision Therapeutics Inc. would merge with Oracle Healthcare Acquisition Corp.

First off, this is the first deal struck in the life sciences industry involving a special purpose acquisition company that we've seen in some time, not since Ithaka Acquisition Corp. acquired cooling company Alsius Corp.

Second, we'd just finished writing an article showing how well public investors have embraced diagnostics and imaging companies like Genoptix Inc. and Virtual Radiologic Inc. much to the benefit of the VCs in those companies. (Check out the upcoming START-UP for the full analysis.)

So here we have a diagnostics company that opted to pass on an IPO and embrace a SPAC-buyout. Why? Well, if the deal is consummated it'll likely turn out to be a good move for Precision.

Despite the rational exuberance for diagnostics, IPO buyers weren't likely to give as warm an embrace of Precision as they've given Genoptix simply because the financials aren't there yet. Nanosphere Inc., for example, is doing well but not nearly as well as Genoptix, possibly because its business isn't as developed.

With its cancer diagnostic product on the market (go here for details) Precision brought in $1.7 million in revenue over the first nine months of this year while reporting a loss of $13.5 million. Genoptix is pulling in far more revenue and now is actually making millions. Obviously, public investors prefer companies that actually report income rather than losses or they'll suspend that rule for biotechs and device companies with high upsides.

That certainly isn't to say Precision won't get there. It's just not there yet.

So Precision management probably is wise to put down the IPO dice and accept the merger with Oracle, which comes with a ticker symbol and, more importantly, $120 million in cash.

The company's board likely will have to share power and returns. But the capital and ticker give Precision's investors a surer route to an eventual exit.

With venture investors already committing $73 million to the company, finding attractive terms for more private capital likely would have been difficult if the IPO failed. According to Precision's S-1 filing, the company's largest shareholders include Adams Capital Management, Quaker BioVentures, TVM Life Science Ventures, Birchmere Ventures, Stephens & Co.

So what's in it for Oracle, which was started in 2005 by hedge fund manager Larry N. Feinberg, who founded of Oracle Partners,L.P., a healthcare-focused hedge fund in 1993. David Hamilton at VentureBeat asked that very question today.

We obviously can't say for sure other than to draw on Feinberg's standard comments about the company's strong management team and the fact that "the ChemoFx test has been validated in numerous clinical studies and has been reimbursed by both Medicare and commercial payors."

But one very real issue might have been that Oracle appears to be running out of time.

SPACs are not open-ended things. IPO investors acquire shares in a SPAC because they trust the management team will take that money and buy a company at an attractive price, thereby creating a strong business with valuable shares. But they'd like to get that money back at some point if such a deal can't be made. So all SPACs have an expiration date, so to speak, when investors are promised their money back--minus fees and other costs--if no company is acquired. Oracle shareholders must vote to approve any deal.

Oracle Healthcare raised its capital through an IPO of its own on March 8, 2006. As per the structure of most SPACs, Oracle management had 18 months to find a company to acquire or else return the capital back to its investors.

On Sept. 8--the final day of the deadline--Oracle signed a letter of intent to acquire another company, according to Oracle's most recently quarterly filing. The signing of the letter gave Oracle management a six-month extension.

However, the filing goes on to state that the letter of intent regarding that purchase was terminated on Oct. 17, freeing up Oracle to find another deal before the pending March 8, 2008 deadline.

Enter Precision.

We're not suggesting this is merely a marriage of convenience. Precision--with Oracle's support--could grow into a diagnostics powerhouse.

But given how long such a deal can take--ask Alsius and Ithaka management about the six months or so the SEC took to review their paperwork--this may be Oracle's last shot at completing a deal that could produce some real returns for its investors and managers, unless there is a provision for another extension that we can't unearth.

Seems like a potential win-win.

Breaking Up is REALLY Hard to Do

The seemingly ideal marriage of convenience and opportunity between Oracle Healthcare Acquisition Corp., a special purpose acquisition company, and diagnostics company Precision Therapeutics was called off just before ceremony.

And it's going to cost both parties a lot more than a deposit for the function hall.

Oracle announced this morning that the planned merger between the SPAC and the diagnostics company is over “due to currently prevailing market conditions.”

Seems to us SPACS were built to weather such market conditions. In fact, they’re supposed to thrive on it as they give private companies another alternative to get to the public market.

However, they’re not immune to the markets. A majority of the investors who buy into the SPAC through an initial public offering must approve of the merger. In deciding how to vote, investors must weigh whether or not they’d be better off cashing out now rather than letting their bets ride on a company like Precision Therapeutics.

In fact, according to Oracle’s annual filing, any shareholder that voted against the merger stood to receive roughly $8 for each of their shares if they were outvoted and the deal went through. To us, the question would appear to be simple. Were investors better off taking the $8 for their share or rolling the dice with shares in the new Precision Therapeutics shares?

Given the recent performance of IPOs, IN VIVO Blog is guessing the $8 was looking pretty good to Oracle investors.

The first sign of trouble came a few weeks ago when the two parties lowered the price of the deal. It appears that wasn’t enough to convince Oracle shareholders to approve the deal.

This is a fatal blow for Oracle. As we noted back in December,

Oracle Healthcare raised its capital through an IPO of its own on March 8, 2006. As per the structure of most SPACs, Oracle management had 18 months to find a company to acquire or else return the capital back to its investors.

On Sept. 8--the final day of the deadline--Oracle signed a letter of intent to acquire another company, according to Oracle's most recently quarterly filing. The signing of the letter gave Oracle management a six-month extension.

However, the filing goes on to state that the letter of intent regarding that purchase was terminated on Oct. 17, freeing up Oracle to find another deal before the pending March 8, 2008 deadline.

For those without calendars, March 8 is Saturday. The company’s officers must convene a meeting of shareholders to begin the process of dissolving the partnership and returning most of the $113 million raised in the IPO. According to SEC document it appears as if the figure might be closer to $100 million, minus the cost of expenses and other liabilities incurred over the past two years.

What's next for Precision? Hard to say. As pointed out by VentureBeat (where we first read of the news), the company had only $15 million on hand in September. According to the same S-1 filed in November, the company lost close to $10 million over the first nine months of the year. Precision pulled it IPO to pursue the Oracle merger, and now that avenue is closed as well. Its options are limited.

Can Novel-Novel Combinations Work? Deals Of The Week Watches Merck Test The Waters

Merck & Co. Inc.’s Feb. 5 announcement that it is collaborating with three companies to test various combinations of its investigational oncology compound MK-3475 with their drugs highlights the extent to which the big pharma is committed to building a major presence in onco-immunotherapy. The company appears prepared to take aggressive steps to achieve its aims, even as it cuts back in other parts of its business.

The announcement also signals just how important combination drug trials are becoming to certain areas of cancer therapy development, and in particular the importance of “novel-novel” combination trials. Until recently, the industry rarely, if ever, undertook trials in which two investigational-stage drugs are put through clinical development together in the hopes that results will be stronger than either would have garnered alone. With the exception of some government sponsored projects, even combining two novel drugs made by the same company has been rare. Lack of scientific drivers and operational and legal hurdles have kept potential partners at bay.

