Friday, October 28, 2011

Deals of the Week Wonders, Will Artemis Help AZ In Its Hunt for Late-Stage Pipeline?

It's no secret that AstraZeneca needs to bolster its late-stage pipeline. Sure, there's Brilinta, but even assuming it comes through the payer-tests unscathed (a big assumption), it alone won't drive the kind of growth the Big Pharma needs.

AZ has undergone a major pipeline clear-out, under the auspices of its newish, high-profile R&D chief Martin Mackay (ex-Pfizer). At the same time, the Big Pharma's sticking with the high risk, all-eggs-in-innovative-pharma-basket strategy. Indeed, it's not even allowing itself, as several of its (diversified and non-diversified) peers are, to stretch the definition of innovative to include biosimilars.

So it falls to AZ's business development team to come up with the goods, and prove those proponents of diversification wrong. Enter project Artemis -- named after the Roman goddess of hunting. That program's all about "re-defining the relationship between business development and R&D," according to VP, strategic partnering business development Shaun Grady. We all know that, in this era of externalization, R&D and BD are inextricably linked; so it is at AZ that not only does each of the iMeds (innovative medicines units) have a 6-8 strong BD team, but, most recently, they in addition have 4-6 extra individuals who are not BD folks, but are scientists, Grady explains, "dedicated to scouting, searching and evaluating" potential projects, "finding breaking science...and allowing the BD folks to be more transactional."

In other words, there are now an awful lot of people within AZ looking outside of AZ for good ideas. "It's a big step forward," says Grady of the changes, adding that his internal dealmaking targets are "stretch...but realistic." AZ's last late-stage deal was a regional effort, gaining access to denosumab in Japan in May 2011 (a co-promotion arrangement with Daiichi, which acquired rights from Amgen in 2007). The company has been recently proactive around repurposing (Galderma and Alcon deals) and has put a stake in some early stage opportunities this year (Heptares, PTC deals, among others); but given that AZ hasn't done anything since February 2010 (with Rigel, for fostamatinib) to bolster its mid-to-late-stage clinical pipeline, we should perhaps expect a flurry of pre-Christmas partnerships. That has happened before (deals with Targacept, Novexel, Biovitrum, and Trellis were inked in December 2009).

The ever-closer links between R&D and BD at all pharma firms lead us to suspect that the R&D overhaul at AZ must have had some effect on BD? In fact, Grady maintains, the BD group has been an "anchor" of stability throughout. "We've been doing this [buz dev] for years," he said. We provide an anchor; all these new ideas are great, but we must just get on...". Get on with the transactions, that is -- assuming that appropriate assets can be found to transact upon. And the definition of appropriate is changing in our new, payer-driven world. Indeed, "we decided to pan two or three projects that looked, on the face of it, attractive, but where we felt the differentiation was insufficient," said Grady, in very payer-aware terms.

AZ has recently hired Genentech veteran Greg Rossi to head up its new Payer Evidence function. So we can expect yet another new and increasing influence on BD. Could project Pluto be forthcoming? (Pluto: Roman God of wealth.)

While you wait for that, we bring you, as quick as Mercury, the latest edition of ...

Foundation Medicine/J&J: We thought something was afoot when the CEO of Foundation Medicine and the VP of biomarker research for J&J’s Janssen Biotech unit were seen huddling side-stage before they joined a panel at our Pharmaceutical Strategic Alliances conference in late September, a one-on-one that continued for well over an hour after the conference ended. Thirty-two days later, the companies announced a collaboration that will apply FMI’s cancer genomics test capabilities to identify potential biomarkers for use in J&J’s oncology drug development. It was the fourth large pharma collaboration this year for FMI, which emerged from stealth mode in April 2010 advised by a team of world-renowned experts in next-generation sequencing and a mission to better understand cancer biology. FMI is developing a sequencing-based test that drug developers can run up front in clinical trials to better identify who will respond to a drug and why. “For the price of handful of molecular markers you can get a complex description of the molecular make-up of the entire tumor,” FMI CEO Mike Pellini told the audience at PSA. In addition to its use as a supporting tool for pharma, Pellini says the test, which identifies molecular alterations in more than 200 cancer-associated genes, could launch commercially next year, anticipating insurers will pay $3,500 to $4,500, according to a recent Forbes story on the company. A week before announcing the deal with J&J, FMI closed an expanded $33.5 million series A financing, enticing Google Ventures and Kleiner Perkins Caufield & Byers to join with founding investor Third Rock Ventures.--Mark Ratner

Roche/Arrowhead: After an expensive foray into RNAi, Roche is handing off its substantial portfolio to Arrowhead Research Corporation, in exchange for a 9.9% stake in the company, right-of-first-negotiation to programs, and earn-out potential. The Oct. 24 deal followed last November’s announcement by Roche that it was ending its active involvement in the development of RNAi therapeutics. The transaction brings Arrowhead three RNAi delivery systems and three siRNA formats, including the so-called Canonical siRNA structure Roche licensed from Alnylam Pharmaceuticals in 2007 for $331 million upfront. Arrowhead also will take possession of Roche’s state-of-the-art RNAi subsidiary site in Madison, Wisc., and personnel, which the big pharma originally acquired through the purchase of Mirus Bio for $125 million in 2008. In exchange, Arrowhead issued the pharma a promissory note transferring more than nine million shares of its common stock, with a plan to eventually give Roche up to an additional 1.5 million shares, or their equivalent cash value. In tandem with the deal, the Pasadena, Calif.-based nanomedicine firm closed on a $4 million private placement to augment a recently announced $5.5 million financing and entered a three-year, $15 million credit facility with Lincoln Park Capital, which it can draw down as needed. Roche also receives a limited right of first negotiation to three existing RNAi therapeutic candidates transferred to Arrowhead, and similar claims to five other unspecified clinical candidates. For specified candidates, Roche will be entitled to a 3% royalty on net sales should it not enter licensing agreements for those candidates. In addition, Arrowhead will owe Roche milestones – said to range between $2.5 million and $6 million – for achievements such as first regulatory approval of an RNAi therapeutic and sales milestones.—Joseph Haas 

Biogen Idec/Portola: Just months after Merck & Co. returned all rights to Phase II anticoagulant betrixaban to Portola Pharmaceuticals, the privately held biotech is entering the partnering waters again. This time, Portola has inked a lucrative licensing deal around a Phase I spleen tyrosine kinase (Syk) inhibitor and backup compounds with Biogen Idec. Under the deal announced Oct. 27, South San Francisco, Calif.-based Portola receives $45 million upfront -- $36 million in cash and a $9 million equity investment by Biogen giving that company a 2.8% stake in Portola. Portola retains the right to co-promote the lead compound, PRT062607, thought to offer potential in rheumatoid arthritis and lupus, as well as the follow-ons. In addition, Portola could earn up to $508.5 million in development and regulatory milestones, while Biogen will cover 75% of the development costs for the Syk inhibitor program. Portola CEO Bill Lis would not provide a specific breakdown of the milestones other than to clarify that they all could be realized prior to commercialization. “Everything thereafter is a profit-share on a 75/25 basis globally,” he explained. Biogen will lead development of ‘2607 in rheumatoid arthritis and lupus, while Portola will lead development in smaller indications, which Lis said could include immune thrombocytopenia. Portola is very likely to opt in to commercializing ‘2607 should it reach market, he added, and will lead commercialization in smaller indications.--JAH

Karo Bio/Karo Bio: There are plenty of instances when a biotech spins off its early-stage R&D to free up a particularly promising asset that dominates the biotech's value. Typically this can happen when a pharma acquirer swoops in to buy that lead asset (witness the Domain 'one-two punch), spinning out the earlier work into a newco. This week Swedish biotech Karo Bio has foregone the sale and cleaved off its preclinical R&D into a newco, intended "to become autonomous in operations as well as ownership." As intended the split gives investors the option to fund both Karo Bio's preclinical assets or its late-stage eprotirome program, a thyroid hormone receptor agonist about to enter Phase III dyslipidemia studies. (The kind of move some investors feel best aligns investor and management incentives -- as such we expect to see more of these.) The move comes a day after acting-CEO Per Bengtsson landed that job permanently, and he'll stick with eprotirome but not the Karo Bio brand.  The early-stage assets, for which the company will announce a plan within the next six months, get to keep the Karo Bio name; EprotiromeCo needs to find a new name without the benefit of an IVB naming-poll. Sorry guys.-- Chris Morrison

