Friday, December 10, 2010

DOTW Senses Change In The Air

Fast away the old year passes. Hail the new ye lads and lasses.

As the last days of 2010 fast approach, already there is a sense that change is in the air (except perhaps in Washington D.C. but that's another matter.) In biopharma land, Dick Clark is packing up his office, making way for Ken Frazier, described by some Merckies as "visionary." Meantime the abrupt departure of Pfizer's Jeff Kindler has industry wags' tongues...well, wagging.

Kindler's hefty severance package suggests he may well have been pushed from the Pfizer nest. Regardless, it would appear that Ian Read, who takes over as the CEO of the world's biggest pharma (and no, that ain't necessarily an appellation to be proud of), may well find himself the agent of change--whether he wants to or not.

Less than a week after being installed in the top spot, Read already faces the task of sorting out the firm's emerging markets strategy in an increasingly competitive environment. On Dec. 9, Pfizer revealed that David Simmons, the president and general manager of the established products division, will assume duties vacated by retiring emerging markets chief Jean-Michel Halfon, who had led that unit since its formation in late 2008. In what can only be described as additional--and certainly unwelcome--news, media outlets reported that same day the pending departure of Steve Yang, who moves to AstraZeneca after leading efforts to develop Pfizer's Asia-based R&D strategy and playing a critical role in helping integrate Wyeth post-merger.

Pfizer clearly faces a potentially difficult 2011 as it seeks to replace revenue when the juggernaut Lipitor’s patent exclusivity ends. (Contrary to popular opinion that won’t mark the end of the world; 2012 is the year to watch for those of an apocalyptic bent.) To compensate, the drug maker appeared to be devising a strategy that would allow it to breathe extra life into its cholesterol-lowering drug via a bolstered presence in emerging markets such as Latin America and the all-important Asia-Pacific.

With Simmons now leading two of the five biopharmaceutical units, some speculate those divisions will be merged, possibly as part of a broader restructuring. Tim Anderson, the knowledgeable pharmaceuticals analyst with Sanford Bernstein, wrote in a research note Thursday Dec. 9 that his firm believes the emerging markets and established product divisions will be combined, potentially resulting in cost savings through the elimination of redundancies in separate units. (Anderson also speculates that Pfizer’s oncology business unit could be folded into the specialty biz; despite efforts to build strength in this particular arena, things haven’t exactly gone as planned.)

Certainly the union of the established products group and the emerging markets division makes a lot of sense for Pfizer. While innovative products account for the majority of the company's overall revenue, its off-patent products can essentially acquire a second life around the globe. Branded generics, baby!

The changes taking place at Pfizer are worth noting not because they provide an important, er, read on Read’s management style. No, as Pfizer continues to react to its own patent woes, the choices it makes could influence decisions at competitors (we aren’t saying in what direction). As such, it becomes if not an important bellwether, at least a means of benchmarking how industry continues to respond in the post health-care reform era.

Where else is change afoot? At expert network cos. where doing biz has gotten a lot harder. Not, however, at Genzyme. At this point in the year, only those who have been hanging out on exotic islands with absolutely no mobile, "sat" phone, or internet access could possibly be unaware that Sanofi’s hostile take-over for Genzyme expires today. In the absence of a white knight, the French pharma has no compelling reason to raise its bid (investors certainly haven’t been impressed with the biotech’s PR efforts to boost share price.) Analysts like Mark Schoenebaum at ISI Group, believe Sanofi will let Genzyme execs sweat it out for the rest of the year. Unfortunately for the biotech, last we checked deodorant wasn’t considered a legitimate reimburseable health care expense. (Botox on the other hand…)

Finally, a remonstrance to vote early and often for this year’s DOTY nominees and support the change you believe in. Meantime, while reviewing your favorite transactions, don’t forget to take a gander at this week’s round-up of the industry’s deal making. Change may be in the air, but it’s also true some things never change. Thus, we bring you another edition of…

Cephalon/Mesoblast: This week’s tie-up between Cephalon and Mesoblast shows stem cell technologies can garner hefty upfront dollars. Cephalon is spending $130 million upfront to develop and commercialize the Australian biotech Mesoblast's adult mesenchymal precursor stem cell therapies for multiple indications, the companies announced late Dec.7. In addition, Cephalon has agreed to pay regulatory milestones of up to $1.7 billion, with a hefty percentage of that amount deliverable upon U.S. regulatory approval of selected products. In exchange, Cephalon is getting exclusive worldwide rights to co-develop and commercialize products in several indications: congestive heart failure, acute myocardial infarction, Parkinson's disease, Alzheimer's disease, and, furthest along, products for augmenting hematopoetic stem cell transplantation in cancer patients. The large upfront is striking given the early stage of Mesoblast’s technology; also striking is the equity component — Cephalon is buying a 19.9% stake in the Aussie firm for $220 million. It certainly demonstrates Cephalon’s commitment to the technology. A spot check of Elsevier's Strategic Transactions database indicates big stem cell deals are still the rarity: the 2008 Genzyme/Osiris alliance, which gave the smaller biotech $75 million in upfront money, is the only one that comes close. For Cephalon, the Mesoblast alliance is part of its ongoing strategy to amass biologics capabilities via the deal table. Other examples: Ception, Bioassets, and Arana Therapeutics.--Wendy Diller