Certainly science is shifting, and many oncology researchers believe early-stage collaborations are inevitable, given the direction of scientific innovation and the costly and time-consuming nature of clinical trials. Furthermore, FDA has shown greater willingness to consider novel-novel combinations in recent years, issuing a first draft guidance in December 2010, and, in June 2013, a final guidance, which clarifies its thinking on the potential regulatory path for approving two new drugs as a combination regimen.

Roche,  Cyclacel Pharmaceuticals Inc., and just maybe one or two others, are currently testing combinations of their own investigational drugs--developments are followed diligently by "The Pink Sheet"'s Shirley Haley and others on the team. But those initiatives pale in terms of scope with Merck’s willingness to work with Pfizer Inc., Incyte Corp., and Amgen Inc.   The drug involved is a high-profile litmus test for Merck: MK-3475, a PD-1-specific antibody, is currently in Phase III as a monotherapy for melanoma and is being studied in a total of 13 clinical trials involving more than 4,000 patients suffering from a variety of cancers.  The company announced in January that it is starting a rolling NDA for the drug, which it expects to complete in mid-2014.

Investigators will evaluate MK-3475's safety and efficacy when combined with Pfizer’s small molecule kinase inhibitor Inlyta (axitinib) in patients with renal cell carcinoma, and also with the investigational immuno-oncology drug PF-05082566 in multiple cancers. Inlyta already is on the market as a monotherapy for RCC, and ‘2566, which targets the human 4-1BB receptor, is in Phase I, according to Pfizer’s website.

In the second agreement, Merck will cooperate with Incyte on a randomized, double-blinded Phase I/II study of MK-3475 and Incyte’s investigational drug INCB24360, an immunotherapy that inhibits indoleamine 2, 3-dioxygenase (IDO) in patients with previously treated metastatic and recurrent non-small cell lung cancer. Finally, MK-3475 and Amgen’s investigational immunotherapy talimogene laherparepvec will be put to the test in a Phase Ib/II study in patients with previously untreated mid- to late-stage melanoma.

Merck already has signed a similar deal with GlaxoSmithKline PLC around combining MK-3475 with GSK’s Votrient (pazopanib) in advanced RCC, and it seems ready for more. “You can expect to see more of thse deals, both in terms of monotherapy and in combinations,” said Merck's VP, Clinical Oncology Research Eric Rubin on the day the company announced its triple play. As for the particular compounds chosen, he noted, these were areas of particular interest based on “our understanding of drug mechanisms and the potential of combination effects that will be synergistic in their efficacy.”

He would not discuss details of the data Merck looked at to select its partners, but said each case had “a strong rationale.” A  fair amount of literature has been published on IDO as a target and its involvement in immune regulation and in particular with melanoma, for example, he said. Nor would he discuss timing of read outs from any trials, all of which are expected to begin later this year.  The Incyte compound is currently in Phase II as a monotherapy for ovarian cancer and as a combination therapy with Bristol-Myers’ Squibb’s Yervoy (ipilimumab) for advanced melanoma.

Merck’s previous experience with a novel-novel combination trial involving its AKT (part of the phosphaltidylinositol-3 kinase pathway) inhibitor and AstraZeneca PLC’s MEK (mitogen-activated protein kinase) inhibitor also likely paved the way. That effort began in 2009 and was among the first, if not the first, examples of two big companies collaborating in such close fashion on such early-stage compounds.  The Merck drug was in Phase I trials at the time the deal was signed, while the AZ drug was in Phase II but had not yet reached proof of concept.  The timing inevitably led to concerns about sharing of proprietary data and intellectual property, as well as scientific uncertainties and questions about potential regulatory uncertainties down the road.

Merck isn’t saying much about how the new deals are managing the operations or funding of the trials, but Rubin noted that the earlier relationship with AZ has been positive and “a good way to learn how to do this.” Some of the learnings resulted in other trials, he said, including as one of four arms of the BATTLE-2 trial, which investigators will discuss at the American Association of Cancer Research meeting in April. That trial, now recruiting 450 patients with advanced non-small-cell-lung cancer, is expected to complete in 2017, according to Clinicaltrials.gov.

The structure of the 2009 deal was fairly simple, with Merck sponsoring the Phase I study and both companies splitting the costs.  A joint governance committee with shared decision making rights oversaw the program. IP arising from the collaboration is to be shared by the inventors, and most importantly, each company was to have freedom to study its compound alone or with other drugs as well.

Merck’s been active on other fronts in the deal space, and recently revamped its R&D unit's business development group, bringing in a new leader, Iain Dukes from Amgen. Other companies are also doing their share of wheeling and dealing, as is seen in the latest round of ...--Wendy Diller

 

Merck/ Ablynx: Merck  has turned again to Ablynx’s Nanobody technology platform to identify new product candidates, this time compounds directed at immune checkpoint modulators, currently a hot area of research following the success of  Yervoy.

Building on their initial research partnership started in October 2012 in neuroscience, Merck and Ablynx have now agreed a research collaboration and licensing agreement that will discover and develop several predefined Nanobodies that could become cancer immunotherapies. Nanobodies are based on single-domain antibody fragments, and have several beneficial features compared with conventional small-molecule or antibody-based therapies, including the possibility of being linked together in bi-specific or tri-specific constructs. Researchers believe combinations of immune checkpoint inhibitors could be important in the treatment of certain cancers.

Ablynx will receive an upfront of €20 million ($27 million) and up to €10.7 million in research funding during the three years of research covered by the new collaboration signed Feb. 3. The Ghent, Belgium-based biotech could also receive development, regulatory and commercial milestones on achieved sales thresholds for a number of products that could amount to a chunky €1.7 billion, plus tiered royalties. Merck will develop, manufacture and commercialize any products resulting from the collaboration. 

Ablynx has been active over the past six months in signing up Big Pharma companies for research collaborations and partnerships. In September 2013 it strengthened an existing collaboration with Merck Serono by setting up a dedicated discovery team for the German Big Pharma at Ablynx. In the same month, U.S company AbbVie licensed the anti-interleukin-6 Nanobody, ALX-0061, for global development.-- John Davis

Accelerating Medicines Partnership:  NIH Director Francis Collins outlined a broad public/private partnership Feb. 4 to speed up and increase the success rate of research into finding new biological pathways for therapeutic intervention. Called the Accelerating Medicines Partnership (AMP), the alliance will combine the efforts of NIH, FDA, 10 biopharma companies, and the non-profit community to transform the current discovery model for new drugs and diagnostics.
The five-year effort is funded with $230 million provided in approximately a 50/50 split between NIH and the pharmaceutical industry. It will focus first on characterizing effective biomarkers and distinguishing biological targets most likely to respond to new therapies in three areas: Alzheimer’s disease, type 2 diabetes and a pair of autoimmune disorders, rheumatoid arthritis and systemic lupus erythematosus.

