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If you've voted in our Deal of the Year competition, thanks. If you haven't voted, you can vote here.
Meanwhile, after a Crazy week last week (which our crack team of DOTWologists were all over), very little has happened in industryland since Wednesday's preeeetty cool AZ/Forest/Novexel deal (except for that HCR vote). So we'll make some stuff up.
OK readers, it's time to have your say! This year we've set up a special IVBDOTY web page where you can vote in all three categories. CLICK HERE TO GO TO THE VOTING BOOTH.
And so here, in no particular order, are your IN VIVO Blog 2009 Big Pharma Deal of the Year nominees. Please do comment on this post about any and all of these deals, and why you voted the way you did.
Dollars for Donuts: Is the biggest deal for Big Pharma in 2009 the $80 billion deal struck by the brand name trade association PhRMA as its contribution to health care reform? We call it "Dollars for Donuts" because a key element of the deal is the industry's commitment to offer a 50% discount on drugs purchased by Medicare beneficiaries in the Part D coverage gap, a.k.a. the "donut hole" in the prescription drug benefit for seniors and the disabled. It's not a traditional biz dev opportunity, we admit. But if Big Pharma dealmaking is about anything, it is about paying up front for access to new commercial opportunities downstream. And this deal fits that model perfectly.
Pfizer/Wyeth: This is the deal that marked the beginning of a new kind of Big Pharma. For better or for worse, it turns Pfizer from an R&D-focused, high-risk, high-reward company into a diversified, industrialized group whose investment appeal is less about growth than about dividends, efficiency and value. In its scale, the transaction symbolized the scope of Pfizer's--and other Big Pharma's--challenges, and in its content, it captured--in one fell swoop--many of the individual strategies drug firms are pursuing in order to escape from their R&D productivity problems.
Pfizer/DOJ Bexxtra Settlement: Pfizer’s September settlement is by far the biggest in the wave of industry prosecutions that defined the decade of the 2000s. But these settlements have always been more important than the dollars. Each case—and the headlines it generates—marks another step down in the reputation of the industry. They have helped stoke a puritanical fire in the medical establishment, one that aims to root out all industry influence over clinical research, medical education, and clinical practice standards, a movement that could, taken to extremes, jeopardize the entire private sector biomedical model.
Merck/Schering-Plough: Merck might've only been buying time through this deal--time to figure out what on Earth to do about a $4 billion patent-expiry problem--and will be doing the usual, un-prize-worthy cost-slashing (the deal's synergies represent a whopping 40% of sales). But what it lacks in headliners it makes up for, we argue, in behind-the-scenes cleverness.
GSK/Pfizer ViiV Healthcare JV: It's not every day that Big Pharmas join forces in an important way. The HIV joint venture between Pfizer and GSK, announced in April, and later labeled ViiV, may be industry's biggest exception. The company combines GSK's and Pfizer's marketed HIV portfolios and pipelines into a standalone with more clout than either party would have individually, helping reduce both sides' cost, and infusing accountability and productivity in a way that only a smaller outfit can. Negotiating the terms wasn't easy, but if this tie-up works, it might not be the last. "If there's another opportunity to do the same thing again with GSK, we'd do it," said Bill Ringo, SVP BD at Pfizer.
Roche/Genentech: With its landmark agreement with Genentech already nearing a sunset, Roche made a preemptive strike, betting it would gain more by owning 100% of sales juggernauts such as Avastin and the ability to slash duplicative infrastructure than it stood to lose if the top talent at Genentech hung up their lab coats. This tie-up isn't about innovation, it's about efficiency. And the acquisition's final price tag--$95-a-share, while certainly a great deal more than the intitial $89-a-share bid price, is more than matched by the likely earnings potential of Genentech's already marketed products. Furthermore, analysts estimate the biotech's mid- to late-stage pipeline more than adequately supplies Roche with a pipeline reservoir through 2016.
OK readers, it's time to have your say! This year we've set up a special IVBDOTY web page where you can vote in all three categories. CLICK HERE TO GO TO THE VOTING BOOTH.
And so here, in no particular order, are your IN VIVO Blog 2009 M&A/Alliance Deal of the Year nominees. Please do comment on this post about any and all of these deals, and why you voted the way you did.
Johnson & Johnson/Elan: Johnson & Johnson's July purchase of Elan's Alzheimer's immunotherapy program (AIP) via a stock purchase plan that gives the health care giant an 18.4% stake in the biotech. And the deal's complicated structure helps both J&J and Elan hedge against risk. In return for roughly $1 billion in capital (slightly less after Elan got into a tussle with BiogenIdec about a potential change of control to Tysabri), J&J is creating a new co focused on Alzheimer's immunotherapy, with a near-term focus on the interesting, but still very risky Phase III antibody bapineuzumab. Elan benefits because it doesn't have to fork over all the upside to its Alz program, given the biotech retains a 49.9% stake in the newco and also has a 49.9% share in its profits or losses. Elan also also gets significant help funding bapi's development with this deal. With J&J committing another $500 million to the antibody's Phase III trials that molecule will have to rack up $1 billion in costs before Elan has to pay another penny.
