Friday, May 02, 2008

Deals of the Week: Contents Under Pressure

It's been one of those weeks, hasn't it? Seems like almost every biopharma news story this week illustrated the industry's dire straits. Okay, there was some good news. Pfizer and Eisai won an appeal against a recommendation by the UK government that discouraged use of the Alzheimer’s drug Aricept. But don't get too excited. The British government didn't authorize wider use of the medication. Instead, the drug companies get access to the computer models NICE researchers use to weigh a drug's cost-effectiveness versus its clinical utility.

Meanwhile, Johnson & Johnson announced another round of lay-offs this week, axing 400 employees from OrthoBiotech and Centocor as it combines the two organizations' sales and marketing teams, while Wyeth reduced its numbers by another 1200. The dynamic duo of Genentech and Biogen Idec announced that its best-selling antibody Rituxan doesn't treat lupus any better than placebo, while another fab pair--Genzyme and Isis--struck out with regulators concerning their cholesterol lowering mipomersen.

But we're awarding Merck this week's award for staying on message despite a trifecta of negative news. Late last Friday came the Food & Drug Administration's announcement that it was issuing a "not approvable" letter for the Singulair/Claritin allergy combo being developed in conjunction with Schering. Merck had barely recovered when the FDA delivered more bad news late Monday: another non-approvable letter for another combo pill, the company's extended-release niacin plus the anti-flushing agent laropiprant called Cordaptive. And on Wednesday, came yet another letter from regulators, this time warning Merck about deficiencies at its vaccine manufacturing plant in West Point, PA. Merck wasn't the only company feted by regulators this past week. (In need of amusement? Check out this post from WSJ Health Blog, where Merck CEO Dick Clark admits he "can't blame the media." Whew. I feel soooo much better now.)

Are you feeling the pressure too? Take a load off. It's time for...

Pfizer/Esperion: More than a year after Pfizer closed down its Michigan operations, Esperion, the Ann Arbor company Pfizer bought back in 2003 for $1.3 billion and then shut down, is getting a new lease on life (and a new lease on some Pfizer lab space). Pfizer announced this week that it is spinning out Esperion under the leadership of the original firm's founder, Roger Newton, with $22.8 million in tranched venture backing from co-lead investors Aisling Capital, Alta Partners and Domain Associates, as well as Arboretum Ventures.

Our colleagues at The Pink Sheet Daily were on the case yesterday with the story here (subscription necessary). Esperion 2.0 restarts with a small molecule dual inhibitor of fatty acid and cholesterol synthesis that has not yet reached preclinical. The molecule was part of the original Esperion package bought by Pfizer five years ago, but according to Newton, Pfizer chose not to develop the drug candidate. For now, Pfizer will hang on to the rest of Esperion 1.0's stable of HDL raisers--despite the fact that the ones slated for further development--including the driver of that original acquisition, ETC-216, aka Apolipoprotein A-1 Milano--have been shelved for "scientific and technical reasons," according to the Big Pharma. Why? Pfizer R&D chief Martin Mackay told IN VIVO today that Pfizer would like to out-license the assets separately, perhaps using them as a quid in a separate transaction that will hopefully fetch more immediate and significant value.

That's just fine by Roger Newton, who told us that 216 was never part of his discussions with Pfizer on the spin-out. So now that Pfizer has broken the seal on its spin-out strategy is there more deal flow to come? Our Pink Sheet Daily colleagues think so, reporting yesterday that Pfizer is putting together dermatology and CNS packages destined for separate out-licensing deals. We'll have a more in-depth analysis of Esperion 2.0 in the next issue of START-UP and on Pfizer's spin-off and out-licensing strategy in the May IN VIVO.