AMP’s work will be considered “pre-competitive” – all parties have agreed to forego seeking any intellectual property rights on the group’s work, which will be disseminated for free usage by any and all medical researchers, public or private, affiliated or independent. “Competition will come later after the initial discovery phase where we, the AMP, collectively identify the most compelling targets and then the full competitive power of the pharmaceutical industry will kick in to develop the actual therapeutic molecules,” Collins said.

The companies participating in AMP are AbbVie, Biogen Idec, Bristol-Myers Squibb, GlaxoSmithKline, Johnson & Johnson, Eli Lilly, Merck, Pfizer., Sanofi and Takeda. Also taking part are PhRMA, the Foundation for the NIH and a set of disease advocacy groups focused on the four diseases chosen for initial focus. --Joseph Haas

Myriad/ Crescendo: Having watched Crescendo Bioscience gain a foothold in the market for inflammatory and autoimmune diagnostics market, Myriad Genetics is now moving to acquire the company – a right it obtained via a novel strategic investment agreement in 2011. That agreement included a $25 million loan – nondilutive financing that was to be repaid in years 4-6 – and a three-year option to acquire Crescendo at a multiple of revenues once those revenues hit an initial threshold and according to a formula gauging their rate of growth after that.

In November 2013, Myriad said Crescendo had met the terms for exercising the option. The purchase price – $270 million cash, less $25 million payback on the loan – was calibrated according to the pre-established revenue target. The press release announcing the acquisition noted that Crescendo’s sales for the most recent quarter were $10 million. Sales of Crescendo’s inaugural product, the Vectra DA protein-based diagnostic for measuring disease activity in RA patients, surged in 2013 owing to a confluence of factors: In May, Crescendo obtained CMS coverage, representing close to 40% of the RA population. It simultaneously expanded the Vectra sales force from 20 to 33.

Then in June, the company presented ten posters at the EULAR Annual Meeting, which further drove interest in ordering the test. The deal is in keeping with Myriad’s goal of diversification in therapy area (beyond oncology) and technology (protein versus DNA/RNA tests). (A more detailed analysis will be out shortly in Informa's monthly strategy publication, IN VIVO.) The announcement did little to deflect analyst concerns over Myriad’s immediate prospects, however. CMS recently reduced payments for its BRACAnalysis tests by almost half, and the company is facing new competition in BRCA testing following the US Supreme Court decision last June invalidating BRCA gene patents.  As Michael Yee of RBC Capital Markets said in a note following Myriad's February 4 earnings call, during which the Crescendo acquisition was discussed, “we think the stock remains a battle of Bulls/Bears this year until more visibility occurs.”--Mark Ratner

Valeant/ PreCision: When it comes to acquisitions, Valeant Pharmaceuticals investors have high expectations now that CEO J. Michael Pearson have vowed the company will become a top-five pharma by 2016 with business development the key avenue to meeting that goal. Valeant announced its first acquisition of the year Feb. 3, buying PreCision Dermatology Inc., a prescription and cosmetic dermatology firm. Valeant agreed to buy the privately-held dermatology company for $475 million in cash plus $25 million in milestones.

Relative to some of Valeant’s recent acquisitions like Medicis Pharmaceutical Corp. for $2.6 billion in 2012 and Bausch &  Lomb Inc. for $8.7 billion in 2013, the PreCision buyout is smaller and should be one that an experienced buyer like Valeant can quickly integrate into its operations. PreCision’s sales are expected to be approximately $130 million in 2014, according to Valeant. The company, based in Cumberland, R.I., employs about 175 people. It was established in December 2010 from a spinout of Onset Therapeutics, a subsidiary owned by Collegium Pharmaceutical Inc. PreCision’s initial investors were Essex Woodlands, Boston Milennia Partners, Frazier Healthcare and Westfield Capital Management.

The acquisition of Medicis catapulted Valeant into a leader position in dermatology, where it ranks second behind Galderma SA. The company added more dermatology businesses in 2013, including Obagi Medical Products Inc., the maker of aesthetic and prescription skin-care lines, which it bought for $418.4 million. In December, Valeant said it would buy Solta Medical Inc. for $237 million for its aesthetic devices, which are sold to dermatologists.--Jessica Merrill

Novo Nordisk/ Zosano: In the crowded market for diabetes drugs, methods of administration and delivery systems can be important differentiation factors. Novo Nordisk added a new delivery system to its experimental drug pipeline on Feb. 5, when it partnered with Fremont, Calif.-based Zosano Pharma Inc. to gain rights to its microneedle patch system. Novo Nordisk will attempt to create a transdermal delivery system for semaglutide, its Phase III glucagon-like peptide-1 analogue for type 2 diabetes.

Zosano received an up-front payment of undisclosed size to cement the deal. Novo Nordisk agreed to pay development, regulatory and commercial milestones worth up to $60 million for the first product jointly developed under the agreement, as well as royalties. The companies will also investigate other GLP-1 products, each of which could trigger an additional $55 million in milestone payments. The companies will collaborate on development during the preclinical product stage, but Novo Nordisk will cover further development costs and reimburse Zosano for other development and manufacturing costs.

Spun out of Alza Corp. in 2006, Zosano has raised more than $120 million from investors including New Enterprise Associates, ProQuest Investments, and Nomura Phase4 Ventures. It has previously tested its microneedle patches in products based on Eli Lilly’s Forteo (teriparatide) and Amgen’s Epogen (epoetin alfa).--Paul Bonanos



Hat tip to  James Moore, Certified Accountants for image

Deals of the Week: It's the End of the World as We Know It

Been reading the news this week? Apparently the sky is falling in pharma land. The WSJ reports that pharma's golden age is on the wane thanks to looming patent expirations and a poor track record in product approvals. (Hmm. Where have we heard that before?) BMS is the latest pharma to announce lay-offs--yesterday it announced 10% of its workforce would go. China's drug manufacturing capabilities pose a national security risk according to the Kansas City Star. Poor Carl Icahn: it looks like Henri Temeer and Genzyme will elude his clutches after all. (For more on Genzyme's strategy, make sure to watch for our upcoming IN VIVO feature.) And an FDA advisory panel nixed the use of Genentech's Avastin for breast cancer, sending the company's stock price plunging. (C'est la vie. You can't win 'em all right?)

