Friday, September 09, 2011

Deals of the Week Mulls The Wild Frontier

Sometimes, it's said, the pioneers are the ones that end up with arrows in their backs. It's a tech-industry cliché, one designed as a reminder that first-mover advantage isn't everything. There are those whose innovations turn into category winners, and then there are those whose inspired inventions become part of someone else's best-selling product.

While it's rarely quite that way in the pharma business, drug-developing pioneers can still face challenges that benefit their competitors but backfire on their own ambitions. Among the Davy Crocketts struggling to translate a novel product into a sales juggernaut is Seattle's Dendreon, which was thought to be sitting on a goldmine when its Provenge (sipuleucel-T) became the first cancer immunotherapy to be approved by FDA in April 2010. Now, however, the company has more muted expectations for Provenge -- and accordingly, will go through a painful restructuring that will cost a quarter of its employees their jobs.

Many estimates pegged Dendreon to bring in well over $1 billion annually at its peak, given its survival benefit for prostate cancer patients, and Dendreon staffed up accordingly to meet anticipated demand. During a Sept. 8 conference call, CFO Greg Schiffman acknowledged that it had overreached in projecting $350 to $400 million in annual sales, including $175 to $200 million in the fourth quarter alone.

Many doctors are loath to prescribe the expensive buy-and-bill drug, reportedly due to concerns about reimbursement; thus, it's been difficult for Dendreon to reach Provenge's target patient population. While the company ultimately made the decision not to close its three manufacturing plants, it has scaled back production -- and one commercial relationship didn't survive the cut: Dendreon canceled its antigen supplier contract with GlaxoSmithKline, which company officials described as a "second-source" contract rendered unnecessary by the slow sales.

With 500 staff set to be laid off, Dendreon says it can save $120 million annually, and now expects to break even on Provenge if it can generate $500 million in annual sales. A fraction of what they'd hoped for, sure, but sometimes that's the price of being first-to-market with a category-defining product. "We are scientific pioneers," said Gold during the conference call, "and also commercial pioneers."

With that in mind, it's Friday afternoon. Sure, it was a short work week for most of us, but we all deserve a break. So please ride off into the sunset with...

GlaxoSmithKline/BARDA: GlaxoSmithKline has received a two-year $38.5 million grant from HHS’ Biomedical Advanced Research and Development Authority to support the pharma’s development of an experimental antibiotic against biothreat pathogens such as Yersinia pestis, which causes bubonic plague, and Bacillus anthracis, which causes anthrax. GSK could receive additional financing from BARDA if the research agreement is extended, bringing the potential total funding to $94.5 million. The work centers around development of GSK2251052, an antibiotic targeted at the bacterial enzyme leucyl tRNA synthetase (LeuRS), which is moving into Phase II in ventilator-associated pneumonia and Phase III for complicated intra-abdominal infections. GSK ‘052, previously known as AN3665, is a boron-based Gram-negative systemic antibiotic that GSK licensed from Anacor Pharmaceuticals under their 2007 platform technology collaboration around four targets. On Sept. 6, GSK and Anacor agreed to extend that research partnership around LeuRS candidates, with the pharma returning all intellectual property related to the other three targets included in the original deal. — Joseph Haas

Evotec/Roche: German drug discovery company Evotec appeared at first blush to have pulled off a coup on Sept. 5, when it announced it was licensing back to Roche a potential Alzheimer's therapy, EVT-302, first inlicensed from the Swiss multinational more than five years ago. A great piece of business for Evotec, apparently, with Roche paying it an upfront of $10 million and potentially over $800 million in future development and commercial milestones. But on closer inspection the ownership of the asset had as many switchbacks as an alpine pass: a predecessor company, Evotec Neurosciences, owned EVT-302 when it was first spun out of Roche, and these rights came with the company when it was later acquired by Evotec. Under the all-new deal, Roche benefits from a package of preclinical and clinical data, collected by Evotec when it tried, and failed, to develop EVT-302, a highly selective MAO-B inhibitor, as an aid to smoking cessation. EVT-302 complements the other approaches Roche is pursuing for the treatment of Alzheimer's, including MAbs against beta-amyloid. With Roche now shouldering all costs of development, the deal works well for Evotec: over the past two years, it has restructured its business and is focused on developing drug discovery partnerships with partners, rather than developing its own R&D pipeline. MAO-B is up-regulated in the brains of Alzheimer's disease patients, and as well as breaking down monoamines like the neurotransmitter dopamine, it also produces oxygen free radicals, which contribute to oxidative stress and could possibly accelerate the disease process. An inhibitor might slow down disease progression, and Roche is to conduct a Phase II trial in 2012 to prove this concept. - John Davis

