Thursday, December 27, 2012

REMINDER: Vote in Our Deals of the Year Poll!


Friday, December 21, 2012

Deals Of The Week: 'Tis The Season To Be Jolly

'Tis the Season to be Jolly, so deals of the week has finalized its last offering of the year, confident that dire warnings of apocalypse coinciding with the ending of a Mayan calendar are hokum.

Business development executives are also ignoring such suspect perils, and are continuing to close on deals, collaborations and tie-ups, producing their own version of Christmas Cheer.

Europe is one region where holly bedecked halls will hopefully take the mind off austerity and its continuing toll on individuals' livelihoods and the funding of health care. At least no European country has succumbed to defaulting on their debts, yet.

So when office parties clog up your favourite eateries, and shopping in the malls and down the boulevards becomes too much of an assault course, return to your armchair to read who wound up under the mistletoe this week, in ...

Celgene/Sutro: Sutro Biopharma Inc. announced a collaboration Dec. 18 with Celgene Corp. to design and develop optimized antibody drug conjugates (ADCs) and bispecific antibodies (BSAs) for two undisclosed Celgene targets. The San-Francisco antibody specialist will also manufacture a naked antibody owned by Celgene using its high-yield, low-cost cell-free protein synthesis technology. The Celgene deal harnesses the Sutro platform’s strengths in combinatorial candidate design, post-lead optimization, and R&D scale up. Sutro CEO Bill Newell said the platform, using one basic cell-free extract, allowed them to make ADCs, BSAs, naked antibodies, and peptides. Sutro is responsible for the design and production of preclinical materials. Celgene will pay a "substantial" upfront consisting of cash and equity, as well as research, development, and regulatory milestones totaling over $500 million if all programs are successful. Sutro is also eligible for royalties on product sales. Although the deal conforms in some respects with Celgene’s earlier R&D collaborations – the equity investment has become a signature – the New Jersey biopharma will not take a seat on Sutro’s board. Coming on the heels of Celgene’s April collaboration with AnaptysBio Inc. and June tie-up with Inhibrx LLC, the deal represents a deepening of the biopharma’s involvement with next-generation antibody technologies. Beyond the cash and biobucks, Sutro and its investors get the validation of a high profile partner and the gratification of seeing a relentless and disciplined focus on its lab-to-commercial scale protein platform finally pay off – Michael Goodman

Biogen Idec/Duke University and Others: Adding to a commitment undertaken since George Scangos took over as CEO in 2010, Biogen Idec will provide more than $10 million in research funding to a consortium of academic research centers that will seek to identify new approaches to treating amyotrophic lateral sclerosis (ALS). The three-year initiative will encapsulate an earlier initiative with Duke University and the Hudson Alpha Institute to sequence the genomes of 1,000 living ALS patients. The efforts will involve researchers based at Harvard, Yale, Columbia and Rockefeller University, with Biogen Chief Scientific Officer Spyros Artavanis-Tsakonas spearheading the effort through his own lab at Harvard. Biogen’s hope is that by coordinating research and sharing results across a number of different disciplines, understanding of the mechanism of ALS can be accelerated and new targets and approaches to treatments discovered. The Cambridge, Mass., biotech also is involved in trying to develop a therapy for the disease, having licensed worldwide rights in 2010 to Knopp Neurosciences’ dexpramipexole, now in Phase III. – Joseph Haas

MorphoSys/Bio-Rad Laboratories: Germany’s MorphoSys has decided to trade its revenue-generating antibody reagent business for a “laser-like” focus on its therapeutic pipeline. The company announced Dec. 16 that Hercules, CA-based Bio-Rad Laboratories Inc. has agreed to pay €53 million ($69.7 million) to acquire its antibody reagent business, AbD Serotec. The price will include MorphoSys subsidiaries in Raleigh, North Carolina; Oxford, England; and Dusseldorf, Germany. The deal is expected to close in January 2013. The price also includes a non-exclusive license to MorphoSys's HuCAL (Human Combinatorial Antibody Library), a collection of several billion distinct fully human antibodies, for diagnostic applications. The German biotech's revenues have been largely dependent on AbD Serotec and incoming payments from antibody discovery partnerships based on HuCAL; during 2012, AbD Serotec generated 28%, or €13.7 million, of MorphoSys revenues. The deal will add AbD Serotec’s more than 15,000 antibodies, kits, and accessories to Bio-Rad’s portfolio of research and clinical diagnostic products. Bio-Rad will also receive milestone payments or royalties related to the AbD Serotec business, which was working with more than 20 diagnostic companies to develop antibodies for diagnostic use. MorphoSys will continue to rely on revenues from its HuCAL therapeutic partnerships. It has more than 60 of these with partners such as Pfizer Inc., Novartis AG, and Daiichi Sankyo Co. Ltd., which generated revenues of €32.1 million in the first nine months of 2012. – Lisa LaMotta

