Friday, October 31, 2008

Deals of the Week Loves A Parade

Have you heard? There's a parade in Philadelphia today. Maybe it's going on as you're reading this (streaming video feed here)! How about that?

Beyond the obvious occasion of the Philadelphia Phillies' World Series victory (woooo hoooo!) there are other reasons for a parade, you see. You mightn't have noticed, but today is DOTW's first birthday. Much thanks goes to Ellen Licking whose keen and often lovingly acerbic observations fill this space most weeks.

Which reminds us to make a programming note: we'll be stretching the format a bit in the coming weeks and introducing you to our Deals of the Year Top Ten Countdown. (We hear World Series MVP Cole Hamels did last night's Top Ten on Letterman, BTW. Just sayin'.) Got any favorites? Make your case in the comments!

Oh yeah, and it's Hallowe'en!

We're going to skip the weekly wrap-up this week--at the moment we have a bit of a one-track mind. But never fear: we won't go all Bud-Selig on you and suspend this post two-thirds of the way through. Just like Brad Lidge (video), there's no stopping your weekly Closer. Forthwith, a parade of deals unlike any others, for they are:

Clinical Data/Avalon: Biomarker aggregator Clinical Data continued its acquisition spree this week (the week the Phillies won the World Series), snapping up Avalon Pharmaceuticals’ biomarker discovery capabilities and a pipeline of potential oncology compounds for $10 million in stock. The transaction also included a private placement of Avalon stock, a $3 million term loan to Avalon, and an exclusive license to its biomarker platform. For struggling Avalon, the deal is a bailout that will allow it to continue development of its therapeutics, including drug discovery partnerships with Merck and Novartis. For Clinical Data, the deal is part of its ongoing plan to develop and acquire key biomarkers of drug response, to enhance its bargaining position with potential drug development collaborators and as an in-licenser. We discussed their strategy in an IN VIVO feature story on biomarkers for psychiatric drugs in July, when we focused on Clinical Data’s Phase III drug vilazodone, which it acquired from Merck KGAA via the acquisition of Genaissance Pharmaceuticals in 2005. Shortly after that story ran, Clinical Data bought Adenosine Therapeutics in an $11 million cash deal that also included issuance of $25.2 million in promissory notes. Adenosine brought it preclinical drug candidates in cardiology, diabetes, inflammatory diseases, and sickle cell anemia, around which it expects to use its biomarker expertise to target likely responders, and Stedivaze (apadenoson), an experimental adenosine-based stress agent for myocardial perfusion imaging. These deals, along with earlier pick-ups of biomarker developers Epidauros, Genaissance, and Icoria, reflect the opportunistic attitude of Clinical Data’s chairman, Randal Kirk, which has transformed the company over the past three years. It also shows that with biotech assets available on the cheap these days, even for smaller companies, if they’re willing to spend their cash or are in a position to extend short-term credit, it’s a good time to be identifying opportunities.--Mark L. Ratner

GSK/Genelabs: GlaxoSmithKline PLC said on Thursday (the day after the Phillies won the World Series) it was acquiring the hepatitis-focused infectious disease play Genelabs Technologies for $1.30/share, approximately $57 million. The deal, by GSK's infectious diseases CEDD, brings the Big Pharma a bunch of HCV-focused assets in research, lead, and preclinical stages. GSK already has rights to Genelabs Phase II Hep E vaccine, which was in-licensed by then-SmithKline Beecham waaay back in 1992. A Phase III SLE candidate, Prestara, has been in development since the early/mid '90s; Genelabs received an FDA approvable letter for the candidate in 2002 and two Phase III trials later the company had been looking for a development partner to conduct further clinical work. That the companies' release doesn't mention Prestara probably shouldn't therefore be a surprise. GSK instead heralds Genelabs' early stage work in HCV, which will give it a drug discovery platform in this hot therapeutic space.

Merck-Serono/Theratechnologies: Canadian biotech Theratechnologies said on Wednesday (the day the Phillies won the World Series) that it licensed to Merck-Serono US rights to tesamorelin, a Phase III treatment of excess abdominal fat in HIV patients with lipodystrophy. Theratechnologies will receive a license fee of $22 million, an equity investment of $8 million (at C$4.73/share, a 130% premium on the previous day's close) plus milestone payments and a royalty on net US sales. Theratechnologies will continue to develop tesamorelin for additional indications, which M-S has the right to option (and thus pay equal development costs). Theratechnologies holds an option to co-promote tesamorelin in additional indications. Merck-Serono has a bit of history in HIV-related lipodystrophy, though not the particularly good kind. In 2003 then-Serono paid the US Justice Department a whopping $704 million in a settlement related to the company's alleged illegal promotion (in lipodystrophy and other areas) of its human growth hormone Serostim, which is approved for HIV-related cachexia.

Cephalon/Acusphere: Expect to hear about more deals like this one that escaped us last week (the week before, well, you know): cash-desperate Acusphere, a drug delivery specialist, granted Cephalon an option to license its ultrasound contrast agent Imagify, which is awaiting an FDA decision next February, as well as an exclusive WW license to its preclinical injectible version of celecoxib, AI-525. (The Pink Sheet Daily's coverage of the deal is here.) Essentially a complex deal boils down to this: Acusphere gets $20 million from Cephalon upfront (comprising a $15mm senior secured convertible note and $5mm cash for AI-525) so it doesn't go bust before FDA weighs in on Imagify, and Cephalon gets a very good price on a product candidate that--if it had to wait until post-approval or post-Advisory Committee (which is scheduled for December 10th), would certainly be a lot more expensive. If Cephalon exercises its option, that triggers a $40mm payment to Acusphere upon approval and a double-digit royalty on net sales.

Celgene/MethylGene: The rising tide of Philly baseball supremacy couldn't lift all ships this week. Call this the honorary Tampa Bay Devil Rays no-deal of the week. Montreal-based MethylGene has fallen on hard times now that Celgene has decided to pull out of a 2006 licensing agreement with the biotech. (That deal was originally inked by Pharmion, which was acquired by Celgene in late 2007.) As a result of the decision MethylGene will halt basic research, layoff about half its employees, and focus its resources on its three lead drug candidates: MGCD0103, '290, and '265. '0103, the lead project in the Pharmion/Celgene collaboration, has been under a clinical hold since August, when the company reported 19 instances of pericarditis or pericardial effusion in trials of the HDAC inhibitor. MethylGene is confident it can convince FDA to lift the hold, though it has not yet met with FDA to do so. The Pink Sheet Daily's coverage of the deal is here.

image: philadelphia inquirer/Michael Perez

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