Monday, December 20, 2010

2010 Alliance DOTY Nominee: Biogen Idec/Knopp Neurosciences

It's time for the IN VIVO Blog's Third Annual Deal of the Year! competition. This year we're presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (four or five 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™.

Back in August, hacking through the thickets of the Biogen Idec-Knopp Neurosciences deal for a Phase II amyotrophic lateral sclerosis treatment, we thought for a moment we'd stumbled across a rare beast. Our binoculars at the ready and pith helmets stained with sweat (since we're on a Kipling kick), could it exit-by-license? Egads!

It wasn't, actually. But it was no less exotic, and well worth nominating for our Alliance Deal of the Year. The deal itself was straightforward: Biogen Idec paid $80 million upfront -- $20 million as a fee and $60 million in equity -- for worldwide rights to KNS-760704 (dexpramipexole), which had hit its primary endpoint in a Phase II trial for ALS, also known as Lou Gehrig's disease. Dexpramiprexole came with orphan designation in both the US and Europe, and fast track FDA status. Milestones to Knopp could add up to $265 million more, as well as tiered, double-digit royalties on worldwide sales.

Knopp told our Pink Sheet colleagues that the $80 million was more than it needed for its ongoing operations, and it would return extra cash to investors -- a mix of low-profile institutional investors, angels and foundations.

But it was no exit or share buyback, according to Knopp. Instead the investors who got the distribution kept all their equity: in essence, a one-off dividend. (Biogen's $60 million equity purchase was directly from Knopp.) And spokesman Tom Petzinger said there was no quid pro quo, either. If and when Knopp finds itself in need of cash, the investors are under no obligation to re-up.

Petzinger and the rest of management like to think their gesture will create investor goodwill that will be remembered in the future. "It might be a highly unusual move, but it doesn't mean it's not highly appropriate or strategic," Petzinger said.

The deal was also notable as the first consummated in Biogen's Scangos Era, announced less than a month after George Scangos took over as chief executive. Under Scangos, Biogen has pledged to retrench around neurology and hemophilia, with its oncology and cardiology programs now on the block.

Dexpramiprexole is a reverse-image twin of Boehringer Ingelheim's Parkinson's disease drug Mirapex (pramiprexole). Biogen believes its version has the potential for greater neuroprotective activity because it has less affinity for dopamine receptors and can be used at higher doses. Thus far, the molecule has survived the R&D shake-up; indeed, executives highlighted it at a Nov. 30 R&D roundtable and reiterated last month Biogen would start a Phase III study in 804 ALS patients in the first half of 2011.

However exotic the arrangements of the deal that put dexpramiprexole in Biogen's hands, rarer -- and indeed more welcome -- would be market approval, as to date only one drug to treat the disease has come to market, according to the ALS Association. -- Alex Lash

Photo courtesy of flickr user majorvols.

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