F-Star/Merck Serono: F-Star, an antibody engineering company based in Vienna, Austria, saw its relationship with one of its pharmaceutical corporate investors blossom this week when it announced a discovery and development agreement with Merck Serono, the pharmaceuticals arm of Merck KGaA. The German company's VC arm, Merck Serono Ventures, has only been an investor in F-Star since January 2010, when it co-led an €8 million extended Series A financing, but its parent company obviously liked what it saw. Merck Serono and F-Star will now build on their relationship by collaborating on the discovery and development of antibody-derived therapeutics against inflammatory disease targets in a deal valued at €492 million ($683 million). Merck Serono will nominate three therapeutic targets and the companies will collaborate on developing targeted and bispecific biologics against these molecules. Merck Serono will have exclusive commercialization and development rights, with F-Star receiving an initial technology access fee, research-based funding, and development and commercialization milestones, as well as tiered royalties on sales. Accessing bispecific antibody capabilities has been a hot topic lately, with this week's F-Star/Merck Serono tie up reminiscent of last week's Zymeworks/Merck collaboration, although the technology access fee and committed R&D dollars make F-star's tie-up richer. - J. D.

Astellas/Evec: Japan’s Astellas Pharma has in-licensed the worldwide development and commercialization rights to a fully-human antibody targeting infectious disease from Japan’s Evec. Specific details regarding the program weren’t provided. While Astellas’ upfront payment for the pre-clinical program is modest at ¥600 million ($7.75 million), development and sales milestone payments could add as much as ¥13 billion ($168 million) to the deal, which also includes royalties. Founded to commercialize research conducted at the University of Hokkaido and based in Sapporo, eight-year-old Evec is developing antibodies for cancer and inflammatory disease as well as infectious disease. Evec previously licensed an antibody to Boehringer Ingelheim in a 2008 deal that could be worth up to €55 million ($75 million). In August, Astellas appointed a new CEO, promoting Yoshihiko Hatanaka, the head of the U.S. Astellas unit, to the top post. – Lisa LaMotta

Eisai/SFJ Pharma: It's a deal -- and a financing! This week's DOTW two-fer illustrates the heightened risk-hedging protocols at work as big pharmas try and limit their cash R&D burn, while still retaining access to a product a la project finance. And based on the press release, there ain't a whole lot for Eisai -- or its shareholders -- NOT to like about the SFJ arrangement. Essentially Eisai has partnered late-stage clinical development of its Phase III tyrosine kinase inhibitor, lenvatinib, in thyroid cancer. Under the agreement, the studies will be conducted by Eisai (so it keeps control!), BUT they will be completely funded by SFJ. That's right --SFJ is picking up the tab, and in return stands to earn milestone payments, but only if the compound wins regulatory approval. In addition, if and when the compound is approved, all commercial rights remain with Eisai. With so many of the financial details of the relationship undisclosed, one has to assume that the future milestone payments owed to SFJ, which is backed by VCs including Clarus and Abingworth, are lucrative. This isn't the first time Eisai has sought a partner to hedge its development risk: back in 2009 Eisai teamed up with the CRO Quintiles to develop multiple oncologics. That particular alliance called for Eisai and Quintiles to share development costs, with Quintiles' cancer specialists conducting the proof-of-concept trials and Eisai paying milestones for compounds that meet predefined POC criteria.--Ellen Licking

Image of Davy Crockett, painted by Chester Harding, reproduced courtesy of Wikimedia Commons.

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