GSK/Concert: GSK’s deal with Concert is representative of GSK's many option-alliances: flexible, low-cost, risk-mitigating, pay-for-performance-oriented and, frankly, we think just rather clever. It's also a very definite sign of the times. GSK paid $35 million up front (including $16.7 million in equity, another way to spread risk) for options on three projects, the most advanced of which started Phase Ib in November this year, the least advanced of which hadn’t even been selected at the time of the deal. GSK can opt into these programs at clinical proof-of-concept (or slightly earlier, at Phase I, for the lead). It’s risk-sharing deal content, too: Concert’s compounds are mostly deuterated versions of existing molecules, meaning it has replaced hydrogen atoms with deuterium atoms, creating new, patentable chemical entities that skirt existing IP and that may even be safer and/or more effective than the originals.
Astellas/Medivation: With pipelines flagging and the general push to look outside, the hottest targets/assets/technologies are still commanding value in competitive auction arrangements. In October Medivation announced a tie-up with Astellas to develop its Phase III prostate cancer drug, MDV3100 in a transaction worth $110 million up-front and biobucks of more than $650 million. Moreover, Medivation still keeps significant control of the development program--at least in the US, where the two firms evenly split costs. (Ex-US, Astellas picks up the whole tab for development and commercialization, providing tiered double-digit royalties in exchange for the privilege.) Astellas was a particularly active dealmaker in 2009, this deal hits a hot oncology target, and was an early sign that dealmaking upfronts are on the way back up.
GSK/UCB: The January deal in which GSK paid UCB $670 million for commercial operations in more than 50 non-core countries, as well as rights to sell some primary care drugs in those territories, captures so many of 2009's biggest trends: the land grab in emerging markets, the tug of regionalization versus globalization, the ongoing shake up in primary care, and diversification--the bluster of the big versus the commitment of the focused. On one level, the deal shows how two companies with very different strategies are reacting to the mania about emerging markets. GSK is looking to be a geographically diversified global provider of medicines at all price points to as many countries as possible—and says its far-flung infrastructure, deep pockets, and global expertise make it the go-to company for late-stage deal-making in emerging markets. UCB, on the other hand, is joining a small, but important group of biopharma that has chosen to intensify its focus rather than diversify. It recently repositioned itself as a spec pharma focused on CNS and inflammatory diseases and is extending that idea globally.
Abbott/Solvay: Abbott's $6.6 billion acquisition of Solvay's pharmaceutical unit follows a pretty straightforward plot line, but the clincher to the story is this: Abbott is buying the Belgian drug unit with cash, most of which is coming from overseas. It's a smart use of those funds since repatriating it would subject it to a hefty 35% tax. And while multinationals sidestepped a withdrawal of the overseas tax deferral by the Administration earlier this year, some in the industry still think the axe could fall, next year when the budget review comes around. The drug maker also adds more than $3 billion to its top line and gains full control over the blockbuster TriCor/TriLipix dyslipidemia franchise, a business Abbott has big plans for, and the addition of Solvay's drug unit also extends Abbott's geographic footprint, adds a branded generics business and provides entry into vaccines. (Ooh, diversification.)
Sanofi-Aventis/Regeneron: Biotechs often link their destinies to a Big Pharma big sibling, but few have gotten such sweet deals as Regeneron has with Sanofi-Aventis. Sanofi pays Regeneron $160 million a year in research funding through 2017 and can take over development of any antibody candidate at IND. Sanofi then funds clinical development, and if the candidates come to market, Regeneron splits profits (50/50 in the U.S., and a sliding scale from 65/35 to 55/45 in Sanofi's favor outside the U.S.). Regeneron reimburses Sanofi half the development costs from its share of the profits, which means no profits, no reimbursement. What's the catch? You tell us when you find one, at least from Regeneron's point of view.
OK readers, it's time to have your say! This year we've set up a special IVBDOTY web page where you can vote in all three categories. CLICK HERE TO GO TO THE VOTING BOOTH.
And so here, in no particular order, are your IN VIVO Blog 2009 Exit/Financing Deal of the Year nominees. Please do comment on this post about any and all of these deals, and why you voted the way you did.
Lundbeck/Ovation: Acquisitions with earn-out payments (a.k.a. CVRs) dominated the biotech M&A scene, particularly during the dark days of early 2009. Lundbeck's acquisition of Ovation boasted a biobucks figure of $900 million. No doubt there was a large down-payment ($600mm) but a substantial sum rested on the regulatory progress of Ovation's epilepsy drug Sabril. The CVR-boosted deal structure was established to allow Ovation and Lundbeck to share the risk associated with that approval. That drug was approved by FDA in August with a REMS to help mitigate the risk of peripheral blindness, a known side-effect of the drug. The REMS itself was well-anticipated given the rocky history of the drug (which Ovation licensed in from Aventis in 2004) and Sabril is now on the market--second line for epilepsy and first line for infantile spasms, a condition for which the drug has Orphan designation.
Abbott/PanGenetics: Asset-focused funding of early-stage projects has fallen in and out of favor over the years, but the success of PanGenetics November deal with Abbott for its nerve growth factor antibody may draw imitators. In an interesting twist on company creation, the outfit was structured from the get-go as essentially two independent one-asset companies (NGF was one, the other is CD40), of which founder Index Ventures still owns 40% apiece. And so at first the Abbot/PanGenetics transaction looked like an oddly up-front-heavy licensing deal, but when Abbott paid $170 million up-front plus a potential $20 million milestone to access the biotech's PG110 Phase I anti-NGF project, it was in fact buying that company. The $170 million went straight to PanGenetics' investors; it won't be ploughed into the anti-CD40 mAB program. Nor will Abbott pay any downstream royalties to the biotech or its investors.