Cubist/Adolor: This week Cubist Pharmaceuticals diversified its portfolio with its acquisition of Entereg maker Adolor in a deal announced Oct. 24 worth $190 million up-front and another $225 million in contingent payment rights (CPR). Adolor wasn’t exactly on life-support, but the maker of the peripherally acting mu-opioid antagonist hasn’t exactly triumphed when it comes to building revenues for Entereg, which posted 2010 U.S. sales of just $25 million. Moreover, the company hasn’t had it easy when it comes to partnering. In late December, Pfizer pulled out of a deal with Adolor around two pain products; this past June the company bought back Entereg rights from long-time partner GlaxoSmithKline for $25 million. Still owning 100% of Entereg looks to have been a smart decision given the Cubist deal; the upfront alone is 7.6x what it cost Adolor to gain full control of the product and take questions about who’s driving its commercial strategy off the table. Cubist has been intent on moving beyond its anti-infective chops, looking for hospital products that can be sold at the same call point as its successful Cubicin. In addition to a marketed product, via the Adolor acquisition Cubist also gets an interesting call option on a pipeline product, ADL5945, which has promising Phase II data in the opioid induced constipation indication. Still there’s quite a bit of risk associated with ‘5945 and many analysts think Adolor could be too late to the game with its compound; thus, the deal’s CPR structure means Cubist isn’t taking 100% of the risk for the compound. Indeed, if ‘5945 is approved in the US with what Cubist deems an unfavorable label, the milestones owed Adolor shareholders drop from as much as $3.00 per share to just $1.25 a share. – Ellen Licking
Biotie Therapies/Newron Pharmaceuticals: Without Merck Serono as a father figure, guiding the hand of Milan-based Newron Pharmaceuticals, the Italian biotech suddenly looked less attractive to Finland's Biotie Therapies. It's only seven days since Merck Serono sent back the late-stage potential Parkinson's disease therapy, safinamide, to Newron, but time enough for Biotie's directors to terminate their planned merger with Newron, laid out at the end of September, and to say they were entitled to a merger break-up fee of €1.5 million. One of Newron's attractions would have been milestone payments from Merck as safinamide progressed towards the market; these will no longer be received, although Merck has promised to finish off some of the clinical work. Newron, which had €10 million in cash and an option on another CHF27.5 million ($32 million) from financing firm Yorkville at the half-year stage, said safinamide would be an attractive opportunity for any company with a commercial capability.--John Davis

image from flickr user pilar torres used under creative commons license

Financings of the Fortnight Tells A Tale of Two Conferences

Investors gauging the market mood look for signs. We also spent two days this week at the BioInvestor Forum in San Francisco looking for signs that the current biotech climate is anything but a bummer.

No dice. Everyone we spoke with thought attendance felt light; the show runners at BIO countered that registration was up 5% over last year then blamed the first day's obvious loneliness on traffic snarls caused by President Obama's visit to San Francisco. Most of the company presentations we attended had fewer than 10 people in the room, and that included the company's PR rep and the guy or gal running the A/V gear. On the second day, organizers cut the main room in half to make the panel discussions feel more intimate.

The biggest sign of malaise was the title of the final panel: "Opportunities or Apocalypse? Prophecies for 2012." To even contemplate the A-word in what's supposed to be an industry-boosting event was a sign of how sour the mood is right now. Still, Matthew Perry of Biotechnology Value Fund, Bryan Roberts of Venrock, Kurt Von Emster of VenBio, and Ron Laufer of MedImmune Ventures did their level best to buck everyone up. Perry prophesied con mucho gusto that old-school biotech companies, built on groundbreaking science, will start going public in the next 12 to 18 months before even having late-stage clinical data.

While the word "apocalypse" literally hung over everyone's head the entire time on the projection screen, an exit sign glowed over Roberts' right shoulder. No one on stage seemed to notice. How's that for symbolism?

Another sign of the "new normal" of the decreased influence of traditional venture capital: big drug makers aren't just being more aggressive with their own in-house venture arms, they're also thinking hard about deploying capital as limited partners to back venture groups struggling to raise money during the Great Shakeout. Both Merck & Co. and Eli Lilly have taken steps to invest in early stage science via the LP route: Merck through its Merck Research Venture Fund, which our industrious colleagues were first to report here, and Lilly via its Mirror fund initiative, which has encountered some speed bumps.

On another panel, the topic was not building companies but asset financing -- moving drugs forward in the most efficient manner possible and into the hands of the strategic buyers who need to refill pipelines. While David Collier of CMEA Capital was on stage discussing his firm's asset-financing plans through a CMEA-funded vehicle called Velocity Development Corp., another venture firm across the country made good on a similar plan. Atlas Venture unveiled its first asset-based limited-liability corporation, Arteaus Therapeutics, which we detail below.

An antidote to the subdued investment scene was a short walk away (or a cable car ride, if you prefer). In a Nob Hill hotel conference room, the World ADC Summit brought a packed house of mainly scientists together for talks on antibody-drug conjugates, a field that needed three decades to produce an exciting commercial product: Seattle Genetics' Adcetris (brentuximab vedotin), which received FDA approval in August. We're not counting Mylotarg (gemtuzumab ozogamicin), which Wyeth had approved in 2000 but never caught on and was removed from the market in 2010 for safety concerns.

The mood at the ADC Summit was palpably different: an acknowledgment that the door is wide open to a vast array of technological advancements, some of which could be quite disruptive and are being driven by small venture-backed firms. One of those firms was Syntarga, with drug-and-linker technology, that agreed to be acquired in June by its Dutch neighbors Synthon; former Syntarga CEO Vincent de Groot, now a vice president at Synthon, told IN VIVO Blog that ADC innovation will come "from all angles," and what's now known is only the visible part of a technological iceberg. Seattle Genetics, Immunogen and Genentech will need to continue to innovate to ensure their tenure as ADC leaders isn't short-lived -- not that those companies are standing pat. (For more background on the rising ADC tide, have a look at our story from December.)

To be fair, BioInvestor also had a lively panel discussion dedicated to ADCs peopled with executives from some of those small firms. But the ADC Summit in particular was a reminder that there is plenty of enthusiasm to create biomedical innovation (yes, among the Big Pharma, too). The enthusiasm to open one's wallet to fund such innovation, however, is quite a different story.

A quick note: If there's a topic you'd like to see in this column, or you have specific feedback that you'd rather not put in Web comments for all to see, drop us a line at or Make sure to include FOTF in the subject line. Your support helps nourish clinical development of subject-verb conjugation that addresses unmet syntactical need every two weeks in...

Arteaus Therapeutics: Earlier this year, Atlas Venture said it would explore a new asset-based funding model, yet another experiment by a venture firm in an effort to improve returns from early-stage products. Its first such investment appeared Oct. 19 with the launch of Arteaus Therapeutics, a company without employees created solely to house a Phase I migraine drug spun out of Eli Lilly & Co. Atlas and OrbiMed Advisors provided $18 million in Series A funding to Arteaus, a start-up designed to be even more virtual than most virtual companies. It will be structured as a limited liability corporation (LLC) and will be controlled primarily by Atlas Venture Development Corp., a stand-alone offshoot of Atlas intended to direct operations at several companies like Arteaus simultaneously. Atlas partner and acting Arteaus CEO Dave Grayzel said the cash will fund clinical trials to show proof of concept rapidly; if that’s achieved, Lilly holds an option to reacquire the asset at undisclosed pre-negotiated terms, and therefore deliver an exit for Atlas and OrbiMed. A bit of irony: Lilly has been working to build exactly this type of relationship with three venture funds in what it calls the"Mirror" portfolio. Those plans have not gone quite as expected, with at least one fund, CMEA Capital, not participating. (Lilly said in early 2011 that one of its venture partners had accepted two molecules, one from Lilly and one from a third party.) Atlas is not one of the Lilly "Mirror" funds. The molecule, an antibody being studied as a prophylaxis for migraines, binds with calcitonin gene-related peptide (CGRP); both Merck and Boehringer Ingelheim have halted development of CGRP antagonists designed to treat acute migraines. -- Paul Bonanos