Amgen/ImmunoGen: With ImmunoGen’s T-DM1 (trastuzumab emtansine) on the verge of approval with collaborator Genentech/Roche, the company is continuing to attract partners for its targeted antibody payload (TAP) technology, which delivers a targeted cancer-killing agent to tumor cells. On Dec. 19, Amgen licensed the rights to use Immunogen's maytansinoid TAP technology to develop an anticancer therapeutic to a third target, having licensed rights to use the technology for two other targets in 2009. The original licensing option agreement was struck between the two companies in 2000. With each license Amgen chooses to option, ImmunoGen receives an upfront payment of $1 million and is entitled to $34 million in milestones, plus sales royalties. While ImmunoGen has brought in over $300 million in cash from partnerships over the last decade, the company has been trying to shift its focus to its own internal pipeline. It has three compounds in the clinic, with its lead compound, IMGN901, in Phase II in small cell lung cancer. - Lisa LaMotta

Intercell/Vivalis: A new European vaccine and antibody specialist, Valneva, will be formed by the proposed merger of two publicly quoted biotechs, Austria's Intercell AG and France's Vivalis, announced Dec. 17. Valneva will combine the product development and commercialization skills of Intercell with the vaccine cell line technology of Vivalis, and will become one of the few remaining independent European vaccine companies, after a string of takeovers and mergers in the sector over the past five years or so. Intercell develops and markets the Japanese encephalitis vaccine Ixiaro/Jespect, whose sales growth has not been as smooth as the company expected. In 2012, vaccine sales are likely to be 10% to 20% lower than expected, around €26.5 million to €28.5 million. Vivalis, whose EB66 embryonic duck cell line is used by numerous pharmaceutical companies to produce antibodies and vaccines, has also seen revenues decline in the first nine months of 2012 because of the ending of some manufacturing licenses. Through a stock merger, Vivalis shareholders will end up with 55% of Valneva. Intercell shareholders will also receive an earnout relating to the successful development of a Pseudomonas aeruginosa vaccine that the Austrian company's collaborator Novartis is currently evaluating in a Phase II/III clinical study. And a €40 million ($53 million) rights issue supported by France's strategic industry investor, Fonds Strategique d'Investissement (FSI), will follow the closing of the merger in May 2013. – John Davis

Janssen/Evotec: Janssen Pharmaceuticals Inc. has acquired an exclusive worldwide license to Evotec AG's NR2B subtype NMDA-antagonist portfolio of drug candidates, which have potential in the treatment of depression. Evotec will receive an upfront of $2 million from Janssen, with a further $6 million paid upon confirmation of certain preclinical properties of the candidates. The Hamburg, Germany-based company could also receive additional milestones totaling up to $67 million upon successful completion of certain clinical, regulatory and launch events for a first product. Additional, reduced milestones would be paid for the development of additional indications and/or compounds. Furthermore, Evotec could also receive an additional $100 million in commercial milestones depending on certain sales thresholds, and royalties that could be as high as double-digit on sales. However, a portion of the payments will be shared with Roche, which originally discovered the compounds. Evotec developed the compounds from discovery through to clinical studies, and Roche entered into an agreement in 2009 with Evotec on Phase II studies of portfolio compounds in treatment-resistant depression, although that collaboration ended in 2011 because of difficulties the study protocol caused in recruiting patients. - John Davis

MedImmune/Progenics: AstraZeneca's biologics arm is in-licensing Progenics Pharmaceuticals’ Clostridium difficile late-stage preclinical program as part of MedImmune’s search for monoclonal antibody candidates to prevent and treat bacterial infections. Under the deal, MedImmune will assess the potential efficacy and safety of antibodies targeting C. difficile toxins. Preliminary research suggests the antibodies are highly potent against most of C. difficile strains found in the U.S. and Asia, and are potent against hypervirulent strains. For Progenics, the move reflects its decision in 2011 to focus on its oncology programs. The biotech’s pipeline candidates include PSMA ADC, a human monoclonal antibody-drug conjugate in Phase II for prostate cancer, and preclinical stage novel phosphoinositide 3-kinase (PI3K) inhibitors for cancer. Clostridium difficile infections are the leading cause of hospital-acquired bacterial infections in the U.S. and are associated with more than 20,000 deaths and more than $1 billion in healthcare costs annually. The infection most often occurs in people who have been hospitalized, although up to 28% of cases are community-acquired through contaminated soil, water, pets, cattle, and food. – Sten Stovall