Cephalon/Ception: Cephalon's option to buy Ception for $100 million upfront and another $250 million in milestones, with the purchase tied to the clinical performance of the start-up's Phase IIb/Phase III anti-interleukin-5 antibody, reslizumab, was the first of half a dozen or so option-to-buy deals in the past year. As we wrote at the time the deal was announced, the option-to-buy strategy is a clever way for Cephalon to acquire a potentially valuable large molecule platform while simultaneously capping the expenses it might owe down the road as it tries to build a pipeline of novel drugs to treat inflammatory diseases.
Vertex Sells Telaprevir Milestones: In July Vertex announced that it would sell its future milestone payments associated with the filing, approval and launch of the HCV protease inhibitor telaprevir in Europe. Those milestones are owed (potentially, of course) by J&J, which licensed European rights to the HCV protease inhibitor from Vertex in 2006, and could total $250 million. The complicated, two transaction deal was just the latest move by Vertex in a series of ambitious financings that have raised hundreds of millions of dollars over the past two years.
Movetis' IPO: Any company that gets an IPO done these days could be considered worthy of a DOTY nomination. Movetis' was the best of an admittedly small bunch, hauling in nearly €98 million. And what's more as of this writing the company is trading above its €12.25 per share offer price. Movetis spun out of J&J at the end of 2006 with about €60.8 million in Series A venture funding led by Sofinnova (pre IPO Sofinnova Partners held 22.5%, Sofinnova Ventures had 16%) and Life Science Partners (16.9%). At the time its lead asset, the newly-approved-in-Europe for a subset of constipation patients Resolor, was already in Phase III. (In exchange for pipeline, J&J held on to 21.2% of the company and received an upfront fee.)
BMS/Mead Johnson Spin-Off: Bristol's two-part spin-off of nutritionals unit Mead Johnson is a creative and lucrative pair of deals that help the company boost cash flow and juice its earnings per share to keep rivals at bay while it deals with two large patent expiries and tries to employ its String of Pearls strategy to restock its pipeline. Structured as a stock-buyback, BMS is trading shares of Mead Johnson for its own stock in a tax-free transaction. The move capitalizes on the dramatic increase in MJN share price since Bristol IPO'd the unit in February. This latest--and probably last--move toward a biopharma focus at the expense of the diversification the rest of the industry seems so enamored by does sacrifice stability for short-term gain. But it might just help to secure the company's longer-term existence.
It's time for the IN VIVO Blog's Second Annual Deal of the Year! competition. This year we're presenting awards in three categories--that's 300% more fake prizes than last year!--to highlight the most interesting and creative deal making solutions of the year. The categories are: Big Pharma Deal of the Year, M&A/Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (roughly half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.
Thus, with its landmark agreement with Genentech already nearing a sunset, Roche made a preemptive strike, betting it would gain more by owning 100% of sales juggernauts such as Avastin and the ability to slash duplicative infrastructure than it stood to lose if the top talent at Genentech hung up their lab coats and gave up their iPhones. (And there’s no doubt some have, including David Schenkhein, Susan Desmond-Hellman, and Art Levinson.)It's time for the IN VIVO Blog's Second Annual Deal of the Year! competition. This year we're presenting awards in three categories--that's 300% more fake prizes than last year!--to highlight the most interesting and creative deal making solutions of the year. The categories are: Big Pharma Deal of the Year, M&A/Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (roughly half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.
It's no secret that Bristol-Myers Squibb has spent the last couple years solidifying its stance as a pure biopharma play. Is the company better positioning itself for sale? Going all in on the only thing it thinks it does well to try to stick it out for the long haul ahead of a monster patent cliff? In any case, it's an outlier. And its most recent and perhaps final move to focus on prescription biopharma suggests a confidence in that core business--or a last stand.
While BMS purges non-biopharma assets, others are diversifying at breakneck pace. Just yesterday Sanofi-Aventis said it would spend $1.9 billion to make a splash in the US OTC products market, for example.
Meanwhile BMS was busy trading shares of its nutritionals unit, Mead Johnson, for its own shares in a spin-off of the division. Bristol won't receive cash for the deal, but the transaction will be accretive to earnings in 2010 by reducing the number of Bristol's shares outstanding, thus increasing earnings per share. The exchange offer will also be attractive to shareholders because it is expected to be tax free.
The stock-swap follows BMS's decision to sell a small percentage of the company in an IPO that was completed in February. That offering raised $720 million and seemed to give BMS some of the virtues of diversification (it could, as a majority shareholder, still consolidate the nutritionals group's top and bottom lines with its own) but allowed for management focus: it was run as an independent unit.
But Bristol reckoned that those 170 million remaining Mead Johnson shares, if all exchanged, would give it a ten-cent pop in EPS next year. Plus with all those shares retired, the company will improve its cash flow by paying out $350 million less in dividends (er, that's provided it doesn't raise its dividend on the remaining shares, and without subtracting the smaller dividend it got from its MJN holdings). What's more, MJN shares are way up since the IPO, so why not take advantage of that valuation bump?
Essentially, the move prioritizes short-term gain over long-term stability. Proponents of the deal say that's OK, because without some sort of short-term gain to appease investors, BMS might not have a medium- or long-term future in which to let it's string-of-pearls strategy play out.
