Friday, July 03, 2009

DOTW: Fireworks

Perhaps in honor of our nation’s birthday, the biopharma industry’s dealmakers got an early start on the festivities, announcing a steady stream of alliances that culminated in a show-stopping finale: Johnson & Johnson’s extremely interesting but complicated pact with Elan Pharmaceuticals.

That deal certainly provides Elan with some much needed capital and may quiet dissenting shareholders who have been advocating for change at the top of the Irish drug maker. In one fell swoop, it also makes Johnson & Johnson a player in a hot therapeutic area given its $1 billion u/f for ¼ of a potential blockbuster/potential bust. (See our previous blog post and coverage in this week's "The Pink Sheet" for more.)

The dollar value of the J&J/Elan tie-up certainly dwarfs other deals announced this week, but that doesn’t make the individual agreements any less interesting. Read on for more analysis.

Wyeth/Catalyst: It’s dealmaking as usual for Wyeth, certainly as far as biotherapeutics are concerned. This week’s tie-up with Catalyst for Factor VIIa hemophilia hopeful CB813—the partners’ second collaboration—pits the Big (soon to become Very Big) Pharma up against Novo Nordisk’s market leader in the space, NovoSeven. The Catalyst compound could be more potent and longer-acting than NovoSeven, which sold $341 million in the first quarter of this year. Compelled by the promise of this still-preclinical asset, Wyeth paid $21 million up front and may fork out more than $500 million in research funding and milestones—plus double-digit royalties. It will also fund 12 Catalyst FTEs. Three things to note: 1) Not all deals, even pre-clinical deals, are option-deals. Even GlaxoSmithKline, optioners-de-rigueur, admitted as much on a panel at this week’s Euro Biotech Forum in Barcelona. For all we know, Wyeth may have wanted an option structure, but with four interested parties (according to Catalyst) it probably didn’t have much choice. In this case, Wyeth takes over the program once it reaches the clinic. 2) The new Pfizer-Wyeth, committed as it is to biologics will present serious competition, both at the dealmaking table and commercially, in this large molecule space. Sure, NovoSeven is a minor part of Novo’s otherwise insulin-focused business. And Wyeth’s existing three-drug hemophilia franchise sells less, combined, than NovoSeven. But Wyeth/Pfizer will have serious commercial muscle—and international reach. 3) Let’s hope the change-of-control clauses are solid: Novartis Venture Fund has backed the biotech since 2004, and Johnson & Johnson’s VC arm, JJDC, invested in 2008 via Centocor. As for Wyeth’s own pending change of control: no issues, says Catalyst, because Wyeth’s R&D head Mikael Dolsten is taking the biologics reins at Pfizer.--Melanie Senior and Joseph Haas

Astellas/Maxygen: After pursuing strategic discussions with various parties since October 2008, Redwood City-based Maxygen has finally inked a deal. And it’s likely the outcome—a joint venture with Astellas focused on discovery, research, and development of multiple protein-based drug programs—isn’t exactly what the biotech’s senior management had in mind. Ever since September 2008, when Astellas signed a small deal with Maxygen for its CTLA4-Ig program—called MAXY-4—the Japanese drugmaker has been on a short-list of the biotech’s potential acquirers. But even though Astellas clearly likes Maxygen’s proprietary protein shuffling technology enough to want to deepen the relationship, it wasn’t so enamored with the platform that it felt compelled to buy the company outright. As part of the latest arrangement, Maxygen will contribute $10 million in cash and substantially all of its programs and technology assets to the JV in exchange for an 83% ownership stake in the newco. Astellas will also invest $10 million in the venture in exchange for the remaining 17% ownership stake. In addition, the big drug maker has a three-year option to buy out Maxygen's share of the venture at a predefined price that starts at $53 million and could go as high as $123 million, and will contribute up to $30 million of funding during that time period. The arrangement leaves Maxygen as essentially a holding company of financial assets including: 1) roughly $200 million in cash; 2) a 22% stake in privately-held biofuel specialist Codexis rumoured to mulling an IPO; 3) MAXY-G34, being developed for chemotherapy-induced neutropenia and Maxygen's most advanced clinical compound outside MAXY-4. —Ellen Foster Licking

Mylan/Biocon: Strong growth prospects for the global generic biologics space over the next decade are bringing together the world's third-largest generic drug maker Mylan and India's Biocon. The two signed a comprehensive deal June 29 that gives Mylan exclusive commercialization rights in the world’s major markets—including US and Europe—with Biocon sharing in the upside via a profit-sharing arrangement. Further financial details of the deal were scarce, as was color on the actual therapeutic targets. But Mylan confirmed the collaboration's primary focus would be in "monoclonal antibodies and complex biologics." This deal marks Mylan’s efforts to play catch-up in the ongoing biogenerics fray. Both Teva and Novartis, via its Sandoz division, are significantly further ahead when it comes to the creation of biogeneric drugs. Early this year, Teva significantly increased its biologics manufacturing capacity through a collaboration with Switzerland's Lonza group; meanwhile Sandoz continues to hold the lead in biogenerics launches, selling generic versions of epoetin alfa and human growth hormone. In a June 29 note on the transaction, Goldman Sachs analyst Randall Stanicky, said the collaboration positions Mylan ahead of an anticipated U.S. regulatory pathway, but predicted that bio-generics would not "contribute meaningfully until 2013" to the firm's bottom line. The deal also illustrates the growing profile of Biocon, which previously inked a collaboration with Abraxis for development and commercialization of a generic version of GCSF in addition to building a pipeline of novel therapeutic targets via in-house R&D and inlicensing.—Joseph Haas and Vikas Dandekar

