Monday, December 08, 2008

Deals of the Year Nominee: GSK/Actelion

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

Actelion’s worldwide licensing deal with GlaxoSmithKline for Phase III sleep drug almorexant isn't in this competition because of the alluring multi-billion biodollars associated with it. We know that potential regulatory and commercial milestones equal, for the most part, non-existent ones.

It’s in there because the July deal is one of those rare (and post-crisis, even rarer) partnerships where the biotech calls the shots. And where Big Pharma is very happy for biotech to call the shots because a) it keeps risk under control and b)—here’s the good bit--it’s picking up a tip or two on the way about how to run R&D.

Actelion remains fully in charge of the clinical program (unusual, not unique) and gets to further its own ends of creating a sales force by borrowing an appropriate GSK drug for a short time. Now sure, 'biotech hanging onto control' equals 'Pharma hedging its bets'. Small wonder: as we reported here, this compound is a novel mechanism, primary care pill for a non-life-threatening disorder. No wonder GSK is only funding 40% of the development costs. It won’t book sales, just 50% of profits. And while the $148 million upfront money for the Phase III candidate isn’t bad, it’s not blowaway. Nor are the slightly-less-blue-sky pre-commercial milestones of CHF 415 million associated with the drug’s first indication, primary insomnia. (Remember, this deal was signed pre-meltdown, just.)

But in a sense Actelion wanted GSK to hedge its bets because the biotech wants its own bets to hedge too. It reckons it's the one that can make a success out of a compound that it knows best, and, as a spokesperson claims, it's a “long-term deal" based on industrial logic, "not market logic” (thank goodness for that, then). The Swiss group can afford that luxury, with a market cap of CHF 7.1 billion ($5.9 billion) and CHF 1 billion in cash. This in itself makes Actelion a beast as rare as the novel-mechanism PC pill it's touting.

And it’s a company that GSK’s management apparently wants to learn a thing or two from. According to Actelion, its chief Jean-Paul Clozel was invited to speak to GSK R&D heads while the deal was being negotiated (see this post). That's significant: GSK is acknowledging that it might need to learn a few things about how Actelion does R&D, 'so please, biotech, come in and show us. And that means we can’t squash you or take you over, we need to watch you flourish and invite you to share your secrets.' Which explains why Actelion can boast about the wide-open, smiling communication channels right to GSK's boss Andrew Witty, and the origins of an anecdote about an email Witty sent to senior management in both companies essentially declaring that Actelion is in charge of the co-development program and for anyone who's got a problem to take it up with GSK's R&D chief Moncef Slaoui.

This deal also points to the alleged bureaucracy-slashing, crap-cutting going on under Witty’s watch at GSK. “This is a CEO willing to get his hands dirty,” notes one analyst.

Is the pharma leopard finally changing its spots? Who knows, but this deal might point to tantalizing evidence that it is. That’s why its one of our deals of the year. (And if Long-Awaited Change within Big Pharma doesn’t float your boat as a once-in-a-lifetime thing, how about this: a European biotech with sights set on building its own primary care sales force and with sufficient fuel to think about long-term investment in the pipeline. A rare sight.)

image from flickr user lu lu used under a creative commons license.

1 comment:

Anonymous said...

Actually this worldwide deal excludes Japan.