Yep, it's the end of the world as we know it. And I feel fine. (Thanks to Deals of the Week, of course.) Without further ado:

• Novartis/Morphosys: First up: we tip our hats to Morphosys for their avoidance of pure "biobucks" figures in telling the world what they stand to gain in milestones from their latest HuCAL alliance with Novartis, announced Monday. Revolutionary! Now on to the deal, which for Morphosys is a bit revoluationary itself. Novartis will pay the antibody specialists $600 million over ten years in committed payments (roughly 50/50 technology license fees and research support), with an additional $400 million (non-biobucks) in predicted milestone payments. Morphosys basically consolidates its discovery partnership program into this one deal--as older deals come up for renewal, they'll just expire; for example the biotech's deals with Bayer-Schering and Centocor, scheduled to expire at the end of the year, will do so. Interestingly, Morphosys is maintaining more than a small amount of independence. Novartis remains the biotech's largest shareholder, but hasn't upped its stake beyond the 7% it already held, and does not get a seat on the Morphosys board. Morphosys won't be doing any more discovery deals, but will be able to do product-focused outlicensing deals at its leisure. Novartis gains a fully human antibody discovery engine without breaking the bank.
• Merck/Addex: Not a huge deal, cash wise, but the kind of deal Addex's investors were hoping for. Addex gets $3 million upfront from Merck & Co. plus milestones and undisclosed royalties. The companies are targeting the mGluR4 receptor to develop treatments for Parkinson's disease and other indications. Addex's allosteric modulation platform essentially allows modulation of GPCRs without binding to the receptor's active site, leaving that prime real estate open for the receptor's endogenous ligand.
• Pfizer/Adolor: On Wednesday, Adolor signed a deal with Pfizer worth $30 million up-front and $232.5 million more in milestones for two compounds for pain conditions, ADL5859 and ADL5747. Both compounds belong to the delta opioid receptor agonist class, a class of pain drugs related to morphine and oxycodone, but potentially without their debilitating side-effects. As part of the deal, the two companies will split revenues and expenses in the US 60/ 40 with Pfizer taking the lion's share and Adolor retaining co-promotion rights. This is the third big deal this year for Pfizer in the pain space. This summer the company added to its pipeline, signing a $195 million deal with Hydra Biosciences for its TRPV3 antagonists and a $1 billion-plus deal with Icagen for a sodium channel modulator (For more coverage of the pain space see this 2006 IN VIVO story.) This is some much needed good news for Adolor. The company's stock was decimated earlier this year when the FDA put the brakes on the company's mu-opioid receptor antagonist Entereg because of concerns about its lack of and potential CV side-effects. (For more on this product and other GI-related opioid compounds check out this November IN VIVO feature.)
• Lilly/Aveo: Precision Therapeutics wasn't the only diagnostic company making news this week. (For more on Precision's merger with Oracle Healthcare Acquisition Corp. check out this IN VIVO Blog post.) Cancer biomarker play Aveo Pharmaceuticals announced Tuesday it had struck a deal with Lilly to help the pharma identify patients who respond to one of its cancer drugs under development. Aveo's famous for its in vivo cancer models--essentially mice that have been engineered to develop tissue-specific cancers under controllable conditions. To date, the company also has biomarker discovery deals with Schering Plough, Merck, and OSI Pharmaceuticals. Terms of the deal weren't disclosed but if there anything like the $20 million agreement Aveo inked with OSI earlier this fall, it's unlikely there's big money on the table. Historically, that's been one of the problems with the business models of these molecular diagnostic companies. Although they can sign somewhat lucrative fee-for-service deals with pharmas, these partnerhips never seem to translate into upside related to the actual commericalization of a product.
• Fresenius Medical Care/Renal Solutions: On November 29, the German dialysis product maker announced it was buying Renal Solutions, a venture-backed sorbent cartridge maker for as much as $190 million. Just two years ago, Fresenius bet big, buying Renal Care Group for $3.7 billion. That transaction gave the German company an important foothold in the US market, giving it access to more than 30,000 patients at over 425 dialysis centers. The company also made waves when it agreed to a five-year sole-supplier deal with Amgen in October 2006 for that biotech's Epogen and Aranesp. The reason: many critics saw it as aiding Amgen's strategy to prevent widespread US uptake of a competing product from Roche called Mircera. (For more on Amgen and its anemia franchise click here.)

No Quick Fix for Comparative Effectiveness

This month’s Science Matters column in START-UP looks at a recent assessment of characteristics of the clinical trials recorded in the US-based registry ClinicalTrials.gov, and suggests that the questions raised in that paper for interventional trials also hold for other strands of clinical research, notably those focused on comparative effectiveness.

The authors of the assessment, which was reported in the May 2 issue of the Journal of the American Medical Association, noted that ClinicalTrials.gov suffers from defects in methodology and standardization. The problems are even more acute with comparative effectiveness research (CER), and one reason FDA places scant value on observational studies, at least as currently conducted.

Addressing those issues -- in both realms -- is critical. “In our traditional evidence development framework, we were trialists or observational scientists but rarely both,” Richard Gliklich, president of the Outcome unit of QuintilesTransnational, told attendees at the annual Post-Approval Summit held earlier this month at Harvard Medical School. “In the emerging framework, this false dilemma is no longer affordable. There are too many questions to answer, too many settings, too many populations.”

It’s easy to find examples of CER methodologies causing confusion rather than creating clarity. A recent CER-skeptical story in The Wall Street Journal led with two studies using the same UK patient database drawing very different conclusions about whether osteoporosis drugs increased the risk of esophageal cancer. It’s also easy to try to draw a dividing line between efficacy and effectiveness research. But the discussion is more nuanced. As Gliklich said, both approaches are needed. In each realm, data need to be gathered using methodologies that allow for apples-to-apples comparisons.

Gliklich made his remarks introducing Summit keynote speaker Michael Rosenblatt, CMO at Merck, who went on to highlight many of the key challenges around CER. For example, if a data set is biased, “you can get the wrong answer, but with great precision,” he said: in many cases it may possible to detect very small changes in risk estimates, but not understand whether they are clinically significant or not. Plus, “something you would think would be clear-cut like a diagnosis of a myocardial infarction, where you have cardiograms and a blood test, still has about a 15% miscoding rate,” he said. In such a case, comparing one drug’s side effect to another’s where one drug might have a meaningful but small percent difference in efficacy, would be impossible.

Making a CER framework valuable is a formidable challenge. Health care provider systems all do things differently: can they rely on outside studies, even the best from places, or does the analysis still have to be done institution by institution? And if so, do they have the resources? We put that question to Kevin Tabb, CEO of Beth Israel Deaconess Medical Center in Boston, a panel participant at a May 18 symposium held at the MIT Sloan School of Management on health care costs, following the meeting. “It still has to be done institution by institution,” he said. “It’s incredibly expensive and we don’t have the tools to do it.”

In his opening remarks to the MIT Sloan gathering, Massachusetts Governor Duval Patrick referred to the 2006 Massachusetts health care reform legislation. That a solution is not perfect is not a reason to not do anything, he said: “It’s [not a matter of] a perfect solution versus no solution.”

We hope that observation holds for the newly formed, high-profile Patient-Centered Outcomes Institute, the entity charged with enabling much of the US’s future CER efforts.