The bottom line is that BMS needs to keep its rivals at bay by maintaining or boosting its worth in the face of two massive patent expirations (Avapro and Plavix) to make sure nobody can buy them on the cheap. That means good growth from existing and in-line products and potentially spending its $10 billion cash pile on a few more near-market pearls.
That's no easy task, but its two-part parting of the ways with Mead Johnson is a creative and lucrative pair of transactions that puts it in the best position to succeed.
image by flickr user nerissa's ring used under a creative commons license
It's time for the IN VIVO Blog's Second Annual Deal of the Year! competition. This year we're presenting awards in three categories--that's 300% more fake prizes than last year!--to highlight the most interesting and creative deal making solutions of the year. The categories are: Big Pharma Deal of the Year, M&A/Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (roughly half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.It's not every day that Big Pharmas join forces in an important way. Sure, they might call on each other from time to time to help promote a drug, or to take on some late-stage development cost. But create a joint venture? Pool pipelines and marketing infrastructure? Never.
Not until this year, anyway. So our latest DOTY nominee is the HIV joint venture between Pfizer and GSK, announced in April, and later labeled ViiV.
Ok, so no award for the name. But award the notion: combining GSK's and Pfizer's marketed HIV portfolios and pipelines into a standalone with more clout than either part would have individually, helping reduce both sides' cost, and infusing accountability and productivity in a way that only a smaller outfit can. (Just ask GSK about small-is-better in R&D.) ViiV is run by relatively independent management which makes its own R&D decisions; it can pluck R&D programs from either parent if it likes, but it isn't obliged to.
So this isn't just about fencing off a non-core priority area for both sides (and one that, let's face it, can attract unwelcome controversy), but it's also about sharpening up and making more accountable the HIV scientists. At the same time, GSK wins a bunch of pipeline products from Pfizer (great, since Combivir's heading for genericization), and Pfizer benefits from GSK's commercial clout in the field (great again; just look at the flop that was Selzentry).
ViiV is expected to generate $2.4 billion in sales in its first year; not, then, an immediate threat to leader Gilead (FY '08 sales: $5 billion), but a nice cash cow for its parents--even more so if the whole lot eventually leaves home in a spin-off.
And that's not out of the question. No indeed--"I wouldn't rule it out," Martin Mackay, Pfizer's global R&D head (and on the JV board) told us earlier. And that admission--beyond the actual creation of the JV--warrants a Roger, surely. (Roger always called for disaggregation, remember?)
What's more, if this tie-up works, it might not be the last. "If there's another opportunity to do the same thing again with GSK, we'd do it," said Bill Ringo, SVP BD at Pfizer.
Negotiating the deal wasn't easy, we understand--especially the equity split which is 85%/15% in GSK's favor. But that this happened, and that it may be replicated, should matter to the rest of the industry. It starts to signal the start of more accountable, efficient, collaborative and customer-focused pharma. So vote.
image by flickrer Wolfsoul used under a creative commons license
It's time for the IN VIVO Blog's Second Annual Deal of the Year! competition. This year we're presenting awards in three categories--that's 300% more fake prizes than last year!--to highlight the most interesting and creative deal making solutions of the year. The categories are: Big Pharma Deal of the Year, M&A/Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (roughly half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.It may not be the archetype traditional discovery oriented biotech company, but the IPO by GI-focused J&J spin-off Movetis in early December is by our estimation the best sign so far that public investors are returning to riskier biotech debuts. Any company that gets an IPO done these days could be considered worthy of a DOTY nomination--the company that pulls off the best of the (admittedly small) bunch? We think they're worthy of your vote.
Movetis raised €85 million ($128 million; also, the underwriters have some more time to exercise the overallotment, which could take the total to nearly €98 million UPDATE: Yep, the overallotment was exercised today). That's quite a bit more than China Nuokang Bio-Pharmaceutical ($41mm), Cumberland Pharma ($85mm), Omeros ($68mm), or D-Pharm ($23mm). (We're not throwing Talecris into this particular group and we'll get to Mead Johnson, tomorrow.) And what's more as of this writing the company is trading above its €12.25 per share offer price.
Movetis spun out of J&J at the end of 2006 with about €60.8 million in Series A venture funding led by Sofinnova (pre IPO Sofinnova Partners held 22.5%, Sofinnova Ventures had 16%) and Life Science Partners (16.9%). At the time its lead asset, the newly-approved-in-Europe for a subset of constipation patients Resolor, was already in Phase III. (In exchange for pipeline, J&J held on to 21.2% of the company and received an upfront fee.)
Does Movetis' success bode well for Anthera, Aveo, or Ironwood? Perhaps, but we'd point to the bevy of biotech follow-on offerings too. Investors are returning to biotech--whether because they see a fundamental shift in the value of biotech business or because they figure they can get in at a good price.
We don't believe for an instant that this interest will translate into rosey times across the board for cash-starved biotechs and the VCs that love (and support) them. But we do see investor interest sparking more acquisitions as pharmaceutical companies in the hunt for new drugs figure the market has sunk to its lowest depths.
So cast a vote for Movetis, the pick of biotech's first IPO litter in two years, a ray of hope, and just maybe a sign of an upcoming wave of private biotech takeouts.