Regeneron Pharmaceuticals: It's every little biotech's dream: sign several platform-validating licensing deals, save a few choice molecules (or regions, or indications) for itself, bring a drug to market that could put a lickin' to one of the big boys, then borrow a barrelful of non-dilutive cash for the commercial war chest. Regeneron hasn't yet shown that its wet age-related macular degeneration treatment Eylea (aflibercept) can beat Genentech/Roche's Lucentis; in fact, thanks to a three-month PDUFA delay, it must wait until Nov. 18 for approval. But it's got the cash for the battle. Regeneron announced October 18 it raised $400 million in convertible debt, payable over five years at 1.875%. As commercial chief Bob Terifay told IN VIVO this summer as part of an analysis of biotechs that manage to bring a first drug to market, the firm is shifting significant resources to the commercial side for the first time. Eylea would actually be Regeneron's second approved drug; its first, Arcalyst(rilonacept), treats a family of ultra-rare diseases and requires scant commercial outlay. Eylea sailed through its FDA advisory committee meeting and is still expected to win approval. If Regeneron can convince doctors and payors of Eylea's benefits (fewer injections, for example) it could take market share from Lucentis, the proper use and price of which has been thrown into question by the CATT study. Bayer HealthCare has rights to Eylea ex-U.S. -- Alex Lash

SAGE Therapeutics: Third RockVentures is one of the few VCs willing to make big bets on early stage science these days. With the announcement on October 18 of its solo staking of SAGE, a Boston start-up developing novel medicines for schizophrenia, depression, and other CNS conditions, the investment group makes its first major bet in neuroscience. It’s a move that’s been expected since October 2010 when Steven Paul, former EVP of Lilly Research Laboratories and a neuroscientist by training, joined Third Rock Ventures as a venture partner. Underpinning SAGE is a proprietary chemistry platform called PANAM, referring to the start-up's intent to develop positive and negative allosteric modulators of GABA and NMDA receptors. Both proteins are critical actors that respectively play a role in the transmission of the inhibitory and excitatory neurotransmitters, gamma-aminobutyric acid and glutamate. Third Rock has been incubating the company for more than a year, building its IP position and an advisory board of top-notch academics. "It will be hard for anyone else to mimic this approach given what we've consolidated over the last year," interim CEO Kevin Starr(and a Third Rock partner) told “ThePink Sheet” DAILY. Both Starr and Paul said the $35 million Series A, which may or may not be tranched, is enough to take four or five programs forward simultaneously. One of those seems likely to be a positive allosteric modulator for schizophrenia that has “encouraging” data, according to Paul. Interestingly,one family of targets SAGE won't be pursuing is the metabotropic glutamatereceptor (mGluR) family, among the hottest targets of interest inside many big pharmas and biotechs, including Lilly, Johnson&Johnson, and Addex Pharmaceuticals. –- Ellen Foster Licking

BIND Biosciences/Selecta Biosciences: These two Boston-area nano-medicine companies already have much in common: both were co-founded by Massachusetts Institute of Technology professor Robert Langer and Harvard Medical School professor Omid Farokhzad, and both feature Flagship Ventures as an original investor. But they're now connected in another way: simultaneous investments by Rusnano, the Russian state fund for nanotechnology run by former Russian politician Anatoly Chubais, who ran the privatization process under Boris Yeltsin. Announced Oct. 27, Rusnano is investing $25 million in each company, making it the largest investor in rounds totaling $47.5 million for each company, with new and existing investors filling out the slate. Both BIND and Selecta will open subsidiaries in Russia to tap into scientific talent as well as clinical trial populations. Both firms have advanced a lead candidate from their platforms. Selecta, with its Synthetic Vaccine Particle platform, is just now entering the clinic with its program for smoking cessation. BIND, whose Accurin platform aims to accumulate systemic cytotoxins in higher, more targeted concentrations, is in Phase I with its lead progam BIND-014, a reformulated version of the chemotherapy docetaxel, aimed at advanced or metastatic solid tumors. -- A.L.

Monday, October 24, 2011

So We're Courting Biosimilars After All -- For Market Access

How times change. Once the evil Queen in branded biotechs' hugely profitable fairy-story, biosimilars has turned into, if not the attractive prince, then at least a character worth courting.

"We believe that biosimilars have a role to play, provided they are safe and effective, so we are investigating new ways to serve patients in this rapidly evolving field," declared Amgen's SVP, R&D, Joe Miletich in an emailed statement last week. He wouldn't say much more, and no-one wanted to be interviewed about this new relationship. But Amgen is far from alone in wooing copy-cat biologics.

Biogen Idec's trying to do it as well, albeit with the help of a partner, since it's got too much to do with the Phase III pipeline in-house. Thus although "a bit effort of our own isn't on the cards," according to CEO George Scangos, "I do think there will be a market. So we're in discussions now, with folk who can take it on with us," he told the audience at Elsevier's recent Pharmaceuticals Strategic Alliances conference.

Meanwhile private Boehringer Ingelheim, too, is trying to join this party -- and do so rather earlier than it did in the case of original therapeutic biologics (where it mostly failed to leverage its significant production and manufacturing expertise, missing out on pharma's biologics land-grab of the decade gone by). "It is our objective to be one of the major players in this field," the company told us, by building its own internal pipeline to commercialize in the US and Europe. "We feel confident that we are able to leverage our capabilities in product development, supply and clinical expertise at Boehringer Ingelheim to offer high quality products understanding the patients’ needs."

So there's the secret: patients' needs. Or let's call it payers' needs. Innovators – not just the traditional large molecule players, but Big Pharma such as Merck and Wyeth-ed Pfizer, too – are falling over themselves for a piece of this multi-billion dollar pie, in part as a nice way to solve the in part since it represents spot-on where payers' -- the customers'-- demands are going right now across the sector as a whole: toward cheaper, safe medicines that are good enough, rather than the absolute best.

And as the new biosimilar players jockey for market share (look out for our November issue of IN VIVO for more on how), they'll be forced – at least as long as automatic substitution remains off the cards -- to emphasize precisely those un-sexy peripherals such as route of administration, formulation and compliance support services that are so valuable to payers and patients, in order to compete.

Biosimilars is a useful friend to get to know, in other words – if you aren't already quietly connected. Alongside the grand declarers are players like Lilly, with its biosimilar version of Sanofi's basal insulin Lantus approaching Phase III, and Inspiration, which just filed a biosimilar Factor IX in Europe for hemophilia B. Everyone's hoping that biosimilars will soon generate rather more of that commercial magic that their fairy-tale promised, but has thus far struggled to deliver.

image by flickrer princessashley used under creative commons

Friday, October 21, 2011

Deals of the Week Ponders: Is IND the New Biotech Dealmaking Sweet Spot?

Today in the hot-off-the-presses October issue of IN VIVO we argue that early-stage biotechs ought to stop pushing their drug candidates through to clinical proof of concept.

Now before you start to laugh, hear us out. And take a look at the data.

Though clinical proof-of-concept has long been the goal for biotechs hoping to land a sweet licensing deal or acquisition, getting there takes plenty of cash -- cash that's increasingly scarce as venture funding dries up or moves on to later-stage, in-licensing based opportunities. What's more, it seems that neither the public markets nor licensing partners ascribe much value any more to early clinical success. Finally pharma companies seem eager to deal earlier on in the value-chain as pre-clinical stage deals are up in volume this year while the number of deals for assets in Phase I, II or III remains stagnant. They're also increasingly skeptical, executives and analysts note, of biotech's development work.

In short, for many biotechs in 2011, clinical development might not be worth the risk. Up-front deal values for pre-clinical stage assets have held steady over the past five years, while up-fronts for assets in Phase I, II and III have suffered. The chart below shows average data for about 300 deals since 2007 with disclosed up-front payments (from a larger set of 770 deals between biotechs and revenue-generating pharmaceutical marketing partners, Jan 2007 through 14 September 2011); we first presented this data at this year's Pharmaceutical Strategic Alliances meeting on September 22.

Sure biotech companies can expect lower up-fronts from preclinical deals, and still stronger up-fronts from Phase I or Phase II transactions. But is it worth the cost, and thus the risk, of getting there? We argue this month in IN VIVO that in fact for most discovery-based biotech companies it probably isn't. Better to land an early-stage deal that's structured to provide investors with at least some liquidity -- Forma's deal with Genentech is an interesting and perhaps imitable model -- than to curb discovery to allocate the lion's share of resources to a lead program.

In Vivo subscribers can check out the whole piece here. And meanwhile here's something that never loses value, it's time for the next edition of ...