PCORI has spent much of its first year debating and drafting methodological guidelines and standards, which will be posted in draft form next week. (For more on PCORI’s preparations for the release of its methodology report, look here.) But industry groups have criticized PCORI (as reported here and here, for example) for its timing and the lack of specificity of its proposed research agenda, which will be a considerable departure from the more familiar investigator-led study design format. Its start-up was at first deliberate, as befits a public-private partnership trying to obtain a popular buy-in to CER without stirring up fears of drug rationing. Now, however, PCORI seems to be in a more frantic hurry-up mode as it seeks to dole out an initial $120 million in research funding by the end of 2012 -- only issuing guidelines for its initial funding announcements after a Board of Governors meeting May 21.

PCORI's invocations of the value of patient-centeredness have sounded simplistic at times, like Dorothy following the yellow brick road to the wonderful land of Oz.  We know that's not the case, and that it's easy to take shots, like the WSJ did, at CER in any form.  But we also know the road ahead is unpaved and will be bumpy, requiring serious and careful navigation. Duke's Rob Califf, first author of the JAMA paper on ClinicalTrials.gov, made the case more succinctly and pointedly perhaps than PCORI itself has managed. Establishing that a drug has some efficacy in a clinical setting does not answer the real-world questions of how to use it, when to use it, how long to give it and how to compare it with others, he told us. “That’s what comparative effectiveness is all about and where you need the spectrum of different kinds of observational studies and randomized trials."

Maybe They Should Be Called SCRAPs

It was at least worth the attempt.

Dynogen’s VCs didn’t want to put up enough money; new VCs would invest only on punishing terms; public investors wouldn’t support an IPO; no good reverse-merger opportunities presented themselves; and it didn’t have enough clinical data to excite the interest of Big Pharma.

So it tried to SPAC (see our original analysis in START-UP here) – reverse merge into a shell called Apex Bioventures Acquisition, which had IPO’d back in June 2007 with the mandate to go and find its shareholders a business. Dynogen’s goal: reach an alternative class of IPO buyers, retail investors who might be willing to take venture-equivalent risk at a time the traditional biotech funds (e.g., Deerfield, T. Rowe Price, Brookside, MPM) won’t.

It didn’t work – the second biotech SPAC failure in as many months (see our coverage of Precision Therapeutics’ SPAC attempt here and here ). And while we don’t have the inside details of the Dynogen deal, the obvious point is that the spread of biotech aversion has reached virtually plague proportions.

Dynogen and Apex gave themselves every advantage a development-stage biotech could to succeed in SPAC-ing. First, they got themselves a top-tier bank, Lazard, to help them with the deal – SPACs have somewhat shady reputations and getting Lazard to sign on represented something of a coup.

Second, Apex and Dynogen did what they could to avoid hedge funds – a problem class of investors for a SPAC. Since a SPAC acquisition won’t go through unless it gets approval from a large majority of investors, the SPAC’s investors can basically blackmail the SPAC managers and the target’s VCs to buy them out at a profit. The first biotech SPAC, PharmAthene, for example, needed 80% of its SPAC’s shareholders to go along with the deal, but PharmAthene’s managers, VCs and the SPAC’s chairman ended up having to buy out perhaps $10 million or more worth of shares. So Apex had created a largely retail ownership base (retail investors are less likely to play financial games) and the deal could go through with the approval of just 70% of investors (not 80%).

Not good enough. According to news reports, Dynogen and Apex couldn’t even convince the 70% of Apex investors that they needed.

Dynogen is far from the riskiest of clinical-stage companies. But approvals for its drugs are by no means a slam dunk. It’s developing drugs for a condition – irritable bowel syndrome -- that interests Big Pharma (treatments are few; pipelines sparse), but also makes them quite nervous since virtually the only drugs for the condition -- GlaxoSmithKline’s Lotronex and Novartis’s Zelnorm -- ran into trouble for different adverse events.

And though Dynogen’s two most advanced IBS compounds are theoretically less likely to run into similar problems (none of these side effects showed up in previous human testing by originator Mitsubishi Tanabe), proving efficacy in IBS is tricky. You test whether patients feel better which means that getting a truly credible efficacy signal requires much larger trials than Dynogen’s positive Phase IIa tests. In short, Apex’s shareholders weren’t investing in a company with real efficacy proof-of-concept.

In terms of the life sciences world, SPACs are better suited to medical device companies and, in particular, companies with sales – like the temperature-management business Alsius (see the coverage here). But problem there is that – unlike biotech – most credible device companies can find private investors willing to put in money at relatively generous valuations. And Alsius itself is hardly an advertisement for device SPACs – the stock is down 72% since it began trading.

Apex, on its extremely brief conference call to announce the Dynogen deal’s demise, was upbeat about its chances to find another health-care company to buy. But the 14 months it’s got to find, negotiate and get approval for another transaction (average health-care SPAC seems to take about eight months from announcement to close) looks like a pretty short runway.

Meanwhile, for biotechs, and the VCs marooned in them, one other route to the public markets looks like it’s shut tight.

On the other hand, it also looks like the only way for biofinancing to go is up.

"On the grounds of Grant's Tomb, a heart, reconstructed," by Flikr user CarbonNYC used under a creative commons license

FDA’s 12-Step Program

The first step in any recovery is recognizing that there is a problem.

Based on a recent shift in public comments, it sounds like FDA Commissioner Andrew von Eschenbach has accomplished that important first step in a recovery program for the agency: he is now acknowledging publicly what others have been lamenting for some time—that FDA has reached a crisis point in its ability to complete its mission with its available resources.

While von Eschenbach says he first recognized the resource issues soon after joining the agency, he is starting to become more forceful and use stronger language than in previous public appearances.

The change in tone began with an interview that appeared in the Wall Street Journal on February 27, in which von Eschenbach sought to correct a misperception that he didn’t think FDA needed more resources. He followed that with a keynote address two days later at the National Press Club, during which he talked about the “potential for tremendous peril” during a time that he referred to as a “turning point” for FDA.

But the real change seemed to come during what is likely to be von Eschenbach’s final keynote at the Food & Drug Law Institute’s annual meeting last week. Using a term he has largely avoided in the past, von Eschenbach acknowledged that the agency is in the midst of a “crisis” as it struggles to meet all its responsibilities on a shoestring budget.

“This agency is burdened with an enormous portfolio of responsibilities of incredible scale and scope that have been growing over time,” he said. “And they have been growing in a manner that is somewhat akin to children putting ornaments on a Christmas tree. Each one of them maybe very important but the process was done without planning without precision and without prioritization.”

That increase in regulatory mandates is “further complicated by one more catastrophic element added to this formula for potential disaster,” he said. “All of this in context of uncontrolled expansion and accelerating complexity compounded by in effect reduction in resources available at FDA with which to cope with these changes.”

Those reductions—which prevented FDA’s budget from keeping pace with inflation—“were so subtle that when one looks at the bottom line, there was an apparent deception,” von Eschenbach said. The agency’s work force appears adequate on the surface, but in reality is overextended, aging, unstable and “working and coping with inefficient tools.”