We hope you east-coasters enjoyed the snow and that it didn't wreak any personal or vehicular havoc. It sure looked like fun from iced-over Europe (we're sure a trip to the dentist looked like fun if you were traveling by Eurostar this weekend). Meanwhile the weather and the calendar put a slight damper on industry activity over the weekend but the Senate was busy wheeling, dealing and voting. 60-40. Is Health Care Reform a done deal? It seems so.
On to the weekend wrap-up, but first a reminder: don't forget to check out our Deal of the Year candidates (in three categories). A few more to come early this week and voting commences on Wednesday.
While you were making a snow-Vader ...
It's that time of year. Time for making merry with wassail, carbohydrates, and Tiny Tim-isms. In the spirit of inclusion, it's tempting to spit "Bah, Humbug," but Joe Lieberman beat us to it.
Perhaps three ghosts will haunt the Connecticut Senator in the coming days to convince him the public option and Medicare buy-in are causes worth supporting. If not, there's always Al Franken, who doused Lieberman's discourse with a well executed bang of the gavel on Thursday.
Health care reform isn't quite dead as a doornail, but it's been a week of few real accomplishments for the legislative branch of our government. That's not the case for our industry's deal-makers, who heeded last week's post and embarked upon some holiday shopping. Indeed, by our count there were more than 18 biopharma M&A and licensing deals announced between Monday and Friday morning, a new record here at IN VIVO Blog.
Finally, a biotech economic stimulus plan! Or is this simply a desire -- made more enjoyable by a signed term sheet -- to get out of Dodge for a couple of weeks? Either way, we commend them for avoiding the last minute holiday shopping frenzy and the extra costs of overnight shipping.
It's the twelve days of Christmas plus eight crazy Hannukah nights all in one ecumenical package waiting to be unwrapped under the cozy glow of a Kwanzaa candelabra. (If you need more light, feel free to fire up the menorah and plug in the ol' Tannenbaum.)
Without further ado, we bring you another naughty-yet-nice edition of ...
Johnson & Johnson/Acclarent: On the first day of Chrismahanukwanzakah, my true love gave to me not a partridge in a pear tree (potentially messy, and what to do with all that fruit?) but $785 million. J&J strikes again, with its Ethicon division taking out privately-held Acclarent in an all-cash offer to boost its presence in a hot market: ear, nose and throat treatments. Acclarent makes a balloon-catheter system that is gradually inflated to treat blocked nasal passages for use in sinus surgery, and the start-up's Balloon Sinuplasty technology and Relieva product portfolio have been approved for use by FDA since 2005. Once again J&J is acting opportunistically to acquire businesses where it sees growth, such as in Alzheimer's, via its Elan deal (a DOTY candidate), and vaccines, provided by its 18% purchase of Crucell. By establishing Ethicon in the large emerging ENT space, the diversified pharma is hoping to reverse a biz which has declined largely as the result of Cordis' loss of market share in drug-eluting stents. The deal also validates the involvement of corporate venture. JJDC, J&J's venture arm, began investing in Acclarent about a year ago as part of a broader strategy to be more strategic in its venturing. -- EFL
Merck/Avecia & Merck/Pfenex: On the second day of Chrismahanukwanzakah, Merck's business team brought home not two French hens, which would have been nice, but two deals to kickstart the firm's biologics manufacturing capacity. A year after shaking up the marketplace with the announcement that it was building a unit dedicated to me-better and follow-on biologics, Merck this week started to bring home the goods. On Monday the big pharma signed a $52 million licensing deal with Pfenex, which only recently spun out of Dow Chemical, to access the biotech's Pseudomonas-derived protein expression technology to develop an undisclosed vaccine. On Thursday, Merck announced it was buying a contract manufacturing organization, Avecia Biologics, for an undisclosed amount, gaining a fully operational facility with four manufacturing streams and 500 employees. Add these plants to the facility Merck bought in February, when it paid Insmed $130 million for its 50,000 square-foot biologics plant staffed by 70 workers . (That deal also included four follow-on biologics.) Merck is wise to grab capacity from the start; bringing biologics plants on-line is costly and time-consuming, and the company has ambitious goals, including the launch of at least six biologic drugs six between 2012 and 2017. -- EFL
Hospira/Orchid Pharmaceuticals: On the third day of Chrismahanukwanzakah, we took a break and instead celebrated Diwali a bit late. It's the thought that counts. Hospira joined us and swooped up Chennai, India-based Orchid Chemicals & Pharmaceuticals' generic injectable drug business for $400 million on Dec. 15, gaining a much-wanted hospital-based medicines business. The move is part of Hospira's effort to broaden its therapeutic coverage. The deal gives Hospira Orchid's beta-lactam antibiotics portfolio and pipeline and facilities, including both manufacturing and R&D operations, and roughly 450 staff. Orchid's product range includes injectable cephalosporins and penems and so far has chalked up sales of around $90 million this year, along with earnings before tax of $35 to 40 million. Hospira already sells seven of Orchid's antibiotics products on a profit-sharing basis in the U.S. and Europe, with a profit margin of nearly 30%. Thus this week's acquisition is the next step in the evolution of an already successful partnership. --Vikas Dandekar and Daniel Poppy