Abbott/Costello (deemed so by IVB's reader poll) : In a move intended to unlock the value of its proprietary pharmaceuticals business, which may be undervalued due to investor concerns about the possibility of declining sales for multi-blockbuster Humira (adalimumab), Abbott announced a plan Oct. 19 to split into two companies over the next year. The pharma will consolidate four business segments – medical devices, diagnostics, nutritionals and brandedgeneric drugs – into a diversified medical products company that will retain the Abbott name and be led by current Chairman and CEO Miles White. Meanwhile, the company will spin out its portfolio of prescription pharmaceuticals, including Humira, which has garnered sales of $5.7 billion through the first nine months of 2011, along with its R&D pipeline into a still-unnamed research-based pharmaceutical company. The spinout will be led by Richard Gonzalez, currently executive VP, Global Pharmaceuticals, for Abbott and a decades-long veteran at the company. The diversified company brings in about $22 billion a year, execs said on an investor call, while the pharmaceuticals unit earns about $18 billion annually, with Humira’s share of that total growing. Investors are wary of Humira’s growth potential because of competition it may face from new drugs in development, like Pfizer’s tofacitinib, and biosimilars. Gonzalez said Humira can continue to grow, however, by increasing penetration in non-mature indications as well as through label-expansion plans. All in all the move (and investors' reaction) suggests confidence in pharmaceutical growth continues to ebb. —Joseph Haas

Servier/Miragen: In the largest deal yet for the fledgling microRNA sector, four-year-old startup Miragen Therapeutics agreed to license some geographic rights to three preclinical targets to Les Laboratoires Servier. The mid-sized French pharma will pay $45 million up-front, plus potential milestone and royalty payments worth $352 million as well as development and support payments, for rights to the three targets outside the U.S. and Japan. The deal covers Miragen’s two lead programs, miR-208 and miR-15/195, and a third target not yet identified by the companies; all are in the cardiovascular disease space. Although Servier will fund all clinical trials through Phase II, Miragen retains the right to co-sponsor the Phase III development and commercialization of any of the three, and will collaborate with Servier throughout the research and development phase. MicroRNA drugs are thought to overcome a difficult problem of delivery of RNAi drugs, allowing for traditional infusions and injections; Boulder, Colo.-based Miragen has named eight compounds in its pipeline. Although the fresh capital will keep it afloat far longer than its initial $18 million in private capital raised since 2007, Miragen CEO William Marshall says the company is still planning a large Series B round. – Wendy Diller & Paul Bonanos

Roche/Anadys: For several years as competition in the hepatitis C space intensified, some market analysts have expected a big pharma to buy out Anadys Pharmaceuticals and its portfolio of two HCV candidates. Roche did so Oct. 17, announcing a tender offer to acquire the biotech for $3.70 a share, a premium of 256% over the stock’s closing price on the last business day before the transaction. The purchase price willcome to about $230 million, which analysts and Anadys executives alike called solid value for current shareholders. Despite unveiling promising Phase IIb data for its lead program, non-nucleoside polymerase inhibitor setrobuvir (ANA598) on Oct. 13, the San Diego firm’s stock closed at just $1.04 on Oct. 14. Roche proposes a tender offer which Anadys officers and board members, collectively comprising about 7.9% of thebiotech’s outstanding shares, already have committed to accept. The Swiss pharma said it plans to complete the tender offer before the end of the year and two analysts we interviewed predicted Roche would face little difficulty in getting shareholders to accept its offer. While a 256% share price premium is an eye-catching number in the current biotech environment, a long-term review of Anadys’ history suggests the sale’s valuation may not make for a great success story for biotech investors. Overall, Roche is offering about the equivalent of the amount investors have put into the company since its relaunch in 2000.--JAH

Ipsen/Syntaxin: Ipsen and UK biotech Syntaxin on Oct. 20 announced a tie-up to discover new compounds in the field of botulinum toxins, an area where Syntaxin has considerable biology expertise, and where mid-sized Ipsen already sells Dysport for a variety of movement disorders. Ipsen will provide up to $9m in research milestones over the first three years, help fund FTEs and offers additional license fees and the usual slate of pre- and post-approval milestones and royalties. The tie-up doesn’t come out of the blue: Ipsen in November 2010 participated in an €18m Series C for Syntaxin, owns 8.9% of preferred shares on a fully-diluted basis, and, according to CBO Nigel Clark, concurrently signed a first research collaboration with the French group at the time of the investment – a deal that remained largely below-the-radar. Even without the history, Ipsen’s re-invigorated focus on its two key commercial assets, Dysport and acromegaly drug Somatuline, and its related move to restrict R&D efforts to the corresponding neurology and endocrinology franchises make Syntaxin an obvious partner, on paper: besides its knowledge of neurotoxins, its own lead program is an acromegaly candidate due to enter the clinic during the 2H of 2012. “We fall into a strategic focal point for Ipsen,” summarized Syntaxin CEO Melanie Lee. This latest deal does come with a few potential wrinkles, though. The biggest is that Syntaxin has, since several years before its 2005 spin out of the UK’s Health Protection Agency, been in bed with Allergan, Ipsen’s key commercial competition in the botulinum toxin space. The candidate discovered under those partners’ second collaboration in 2006 is due to report Phase II results next year in PHN and overactive bladder. Lee says it’s not a problem, because the Allergan and Ipsen deals represent “different uses of the [Syntaxin] technology.” In the Allergan deal, Synaxin’s effectively re-targeting botulinum toxin, applying its Targeted Secretion Inhibitor technology to “target cells of our choice for inhibition of secretion in that the PHN and OAD settings,” says Lee. The Ipsen deal involves exploring the potential further uses of natural botulinum toxins (neurotoxins that inhibit neurotransmitter secretion from nerve cells) “as we unravel the biology of botulinum.” – Melanie Senior

Merck-Serono/Newron: Merck Serono, the pharmaceuticals division of Merck KGaA, isn't waiting for the Phase III program on the role of Newron's safinamide in Parkinson's disease to be completed in another six months. The German company surprisingly announced October 21 that it was returning safinamide to Newron because it believed the product had less market potential than it originally anticipated. The announcement immediately put the intended merger of Italy's Newron with Finland's Biotie Therapies, announced only a month ago, in doubt. Executives from Newron and Biotie were participating in a joint investor roadshow on their intended merger when Merck dropped its bombshell, and are now having to consider how best to proceed. Perhaps the writing has always been on the wall: since the original agreement was brokered in 2006, Merck's clinical trial program has only evaluated safinamide as adjunctive therapy in Parkinson's disease, while originally it was thought the molecule could have potential in other therapeutic areas, including Alzheimer's disease. And Merck has been busy of late re-prioritizing its R&D pipeline and making organizational changes following the late-stage failure of its MS therapy, oral cladribine, development of which was finally terminated in July 2011. -- John Davis

Thursday, October 20, 2011

European Regulator-HTA Rapprochement Not Quite There

Oh wouldn't it be nice if regulators and cost-effectiveness bodies could align their demands a little more helpfully? What a boon such hand-holding would be for controlling the costs of drug development, while still supporting innovation and recognizing value.

Still, there remains little substance as to how such a partnership could be effectively achieved, as was clear from this year's meeting of The Organisation for Professionals in Regulatory Affairs in Rome, Italy, on Oct. 13-14.

Despite the logic of closer HTA/regulatory harmonization -- the timelines are so close anyway, and patient access is impossible unless both sets of demands are met – regulators and price-sensitive HTAs remain uneasy bedfellows.

Indeed, back in Sept. 2009, EMA's then-director Thomas Lönngren expressed an almost ethical concern that the two sides were getting too close, as if one risked undermining the other. Since then, there's a more widespread agreement that things need to change, but certain executives, such as Aginus Kallis, head of the Dutch medicines agency, are still skeptical as to whether a closer relationship could ever work.

The fact that HTAs are now requiring even earlier-stage data further increases the value of (and need for) a coordinated regulatory/HTA approach. But according to Mats Mårfält, Senior Director, European Regulatory Affairs at AstraZeneca, progress in a Swedish pilot study designed to promote such coordination has been disappointing.

The idea was for Sweden's medicines agency (Läkemedelsverket) and its HTA body (TLV) to progress step-wise from single, to parallel and finally to joint scientific advice. Mårfält’s assessment was that the result was cacophony, as each stakeholder – including the manufacturer – sought only to blow its own horn. The regulator and HTA were reluctant to disagree and even discuss in from of the applicant; there was no attempt to align views at all. Far from building relationships, this looked more like playground squabbles.

And sadly, Anders Blanck, current head of the Swedish pharmaceutical industry association, later confirmed that there had been no further advance since this embarrassing, early stage.

If the relatively progressive Swedes can't do it, what hope for regulatory-HTA rapprochement across the rest of Europe's nations, let alone the whole region? Not much, it seems.

But maybe that doesn't matter, suggested Andrea Rappagliosi, Vice President European Government Affairs, GSK. Sure, HTA is a hurdle (albeit one that we know won't go away), and the lack of coordination with regulators is a pain. But it's Europe's patchwork of pricing and reimbursement systems – some tied up inextricably with HTA and even approval, others not – that are the real problem for market access.

