Friday, March 04, 2011

Deals Of The Week: The Sushi Edition

The biggest deal of the week, Daiichi’s purchase of the California biotech Plexxikon for $805 million upfront, prompted headlines elsewhere about the rise of Japanese dealmakers. Faithful readers of IN VIVO Blog won't be surprised by such pronouncements. It’s a trend that has been gathering steam since Eisai’s take-out of MGI Pharma and Takeda’s land-grab of Millennium Pharmaceuticals. (And yes, that's about 3.5 years longer than Kyowa Hakko's bid for ProStrakan.)

Indeed, as we wrote in a May 2010 IN VIVO feature, Japanese pharmas are now serious contenders for partnerships outside their home country as domestic factors –including consolidation in the home market, slowing growth, and a strong yen – have become powerful forces of change.

And as the Plexxikon deal shows (see below) that’s very good news for biotechs of a certain profile –especially neurology and oncology players close to commercialization. Given the merger mania of the past several years, the pool of potential acquirers for biotech assets has diminished, meaning any new buyers willing to pay top dollar are welcome news. In addition, Japanese players like Takeda( or Astellas or Daiichi) seem amenable to terms that allow the smaller party a great deal of autonomy, whether it’s running a biotech as a stand-alone within the parent pharma or establishing co-promotion/co-development options as part of an alliance.

The continued activity of players like Daiichi means biotech execs should brush up on their Japanese and learn to love sushi. (What’s not to love about sushi?) As always, domo arigato for reading…

Daiichi Sankyo/Plexxikon: Kaaa-ching! Bidding by multiple companies and strong data for a late-stage, targeted melanoma drug helped drive Daiichi Sankyo’s eye-popping acquisition of privately-held Plexxikon this week. The deal is one of the priciest acquisitions of a private biotech since 2006, according to Elsevier's Strategic Transactions and in-line with J&J's take-out of abiraterone developer Cougar Biotechnology. Equally notable is Daiichi's down-payment. At a time when bigger and smaller pharmaceutical players are trying to hedge their risk by structuring earn-out heavy deals, the Japanese pharma is shelling out $805 million, a deposit that approximates 86% of the deal's potential value. Even without the additional milestones, this sum provides an impressive return for the nine venture capital firms who have staked 10-year-old Plexxikon, which has made a name for itself with its targeted melanoma drug PLX4032. But the deal's price tag is only a piece of the story; the advent of a dark horse buyer is another important consideration. Back in 2006, Plexxikon partnered the drug to Roche for $40 million upfront, retaining an option to co-promote the product in the U.S. market. In early January 2011, Plexxikon exercised this option, agreeing to reimburse Genentech, which is responsible for ongoing development of the medicine, for certain marketing and promotion costs. With the planned acquisition, this option - and the resulting enhanced royalties on product sales owed to Plexxikon - now transfers to Daiichi. That the Japanese pharma would spend so much to obtain only a piece of a potentially lucrative molecule illustrates both the scarcity of late-stage oncology assets and just how much Big Pharmas are willing to pay to get drugs with validated mechanisms of action in this competitive therapeutic area. (For more, see our 2006 feature "The $100 Million IND.") It also brings Daiichi in line with the other big three Japanese pharmas - Astellas, Takeda Pharmaceutical and Eisai - all of whom have used acquisition to bolster their U.S. oncology offerings. --EFL

Takeda/Intra-Cellular Therapies: Daiichi wasn’t the only Japanese pharma wheeling and dealing this week. Takeda also announced its decision to license Intra-Cellular Therapies’ preclinical, orally available phosphodiesterase type 1 (PDE1) inhibitors for treatment of the cognitive impairment associated with schizophrenia in what appears to be a heavily back-end loaded deal. Disclosed terms were pretty vanilla: Takeda makes an undisclosed upfront in exchange for exclusive worldwide rights, and will pay development milestones of up to $500 million, with another $250 million owed if the product(s) hit certain sales objectives. Takeda will be solely responsible for the development, manufacturing, and commercialization of the compounds. In addition to schizophrenia, Takeda also has rights to develop the inhibitors for other neurological indications, potentially including dementia, Parkinson’s disease, and Alzheimer’s disease. Privately-held ITI is built around scientific findings discovered in the lab of Rockefeller University’s Paul Greengard; in 2005 it also inlicensed a basket of preclinical compounds from Bristol-Myers Squibb. According to sister publication “The Pink Sheet” Daily, ITI hadn’t planned on partnering its PDE1 program quite so soon, but pharma’s level of interest in the compounds, which are very selective for the PDE1 subfamily and thus, presumably, won’t cause off target side-effects, was so high the company changed its mind. Neither company would discuss timelines or details on the clinical development program, but ITI's CEO Sharon Mates did say there were clearly defined endpoints for positive symptoms associated with schizophrenia, as well as standard cognition measurements. –EFL