Cubist/Calixa: Cubist Pharmaceuticals, the marketer of Cubicin, fulfilled the holiday wishes of investors -- oh, those pesky calling birds -- and made good on a promise to acquire a late-stage asset to enhance its pipeline. On Monday, Dec. 14, the biotech agreed to pay $92.5 million in upfront cash to acquire privately held Calixa Therapeutics and its Phase II antibiotic CXA-101. The transaction shows how companies are pushing forward with the development of new antibiotics, despite no formal FDA guidance for clinical trials of anti-bacterial medicines in certain key indications. There's been much focus on Calixa's CXA-101, but the key to this deal, which could deliver up to $310 million in milestones to Calixa's venture backers, is actually Phase I candidate CXA-201. This compound combines CXA-101, a novel cephalosporin, with tazobactam, a beta-lactamase inhibitor that is a component of Pfizer/Wyeth's antibiotic Zosyn. While '101 currently is in Phase II studies as treatment for complex urinary tract infections, Cubist thinks the drug's greatest potential is the '201 formulation in drug-resistant, gram-negative infections, especially those involving the pathogen Pseudomonas aeruginosa. -- Joseph Haas
GlaxoSmithKline/NanoBio: Five golden rings for privately-held NanoBio this week! The biotech, which has spent the last decade developing a novel nano-emulsion drug delivery technology, announced its first deal: an exclusive license with Glaxo to develop an OTC version of its proprietary, Phase III-ready cold sore medicine, NB-001, in the U.S. and Canada. The deal isn't noteworthy for its terms; the upfront is a hardly staggering $14.5 million (which could increase to $55.5 million based on undisclosed development milestones). And NanoBio continues to shoulder the cost and risk of the Phase III development program. More interesting is the commercial strategy NanoBio intends for NB-001: skipping the prescription market and aiming straight for OTC distribution with GSK's help. According to NanoBio CEO James Baker it's the most logical approach given the current market for therapeutics for cold sores, aesthetic nuisances that don't warrant the time and expense of a doctor's visit. And NanoBio couldn't have picked a better partner than Glaxo, which already markets the number one OTC medicine for cold sores, Abreva. The deal fits nicely with Glaxo's determined push to invest more R&D dollars in its consumer health business, and continues to show the drug marker's renewed interest in dermatology, once considered a therapeutic backwater. -- EFL
Takeda (Millennium)/Seattle Genetics: Just days after Roche/Genentech abandoned Seattle Genetics under the mistletoe, unimpressed by the biotech's dacetuzumab, a CD40 antibody in development for lymphomas and multiple myeloma, the cash-rich Seattle-based biotech shook off the rejection and reapplied its lipstick. Lo and behold, who should appear but another angel of deal-making, Takeda's Millennium oncology unit. Takeda, which has bet heavily on oncology as one of its future areas of growth, didn't take Rochentech's leftovers, however. Millennium was more interested in brentuximab vedotin (SGN-35), a next-generation antibody-drug conjugate in Phase II/III development for lymphomas. And Millennium was feeling generous (ah, the fabled Chrismahanukwanzakah spirit!) giving Seattle Genetics $60 million upfront for exclusive rights outside the U.S. and Canada plus up to $230 million in additional progress- and sales-based milestones. The companies will split the cost of developing B vedotin 50/50, with Takeda expected to contribute at least $75 million over the first three years. Takeda will also be solely responsible for developing the drug in Japan. Until its 2008 acquisition by Takeda, Millennium was a U.S.-only biotech. But as it has become Takeda's center of oncology expertise, it has also sought to build its commercial infrastructure abroad via transactions like the May acquisition of IDM Pharma to access Mepact, an osteosarcoma treatment approved in Europe but not yet available in the U.S. -- Jessica Merrill & EFL
Amgen/Array: Lords a'leapin'! You want proof deal values are on the rise? Look no further than Array BioPharma's tie-up with Amgen this week. The Big Biotech ponied up serious upfront cash, $60 million, for Array's Phase I glucokinase activator, ARRY-403, being developed to treat Type 2 diabetes. Beyond '403, Amgen and Array are teaming up to identify and advance second-generation glucokinase activators in a two-year research deal that requires Amgen to foot the bill. In addition, Array stands to realize up to $666 million in clinical and commercial milestones, although some are pegged to at least one backup compound reaching market in addition to '403. Finally, if '403 does reach the market, Array will receive double-digit royalties on sales and retains a U.S. co-promote option. At first blush, Amgen as a diabetes developer might be a head-scratcher, but the biotech has made an effort to diversify its pipeline away from its historical focus of oncology to include other primary care areas such as osteoporosis (denosumab, anyone?). The disconcerting surge in Type 2 diabetes in the U.S. makes the metabolic disease arena another area of interest, despite potential regulatory hurdles. Indeed, Amgen has two oral molecules of its own -- AMG 221 and AMG222 -- in early to middle clinical trials for Type 2 diabetes. -- JH
Astellas/Ambit: Ambit Biosciences of San Diego could earn up to $350 million in milestones on top of $40 million upfront from Astellas Pharma to jointly develop and commercialize FLT3 kinase inhibitors in oncology and non-oncology indications. The partnership, announced Dec. 18, includes Ambit's lead investigational drug AC220, which started Phase II trials earlier this month in relapsed/refractory acute myeloid leukemia, and other undisclosed FLT3 kinase inhibitors. It's the third oncology partnership signed by Astellas with a U.S. biotech in as many months. Ambit could receive post-approval milestone payments upon certain sales thresholds, as well as tiered double-digit royalties on net sales. The companies will share equally in U.S. profits and losses, and Ambit will have the option to co-promote in the U.S. -- Carlene Olsen