So let HTA and authorization bodies continue to remain apart, provided they enjoy "robust two-way communication" in order to avoid overlap and duplication (which, judging from the Swedish experience, may be a stretch). Just speed up pricing and reimbursement – something that's being attempted, via proposed amendments to the European Transparency Directive. And here progress is being made, according to Rappagliosi, but as always the wheels of the EU legislative process move slowly -- Faraz Kermani

image by flickrer wolfsoul used under creative commons

Wednesday, October 19, 2011

Help Name Abbott's Pharma Newco

Friday, October 14, 2011

IVB Culture Corner: Device Wonkery on the Small and Big Screen

Perennial hot policy topics for the device industry rarely double as plot drivers for TV and movie screenwriters. But this has turned out to be big week for those select few of us (count me among them) who are in the market for medical-device-themed dramas.

This week on CBS's Chicago law firm drama “The Good Wife,”, Alicia (Julianna Margulies) and her suave boss are locked in a heated arbitration process with defense attorneys. The case: a patient treated with a spinal cord stimulator for pain who is experiencing adverse events is suing her doctor after she discovered, first, that the device she received was invented by the physician, who was receiving royalties on its sales, and, second, that that the product was not FDA approved. “He just implanted it in me like I was a guinea pig,” Alicia’s client claims in one deposition.

This all rang a bell to me. Replace 'spinal cord stimulator' with 'mitral valve repair device' and you have a very similar situation to the controversy that surfaced in 2008 with Edwards Lifesciences Myxo ETlogix 5100 annuloplasty ring. A patient got the Myxo device in 2006 after her cardiologist referred her to Patrick McCarthy, a cardiothoracic surgeon and Edwards consultant at Northwestern University who invented the Myxo ring and other annuloplasty devices. He was conducting a study on early experiences with the device. The patient developed an inflammatory reaction and went back to the Northwestern cardiologist who referred her, Nalini Rajamannan, for a follow up. In conjunction, the patient noticed on a warranty card she received after the procedure that her device was labeled as the “McCarthy” annuloplasty ring, which prompted her to go to FDA; she was apparently concerned that she was implanted with a prototype device invented by the surgeon without her consent. FDA’s response: we have not approved that device. It turned out Edwards had relied on a 1997 FDA guidance document to internally justify that the product was only a “minor modification” to a previously cleared ring and thus did not require a submission or notification to the agency. This is a common practice and a good way for FDA to avoid clogging up its dockets with a whole bunch of submissions for aesthetic modifications or minor wording clarifications in labeling, for example, but there has always been a gray area about where the line should be drawn.  Anyway, the patient sued.

I was smitten when the term “minor modification” was a major plot turner in Sunday’s episode. It was almost enough to stop the plaintiff team in their tracks when a product manager for the manufacturer testified that the device was legitimately on the market and required no investigational status or extra informed consent because it was only a minor modification of a former device. Ah, but touché. Borrowing an argument forwarded in an ongoing real-life suit against Dr. McCarthy, Alicia’s team eventually points to the doctor’s patent for the spine stimulator in question, which describes the device as the best thing since sliced bread and clearly different from anything else before it. That was enough to get the plaintiff a multi-million dollar settlement.

Real life, as usual, is more complicated. The patient inquiry and, perhaps, follow-up communications by the patient and Dr. Rajamannan with a few senators named Obama, Durbin and Grassley, prompted FDA to looking further into the matter. Edwards removed the device from the market in 2008 and submitted a new 510(k) application. The company ultimately gained a 510(k) clearance in April 2009 for what is now called the dETlogix 5100 ring, for a more general indication than what Myxo was originally marketed for. The original patient who raised the matter dropped her lawsuit against McCarthy, Northwestern and Edwards, but a different patient who received the device during a similar period continues to pursue a suit. The controversy was one key driver in FDA’s decision to revise its 1997 guidance to companies on how to determine if they need a 510(k) for a device modifications; a new draft was issued this summer. And the matter made some headlines again this week as news came out that Dr. Rajamannan, after already being denied tenure, was dismissed from her position at Northwestern Sept. 30.  The University says the dismissal is the result of her not gaining tenure based on a peer-reviewed process and is in no way retaliatory. Rajamannan disagrees.

If that was not enough for us med device policy geeks, we have the movie Puncture, which had a special screening in Washington D.C. on Wednesday night and is in limited release in New York, Los Angeles and Houston. It appears that Chris Evans, the title star of the 2011 summer action film, “Captain America: The First Avenger,” is now battling unsafe needles in a film loosely based on the real-life case of Retractable Technologies.

That company sued Tyco Healthcare, Becton Dickinson and the hospital group purchasing organizations Premier and Novation in the late 1990’s based on allegations that the device makers and GPOs engaged in contracts that unfairly excluded Retractable’s self-retracting safety syringes from the market (the suits were eventually settled for $150 million). Evans plays one of the attorneys (who happens to have a drug addiction), who takes the case of a nurse who contracted AIDS from a needlestick injury, eventually leading them to the inventor of a retractable syringe and ultimately to a show down with corrupt hospital executives, device manufacturers and their congressional supporters.

Underlying the challenge for the protagonists is a “corrupt arrangement between monolithic hospital purchasing cartels and a big needle maker, in which the industry giant was able to pay millions in kickbacks to the cartels to make sure its unsafe products — and only its products— were used in hospitals,” according an unofficial movie website set up by several groups to highlight the real-life issues portrayed in the movie.

This is a direct reference to the GPO safe harbor, which allows the purchasing organizations to accept fees from hospital suppliers, including device makers and others, with whom they negotiate discount contracts with for member hospitals, without running afoul of the federal anti-kickback statute. The Medical Device Manufacturers Association, which has been lobbying Congress to remove the safe harbor for years based in part on arguments that it encourages GPOs to block smaller firms from hospital customers, sponsored the D.C. screening. The group invited congressional staff and members of the press, among others.

It remains to be seen whether Puncture helps MDMA make headway on Capitol Hill. On the whole, “The Gray Sheet”'s Jessica Bylander, who attended the screening, reports: “The film was a pretty typical David and Goliath story, pitting this group of “underdogs” – the friends’ struggling law firm, the engineer who couldn’t sell his product and the nurse who contracted HIV – versus the very slick-seeming, well-oiled GPO machine whose lawyers basically tell the main characters to give up because there’s no way they can win and no way the GPO will settle. But apparently the GPOs eventually did.” For a potential lobbying tool, however, she notes, “The movie was uncomfortably R-rated at times.”

-    David Filmore

Deals of the Week Considers Another Blockbuster

"If you guys were the inventors of regorafenib, you'd have invented regorafenib." It may not have much of a ring to it, but that's the line a Bayer executive might have spoken if screenwriter Aaron Sorkin had scripted the company's tiff with longtime partner Onyx Pharmaceuticals. And like the spats Sorkin brought to the silver screen in The Social Network last fall, the Bayer-Onyx quarrel resulted in a settlement.

What could have shaped up as a cinematic tale of betrayal ended with a handshake this week, as Onyx agreed to drop its lawsuit against Bayer, several days into a trial in U.S. Federal District Court in San Francisco. The agreement resolves litigation that has persisted since May 2009 and restores peace to a partnership that dates back to 1994.

At stake were the rights to Phase III candidate regorafenib, a cancer-fighting compound that bears a strong resemblance to Nexavar (sorafenib), the nearly-$1-billion-a-year oncology drug on which Bayer and Onyx have collaborated since the mid-90s. ("You know what's cool? A billion-dollar drug.") Onyx had charged that Bayer developed the newer molecule in secret, violating the companies' agreement to disclose research of other compounds related to Nexavar. Regorafenib's chemical structure is almost identical to Nexavar's, substituting one fluorine atom for a hydrogen atom.

Rather than simply cutting a check or handing over equity, as Zuck did for both the adversarial Winklevii and his former friend Eduardo Saverin, Bayer has resolved to move forward with its partnership with Onyx, while restructuring some elements. Onyx gets 20% of worldwide sales of regorafenib in oncology, and it won't shoulder any costs for its late-stage development; Bayer will handle that. Bayer will also pay Onyx fees if they agree to co-promote the drug inside the U.S., where it has been tested in metastatic colorectal cancer and gastrointestinal stromal tumors.
Cash changes hands right away, too: Bayer is buying out Onyx's rights to Nexavar royalties in Japan for $160 million, giving Onyx additional funds as it readies another Phase III cancer drug, carfilzomib, for regulatory approval. Moreover, Bayer agreed to waive the change-of-control provisions that would have required Onyx to give up Nexavar profits in the event Onyx is sold, thereby freeing up its merger-and-acquisition options.

