Deals of the Week: Swap Meet

People, we seriously need to talk about Eggo Waffles.

But first, a dearth of meaty deals this week has us thinking more about Bristol-Myers Squibb's share-swap/buyback/spin-off of its nutritionals unit Mead Johnson.

We tried to make the point earlier this week that Bristol's move was too focused on short-term gain. Others have pointed out to us that 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.

Perhaps that's true. But the biopharma could have found a middle ground, cutting its stake in Mead Johnson down to 50%, for example. Again, maybe that wouldn't be enough. But let's move on.

As our colleagues at OTC Today have put it, BMS went 'full biopharma.' But now that Mead will be an independent company, the question is: for how long? And what does BMS do next?

BMS needs to keep its rivals at bay by maintaining or boosting its worth in the face of two massive patent expirations 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. See, it's simple!

As for Mead, everyone out there says it's just a matter of time before the Nestles and Heinzes of the world come calling. Nestle will surely have the cash thanks to its put-option on Alcon's shares as part of this deal with Novartis. But nobody seems to be talking about any potential pharmaceutical acquirers. What about diversification-loving Sanofi-Aventis? GSK? Even Pfizer?

Our colleagues at The Tan Sheet will take an in-depth look at potential Mead suitors from the worlds of pharmaceuticals, nutritionals and food in Monday's edition. Who are your favorites?

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OK, waffle time. Meanwhile, Kellogg Co., the makers of Eggo Waffles, seem to be having even more trouble than Genzyme in sorting out some manufacturing issues (at least they have a flood-related excuse. And it's not all bad news. We didn't find out this week that Eggo interferes with metabolizing Plavix, for example). These factory problems though have apparently led to a US-wide shortage of this blogger's children's favorite mass-produced breakfast-waffle product. So here's the question: what's the best Eggo substitute?

While we wait for inevitable stories in the press about Eggo-riots and Eggo price gouging, Eggo eBay entrepreneurs, and what not, these deals below don't have to l'eggo of anything, because they're the ...


GlaxoSmithKline/Nabi Pharmaceuticals: GSK's option-based deals often occur in discovery and early-stage development, but it shifted focus much farther up stream to get a toehold on a potential blockbuster, Nabi's NicVAX smoking vaccine. NicVAX is currently in Phase 3, and GSK paid $40 million for an option to grab full rights by the end of Phase 3. Exercising the option triggers another $58 million payout to Nabi, which for the time being has to foot the development costs. The upfront fee will help, as will a $10 million grant from the US National Institute on Drug Abuse. The vaccine is a monoclonal antibody that binds to nicotine and prevents it from crossing the blood-brain barrier and hitting the brain's pleasure centers--receptors that release stimulants such as dopamine. Other milestones include $20 million for successful completion of Phase 3, up to $70 million for US or European Union approval, and up to $61 million for approval in other major markets. In the first of two Phase 3 trials, patients get six injections over six months and try to stay away from the smokes for at least a year. They'll also get counseling. (One piece of advice: Don't hang out with your friends who smoke.) GSK also receives rights to develop a next-generation smoking vaccine based on Nabi patents and technology, regardless of its decision to exercise the NicVAX option. All told, Nabi could earn option and milestone payments up to $500 million, plus sales royalties. Royalties for NicVAX will be 10-15% based on a minimum of annual net sales from $300 million to $600 million. Royalties for next-generation products will range from 7-9% based on the same annual net sales figures. - Alex Lash

Cosmo/BioXell: Not all European spin-offs from Big Pharma have quickly secured approval of a lead product and filed for an IPO like J&J progeny Movetis. After raising north of 100 million euros since inception, BioXell, the 2002 Roche spin-off once thought to mark a resurgence in Italian biotech fortunes, said on Wednesday it would be acquired by compatriot Cosmo Pharmaceuticals for CHF15.1 million in cash, and Cosmo shares worth another CHF26 million (both companies are listed on the Swiss exchange). The purchase price was at roughly a 17% premium to BioXell's 60-day average. Cosmo, a GI-focused specialty company, will also pay potential earn-outs based on the sale of certain BioXell assets to third parties. BioXell has been on the block since earlier this year when Phase IIb results for lead compound Elocalcitol in overactive bladder disappointed. Interestingly BioXell's now-lead asset is a humanized antibody against nerve growth factor (NGF) receptor TrkA acquired from Lay Line Genomics. Lay Line was also the source of another NGF program, the one PanGenetics just sold last week to Abbott for $170 million in cash.--CM

image by flickr user ken mccown, creative commons.