Forest/Almirall: Forest Laboratories on Thursday hung a few ornaments on Almirall's tree, paying $75 million up-front for U.S. rights to the Phase II, inhaled, once-daily, long-acting beta agonist LAS100977. The drug will be developed in combination with a corticosteroid for asthma and chronic obstructive pulmonary disease (COPD), using Almirall's multi-dose dry-powder inhaler, Genuair. Forest also has agreed to pay undisclosed milestones and sales-based royalties around LAS100977, and will assume the majority of development costs. The agreement -- including its rich up-front -- comes even though the last compound Forest licensed from the mid-sized Spanish group, the long-acting muscarinic antagonist Eklira, disappointed in late-stage COPD trials. The U.S. group is scrambling to expand its respiratory franchise as leading anxiety/depression drug Lexapro faces patent expiry. In August, the U.S. group paid $100 million up front for U.S. rights to Nycomed's phosphodiesterase-4 enzyme inhibitor Daxas (roflumilast) for COPD, for which an NDA was filed in July. Although the tie-up helps Almirall claw back credibility since the set-back to aclidinium (a drug widely perceived as a potential blockbuster that could transform the mid-sized group) it doesn't put the partners first in the once-daily LABA/ICS race. GSK and partner Theravance own that honor, closely followed by Novartis. -- Melanie Senior
Eisai/AkaRx: Not to be left out of the party, Eisai piped, danced and drummed a merry tune this week and exercised its option to acquire AkaRx for $255 million. The fourth largest Japanese drugmaker obtained the right when it acquired MGI Pharma for $3.9 billion in 2007. That same year, long before option-to-acquire deals became popular, MGI Pharma struck its arrangement with privately-held AkaRx, which spun out of another Japanese firm, Astellas Pharma. At the time, MGI paid $45 million to buy the company anytime before Jan. 8, 2010 for the $255 million offer price. The deal provides a very tidy exit for AkaRx's backers -- Astellas Ventures, InterWest, and Sutter Hill -- who invested $11.1 million in 2005. Apparently Eisai, which has made oncology a big part of its growth strategy, wanted exclusive rights to AKR-501, an orally available small molecule to treat thrombocytopenia, a side-effect of chemo. -- EFL
Silence Therapeutics/Intradigm: Santa Claus has his favorite ruminant-enabled aerosol-propelled delivery mechanism, but even he can't deliver short interfering RNA molecules to their targets. With their inherent instability, the promise of siRNAs will only go as far as they can travel in the body without breaking up. That's one reason the folks at Silence and Intradigm are merging. Based in London, Silence is buying Intradigm of Palo Alto, Calif. with nearly 80 million shares. A mix of investors from each side, plus some new ones, will buy £15 million in new shares at 23 pence per. The deal leaves Intradigm investors with 37% of the newco, to be called Silence, and three of eight board seats. Intradigm CEO Phil Haworth, who will keep the same title, says the modus operandi of the deal is to bring two distinct delivery platforms together. Silence works with liposome technology, Intradigm with polymers that bind to siRNA molecules and increase payload. Combined, the technologies might issue what Haworth calls "a whole new set of delivery tools," which will be Silence's main focus next year using the cash it's raised with the merger. -- Alex Lash
Biogen Idec/Facet Biotech: And on the last day of Chrismahanukwanzakah, things got complicated. Its a deal, even two, wrapped inside a No Deal, that might lead to an even bigger deal. Wednesday at midnight Biogen officially ended its $450 million, $17.50-a-share hostile bid for its MS development partner Facet. That's the No-Deal part. But Facet strengthened its defense by giving its top two shareholders permission to boost their holdings above 15% without triggering a poison-pill plan. Facet's board launched the plan in September as a response to Biogen's first hostile bid of $14.50-a-share, or $355 million. There was even more quid for the quo: The investors, Baupost Group and Biotechnology Value Fund, agreed that if they do exceed the 15% limit they will vote any shares above that threshold either in proportion with other Facet shareholders or according to the direction of the Facet board in future voting situations. And they can't go higher than 20%. And the potential bigger deal: Facet has asked its bankers to solicit other bids. Will anyone go higher than $450 million, even with Biogen holding 50% of the rights to Facet's top two drug candidates? Whether third parties jump in or not, Facet officials say Biogen is welcome to rejoin the fray. -- Alex Lash
Sometimes, we need a little extra. Know what we mean?
A little extra sleep--just five more minutes... Maybe just one more beer, sure. OK just one more holiday cookie ... an extra day to finish the 'Financings of the Fortnight' post. But this past couple weeks has been top-up time in biopharma land too. And biotechs sleep, drink, and eat cash.
We joked earlier on the blog that "flat rounds are the new up" has been replaced by "second closes are the new flat rounds." True?
arGEN-X said on Dec. 3 it added €3 million to its Series A; Zogenix said on Dec. 7 that it added $35 million to its Series B; On-Q-Ity said on Dec. 14 that it added $5 million to its Series A; Epizyme said on Dec. 8 that it added $8 million to its Series A; Evolva said on Dec. 14 that it added CHF 21 million to its post-Arpida deal Series B.