Merck/Lycera: Privately held, autoimmune-focused Lycera signed a collaboration with Merck March 3 under which the two companies will discover, develop and commercialize small molecule candidates that orchestrate the differentiation of T-helper 17 cells. Diseases targeted by the partnership may include rheumatoid arthritis, psoriasis, inflammatory bowel disease and multiple sclerosis. The deal calls for Merck to pay Michigan-based Lycera a $12 million upfront payment, undisclosed research funding, as well as research, development and regulatory milestones of up to $295 million. (There are also potential low-double-digit tiered royalties on any products that reach the market.) The companies will collaborate on discovery and preclinical work, with Merck responsible for clinical development of any resulting candidates. The pharma also will hold worldwide marketing and commercialization rights to such candidates. Lycera, profiled in this 2009 Start-Up article, is backed by InterWest Partners, ARCH Venture Partners, Clarus Ventures and EDF Ventures. It brought in $11 million last April in the second tranche of a Series A financing announced in April 2009.—Joseph Haas

GlaxoSmithKline/Targacept: In a “No-Deal” that was not unexpected, GlaxoSmithKline, which announced plans to exit the central nervous system arena a year ago, terminated its partnership with Targacept March 3 to co-develop neuronal nicotinic receptor modulators in five therapeutic areas – pain, smoking cessation, addiction, obesity and Parkinson’s disease. GSK paid $35 million upfront to initiate the partnership in 2007, including a $15 million equity investment in the North Carolina biotech. Its resulting exit leaves Targacept in full control of all programs subject to the alliance, each of which is still in preclinical stages. Targacept, which still has a potential $1.2 billion, multi-program collaboration in place with AstraZeneca, said it made $45 million over the life of its deal with GSK. In a March 4 note, analyst Robyn Karnauskas of Deutsche Bank said AstraZeneca is Targacept’s key partner, as the companies await Phase III data for TC-5214 in adjuvant treatment of refractory depression in the fourth quarter of this year. Targacept, which had about $252 million in cash on hand at the end of 2010, also is awaiting AstraZeneca’s decision on whether it will opt in on the Phase II schizophrenia and ADHD candidate TC-5619 – top-line data in ADHD are expected by the end of this quarter, with AstraZeneca expected to makes its call by mid-year.--JAH

Ipsen/GTx: GTx can’t seem to catch a break. When its Ostarine-focused alliance with Merck blew up last year, GTx at least had the committed support of Ipsen. The two have been partners since 2006 when they aligned to develop the biotech’s selective estrogen receptor modulator (SERM) toremifene to treat the side-effects of androgen deprivation therapy in prostate cancer patients. And Ipsen remained true even though toremifene’s clinical development path has been strewn with obstacles, including a 2009 complete response letter requiring an additional Phase III clinical trial. That’s not to say the alliance didn’t change; after the CRL, the two parties revised their 2006 deal, releasing Ipsen from milestone payments in exchange for in bankrolling up to $58 million to support the additional clinical trial. This week comes news that Ipsen is calling it quits on toremifene after all. Apparently the projected costs associated with the needed clinical trial exceed the $58 million sum the two brokered in 2010. “We spent significant time analyzing the business case for toremifene 80 mg and have concluded that the most appropriate course is to terminate our collaboration,” GTx’s CEO Mitchell Steiner said in a statement. Ouch. Investors hammered GTx’s stock, which slid 9% on the news to $2.35. The troubles with toremifene could mean some hard choices for GTx, which ended 2010 with $58.6 million in cash and cash equivalents. The company will likely need to find another partner for at least one of its Phase III programs, whether it is toremifene or Ostarine, currently in development for the treatment of muscle wasting in patients with non-small cell lung cancer. --EFL

Image courtesy of flickrer lotusutol, used with permission through a creative commons license.

1 comment:

Alison Shurell said...

Thanks for this round-up, Joe and Ellen. From my perspective, I have to agree that this trend shows no sign of slowing down and that Japanese pharmas are increasingly seeking to create partnerships with biotechs around the world. Pharmaceutical companies, not just in Japan but across the world, are tasked with maintaining top-line growth. As a result, business development and licensing teams are increasingly challenged to in-license promising new compounds and out-license those that are no longer a good strategic fit, which means they’re under increasing pressure to find the right partners or make an acquisition. Here at IntraLinks, we aim to accelerate the business development and licensing process by providing a secure online repository for information exchange, as well as offering a platform in multiple languages, including Japanese.