Friday, May 23, 2008

Deals of the Week: Signage

Another week, another big pharma reorganizes. This week comes news that Lilly's CEO John Lechleiter plans to reorganize several business units, including R&D, to "minimize bureacracy by reducing the layers of management." We wonder if that will impact Lilly's Chorus group, which is attempting to push drugs rapidly to proof-of-concept before investing significant dollars in development.

Shareholder activism reared it head again this week too. More than one third of Glaxo investors refused to endorse the consolation package--a stock bonus estimated between $4 and $5 million--of Chris Viehbacher, who lost out to Andrew Witty for GSK's top spot. (Perhaps they actually want the company to invest in something important, like pipeline? Nah, probably just share buy-backs.)

And Enzon shareholders are itching for that company to explore all strategic options for its remaining commercial operations, according to documents filed with the SEC. Apparently, the recently announced spin-off of the company's biotechnology businesses doesn't go far enough. The twist? DellaCamera Capital, which holds a 5.9% stake in the company, earns this week's award for stirring the pot--not Carl Icahn. (But for you Icahn watchers, fear not. Carl may be up to his old tricks. He's increased his shares in Byetta maker Amylin Pharmaceuticals and is reportedly in discussions with management about ways to maximize product sales and development.)

Meantime, the Institute for Safe Medication Practices published its list of most dangerous drugs and--surprise--Pfizer's Chantix took top billing. As we wrote here, Chantix has been steadily climbing to the top spot on ISMP’s list, based in large part on an increased incidence of psychiatric adverse events. Now comes news, published in Drug & Therapeutics Bulletin, that the Pfizer pill may cause--among other things--serious accidents and falls, potentially lethal cardiac rhythm disturbances, severe skin reactions, acute myocardial infarction, seizures, and diabetes. (Aren't you glad it's for healthy people?) The findings prompted the Federal Aviation Adminstration to ban pilots and air traffic controllers from using the drug. (That makes you feel much better, doesn't it?)

Another "top" list made headlines this week: World Pharmaceutical Frontiers published its annual top 40 most influential people in our industry. Sadly, our own Roger Longman was passed over yet again (hey, I need my job). Still the list was informative and indicative of the changes roiling the industry. In 2007, execs from Pfizer, Novartis, and Bayer all took top billing, but this year no single big pharma exec made the top ten. (Andrew Witty, at number 6, was the one exception, but he hasn't held his position long enough to really screw up.)

Interestingly, the group placed an emphasis on innovation (really!) and regulation, with Genentech's Arthur Levinson taking the number two spot, and NICE chairman Sir Michael Rawlins at Number 5. And guess who took the number 10 spot? Shlomo Yanai, CEO of TEVA, a company that's making a name for itself in follow-on biologics as well as generics. But lest you think Big Pharma has forgotten about innovation, you'll be happy to learn this nugget of truthiness: Joe Jimenez, who recently took charge of Novartis’s pharmaceutical division, told the WSJ that selling drugs is a lot like selling ketchup. It depends on "key account management," code for building better relationships with insurance companies. If that's not a sign of the times, I don't know what is.

Unless, of course, its my own personal favorite:

Myriad/Lundbeck: Myriad Genetics announced a critical tie-up for its Phase III Alzheimer's drug, Flurizan, with the Danish pharmaceutical company H. Lundbeck A/S on Thursday May 22. In exchange for merely European commercialization rights, Lundbeck has agreed to pay Myriad a generous $100 million up-front, plus an additional $250 million in regulatory milestones as well as escalating sales royalties in the 20-39% range. Undoubtedly, the deal terms for Myriad's so-called selective amyloid beta-42 lowering agent are rich, but the real upside seems likely to come later, when the Utah-based biotech looks to ink a revenue-sharing arrangement for the product in the US market. We've written extensively about the potential for alliances to bleed value, but in the case of Myriad's Flurizan, this is a deal that's likely to be validating. Lundbeck, after all, has both the largest CNS sales force in Europe and experience selling Alzheimer's meds. Moreover, Myriad can now afford to partner Flurizan in the US for a dear but not prohibitive price. That's a situation likely to interest partners who might be interested in a biggish deal but who couldn't otherwise afford world-wide rights. Potential interested parties? Forest Labs, which markets Alzheimer's medicine Namenda, comes to mind, as does Takeda, which needs to fill the hole left by the pending patent expiry of its blockbuster Actos. (For an update on the risks and rewards of investing in Alzheimer's drugs, see this recent START-UP piece.)

Medivir/Tibotec: HCV polymerase inhibition gets a boost as Medivir inked an R&D pact with J&J's Tibotec subsidiary. Medivir sees €5 million in cash now, potentially much more later if two compounds reach the market and are approved in two indications. Joining up with J&J keeps Medivir's NS5B polymerase activity in the family as it were, given the two groups' previous deal in the area of protease inhibition (TMC435350 is in Phase IIa trials). HCV polymerase inhibition has had a tough ride lately, with Wyeth/Viropharma and Novartis/Idenix each dropping mid-stage programs in the past ten months. Medivir has pretty extensive R&D experience in the polymerase area--it's developing compounds against herpes virus, shingles, HBV, CMV and HIV polymerases, and even has a five-year old deal with Roche in HCV polymerase (terms of which are/were undisclosed). As in it's 2003 deal with Roche, Medivir has hung onto Nordic commercialization rights in its deal with Tibotec.

Pfizer/FivePrime: Pfizer announced a research tie-up with next generation protein developer FivePrime this week. The collaboration will focus on the discovery of antibody targets and novel protein drugs to treat cancer and diabetes according to the press release. Specific deal terms weren't disclosed, but FivePrime will receive an up-front payment and three years of research funding for its efforts. In addition, Pfizer is taking an equity stake in the company. This deal highlights two major trends we've been watching for some time: the importance of bringing in biologics capablities and the flight to specialist markets. Pfizer has been slow to the biologics party, but has been attempting to make up ground with torrid deal-making, including the recent acquisitions of Coley Pharmaceuticals, CovX, and Biorexis. In addition, the at least partial focus of this deal on oncology represents a shifting attitude among Big Pharma away from the risky primary care markets to a focus on specialty, where there is still great unmedical need but also a less onerous regulatory path. Recently Pfizer CEO Jeff Kindler says he is putting "Pfizer's full scope and scale" behind a push into the cancer market. As part of that effort, he's hired Garry Nicholson, a 30-year veteran of Lilly, to oversee Pfizer's newly created oncology business from clinical trials through marketing.

Daiichi Sankyo/ U3: Another week, another Japanese pharma making noise. Takeda has taken top honors lately, with its big cancer deals with Cell Genesys and Amgen and its acquisition of Velcade developer Millennium. But the other Japanese pharmas aren't giving up on either oncology or their ability to become international powerhouses. Take this week's news that Daiichi Sankyo is buying German biotech U3 Pharma for $235 million in cash. Among the drugs in U3's pipeline: a fully-human anti-HER3 monoclonal antibody due to begin clinical trials this year that is partnered with Amgen. Daiichi is no stranger to the Thousand Oaks biotech. It has Japanese rights to market Amgen's denosumab, currently in Phase III trials for osteoporosis and bone metastases in patients with advanced breast cancer. In addition, Daiichi also has several other cancer products in development, including the Phase II CS-1008 to combat malignant neoplasms.

Photo courtesy of Flickr user ramson via a Creative Commons license.

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