OK none of these extensions are in lieu of less-dilutive-next-round-money-because-we-couldn't-get-new-investors. They're more like that scene in a movie where the bus/train/trolley is rolling away/leaving the station and that one guy who is late is running to catch it and there's someone on the bus/train/trolley reaching out .... and finally they get on board. They always seem to make it, don't they.
In any case it sure seemed like everyone has been squirreling it away for the long winter. In fact as we prepared for our annual January feature in Start-Up about the previous year's most intriguing Series A financing deals we noticed that there were at least a dozen Series A top-ups in 2009--and that only includes biotech and diagnostics firms.
Meanwhile, this is your last Financings of the Fortnight column until 2010. Happy holidays!
China Nuokang Bio-Pharmaceutical: Hoping to take advantage of China's recent health care reform initiative (which includes investing RMB850 billion [$120 billion] in China to improve access to medicines and reinvigorate R&D)? Several Chinese companies are, and a few have rushed to tap into investor interest by completing IPOs as 2009 comes to a close. Most notable among them was Sinopharm, the largest drug distributor in the country, which grossed $1.13 billion in an oversubscribed offering on the Hong Kong stock exchange in September. Just this past fortnight, China Nuokang Bio-Pharmaceutical netted $38 million in an IPO of 4.5 million ADSs on the Nasdaq Global Market. (Selling stockholders also offered 473k shares). Shares were sold for $9, a dollar below the low-end of its anticipated $10-12 price range, and so far not so good--the stock closed at $8.67 on the first day of trading and while it’s crept up a little, the price still hasn’t hit or passed $9. Known for its strength in hematological diseases, Nuokang holds 38% of the Chinese hemocoagulase market with its pit viper venom-derived Baquting (batroxobin) for bleeding control. The drug accounted for 90.1% of the company’s $33 million in 2008 net revenue. Nuokang completed a $17 million Series A financing in 2007 from Sequoia Capital China Fund and HBM BioMed China, which own 13% and 2%, respectively, post IPO (HBM was one of the selling shareholders and previously held close to 5%). Another deal worth noting in the Chinese IPO space: Concord Medical Services, which runs radiology and diagnostic imaging centers throughout China (so somewhat outside of FOTF’s biotech focus but still worth a mention), raised $132 million in its IPO of 12 million ADSs at $11, also this past fortnight.--Amanda Micklus
Dendreon: In one of three follow-on public offerings that netted more than $400 million this month, the Seattle biotech, anticipating approval of its prostate cancer immunotherapy Provenge, raised $409.5 million from the sale of 17.25 million shares of common stock (including the overallotment) at a price of $24.75. (Vertex raised $488.4 million in a FOPO this month, while Human Genome Sciences netted $456.5 in an offering of its own, as you know from this FOTF post.) Dendreon has plenty of plans for the new funds – in addition to hiring manufacturing, sales and marketing, quality and other personnel in anticipation of the Provenge launch, the biotech also will use the cash to accelerate the build out of new facilities in Atlanta and Orange County, Calif., while also adding capacity at its Morris Plains, N.J. site. To illustrate how far Dendreon has come in less than two years, the company netted $46 million in an April 2008 FOPO, placing shares at a price of $5.92 apiece.--Joseph Haas
Afferent Pharmaceuticals: Is this Palo Alto, Calif.-based new company focused on chronic pain therapeutics a Roche spinout or something else entirely? Few deal terms were forthcoming but Afferent announced its launch Dec. 16, with a $23 million series A round led by Third Rock Ventures and Pappas Ventures, with additional investment by Domain Associates and New Leaf Venture Partners. The company’s initial efforts will center on a Phase I P2X3 receptor antagonist (AF-219) licensed from Roche (the license included the Big Pharma’s entire P2X3 program), but Chairman Kevin Starr, a partner with Third Rock, did confirm that Roche also will hold an undisclosed equity stake in the newco. Whether the equity piece is Roche’s only consideration in the deal or if it received a licensing fee and/or potential milestones and royalties related to the P2X3 program or in fact a future claw-back was not revealed. Roche successfully completed two Phase I studies of the first-in-class, orally delivered molecule, and Afferent now plans to begin a Phase II program to study the compound in chronic pain conditions such as osteoarthritis, back pain, visceral pain and neuropathy. Although a victim of Roche’s ongoing pipeline review following the merger with Genentech, P2X3 antagonists are thought to offer significant promise in chronic pain because of their potential for specific targeting, as well as the likelihood of a better side-effect profile than current analgesics.--JH
Molecular Partners: There appears to be no let-up in investor interest for next-generation biologics platform technologies--or ophthalmology plays for that matter. Molecular Partners, the Swiss biotech that has deals with Centocor, Bayer-Schering and Roche, said this week that it raised CHF 46 million in a Series B led by new investor Essex Woodlands Health Ventures, with participation from all existing investors (Index Ventures, Johnson & Johnson Development Corporation, BB Biotech Ventures and Endeavour). The company's lead compound targets VEGF in ophthalmic indications and this cash should be enough to push it through to clinical POC, according to the biotech. One of the firm's investors tells us that the company's DARPin platform is "the next big thing." (If we had a nickel ...) But we can't help but think of ESBATech's recent deal with Alcon (discussed at length in this feature) when musing about the fate of platform biotechs with eye drugs in leading roles: whether or not Molecular Partners is the next big thing, could it be the next big ophtho-carve-out? --Chris Morrison
image by flickr user Jeremy Brooks used under a creative commons license.