GlaxoSmithKline/MeiRui: Rumors that GlaxoSmithKline was pursuing MeiRui have become a reality. On December 8, the Big Pharma announced it was acquiring the Chinese urology firm from stakeholders Pagoda Pharmaceuticals and Allergon for approximately $70 million, as it further deepens its commitment to this important emerging market. Among MeiRui's leading products: Prostat for benign prostatic hyperplasia and Sheniting for overactive bladder syndrome. As part of the transactionGSK, the maker of Avodart, gets not just products but also MeiRui's established sales and marketing platform and a manufacturing facility in Nanjing City, Jiangsu Province, China. Completion of the transaction is expected by the end of 2010, subject to regulatory approval. Ahead of the deal's announcement, consultants told sister publication PharmAsia News just why a GSK/MeiRui marriage made sense. GSK already has four urology products registered in China: Fortum, Augmentin, Zinacef and Timentin. But deeper relationships with Chinese KOLS would undoubtedly help its commercial efforts in the Middle Kingdom, especially as it looks to launch its most important urology product, Avodart. MeiRui certainly helps with that ambition, given its ties to the China Urology Association. MeiRui stands to benefit as well. It has been trying to take Prostat over-the-counter, so Glaxo's considerable OTC expertise should be attractive. Building an emerging markets presence is an important piece of GSK's evolving strategy--and most every other big pharma, for that matter. The MeiRui take-out shows the firm's preference for bite-size acquisitions that can be bolted on to existing businesses isn't waning any time soon.--EFL

Geron/Angiochem: Geron will pay $35 million upfront to license Angiochem’s novel peptide technology that helps transfer oncology drugs across the blood brain barrier. The deal, which consists of a $7.5 million cash payment and a $27.5 million stock issue due to occur on January 5, 2011, gives Geron worldwide rights to Angiochem’s technology linking peptides. These molecules target the LRP-1 receptor with tubulin disassembly inhibitors, disrupting mitosis in tumors. More specifically, Geron gets rights to a drug now known as GRN1005, a derivative of the common chemotherapy paclitaxel, which is slated to enter Phase II trials to treat brain metastases by the second half of 2012. Furthermore, Geron and Angiochem will collaborate on projects that conjugate the same peptide technology with telomerase inhibitors, which inhibit an enzyme crucial to cell division, in an effort to transport those compounds into the central nervous system. Geron already has several telomerase inhibitors under investigation. Unspecified milestone payments, royalties, and a share of any sublicensing revenues will also be due to Angiochem as the projects advance toward commercialization. Angiochem may be due additional cash up front if fluctuations in the price of Geron’s stock drive the equity component’s value below $27.5 million.--Paul Bonanos

Pfizer/Morphosys: Partner-driven bonanza for MorphoSys today! Not only did the German antibody player secure a technology transfer deal with Pfizer via its newly-acquired Sloning BioTechnology unit, but it also announced three other partners have filed to begin Phase I clinical trials with MorphoSys-designed antibodies. That means lots of milestone payments, and triple-validation of the HuCAL technology. It seems those partners believe MorphoSys' rhetoric that HuCAL is "one of the most powerful methods available for generating fully-human antibodies". The German group now boasts 13 partnered HuCAL programs in the clinic, declaring the associated milestone payments as "an important source of revenue." Eat your heart out, Genmab! That humbled Danish antibody group is also upping its partner-generated revenue with a new 'networked' strategy; question is, whether its technology (much of it licensed originally from Medarex) will prove as popular. The Pfizer/Morphosys deal isn't that sexy, certainly not in terms of what was disclosed (nothing, financially, we mean). Sloning's Slonomics (?!) technology platform for making highly-diverse gene and protein libraries will be installed at Pfizer's Rinat subsidiary; MorphoSys gets an up-front payment and annual license fees. Check out MorphoSys' same-day ad hoc announcement for some clues on the size of those payments: it's increasing its 2010 financial guidance ("mainly as a result of the achievement of revenues from additional commercial activities, resulting from the acquisition of Sloning") to anticipate FY revenues of €91-94 million (up by €4-5 million) and operating profit of €13-16 million (rather than €7-9m).--Melanie Senior

Image courtesy of flickrer barney_holmes via a creative commons license.

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