Those statements come in stark contrast to von Eschenbach’s testimony during House Energy & Commerce Oversight & Investigations Subcommittee hearing just two months ago. The hearing—called by subcommittee chairman (and persistent thorn in FDA’s side) Bart Stupak—discussed an FDA Science Board report released late last year that described an agency “at risk” and unable to meet its scientific mission.

Von Eschenbach was asked to comment on the findings, and whether the agency needed more money to complete its mission. The commissioner chose his words carefully: while acknowledging that he had asked HHS Secretary Michael Leavitt for more appropriations for fiscal year 2009, he refused to specify how much, given that the hearing was held before President Bush had released his proposed budget.

And in an exchange with Rep. John Dingell (D-Mich.), von Eschenbach commended the FDA Science Board for its work on the report, but disagreed with the notion that FDA’s scientific base is weak. “It’s not that it’s bad,” he said. “It’s at a level of excellence that needs to continue to improve, and continue to expand.”

Since then, the Administration released a budget proposal that gives a 2.9% increase in appropriations (we wrote about that here), and von Eschenbach started to become a little more vocal about what it will take in monetary resources to get the agency back on track.

That should come as welcome news for the biopharma industry. Simply put, an underfunded, overworked agency is bad for drug sponsors. As we reported in The RPM Report this month, inadequate resources in FDA’s drug center resulted in a decision to prioritize the implementation of new drug safety standards ahead of product reviews.

Drug sponsors should hope FDA continues on its recovery path. FDA and von Eschenbach have achieved the first step; in the typical 12-step recovery program, the second step is believing that a higher power can restore sanity. Perhaps that's where Congress comes in.

Deals of the Week: Winter of Our Discontent

Seems like many folks in pharma land are channeling Richard the Third this week. (Alas, there is no son of York to make winter's discontent glorious summer.)

Certainly staffers at both AstraZeneca and Sanofi-Aventis are less than happy: both companies announced more job cuts this week. (AZ will lay-off some 300 R&D employees from its Alderly Park site while Sanofi plans to reduce its German sales staff by 380.) And, pity the poor VCs. The Star Ledger is reporting that VCs are accepting smaller returns on smaller deals and waiting longer to cash-out as a result of the global credit crunch and the flagging IPO market.

Finally, remember Trimeris? Back in December that company put its R&D activities on hold to review its strategic options. But management isn't moving fast enough for the company's largest shareholder, HealthCor. On Feb. 1, HealthCor officials wrote a letter to Trimeris executives asking for two board seats, stating: "We are not in favor of strategic transactions other than those involving a sale of the business." (Hmm. Maybe the HealthCor folks are actually channeling Carl Icahn...)

If you, too, are suffering the winter blues, fear not. The IN VIVO Blog has a cure. (WARNING: Side-effects may include motivational deficiency disorder, sudden on-set of snarkiness syndrome (SOSS), maniacal laughter, and IN VIVO Blog addiction. Hey, there are worse things...) You guessed it. It's that time again.

• Dynogen/Apex Bioventures Acquisition Corp.: On Wednesday, Dynogen and Apex Bioventures announced they have signed a definitive agreement that will allow Dynogen to become public through a merger with one of Apex Bioventure's subsidiaries. (In case you don't know, Apex Bioventures is a special purpose acquisition company--or SPAC--that raises money for the sole purpose of buying another entity. The key thing is the SPAC can't say whom its acquiring--or even considering acquiring--before it raises the money. SPACs have enjoyed a resurgence in popularity in the life sciences in recent years as an alternative to the IPO market or a reverse merger.) The move gives Dynogen plenty of cash--the press release says the company should have up to $65 million at the deal's closing. Dynogen will certainly need it. It's currently developing two Phase II-stage drugs for gastrointestinal disorders, including irritable bowel syndrome. And given pharma's own R&D heartburn in the space, Dynogen may need the additional data before a partner with deep-pockets will assume some of the development risk. In the past, SPACs have favored companies with a shorter runway to commercialization like Alsius and Precision Therapeutics so this combination will be interesting to watch.
  
• Amgen/Takeda: Hit by declining sales of its EPO franchise and growing competition, Amgen announced a monster two-part deal with Takeda this week. In Part I, Takeda gets Japanese rights to 12 of Amgen's pipeline assets in exchange for $200 million up-front, up to $340 million in development costs, and potentially $363 million in sales-linked milestones and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum. In Part II, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer, for another $100 million up-front and $175 million in additional success-based milestones. The deal embodies two major trends we’ve talked about: the need to cut unnecessary infrastructure and the importance of risk-sharing in the vein of Bristol-Myers Squibb's deals with AstraZeneca and Pfizer. (For a more in-depth look at the deal, see here and here.)
  
• GE Healthcare/ Whatman: On Monday, GE Healthcare announced it was buying Whatman, a global supplier of filtration products and technologies for approximately $713 million. That's a lot of money for a research tools business, even if Whatman posted 2007 revenues of more than $225 million. Still it's a far cry from the $8 billion GE planned to plunk down for Abbott's point-of-care and diagnostics businesses, a deal that was eventually scuppered. It's likely GE has realized it must resort to a serial acquisition strategy if it's to challenge Siemens for the title of global leader in IVD. And Whatman's filtration and sample prep technologies could play a key role in building better protein and DNA-based tests, an area in which GE is interested in bulking up. Meanwhile, we continue to ponder the fundamental connections between tool and test companies, something we wrote about here.
  
• GlaxoSmithKline/ Amira: Also on Monday, GSK and Amira teamed up to develop Amira's 5-lipoxygenase activating protein (FLAP) inhibitors in a deal that could be worth up to $425 million for the biotech. (But only if it meets all potential development and regulatory milestones. Makes you wonder what the up-front payment was, doesn't it?) Most of the flap...sorry, we couldn't resist...is about Amira's lead product, AM103, a once-daily, non-steroidal asthma treatment that just completed Phase I trials in November. This isn't the first monster deal Amira has inked. Back in 2006 it signed a deal with Roche worth up to $287 million to develop three anti-inflammatory candidates.

"West," by Flickr user Dreamer7112, used under a creative commons license.

Early-Stage Funding: Replacing Dwindling VC and Alliance Dollars?

We live in strange times. Venture capitalists, the traditional support for research-stage biopharmas, have been pulling back from early stage investments. Some are moving downstream, some are choosing not to raise new funds, others are exiting life science investment altogether. A few stalwarts – firms like Third Rock, Flagship and Atlas – have stayed the course, continuing to invest in unprecedented, high-science ideas. Although they’ve shown themselves able to re-up their funds, in some cases out-raising their last funds by good measure, it’s too early to say that their portfolio bets will pay off.

Pharma has been stepping into the breach, acting as LP or co-investor with venture. But it’s not enough to reverse the fall in Series A rounds.