Biogen/Acorda: On July 1, Biogen Idec agreed to develop and market Acorda Therapeutics’ multiple sclerosis candidate Fampridine-SR outside the U.S. in a licensing deal worth $110 million upfront and additional milestones totalling up to $400 million. In addition, Biogen will pay Acorda tiered double-digit royalties on ex-US sales of the product. If approved, Fampridine-SR could be the first oral drug that improves ambulation in MS patients; its likely to receive 10 years of exclusivity in Europe based on early conversations between Acorda and the EMEA. Biogen already has a strong franchise in MS courtesy of its flagship products, Avonex and Tysabri,which together generated $2.8 billion in sales for the company in 2008. Because Fampridine can be used alongside current treatments, the oral medicine “fits nicely” with its current portfolio of MS treatments, Biogen’s head of neurology Al Sandrock told The Pink Sheet” DAILY. The deal also takes some of the sting out of recent events at Biogen, where in June dissent shareholder Carl Icahn, who is eager to break up the company, gained two seats on the board of directors after a year-long struggle. Prompted in part by the uncertainty surrounding Biogen's future, Acorda crafted a careful 'change of control' clause in the deal to protect its rights to Fampridine. Sources close to the negotiations note two specific events will have to occur to trigger the change-of-control: first, Biogen has to be acquired; and second, there must be a clear signal that its sales efforts on Fampridine are decreasing as a result of its acquisition. For instance, if Biogen’s new owner cuts the sales force support for Fampridine, Acorda has the right to negotiate a buy back of the product at a fair value.—Carlene Olsen

CombinatoRx/Neuromed: Nasdaq-traded CombinatoRx is merging with privately held Neuromed in an all-stock deal that, for now, gives each company’s investors a 50% piece of the action. But as Neuromed’s Exalgo hydromorphone candidate winds its way through the regulatory process, that balance may change. Exalgo was licensed to Covidien’s Malinckrodt subsidiary only a couple weeks ago and has a November 2009 PDUFA date. Neuromed is therefore hoping to see an approval milestone later this year and is eligible for royalties on the drug’s sales. This isn’t just an earn-out (or CVR, whatever you’d like to call it) for Neuromed; perversely CombinatoRx shareholders may benefit from a delay in the approval process. Neuromed’s backers will get 70% of the combined entity should Exalgo receive FDA approval by the end of this year. If the drug gets approved between January and September 2010, Neuromed’s backers will hold 60%. Approval between October and December 2010 means CombinatoRx shareholders remain in the majority with 60% of the shares, and no approval or approval after December 2010 means CombinatoRx’s backers get 70%. The combination will sport management from both companies and Neuromed’s current president and CEO Chris Gallen, MD, PhD, will hold those titles at the new incarnation of CombinatoRx. CombinatoRx shed the majority of its value last October after the failure of its lead osteoarthritis candidate, and then restructured in November. Since then it has essentially traded below the value of its cash on hand, making it a prime candidate for a reverse merger.—Chris Morrison

General Electric/Geron: There's no financial information associated with this deal, but we admit to being intrigued by the notion that GE and Geron are teaming up in the area of stem cells-based diagnostics. It's a triumph for Geron, which has struggled to turn this promising source of biological material into something monetarily more concrete, partly because of the politically charged atmosphere associated with stem cells, but also because the science is just so damned difficult. In addition to this most recent tie-up, 2009 has been a good year for Geron: it recently received FDA approval to begin the first human studies of an embryonic stem cell-based therapy for the treatment of spinal cord injuries. Phase I studies are scheduled to begin this summer. The GE deal also shows the continued interest by big industry players in these most changeable of cells. Drug makers with collaborations include Pfizer(Wisconsin Alumni Research Foundation (WARF), University College London), GlaxoSmithKline (Harvard Stem Cell Institute), Novartis (Epistem), and Novo Nordisk (Cellartis). Just as one of the first uses for genomic information was the use of biomarkers to enable drug discovery, its not too surprising to see tools players looking at the cells as a potential source for developing tests that help predict a particular drug's toxicity. Indeed, GE may be playing catch up with Invitrogen, which formed a stem cells business unit last year, and has a deal with WARF to use hES to develop new research tools.-EFL

(Image courtesy of flickr user Mr Magoo ICU used with permission via a creative commons license.)

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