It's a good deal for Onyx, which gets timely cash and potential downstream money from a drug it won't have to develop itself. And although the companies have insisted that it's been business as usual between them all along, they appear to have patched things up without much damage to anyone's reputation; Bayer admitted no wrongdoing in the process.

If they never make a movie about regorafenib after all, well, we've got Contagion, haven't we? And also...

Pfizer/Humana: As fans of both the Philadelphia Phillies and the New York Yankees well know, the only post-season outcome that matters is a World Series victory. In the less glitzy world of pharma, outcomes -- particularly data that track real-world outcomes and measure a drug's effectiveness relative to competitors -- could mean the difference between drug launches that sparkle and others that fall flat. With payors now wielding greater control, pharmas need access to the breadth of data required for more informed drug development or post-marketing product plans. Hence, the rise of a new kind of partnership in 2011: the pharma-payor collaboration. AstraZeneca and Sanofi were the first to jump on the bandwagon, inking deals with Wellpoint's HealthCore and Medco's United BioSource respectively. This week it's Pfizer's turn: In a five-year partnership, the world's biggest pharma is teaming up with insurer Humana and its research affiliate Competitive Health Analytics to use real-world outcomes data and comparative effectiveness. The partnership addresses three chronic disease areas affecting the elderly: pain, cardiovascular disease, and Alzheimer's disease. The companies didn't disclose financials and whether or not the relationship is exclusive. Presumably Pfizer is providing some kind of upfront money to support research by the two groups over the length of the agreement. What kind of "skin" Humana has in this particular game remains unknown. For instance, if Pfizer worked with Competitive Health Analytics to show a particular Alzheimer's drug were better than a rival's, could such data spark a reimbursement commitment from the parent company? We're guessing not. But that raises the question: is this multi-year collaboration a true partnership or a fee-for-service arrangement that gives Pfizer data access? What's clear is that, as in the AZ/HealthCore and Sanofi/Medco deals, Pfizer anticipates using the data to improve uptake of already launched products and to help the R&D crew make better decisions about the kinds of studies to conduct with pipeline products to win a stamp of approval not just from regulators but payors as well. -- Ellen Licking

Teva/Par: Generic drug seller Par Pharmaceuticals is shaping up to be the beneficiary of a Federal Trade Commission consent order requiring Teva Pharmaceuticals Industries to divest itself of two products totaling $200 million in annual sales, as a condition for Teva to acquire Cephalon. If the consent order is approved, Par would acquire the generic versions of transmucosal cancer pain lozenge Actiq (fentanyl citrate) and muscle relaxant Amrix (cyclobenzaprine) from the combined company for an amount to be determined. Teva will also supply a year's worth of generic Provigil (modafinil) to Par after its patent expires in 2012. Teva held 43% market share of generic Actiq, while Cephalon and Watson Pharmaceuticals jointly held 40% of an overall generic Actiq market worth $173 million. Amrix is not marketed in the U.S. as a generic, but the FTC determined that both Teva and Cephalon were on a short list of suppliers who could launch a generic version quickly. The consent order is subject to public comment until Nov. 7, after which time the Commission will decide whether to make it final, potentially greenlighting the $6.8 billion all-cash deal announced in May. -- Brenda Sandburg & P.B.

Pfizer/GlycoMimetics: Pfizer deepened its foray into rare diseases by taking worldwide exclusive rights to a sickle cell disease treatment currently in Phase II. In a deal announced October 11, Pfizer will pay up to $340 million to GlycoMimetics of Gaithersburg, Md., for GMI-1070, which has received orphan drug and fast-track status from the FDA. The drug aims to treat painful episodes of vaso-occlusive crisis, a complication of sickle cell anemia that causes obstruction of blood flow and can lead to organ damage. It is the major cause of morbidity and mortality for patients with the rare genetic disease, which occurs more commonly in people or descendants of people exposed to malaria. In the US, 1 of roughly 500 African-Americans are born with sickle-cell anemia, according to the Centers for Disease Control. To date, veno-occlusive crisis episodes have been treated with hydration, pain medication, and blood transfusion, usually requiring up to a week of hospitalization -- over 75,000 a year, according to GlycoMimetics. The firm says that GMI-1070 is thought to inhibit an early step in the inflammatory process that leads to leukocyte adhesion and recruitment to inflamed tissue. GlycoMimetics will be responsible for continued Phase II development, after which Pfizer will take the reins. Beyond the $340 million potential total, the details of the deal were not disclosed. The total does not include sales royalties if Pfizer brings the drug to market. The deal should provide further motivation to venture backers who see rare diseases as a fruitful investment area. Pfizer isn't the only active acquirer or in-licensor; GlaxoSmithKline, Shire, and Sanofi have all made significant investments in the area, and startups such as Ultragenyx Pharmaceutical and Orphazyme have benefited by attracting lavish venture dollars. -- Alex Lash 

Bayer/Yunona Holdings: Bayer has signed a preliminary agreement with Russian pharmaceutical maker Yunona Holdings to set up manufacturing, distribution and sales of drugs in Russia. Under its two-year-old Pharma2020 program, the Russian government has put in place incentives to increase the percentage of drugs sold in Russia to be made in that country, from 23% currently to 50%. A key driver is giving locally-made drugs more favorable reimbursement. As a result, foreign firms such as AstraZeneca, Novartis AG and Novo Nordisk are rapidly committing to build plants in the country, mostly in collaboration with local companies. It’s not clear what drugs Bayer plans to make in Russia, but Yunona is involved in diverse businesses, including oncology drugs and insulin. Analysts consider the country to be one of the major emerging markets for pharmaceuticals. Yunona, which is based in Yekaterinburg in the Sverdlovsk region, represents the Ural Pharmaceutical Cluster, which the Russian government has described as a high-tech complex of production and infrastructure capabilities. The cluster is earmarked for $860 million in government funding between 2010 and 2015. In addition to Yunona, the cluster includes the Ural division of the Russian Academy of Sciences and the Ural Federal University.  -- Wendy Diller

Thursday, October 13, 2011

Financings of the Fortnight Surveys The Landscape

This column has never been one to sugar-coat or wax Pollyanna-ish. And we agree with much of the hand-wringing of the past month over the state of life-science venture. Starting with the NVCA/Medic survey, then the BioCentury "canary in a coal mine" story (and one of our favorite Police songs, by the way), then Atlas Venture partner Bruce Booth's nostra culpa blog post this week, it's been a festival of flagellation.

In fact, our own life-science VC survey notes many of the same problems: capital flowing out of life sciences and into health care IT/services or out of health care entirely; a world of blame laid at the feet of regulators; and agreement that the shakeout of funds -- the most recent casualty being Prospect Venture Partners -- will continue for at least two more years.

(In case you missed it, we published our survey in the September issue of START-UP, and you can find it online in two parts: a feature on biopharma and a feature on medical devices.)

Based on the articles published this week, you could conclude that life-science VCs might as well pack up their portfolios and find another gig; in fact that's a question we asked the more than 70 VCs who filled out our survey. (One wag said his dream job other than VC was "dog walker.")

But it's high time to interject a small contrary note, which our survey also exposed. Investors who self-identified as biopharma specialists were in fact fairly upbeat about the current investment climate. Really. We also dug up venture return numbers, with the help of the folks at NVCA, which showed biopharma returns in the past ten years have practically matched total venture returns. Indeed, Atlas venture partner Bruce Booth, doing similar research independent of us, found the returns, sliced in a slightly different manner, even more optimistic:

A widely held notion amongst GPs, LPs, and entrepreneurs is that Life Sciences/ Healthcare (LS) venture investing is too challenging and has underperformed IT and Internet (Tech) investing over the past decade and will only continue to do so. Nothing could be further from the truth – it seems that like Rodney Dangerfield, LS gets no respect.
If a life science VC can convince a limited partner to put cash into venture capital – admittedly no easy feat these days – there's an argument to make that biopharma, if timed correctly, could match or outpace general venture returns.

We also heard from VCs that those raising new funds don't expect any change in compensation structures despite the desperate fundraising straits and the long-running efforts of this group to, ahem, re-align the financial relationship between LPs and GPs. How's that for optimism?