Merck/GE Healthcare: Merck & Co. Inc. is pitted in a tight race with Eli Lilly and Co. to bring the first BACE inhibitor to market for Alzheimer’s disease. The company announced Dec. 18 it has partnered GE Healthcare to use that company's imaging agent flutemetamol as a potential companion diagnostic to its BACE inhibitor, MK-8931. The announcement comes on the heels of Merck’s Dec. 3 announcement that it had started a Phase II/III study of the drug. Under the GE deal, Merck will use flutemetamol – a positron emission tomography (PET) imaging agent – to select patients for clinical trials of MK-8931, particularly a future trial in prodromal Alzheimer’s disease patients. That’s the phase in which patients have only mild cognitive impairments and have not yet been diagnosed with Alzheimer’s disease. Flutemetamol is being developed by GE to detect beta amyloid deposits in the brain, the buildup of which is believed to be a hallmark of Alzheimer’s disease. In Phase III testing, flutemetamol images showed a strong concordance with Alzheimer’s disease-associated beta amyloid brain pathology demonstrated in brain autopsy and in vivo-cortical biopsies, according to GE. Lilly already markets the PET tracer Amyvid (florbetapir), which shows the amount of beta-amyloid plaque in the brain, for use in diagnosing Alzheimer’s disease, following U.S. FDA approval in April this year. Merck said it opted to partner with GE on flutemetamol because the company had a long history in imaging, and access to infrastructure including PET scanners and cyclotrons that produce the radioactive isotopes used in the procedure. GE continues to own rights to the agent, is studying it independently, and plans to file the product with regulators in the near term - Jessica Merrill

Pfizer/Halozyme: The world’s biggest pharma is paying San Diego biotech Halozyme $8 million upfront for a worldwide license to Halozyme’s Enhanze technology to produce a pair of proprietary biologic drugs that can be administered subcutaneously. It is an earn-out-heavy deal, with Halozyme able to receive future licensing fees for up to four more targets, as well development, regulatory and sales-based milestones that could reach $507 million and royalties on net sales of any products reaching market. The targets and indications for the first two drugs to employ Halozyme’s recombinant human hyaluronidase enzyme (rHuPH20) technology were not disclosed, although a release said one product would be for primary care and the other for a specialty care indication. Future target selections by Pfizer can be made on an exclusive or non-exclusive basis. By addressing volume limitations, the Enhanze platform enables biologics which otherwise might need to be administered intravenously to instead be subcutaneous injections. Halozyme says the delivery technology also could reduce the need for multiple injections, improve patient convenience and reduce health care system costs. The deal is positive news in a year that saw the company's fortunes dragged down by a delay and subsequent FDA complete response letter around Baxter's HyQ immunoglobulin product, which uses the Halozyme technology. – Joseph Haas

Merck/Hanwha Chemical: Is Merck stepping back from biosimilars? That’s a question some industry stakeholders are asking after Korea’s Hanwha Chemical disclosed Dec. 18 that Merck had terminated a deal for Hanwha’s biosimilar of Amgen/Pfizer’s blockbuster Enbrel (etanercept). Merck had acquired developmental and commercial rights to Hanwha’s late-stage biosimilar in 2011 (in all markets except Korea and Turkey), surprising many in the West who had not thought of the Korean conglomerate as a biopharma player. Hanwha received an undisclosed upfront payment and was eligible for technology transfer and regulatory milestones, and tiered royalties on sales. Total upside for the deal was $720 million, Hanwha said at the time. Since then Hanwha has moved forward in its home market, submitting its Enbrel biosimilar for KFDA approval several months ago after completion of local Phase I and Phase III trials. So what happened? A “routine pipeline review,” Merck told our sister publication PharmAsia News, emphasizing that its decision did not reflect a change in biosimilars strategy or commitment. Yet some may wonder. As reported first in the IN VIVO Blog, Merck cut bait on Merck Bioventures earlier this year, deciding to merge the biosimilars unit back into its biologics and vaccines division. And perhaps more to the point, Amgen threw a wrench in development plans for Enbrel biosimilars late last year when it announced a stealth patent that could keep competitors off the U.S. market until 2028. So what’s next? Merck says it will continue to pursue a portfolio of biosimilars and novel biologics that meet unmet needs, including a previously disclosed biosimilar of Roche’s rituximab. But the emphasis, at least to our ears, seems to be leaning more to the novel these days then the similar. As for Hanwha, it says it will look for other multinational partners, not only for etanercept, but also for the next biosimilar in its pipeline, Roche’s Herceptin (trastuzumab). In other words, you better stay tuned. -- Josh Berlin

mistletoe by lovelorn poets, via flickr/creative commons

Thursday, December 20, 2012

It's Time to Vote for IN VIVO Blog's Deals of the Year!