What’s odd is that, despite the decline in VC investment, we’re seeing a steady trickle of truly novel products come to market. Immunotherapy, epigenetics, gene therapy, optimized antibodies aimed at exciting new targets – they’re all working their way through the pipeline. But venture’s declining interest (overall) in early stage start-ups has been going on for over five years now. Shouldn’t we be seeing some signals of scarcity or a fall-off in quality?

So we speculated that maybe that other fount of early stage support, big pharma alliances, is compensating for the drop in venture dollars. Maybe big pharma through its business development activities is correcting for the absence of venture with non-dilutive support for fledgling companies.

But early stage alliance funding, as measured by disclosed upfront payments, has also been trending down. The chart above measures upfront dollars from big pharma/biotech collaborations and licensings.  At its current run rate – as best this can be predicted – the alliance line will finish 2013 at around $940 million, sharply reversing its five-year downward trend.

As to the apparent paradox of a healthy, productive pipeline in the absence of the high investment levels seen in prior years, it appears that the most interesting ideas continue to be funded. As Bruce Booth of Atlas Ventures wrote in his blog two years ago “. . . less capital chasing fewer companies with more disciplined investors offers a mix that bodes well for returns from early stage investing.”

Solid returns is good news for investors, for sure. But is that what pharma, whose own internal labs are sputtering, needs from these engagements? And what about the potential for new players, like crowdfunders, to disrupt the life science investment supply chain? In the next few years, we may be looking at a markedly different environment for financing early stage ideas.

We intend to probe these and other matters at Elsevier’s 2013 PSA: The Pharmaceutical Strategy Conference in the panel “Funding Biotech: New Ways to Create Value.”  We’ll be joined by Gregory Simon, CEO of Poliwogg; Martin Shkreli, CEO of Retrophin; Noubar Afeyan, CEO of Flagship Ventures; Mark Clein, President and Founder of Precision for Medicine; and Damien McDevitt, VP and Head of Business Development for R & D Therapy Areas at GlaxoSmithKline.

We hope you’ll join us.

Deals of the Week: Value Surprise!

There’s a lot of talk about valuation these days. Sort of like the porridge in the nursery tale, it’s either too high, or it’s too low, but it’s almost never just right.

Start-ups and micro-caps are frequently valued on the strength of their lead candidate, with earlier-stage programs, certainly anything in research, heavily or entirely discounted. But it sometimes turns out that the real value was in these lowly, neglected candidates or technologies and not the glitzy lead.

Acquisitions, particularly serial acquisitions, often delay these early-stage programs, and sometimes bury them altogether. But decades later, the ones that squeak by sometimes go on to dizzying heights.  And in a few rare examples, the companies that birthed these hidden gems go on to do it again and again.

Take Sugen. An early specialist in kinase biology, it was founded in 1991, went public in 1994, and was acquired by Pharmacia in 1999 for $728 million. Pharmacia was acquired by Pfizer Inc. in 2003, and most of Sugen’s staff was let go. The few that remained were absorbed into Pfizer’s La Jolla campus. Sunitinib, a follow-on compound to Sugen’s lead angiogenesis inhibitor SU5416, was filed by Pfizer and approved in 2006 for advanced kidney cancer and gastrointestinal stromal tumor (GIST). 2012 sales of Sutent were a shade over $1.2 billion.

Pfizer’s next cancer launch, another Sugen discovery called crizotinib, was a more interesting story. Former Sugen researcher James Christensen, a senior director of precision medicine at Pfizer’s La Jolla campus, told us that it began as a c-Met inhibitor program in the early 2000’s. Around 2006 there was reason to think that ALK was an off-target effect, but the Pfizer team didn’t know what the application would be. In 2007, Nature magazine published an article on the role of ALK translocation in NSCLC. Xalkori launched 4 years later in 2011. 2013 sales are projected at around $290 million.

Fourteen years later, Sugen has returned many times its purchase price. With ALK screening issues out of the way, Pfizer executives expect Xalkori sales to climb. And Pfizer La Jolla may be working on other Sugen-discovered kinase surprises.

The next example was likewise buried under layers of acquisitions. In 1999, Millennium Pharmaceuticals (now Millennium: The Takeda Oncology Co.) acquired fellow Cambridge biopharm LeukoSite for $585 million. The first LeukoSite alumnus, Campath (alemtuzumab, licensed from BTG PLC in 1997), was ultimately approved for CLL in 2001. It never made much headway in that indication. But Sanofi/Genzyme Corp. are hoping it will fare better in multiple sclerosis, where the company has rights acquired from former Millennium partner Bayer AG in 2009, and have recently won approval for the drug as Lemtrada in Europe. LeukoSite also advanced Velcade (bortezomib) after acquiring ProScript, a foundering Cambridge biotech, a few months before being gobbled up by Millennium. Millennium went on to win approval for it in multiple myeloma, seven years after its initial synthesis, in 2003.

But the real buried value may lie in another LeukoSite antibody, vedolizumab, an alpha-4-beta-7 integrin which is expressed only on lymphocytes. It is essentially a targeted therapy for gut inflammation. Takeda Pharmaceutical Co. Ltd. filed in the U.S. for ulcerative colitis, and FDA recently gave it priority review. Tachi Yamada, head of R&D at Takeda, told us at Elsevier’s recently-held PSA: The Pharmaceutical Strategy Conference in New York that vedolizumab, which we thought had originated in Millennium’s labs, ultimately came out of LeukoSite’s antibody libraries.

Yamada said that when he started at Takeda in 2011, he saw the potential of vedolizumab and put resources behind it. “This was a little bit of a program that was being operated by a group of people under the radar,” he said. “We always understood the value of this library of antibodies, and we are looking through them very carefully for other potential applications.”

Nothing new here. Big fishes eat little fishes. Management hierarchies and scientists change. And so do portfolio priorities. Programs are killed or neglected, and sometimes redirected. And once in a rare while they’re spotted, and quietly pursued. -- Michael Goodman  (Thanks to churchwhisperer.com for use of the photo)

Speaking of the vicissitudes of value, here's the latest edition of . . .

Janssen/GSK: Johnson & Johnson’s Janssen Pharmaceuticals Inc. is determined to own a hefty slice of the oral hepatitis C market. The company now has Phase II antiviral candidates in three different classes, thanks to an Oct. 8 deal with GlaxoSmithKline PLC giving it worldwide rights to GSK2336805, an inhibitor of the non-structural 5a protein. Financial terms weren’t released.

Janssen already has an earlier-stage NS5a inhibitor in its pipeline, but plans to study ‘805 in combination with its other oral direct-acting antivirals. Potential two- and three-drug cocktails could include combos with protease inhibitor simeprevir, which has a Nov. 28 PDUFA date, and/or non-nucleoside polymerase inhibitor TMC647055. Janssen is already testing simeprevir in combination with Gilead Sciences Inc.’s nucleoside polymerase inhibitor sofosbuvir and Bristol-Myers Squibb Co.’s NS5a inhibitor daclatasvir, but the new deal gives it a chance to own all the parts of a combo therapy.

