Wednesday, December 07, 2011

2011 Alliance of the Year Nominee: Pfizer/Puma

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

Hard to say what we like best about Puma Biotechnology and the sequence of deals in which Alan Auerbach repeated the formula by which he jumpstarted Cougar Biotechnology and later sold it to J&J for just shy of a cool billion. Was it the speed and ingenuity of the three-step transaction or the audacity of in-licensing a novel-acting agent against a tumor type owned by an entrenched powerhouse?

Yes and yes. The cat man is back and he’s telegraphing his intention to prove that his little guy’s solution to the IPO squeeze is replicable. How else to interpret the fact that puma is another name for cougar? Or that the reverse merger unfolded in the same way – reverse merge a start-up biotech into a Form 10 shell concurrent with raising money through a private placement. Or that, once properly funded, the same speed-to-market clinical strategy was implemented at both companies. This time around, however, the trick was fine tuned.

For starters, the time frame was compressed into a matter of days. Where Cougar licensed in abiraterone two years prior to reverse merging into the public shell SYRK 4, Puma licensed in neratinib from Pfizer days before reverse merging into Innovative Acquisitions Corp and raising $60 million in two tranches from its institutional investors. That raise, by the way, was the biggest for a reverse merger since Athersys pulled the same maneuver in 2007. Innovative Acquisitions, indeed.

Speed and size weren’t the only distinguishing features this time around. By licensing in neratinib – a potent, oral, pan-ErbB (Erb 1, 2, and 4) kinase inhibitor against Her2/ErbB2 positive breast cancer in adjuvant and metastatic settings – Puma is going up against Roche’s Herceptin. And it’s doing so in what’s shaping up to be a crowded field, with about 50 trials of agents against Her2+ metastatic breast cancer in Phases II and III.

We assume that Puma will aim to exploit well known vulnerabilities of Herceptin – its controversial efficacy in early-stage cancers, its IV formulation, and its risk of heart damage. Also, neratinib’s irreversible binding to the tyrosine kinase offers a mechanistic difference from Herceptin. And as Wyeth established, the pan-ErbB approach has promise in a variety of solid tumors, including gastric and lung cancers. For now, though, Auerbach is following the abiraterone playbook – winding down two Wyeth trials in early stage patients and gearing up to test (and launch) the drug as a second-line treatment in advanced HER2+ breast cancer patients.

Auerbach has upped his game with Puma. The terms of the deal with Pfizer, which were partially disclosed in Puma’s S-1 form filed on December 2, called for “substantial payments upon the achievement of certain milestones totaling $187.5 million, if all such milestones are achieved.” The agreement also calls for royalties on net sales of any compounds, including neratinib, licensed from Pfizer. Neratinib, after all, has undergone big pharma testing in phase II and III trials. That’s different from abiraterone, which was in a tiny Phase I trial when Cougar licensed it from small UK specialty firm BTG International Ltd.

But why do we really like this deal? In his first outing, Auerbach demonstrated that company creation around a cheap, innovative asset, and development to proof-of-concept and a successful exit-by-acquisition can be done fast and on a shoestring budget. In a way, he helped to democratize the financing of drug development. Of course, it didn’t hurt that he was a savvy, ex-sell side analyst who knew how to source, vet, and develop an early-stage cancer asset. Cougar was an object lesson in resourceful financing and hyper-capital efficiency. With Puma, he’s up to the same game, but he’s come back to show he can play with the big boys.

image by victor+ via flickr courtesy creative commons license

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