Friday, November 05, 2010

DotW Considers Restructuring

As part of its announced restructuring this week, Biogen Idec decided to terminate or divest 11 programs in areas such as cardiovascular and oncology and instead focus on its historic strength in neurology and autoimmune disease, as well as promising hemophilia assets.

The ripples of that decision are already being felt, most immediately by Cardiokine, a privately-held biotech based in Philadelphia that has raised $87 million in venture dollars since its 2004 founding. Back in 2007 the start-up ,which counts Health Care Ventures and Care Capital among its backers, partnered its sole asset, a selective vasopressin receptor antagonist for hyponatremia called lixivaptan, to Biogen for $50 million upfront.

Amber Salzman, president and CEO of Cardiokine, did her best to spin the divestment news in a positive direction. "I am pleased we have regained exclusive global rights to lixivaptan, a potentially important advance in the treatment of hyponatremia," she said in a statement. "We are nearing the completion of the Phase 3 program and look forward to study results and confirming our registration plans in the near future.”

Biogen nabbed lixivaptan as it was rebuilding its late stage pipeline in the wake of a previous restructuring that began in 2005. At that time Biogen execs admitted they had neglected their pipeline to concentrate on the launch of Tysabri (natalizumab), a next-generation MS therapy that promised much greater efficacy than the interferon-based treatments dominating the market at the time. So they ramped up dramatically in several areas, including CV, buying rights to the pulmonary arterial hypertension drug Aviptadil from mondoBiotech and Adentri, an A1-adenosine receptor antagonist for heart failure, from CV Therapeutics. (Biogen dropped work on Adentri earlier this year. )

As a result of Biogen's new restructuring, Cardiokine loses out on a potential $170 million in milestones. At this point, it's got to hope Big Pharmas in need of late stage products (Lilly? Sanofi-Aventis?) could be drawn into a more lucrative partnership, or even an acquisition.

The safety-first mentality at FDA has resulted in a full-fledged flight away from anything that might be classified with a "C"and a "V," but lixivaptan has a few things going for it, not least that its in Phase III trials. Its use in hyponatremia, an electrolyte disorder characterized by an imbalance of sodium and water, is also a plus. There are currently no approved therapeutic treatments for the condition, which frequently goes undiagnosed. Thus, potential interested acquirers can check the "unmet medical need" box that is now de rigueur in any biopharma transaction. In all likelihood, no deal will emerge until potential acquirers have a gander at top-line data from the ongoing three pivotal trials, especially a 650-patient study in congestive heart failure.

Cardiokine wasn't the only entity to suffer the fall-out from revised priorities this week. The American people also decided to divest more than 60 Democrats from their Congressional pipeline, but for now we'll let others weigh in on the effects of the new portfolio, especially on health care reform. Meanwhile, it's time for this blogger to revisit her own priorities and call it a weekend...

McKesson/US Oncology: The big-ticket acquisition this week was health care services and IT player McKesson's $2.16 billion all-cash take-out of US Oncology, a physician practice management company for cancer physicians. McKesson will pay cash for the outstanding shares of privately-held US Oncology and assume its $1.6 billion in debt. The deal builds on McKesson's aspirations to expand in the oncology specialty services arena, helped out by its 2007 purchase of Oncology Therapeutics Network for $575 million. It also comes as demand for oncology products is on the rise, and drug makers both big and small are doing their best to develop differentiated medicines to tackle the disease, an event that will only increase the need for purveyors of oncology services. (That is until there is pushback from payors about the distribution of pricy cancer meds.) Bringing US Oncology in-house expands the number of oncologists to whom McKesson has access to 3000, according to executives on a November 1 investor call. Currently, The Woodlands, Tex.-based US Oncology supports about 1300 community-based physicians in 38 states. Analysts have reacted positively to the deal, which is expected to close by the end of 2010, because of the complementarity of the two businesses. In a note to investors, Tom Gallucci of Lazard Capital Markets says it gives McKesson “a meaningful land grab within the fast-growth oncology space, lending further scale to its distribution business.” -- Greg Twachtman & E.L.

Bristol-Myers Squibb/Simcere: Behold the rise of regional deal-making. As drug makers look to push into important emerging economies like China and India, they face important decisions related to the development and commercialization of products. Is it better to invest in costly infrastructure and distribution networks, building capacity from the ground up, or leverage the capabilities of an in-country firm that is more familiar with the "hows" and "whos" -- particularly the government regulators and KOLs -- of the local market? BMS chose the latter route in its tie-up with Simcere, a Chinese pharma with a diverse portfolio that includes branded generics and the proprietary medicine Endu, a recombinant human endostatin, for non-small lung cancer. Financial terms of the BMS/Simcere deal weren't disclosed, but as part of the agreement, Simcere receives exclusive rights in China to develop and commercialize BMS-817378, a preclinical MET/VEGFR2 inhibitor. BMS retains rights in all other markets, and the two firms will jointly determine development. Interestingly, it appears the early work will be carried out by Simcere, in what may be an attempt by BMS to leverage two critical advantages offered by China: 1) the still -- for now -- cheaper labor market keeps the R&D burn rate low; 2) with greater access to treatment naive patients, it can be much faster to run oncology trials in a place like China than the US or Europe, where competition for patients is greater. In 2009, Simcere inked a similar deal with OSI Pharmaceuticals for the development of OSI930, a small molecule oncologic in Phase I that targets multiple tyrosine kinases, including one of the same targets hit by BMS's drug, the VEGF2 receptor. -- E.L.

