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Wednesday, December 23, 2009

And the Exit/Financing Deal of the Year Nominees Are ...


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.

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