Friday, June 27, 2008

DotW: Tea Leaves

Bad news on Wall Street this week as the Dow Jones industrial average lost more than 250 points on Thursday and consumer confidence waned. Rising gas and food prices--and the incessant stagflation drumbeat--have prompted a certain proclivity for prognostication stateside. The IN VIVO Blog takes time out to read the industry's tea leaves in this edition of Deals of the Week.

The IN VIVO Blog learned of a major departure this week: Abbie Celniker, head of Novartis's recently launched Biologics division, has left for parts unknown. We aren't really sure what her departure means for Novartis, which announced a major reorganization last October, including the promotion of former Heinz exec Joe Jimenez to run the pharma's drug unit.

News of another major departure surfaced Thursday: David Mott, MedImmune's wunderkind CEO, will be leaving the AZ subsidiary at the end of July for "personal reasons" -- which undoubtedly include too many hours spent burning the candle at both ends within the much more bureaucratic environment of Big Pharma, all the while sitting on a ton of acquisition-related personal cash. And as the clock ran out on what was likely a one-year employment agreement, it's almost certain Mott heard a continuous stream of interesting new investment and management opportunities.

Mott, of course, isn't the only MedImmune executive to announce an exit. CSO Jim Young has also left the company--apparently for a familial and culinary year in France. We suspect biz dev and MediVentures boss Ed Mathers is also considering the next stage of his professional life.

Wholly-owned standalones, à la MedImmune, Sirtris and Millennium, have become common these days as pharmas attempt to transform their business models by purchasing innovative biotechs and ring-fencing them. Mott's departure is almost certain to provoke discussion about the practicalities of the strategy versus, say, Roche's riskier but certainly successful experience with its majority-owned, independently traded Genentech affiliate.

And that, in turn, could promote additional discussion about the need for a diversified business model, particularly as it relates to generics, championed by Novartis and Daiichi and eschewed by Takeda and BMS. Pharmalot's Ed Silverman wonders if J&J is mulling a possible move into generics based on this Wharton interview with CEO William Weldon. Asked about the recent Daiichi/Ranbaxy wedding, Weldon gave this response:

There is a big opportunity in the generic field because of large products going off patent... Each company has its own choices that it has to make. Personally, I think that if you have good research, if you understand the needs of patients and if you can deliver good products into the market, that is the most important thing to be doing and that is where we've committed ourselves so far. But that is not to say that we wouldn't go into generics or other companies. I think that there is a big market emerging and big opportunities in the future.

Meantime, at a forum led by the Institute of Medicine earlier in the week, another approach to drug development emerged, one that Genzyme and Shire (among others)have championed: the orphan drug as blockbuster. For more, check out this post from our own Mike McCaughan. The sludge at the bottom of this blogger's mug is particularly muddy. That means it must be time for...

Genzyme/Isis: Ah, the topsy-turvy ride that is mipomersen. A quick recap: back in January, Genzyme and Isis inked the $325 million up-front alliance on the cholesterol candidate, only to get backfooted by the kerfuffle surrounding Merck and Schering-Plough's Vytorin study, Enhance, shortly thereafter. As we predicted, the regulatory storm in the wake of Enhance (which we've covered extensively--see here) rocked the boat for Genzyme and Isis, which hadn't yet finalized the terms of the mipomersen deal. The companies said in late April that the drug's development timeframe would be reworked in response to an FDA request for more data. For the narrow indication of homozygous familial hypercholesterolemia, that means about a one year delay in filing, from 2009 to 2010. For broader indications including heterozygous FH, a cardiovascular outcomes study will be necessary. So where did that leave Isis and it's truckload of up-front cash and zillions in milestone payments? It took until this week to find out, but the upshot wasn't too bad for the antisense specialist, all things considered. Isis will contribute an additional $50 million to mipomersen's development, reflecting the added cost of the necessary expanded clinical program, and will be eligible for accelerated milestone payments potentially worth $75 million (related to commercial milestones associated with US sales under the heterozygous indication).