Gedeon Richter/Grunenthal: The European women’s health market is in significant flux with the third major deal in a month, and the second involving Budapest, Hungary-based Gedeon Richter. On November 3, Richter purchased Grunenthal’s oral contraceptive business for €236.5 million (about $331 million), roughly one month after Richter bought out Switzerland’s PregLem for CHF150 million ($156 million). Meanwhile on October 28 Teva purchased Merck Serono’s Théramex division for €265 million to deepen its geographic reach in women’s health and particularly in the contraceptive space. Like Teva/Théramex, Richter is eyeing both geographic expansion and growth of its oral contraceptive portfolio with the purchase of Germany’s Grunenthal. The small family-owned firm adds seven contraceptives including Belara to Richter’s portfolio, with sales largely based in Germany, Spain and Italy. The deal covers commercial rights in all markets where Grunenthal’s products are approved, except for Latin America. Richter said the transaction will provide a platform upon which it can establish a sales and marketing base in key Western European countries; currently, Richter’s primary commercial base is central eastern Europe and the Commonwealth of Independent States. -- Joseph Haas

Kadmon/Valeant: Just one week after Kadmon Pharmaceuticals, Sam Waksal's post-ImClone reprise, emerged from stealth mode with the acquisition of Three Rivers Pharmaceuticals, the biotech is back in the limelight. On November 1, the biotech announced a pair of strategic agreements with Valeant Pharmaceuticals that allows the start-up to hit the ground running with a mid-stage HCV candidate. In part one of the two-part alliance, New York-based Kadmon licensed worldwide development and commercialization rights (excluding Japan) to taribavirin, an analog of ribavirin that has completed Phase IIb studies for HCV, for $5 million upfront. Toronto-based Valeant, which said continuing development of taribavirin no longer fit its specialty pharma business model, stands to earn development milestones and sales royalties between 8% and 12% of future net sales related to taribavirin. That doesn't mean Valeant is getting out of selling hep C medicines altogether, however. The deal's second part calls for Valeant to pay Kadmon $7.5 million for rights to distribute in six Eastern European nations the start-up's Ribasphere and RibaPak, formulations of ribavirin that Kadmon acquired via the Three Rivers' deal. Kadmon will serve as the supplier of the two drugs. For Kadmon, a still stealthy company that has released little information about its financial backers, the complicated deal means the company nets $2.5 million and gains a mid-stage asset simultaneously. For Valeant, the outlicensing is consistent with its streamlining after the Biovail merger, as it looks to divest programs that require sizeable R&D dollars to get to market. -- J.H. & E.L.

Swedish Orphan Biovitrum/Amgen: Stockholm-based Swedish Orphan Biovitrum, which wants to be known as “Sobi” -- a decision IN VIVO Blog supports because it sounds like a tasty buckwheat noodle -- is selling back to Amgen its co-promotion rights in Nordic countries to hyperthyroidism compound Mimpara (cinacalcet). "Strategic business reasons" were a driving factor in the "mutual agreement," according to the press release announcing the split. Unfortunately, the two companies declined to say more about why the seven-year deal was ending, or how much Amgen will pay Sobi to wind down the deal. It can't be much. Sobi's revenues from Mimpara were a scant 26.2 million Swedish Krona ($3.9 millon) in 2009. Could this be the converse to the regional dealmaking brouhaha in India and China (see above)? Certainly it's well known that co-promotion deals limited to a handful of smaller markets are time-consuming and complex to manage, which may make the return for both parties de minimus. For its part, Sobi, which has developed its marketing capabilities throughout Europe, is to reallocate resources to its newer products, such as Yondelis, Multiferon and Ruconest. -- John Davis

Johnson & Johnson/Arena: On November 5, J&J's Ortho-Macneil-Janssen Pharmaceuticals division officially called it quits on the development of ADP597, a GPR119 agonist for type 2 diabetes it in-licensed from Arena as part of a two-compound 2004 deal worth $17.5 million upfront. The news marks the end of the six-year collaboration between the two parties; in 2008, J&J discontinued work on another GPR119 called APD668 in order to devote more resources to ADP597, which was believed to be the more potent compound. As of December 28, 2010, all rights to ADP597 officially revert to Arena, which has a portfolio of internally discovered GPR119 agonists, including follow-on versions of APD597 that weren't part of the original J&J deal. It's not clear why Janssen returned rights to the drug, which had just finished Phase I and demonstrated no obvious safety signals, according to company reports. Preliminary data suggest the oral molecule may have utility both alone and in combination with DPP-IV inhibitors like Januvia or Onglyza. It's possible the competitive landscape was one reason the deal came to an end. An interesting new class of small molecule drugs for type 2 diabetes, GPR119 agonists are a hot target in the type 2 diabetes landscape, with players such as Boehringer Ingelheim and GlaxoSmithKline vying to be first to market. The drugs target a protein expressed on the surface of pancreatic beta cells and endocrine cells in the gastrointestinal tract. In preclinical and clinical studies, GPR119 activation has been show to stimulate the relase of GLP-1 and other incretins that play an important role in insulin regulation. All told, Arena netted $32 million from the six-year collaboration with J&J, according to Elsevier's Strategic Transactions database. The return of the asset is another piece of negative news for Arena, which in late October received a complete response letter for its obesity drug lorcaserin. -- E.L.

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