With the sale, GlaxoSmithKline has effectively exited the oral HCV arena, although it will complete an ongoing Phase II trial of ‘805 in combination with ribavarin and pegylated interferon. GSK and Vertex Pharmaceuticals Inc. agreed in November 2012 to conduct a Phase II study of ‘805 with Vertex’s nucleoside polymerase inhibitor VX-135. -- Paul Bonanos

Quintiles/Muscular Dystrophy Association: Quintiles, the global CRO, is reaching further into the world of patient registry development. The Muscular Dystrophy Association has tasked it to develop a neuromuscular disease registry which will provide real world evidence to help researchers, physicians, and patients understand the cause of the disease and identify effective treatments. Financial details were not disclosed. 

MDA will use the registry to study the natural history of muscular dystrophy and related muscle diseases such as ALS and SMA, collect information on practice patterns, inform care guidelines, and improve the quality of patient care. The registry is currently available at 25 clinics within MDA’s national network, with plans to expand to their full network of 200 clinics by 2015.

A Quintiles spokesman wouldn’t comment on the CRO’s plans to grow its registry practice, but he noted that patient registries “are an increasingly important component of real-world evidence development.” The CRO has touched the world of registries before through its Quintiles Outcome division which specializes in observational and real-world research. Quintiles said that the unit, “our real-world and late-phase division, has managed patient registries previously.” -- Michael Goodman

Vivus/Auxilium: Auxilium Pharmaceuticals Inc. stuffed another men’s health drug into its sales reps’ bags Oct. 11 when it licensed rights to Vivus Inc.’s Stendra (avanafil) in the U.S. and Canada. Auxilium will pay Vivus $30 million up front for the erectile dysfunction drug, and is on the hook for an additional $15 million contingent upon a label revision for the drug that reflects an even-better-than-Dominos-Pizza-15-minutes-or-less onset claim.  Further regulatory and sales milestones could eventually take the total outlay to $300 million, and Vivus will receive an undisclosed royalty on sales.

When Auxilium launches the drug at the end of 2013, Stendra will complement its Testim testosterone gel and other men’s health products. (FDA approved the drug in April 2012, though Vivus had yet to launch it.) Auxilium hopes to differentiate the product from its entrenched competition – led by Pfizer’s Viagra (sildenafil) – based on the onset claim. In July 2013, Vivus licensed rights to market the drug in Europe, Australia, and New Zealand to Menarini Group, for $21 million up front plus milestones and royalties.

Vivus, beset by multiple changes at the top of its management ranks this year, is largely valued on the promise of its Qsymia (phentermine/topiramate) obesity drug. With Stendra in the hands of a men’s health specialist, Vivus and new CEO Seth Fischer should now be able to focus on improving sales and/or finding a partner for its main asset. -- Chris Morrison

Lilly/Hutchison MediPharma: Eli Lilly & Co. and Chi-Med's Hutchison MediPharma Ltd. subsidiary have signed an agreement to co-develop and market a small-molecule drug discovered by Hutchison, HMPL-013 (fruquintinib), for treating a variety of solid tumors. Under the agreement, Lilly is to pay Hutchison as much as $86.5 million in upfront payments and development and regulatory milestones, plus tiered royalties based on net sales if the drug reaches the China market. The two firms will share future development costs, which would be carried out by Hutchison. Additional terms were not disclosed.

A vascular endothelial growth factor (VEGF) inhibitor, fruquintinib demonstrated clinical activity in patients with various heavily pre-treated advanced cancers, according to Hutchison MediPharma. Currently, a single arm Phase II study is on-going in China with results expected to be released in early 2014. In July 2013, HMP received Phase II/III Clinical Trial Application approval from China FDA. In the planned Phase II/III clinical trials, fruquintinib will be studied in patients with a variety of solid tumors.

“The collaboration with Lilly will allow for fruquintinib to be developed across various tumor types in China and at a far greater speed than if we went alone,” said Chi-Med CEO Christian Hogg in a statement. 

“In Lilly’s emerging markets business, we are focused on providing patients with innovative medicines from our own pipeline and through collaborations with respected science-based companies such as HMP,” added Jacques Tapiero, Lilly Senior Vice President and President of Emerging Markets. -- Tamra Sami

Novartis/ImmunoGen: Novartis AG has taken exclusive rights to ImmunoGen Inc.’s antibody-drug conjugate (ADC) technology for use in developing cancer therapies against an undisclosed target. This is the second license Novartis has taken onthe technology; the first, in 2010, involved a predetermined number of oncology targets, selected by Novartis. In 2010, Novartis paid ImmunoGen $45 million upfront and up to $200.5 million in milestones for each target resulting in a cancer compound, and royalties. Milestones in the latest deal are also valued at up to $200 million, not including the undisclosed upfront.

Novartis is responsible for development, manufacturing and commercialization of the products.  ImmunoGen’s ADC technology, known as TM1, uses a tumor-targeting engineered antibody that links to a cancer therapy and delivers that therapy to the cancer cells; it aims to be better tolerated and more effective. Roche/Genentech Inc.’s Kadcyla, which combines ImmunoGen’s ADC technology and Roche’s well-established trastuzumab antibody, recently was approved in the U.S. and elsewhere for previously treated HER2-positive metastatic breast cancer patients. ImmunoGen also has partnerships with Bayer Healthcare, Amgen Inc., Biotest AG and Sanofi.

Despite a string of platform deals, FDA approval of a key cancer agent that validates the biotech’s ADC platform, and a wildly optimistic run up overall in biotech stocks, ImmunoGen’s stock has traded within a narrow range for the past 12 months.  Investors are waiting for more data on its lead in-house compound, IMGN901, a small cell lung cancer drug which hit a delay last spring due to dosing adjustment in PII trials. -- Wendy Diller

Takeda/Immunomedics: Takeda will return rights to the humanized anti-CD20 antibody veltuzumab to Immunomedics Inc., not because of any issues that arose in clinical trials, according to Immunomedics, but because of lack of progress on the program. Immunomedics had filed arbitration proceedings against Nycomed (now owned by Takeda) concerning delays in the development of veltuzumab, which the company argued was a material breach in the licensing agreement. Neither Nycomed nor Takeda completed a single trial on the program. Immunomedics says it will continue to pursue arbitration procedures for damages due to the delay in development.

It is weighing its options for the program including signing a new partner or developing it independently. Nycomed in-licensed rights to veltuzumab in non-cancer indications in July 2008 for $40 million up-front and $580 million in potential milestones, with the aim of developing the drug for rheumatoid arthritis. After Nycomed was acquired by Takeda in 2011, it changed the development plan to focus on lupus instead, resulting in further setbacks, according to Immunomedics. In addition to the $40 million up-front payment, Immunomedics also received a total of $20 million in three follow up payments. Immunomedics is separately studying veltuzumab for the treatment of lymphoma. -- Jess Merrill