Of course, the next ten years will be a vastly different landscape than the decade prior. Emerging markets, US healthcare reform and budget cuts, potential long-term economic stagnation... all upcoming factors that could disassociate future performance from historical indicators. But those who remain steadfastly committed to biopharma investing can count on one certainty: less competition in the years just ahead. Those who figure out how to be counter-intuitive won't just make a lot of money; they could wind up backing bold new treatments for Alzheimer's, diabetes (perhaps these folks?), HIV, and other health crises. And those are the VCs whose work will put meaning back into stale, self-important buzzwords like "innovation," "patient-centric vision" and "unmet medical need."

How's this for an alignment of interests: You want a biweekly roundup of biotech financing news, ornery viewpoints, and silly links. And we provide you...

Cleave Biosciences: Big Series A rounds have been few and far between lately, but Cleave Biosciences has pulled in one of the year’s largest, intended to support identification and clinical development of oncology drugs that work by addressing protein homeostasis, the balance between protein synthesis and protein degradation within cells. The Burlingame, Calif.-based start-up landed $42 million in first-round capital, mostly from four venture firms: 5AM Ventures, U.S. Venture Partners, OrbiMed Advisors and Clarus Ventures. The four contributed equally, according to USVP’s Larry Lasky. A smaller component came from Astellas Venture Management, the investment arm of Japan’s Astellas Pharma. Cleave chief executive Laura Shawver served as an entrepreneur-in-residence with 5AM last year, when she met Cleave’s three scientific co-founders. Two were veterans of Proteolix, the developer of proteasome inhibitor carfilzomib, which was acquired by Onyx Pharmaceuticals in 2009. After tracking the scientists’ progress for several months, Shawver formally sought investors; USVP led the process with a term sheet, and the four came together. Shawver isn’t saying which targets Cleave will pursue but says it has three programs that could yield clinical candidates. It will choose its priorities based on both scientific data and market opportunities as they emerge. Cleave expects to seek a partner that would supply non-dilutive capital for at least one drug, although an eventual Series B is likely as well. Shawver confirmed that the Series A round is tranched, but wouldn’t say how much Cleave has received already. – Paul Bonanos

Incline Therapeutics: Last year, we gave Incline a place on the end-of-year A-List for the creative spin-out and funding that formed the company around a discontinued electronic pain patch. More than a year after the deal was announced, Incline has received the balance of its $43.5 million Series A, adding $21.5 million to the $22 million it took in during June 2010, according to a Form D filing. It's more than the arrival of another big hunk of money, however. The second tranche was coincident with a $3.5 million option payment that keeps alive Cadence Pharmaceuticals' exclusive right to acquire Incline. Cadence, the maker of Ofirmev (intravenous acetaminophen), thought it might acquire the pain patch from Johnson & Johnson at first but decided it had other fish to fry -- namely getting Ofirmev approved. So it helped orchestrate the creation of Incline, and it structured a pair of non-dilutive $3.5 million option payments to acquire it down the road. Now that it has prolonged its option with the second payment, its exclusive right comes with a steeper price tag: it can buy Incline for up to $228 million plus a $57 million earn-out any time before the end of 2013 or before Incline files an NDA for its first product. (Before the second tranche came in, the price tag was $135 million.) The product in question is Ionsys, an electronic patch that delivers fentanyl through the skin via a small electronic charge; the product was previously approved in Europe for post-operative pain while in the hands of J&J-owned Alza, but was pulled from the market in 2008 due to a safety concern. Cadence CFO Bill LaRue wouldn’t say whether Cadence strongly considered buying Incline during the first option period, but confirmed ongoing interest in the company. – P.B.

DNAnexus: Google Ventures and TPG Biotech are leading the genomics firm's $15 million round, its second, with previous investors First Round Capital, SoftTech VC, K9 Ventures, and Felicis VC also on board. The firm is teaming with Google to mirror the Sequence Read Archive, a US government site that stores and makes publicly available next-generation genome sequencing data. The agency hosting the site, the National Center for Biotechnology Information, said earlier this year it was phasing out funds for the program. DNAnexus announced plans to host the free databank Oct. 12. It likely won't be the only effort to store and provide access to the vast amounts of genomic sequencing data, given the explosion of new platforms from companies like Pacific Biosciences, Roche's 454 group, Life Technologies’ Ion Torrent and sequencingstalwart Illumina, as well as the rapidly dropping price of sequencing. Personal genome sequencing isn't quite ubiquitous, but the day is coming. DNAnexus is offering a free personal sequencing and $20,000 cash to employees who successfully refer software engineers to the HR department. (What, a 2-for-1 coupon for dinner at Chevy's isn't enough anymore?) With the DNAnexus deal, Google has taken another step into the health field. Not all have gone well. The search and data firm said in June it would shut down its Google Health project that aimed to let individuals store their personal health records online. Google's venture arm has also invested in monoclonal antibody platform firm Adimab, stem-cell researcher iPierian, and personal genomics firm 23andMe, which is run by Anne Wojcicki, married to Google founder Sergey Brin. -- Alex Lash

Zeltiq Aesthetics: You caught us. Four paragraphs after we fume over VCs shying away from true unmet medical need, we write up this piece of work. Cosmetic therapies aren't usually our thing, as you know, but when a panel of well-heeled life science VCs are backing a company that's trying to go public, well, these days that's worth noting. Even if the company is hawking a high-tech procedure that it says will get rid of your spare tire. This isn't a treatment for obesity; it's more like a Dustbuster that zaps your "annoying bumps and bulges of stubborn fat" with a blast of cold without killing surrounding skin and tissue. That's the claim. The FDA approved the device, called CoolSculpting, in 2010. As of June 30 it had 629 systems installed in medical offices worldwide. On October 7 the firm set terms for an IPO at 7 million shares to be sold at $14 to $16 per share, which would raise $105 million at the mid-range price. The main VCs are Advanced Technology Partners, Aisling Capital, Frazier Healthcare, and Venrock. All except Aisling bought at least 2 million preferred shares at $3.42 each in Zeltiq's Series C round in 2008, with each preferred share convertible to 1.07 common shares at the offering. In 2009, all four participated in a $10 million convertible bridge loan and soon after a related financing round. (Details are in Zeltiq's latest SEC filing here.) Aisling says it might buy 10 million shares as part of the IPO, but it's not a binding commitment. Underwriters are led by J.P. Morgan Securities and Goldman, Sachs; they have 30 days after the offering to buy up to 1.05 million additional shares. Zeltiq is expected to price next week. Meanwhile, antibiotic drug developer Cempra filed on Oct. 12 to go public. -- A.L.

Photo courtesy of flickr user Cat Sidh via a Creative Commons license.

Tuesday, October 11, 2011

The German Biosimilars Breakthrough That Never Was

It looked as if Germany had, via a new law in place since Oct. 1, allowed automatic substitution of biologicals with biosimilars. Such a move would have shaved 25% off the country's pharmaceuticals budget and set an important precedent in this nascent field, whose commercial success has so far been severely dampened by the restrictions on such substitution. There was plenty of excitement over the summer.

But it was misplaced. The legislation is in fact far more restrictive. The law permits a pharmacist to substitute a product for “an identical product”, even if the brand name is different. This could happen if a doctor prescribes only by active ingredient or does not rule out the substitution of a branded product for a product that contains the same active ingredient.

It sounds rather like generic substitution, but of course this cannot be the case, because biosimilars are not copies of the originator, they are simply “similar” – and this is the crux of the issue. The leading group of health insurers and the German pharmacists association have therefore agreed that in the case of biological products only those biologics that contain the same raw material and undergo the same manufacturing process are “bio-identical” and qualify for substitution.

This basically means that pharmacists may substitute biosimilars for biosimilars – and not for originators. Just to make sure that no-one confuses the issue any further, the agreement lays down specific substitution groups. For example, the first group consists of Medice’s Abseamed, Sandoz’s Binocrit, Hexal's Epoetin Alfa, because the epoetin alfa active ingredient in all of them is supplied by the same production firm.

So original biotech products remain a protected species for now, much to the frustration of the generics industry association, ProGenerika, which points out that substituting biosimilars for one another does not save any money. Instead, it discourages companies from manufacturing these expensive products because they face immediate competition.

But, leaving the summer madness behind us, there may yet be some hope on the horizon for a quiet revolution for biosimilars in Germany. A guideline on the administration of erythropoietin stimulating agents for the treatment of symptomatic renal anemia came into force at the end of September. It endorses the findings of the European Medicines Agency and states that ‘all available ESAs should be considered comparable in terms of therapeutic application’. The quality, safety and efficacy of approved biosimilars has been ‘adequately proven in the approved indications’, it adds. The first shot has been fired.

-- Faraz Kermani

image by flickrer caribb used under creative commons

Friday, October 07, 2011

Deals Of The Week: PPD/Carlyle Group & Hellman & Friedman; Pfizer/Puma Biotechnology & More...

This past week may have seemed plain vanilla from a deal perspective, but, ironically, it was among the most topsy-turvy of all in a year that has been relentlessly volatile for the burgeoning field cancer immunotherapy.

On Oct. 3, the Nobel Assembly announced winners of the Nobel Prize for Medicine were three immunologists, including Ralph Steinman of The Rockefeller University, who had died of pancreatic cancer three days earlier and thus became one of only a very few scientists to receive the award posthumously. The recognition came for Steinman’s discovery of dendritic cells decades ago; his work has most recently laid the scientific foundation for the biotech Dendreon Corp. to break ground and then much later dash expectations with its controversial but first-in-kind cancer vaccine Provenge for advanced prostate cancer. Bruce Beutler and Jules Hoffmann were also winners of the prize, for their work on the innate immune system, and the work of all three scientists has had implications for industry.

The mood was therefore understandably bittersweet at Cancer Research Institute’s annual scientific meeting. The meeting began in New York on Oct. 3, coincidentally the same day as both Steinman’s death and the Nobel Prize in Medicine were announced; all three prize winners have been active in CRI and winners of CRI’s prestigious William B. Coley Award. Work in the field progresses, as the roster of world-class speakers attested to, and Mitch Gold, CEO of Dendreon, received the Oliver R. Grace Award for Distinguished Service in Advancing Cancer Research – a salve no doubt in light of the recent flubbing he has taken on Wall Street for botching the Provenge launch, at least initially.

Lost in the greater dramas, perhaps, were two small deals around cancer immunotherapies, one involving a barter exchange between Merck KGAA and Ono Pharmaceuticals around Stimuvax, now in Phase III for non-small-cell-lung cancer; in exchange for Japanese rights to the cancer vaccine, Ono is giving Merck KGAA worldwide rights, excluding Japan, Korea, and Taiwan, to its experimental treatment for multiple sclerosis. In addition, Pfizer out-licensed to AZ's Medimmune subsidiary rights to its fully human monoclonal antibody tremelimumab, which binds to the protein CTLA-4, expressed on the surface of activated T-cell lymphocytes. In all cases deal terms were not disclosed but DOTW speculates…

PPD/Carlyle Group & Hellman & Friedman: Since the summer, rumors have swirled that contract research organization Pharmaceutical Product Development Inc. was in play. This week, private equity firms The Carlyle Group and Hellman & Friedman struck a $3.9 billion deal to acquire PPD, taking it private in a leveraged buyout announced Monday, Oct. 3. Affiliates of the two firms will combine to put up nearly $1.8 billion of their own equity capital, although neither firm revealed whether they contributed equally. The firms arranged for the remaining $2.2 billion as debt funding from four lenders: Credit Suisse AG, J.P. Morgan Chase Bank N.A., Goldman Sachs Bank USA and UBS Loan Finance LLC. The deal will compensate PPD stakeholders with $33.25 per share. That’s a premium of nearly 30% over PPD’s closing price of $25.66 on Sept. 30. In July, after rumors first suggested PPD might explore a sale the Wilmington, N.C.-based company issued a statement confirming that it would conduct a strategic review of its options. At the time, however, executive chairman Fred Eshelman insisted that PPD remained committed to its long-term plan and had not considered combining with another CRO. The deal is subject to a 30-day “go-shop” window, and is subject to a $58 million breakup fee if PPD chooses a higher bid, or a $116 million fee if the parties walk away for some other reason. – Paul Bonanos
Merck KGaA/ Ono Pharmaceutical Co. Ltd: Why pay cash if you can barter asset rights instead? In a duo of agreements announced Oct. 4, Germany's Merck KGaA licensed worldwide rights outside of Japan, Korea and Taiwan to Ono Pharmaceutical 's Phase II MS candidate, ONO-4641, while granting Ono Japanese rights to its own Phase III cancer immunotherapy Stimuvax. This is the second barter-style deal that Ono has signed in recent weeks. It licensed Japanese rights to Bristol-Myer Squibb's Orencia (abatacept) on September 20, while BMS gained rights in additional territories to an Ono antibody, ONO-4538/BMS-936558.

The deals were described as two separate agreements, but linking them means that less cash changes hands: Merck owed Ono Yen 1.5 billion ($18.6 million) for the MS drug, but was able to knock a third of that by granting Ono the rights to Stimuvax, now in Phase III for non-small-cell lung cancer, for €5 million ($6.6 million). No further financial details were given, except that milestone payments would be made to Ono on Merck's progress with the MS drug. Merck Serono licensed exclusive worldwide rights to Stimuvax from the US biotech, Oncothyreon. And Merck Serono has also recently snapped up another MS therapy, PI-2301, from a US company going through liquidation, Peptimmune Inc., for what appears to be a bargain $1.5 million up front.—John Davis

Puma Biotechnology Inc./Pfizer Inc.: Entrepreneur Alan Auerbach may have found a replicable biotech business model in a tough financing environment, which relies on private placements and reverse mergers to shore up financing for development of new compounds. Auerbach, a former securities analyst, founded Cougar Biotechnology in 2003 to develop oncology drugs, took it public through a reverse merger in 2006, and sold it to Johnson & Johnson for nearly $1 billion in 2009. Along the way, the company raised several hundred millions of dollars from private placements with institutional investors, who earned handsome returns upon the J&J sale.

Now, he is taking a similar tack with another start up he founded, Puma Biotechnology Inc. On Oct. 5, Puma announced that it had in-licensed worldwide commercial rights from Pfizer to an investigational pan-HER inhibitor, neratinib, now in Phase II studies for Herceptin (trastuzumab)-resistant metastatic breast cancer patients. Almost simultaneously, it also announced completion of a reverse merger with a shell company, Innovative Acquisitions Inc., and a $55 million private placement, which attracted some veteran biotech investors, such as Orbimed Private Investments IV, Adage Capital Partners, H&Q Life Science Investors, and others.

Also, in July, a company with Auerbach on its board of directors, Radius Health Inc., followed a similar financing path after a key partner elected not to exercise its option on its lead compound, a treatment for osteoporosis. Radius raised $91 million from a private placement consisting of two-thirds equity and one-third debt and engineered a reverse merger with the shell company MPM Acquisition Corp. Neratinib is being studied in the neoadjuvant, adjuvant and metastatic settings in patients with HER2/ErbB2 positive breast cancer, the same indication targeted by Roche/Genentech's closely watched T-DM1, for which FDA issued a refuse-to-file letter in August 2010.—Wendy Diller

AstraZeneca PLC/MedImmune/Pfizer Inc: Neratinib wasn’t the only oncology compound Pfizer out-licensed this week. It also gave global development rights for the cancer immunotherapy tremelimumab to Medimmune, AstraZeneca’s oncology arm. Terms of the deal were not disclosed. Tremelimumab is a fully human monoclonal antibody, which binds to the protein CTLA-4, expressed on the surface of activated T lymphocytes. Pfizer is working to build its global oncology franchise, now a distant runner to some of its Big Pharma competitors. Its top oncology drugs are Sutent (sunitinib) and the newly launched targeted therapy Xalkori (crizotinib). But it has had difficulty expanding Sutent indications beyond advanced renal cell carcinoma and gastrointestinal stromal tumors.

The question, then, is why Pfizer would have out-licensed either drug. None of the companies involved in these deals was available for comment, but Pfizer appears to be taking a nuanced approach to building its oncology franchise and is focusing on targeted therapies. And Medimmune’s expertise is in biologics, which could fit well with tremelimumab. –Wendy Diller
Gilead Sciences Inc./ Boehringer Ingelheim: Gilead will license an indeterminate number of non-catalytic site integrase inhibitors (NCINIs) for HIV from Boehringer Ingelheim, including the lead compound BI-224436. Terms were not disclosed other than that Gilead will pay BI an upfront payment plus further payments based on the achievement of development, regulatory and commercial milestones, as well as royalties on future net sales for exclusive worldwide rights to the series.

These second-generation integrase inhibitors represent a new class of antiretrovirals that bind to a novel site distinct from the current catalytic site targeted by the current generation of integrase inhibitors including Merck’s Isentress (raltegravir) or Gilead’s own late-stage candidate elvitegravir. Klaus Dugi, SVP medicine at BI, said in a press release that BI would focus on development of other assets in their virology portfolio, in particular on hepatitis C. BI-224436, which has completed a PIa trial, may offer a superior resistance profile compared with the predecessor drugs by engaging a different site on the enzyme. –Mike Goodman