Medtronic/ Scil Medical Technology: Medtronic’s recent deal with Scil Medical Technology might seem small, but it’s the latest move by the device giant to beef up its biologics business and tackle the so-called convergence between medical devices and biomaterials. The agreement with Scil, a German biopharmaceutical company, centers around that firm’s biologic rhGDF-5 (recombinant human growth and differentiating factor 5), a dental regenerative technology that can regenerate teeth and treat periodontal disease. Under the deal, Scil will continue to push research and development for new dental products while Medtronic will handle clinical trials, regulatory approvals and commercialization. No financial terms were disclosed. The dental application complements Medtronic's own INFUSE Bone Graft program, which won a green light from FDA a year ago for certain oral maxillofacial and dental bone grafting procedures. It's likely that Medtronic is hunting for other deals in this space based on comments Chad Cornell, director of corporate development at Medtronic, made at our IN3 West meeting in Las Vegas earlier this year. (Shame on you if you didn't make the meeting, but you can read that entire discussion here.)

EUSA Pharma/International Drug Development and EUSA Pharma/Alize Pharma Group: EUSA contines to aspire to become a transatlantic spec pharma in the vein of Shire. This week comes news that the two-year-old company is selling off two groups of early stage assets as it continues to focus on building commercial infrastructure in the US and Europe. International Drug Development (IDD) has bought up the start-up's monoclonal antibody research business, which includes a team of research and development scientists and a well characterized library of antibodies; Alize Pharma, meanwhile, has purchased its recombinant L-asparaginase therapeutic research program for acute lymphoblastic leukemia. Terms of neither deal were disclosed, but the agreement with Alize Pharma gives EUSA some kind of call-back option on any resulting product. "This provides EUSA with access to a potential future product that is an ideal fit with the company's oncology focus," the company noted in a press release issued May 1. Both the antibody and the oncology programs originally came to EUSA through its 2007 acquisition of OPi SA. Readers might recall that EUSA has been ruthless in its pursuit of building late stage development and commercial expertise in what it considers its core areas: oncology, pain, and critical care. Back in February EUSA outlicensed a preclinical fully human anti-IL-6 antibody to GSK for $44 million. Then in March the company spent nearly $23 million to acquire Cytogen, a struggling US outfit with expertise in pain and cancer and 40 sales reps to boot. As we noted in an earlier blog post, EUSA has managed to assemble 9 marketed drugs, five late-stage programs, and raise $275 million since its inception, making building a spec pharma look easy. (For another perspective, check out this article from our September 2007 IN VIVO.)

Sepracor/Arrow International: Sepracor decided it was worth its while to make nice with Arrow International, settling a patent dispute over its inhaler solution, Xopenex, that has embroiled Sepracor and an Arrow division, Breath Limited. Under the terms of the deal, Breath has a 180-day exclusive license to launch generic versions of the drug starting in 2012 in exchange for double-digit royalties on generic sales. Perhaps that overture helped smooth the path for another deal between the Massachusetts-based company and Arrow: a global licensing and development deal for a combination Xopenox/ ipratropium therapy that is expected to begin Phase III trials shortly. Arrow's not getting much of an up-front payment--just $500,000--as part of the deal. But milestones for the combo therapy could eventually total $ 70 million. Meanwhile, in a third deal (yes, count them), Sepracor announced its acquisition of Arrow International's Oryx Pharmaceuticals for $50 million up-front plus another $20 million in milestone payments. The tie-up with Oryx, a specialty pharma that in-licenses and markets prescription meds in Canada, could give Sepracor some much needed home field advantage as it seeks to market Lunesta, Brovana, and eslicarbazine in our Northern neighbor. In the press release annoucing the acquisition, Sepracor execs noted that the purchase "fulfills a long-standing corporate objective of developing a commercial footprint in...the Canadian pharmaceutical market." Geographic expansion is, of course, essential to Sepracor right now. In its most recent quarterly earnings report, the company noted that Q1 revenue dropped to $320.8 million from nearly $328 million for the same period last year, while net income slid from $19 million to about $12 million. One reason for the decline: flagging Xopenex prices. As we reported in a recent issue of The RPM Report, Medicare has slashed reimbursement of the drug.
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