Stiefel/Barrier: On Monday came news that privately owned dermatology player Stiefel Laboratories bought all outstanding shares of Barrier Therapeutics for $148 million, or $4.15 a share. The deal price represents a 57.6% premium over Barrier's closing share price on Friday June 20 of $1.76. Stiefel, which makes a variety of over-the counter and prescription medicines, likely saw Barrier as a solid way into the pediatric realm. Two of Barrier's major products include Vusion, an ointment designed to heal pesky diaper rash combined with a yeast infection, and Xolegel, which treats a flaky skin condition called seborrheic dermatitis. Certainly, Stiefel acted opportunistically. As we wrote in this START-UP article, Barrier is one of a number of newly public companies in financial trouble. With less than one year of operating cash remaining, it has seen its share price tumble--back in April, Barrier's stock price was down nearly 78% from its 2004 IPO and in the ensuiing weeks slid even further. Susquehanna Financial analyst Angela Maria Larson told Forbes the deal was "a solid, good offer" but that's likely to be cold comfort to Barrier's VC backers, which include New Leaf Ventures, MPM BioVentures, and TL Ventures. But at least as it pertains to Barrier, these VCs are no longer marooned in the public market.

Novo/Emisphere: As we’ve written elsewhere, Emisphere has had a tough 20 years or so, failing to deliver (no pun intended) on a variety of drug-delivery projects, most spectacularly oral insulin (didn’t work any better than placebo). Now, a little more than a year into the tenure of CEO Michael Novinski, Emisphere has moved from oral insulin, for which needle-less delivery was relatively unimportant, to drugs for which injection is a problem: GLP-1 analogs. To auslanders like us, the different GLP-1’s don’t seem all that clinically differentiated. But Novo’s still unapproved once-a-day liraglutide looks like it will have a delivery advantage over Amylin/Lilly’s marketed twice-a-day Byetta – until, that is, the partners launch once-weekly Byetta LAR. At that point, liraglutide will need extra help – like an oral version. Having worked with Emisphere for at least a year on preclinical studies (with interest significantly heightened by nicely positive clinical studies with Emisphere-designed oral GLP-1), Novo was willing to experiment, modestly. It’s paying a guaranteed $10 million in the first year (modest good news relative to the world of NME drugs, but great for the smaller drug-delivery players like Emisphere – this is its biggest 1st year payment) and, potentially, another $77 million or more in clinical and sales milestones. Emisphere’s stock was, naturally, up on the news – but hardly into champagne territory. The company’s long record of unfulfilled promises is going to keep a lid on the share price until a pivotal trial proves the skeptics wrong.

WuXi PharmaTech/Covance: Although details of the deal still need to be finalized, WuXi and Covance are set to create a 50/50 JV to provide preclinical testing services in China. Covance will contribute $30 million to the project, while WuXi will provide a 323,450 square-foot facility in Suzhou, China. This state-of-the-art facility, expected to be completed in 2009, is designed to meet the US FDA and worldwide regulatory standards. WuXi is one of the leading CROs in China and its success has sparked a wave of interest among VCs and other investors looking to tap into the rapidly growing pharmaceutical business in China. Already, the company has dozens of partnerships with top tier pharmaceutical companies who are looking to off-shore their medicinal chemistry capabilities to China to take advantage of cheaper labor costs. Back in January, WuXi acquired the US biologics firm AppTec Laboratory Services, a move that gave the Chinese firm a US beachhead and greater access to critically important large molecules expertise. This latest deal with Covance, one of the leaders in worldwide clinical testing services, shows that WuXi is interested in extending its offerings beyond chemistry to include GLP tox, drug metabolism, and bioanalytical chemistry services. Although the two companies have yet to team up on clinical trials, that's likely to be another area of interest. For Covance, a tie-up would ease its entry into a lucrative and still largely untapped market. For WuXi, it seems the Chinese giant is positioning itself to become "a truly integrated one-stop shop for offshore and low-cost drug R&D outsourcing in China," says Jinsong Du, an analyst with Credit Suisse in Hong Kong, told our sister publication PharmAsia News.

(Photo courtesy of Flickr user soaleha via a creative commons license.)

No comments: