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

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