Wednesday, December 19, 2012

Alliance Deal of the Year Nominee: AZ/Amgen

It's time for the IN VIVO Blog's Fifth 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™.

2012 featured an uptick in pharma-pharma peer dealmaking, a trend we expect to continue. And though much of that comprised pre-competitive teaming up (see Transcelerate, for example), we continue to see peer alliances designed to avoid duplication of R&D infrastructure and reduce development risk. These are important deals – industry’s largest companies’ tacit admissions that they can’t, and shouldn’t, do everything on their own.

And so when AstraZeneca said it was partnering with Amgen to co-develop and commercialize five of Amgen’s clinical-stage monoclonal antibodies, notably including brodalumab, which is entering Phase III in psoriasis and in Phase II in asthma and psoriatic arthritis, we thought: there’s a deal worthy of a Roger.

The April 2 deal, under which AstraZeneca paid $50 million upfront, bolsters pipeline of its biologics unit MedImmune, particularly in inflammation and respiratory indications. This is no small consideration, as AstraZeneca’s $15.6 billion buyout of MedImmune in 2007 has produced disappointing results so far.

Meanwhile, Amgen gains some needed financial flexibility under the arrangement, as it needed to reduce an R&D budget that exceeded 20% of sales in 2011. AstraZeneca will cover 65% of development costs for the five antibodies – the other four are in Phase I for indications such as Crohn’s disease, ulcerative colitis, systemic lupus erythematosus and asthma – during the years 2012-2014, with the two companies splitting development costs thereafter.

“We have what I consider an exceptionally rich pipeline with a lot of potential medicines we would like to bring forward and find their true benefit. And that costs a lot of money,” Amgen Senior VP of R&D Joe Miletich told “The Pink Sheet” DAILY at the time of the deal. “We have some candidates that are in the clinic already and some that are preclinical that we’d still like to bring forward. And having some financial relief from [the cost of] advancing these five by ourselves will enable us to apply some of those resources, both personnel and expense, to other parts of the pipeline that I think are also very attractive.”

The deal is expected to increase MedImmune’s R&D budget by about $250 million annually in 2013 and 2014, but gives the unit a near-term candidate for regulatory approval and launch, which it lacked before the transaction. MedImmune, which derives 40%-50% of its pipeline from external deal-making, anticipates 32% growth over the next decade in the use of biologic therapeutics in psoriasis.

In addition to brodalumab, MedImmune and Amgen will co-develop:

• AMG 139, a MAB that neutralizes IL-23 interaction with its receptor while not affecting IL-12. It is in Phase I in Crohn’s disease and is thought to offer potential in psoriasis too.
• AMG 181, an antibody to alpha4/beta7 that blocks binding to MAdCAM-1, in Phase Ib trials in Crohn’s and ulcerative colitis.
• AMG 557, which binds to B7 related protein (B7RP-1) and is in Phase Ib in SLE.
• AMG 157, which blocks the interaction of thymic stromal lymphopoietin (TSLP) with its receptor and is being investigated in Phase Ib in asthma.

Amgen will book sales of each antibody if/when it reaches market and will earn a low single-digit royalty on sales of brodalumab and mid-single-digit royalty on each of the other candidates. Following the payout of royalties, the two companies will split profits from each product equally.

MedImmune will lead the development and commercialization of ‘139, ‘157 and ‘181, while Amgen will remain in charge of brodalumab and ‘557. For brodalumab, Amgen will handle marketing for dermatology indications in the U.S. and Canada and for rheumatology indications in the U.S., Canada and Europe.

Kyowa Hakko Kirin holds Asian rights to the antibody under a prior deal. AstraZeneca will promote brodalumab in respiratory indications globally and in dermatology indications in markets not controlled by Amgen or its partners. The commercial rights for the other four antibodies will be determined later – Takeda holds Japanese rights to ‘557.

--Joseph Haas

Financing Deal of the Year Nominee: Rusnano/Domain and CoDa Therapeutics

It's time for the IN VIVO Blog's Fifth 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™.

How about voting for a deal that turns conventional wisdom on its head.

The biopharma industry has looked to emerging markets for near-term revenues and cost efficiencies, but not for scientific or commercial innovation. An umbrella deal between Rusnano, a five-year-old $10 billion Russian sovereign fund, and the US venture capital firm Domain Associates, announced in March, and a subsequent tie up with Domain portfolio company CoDa Therapeutics, goes some way toward erasing those misperceptions. At the same time, the partners’ tie up reflects sovereign funds’ increasingly important role in shaping the life sciences industry.

And it does so in such a creative, enticing way that Russia, not typically known as a life sciences innovator, is generating excitement among US VCs and biopharma companies. Rusnano is linked to Russia’s Pharma 2020 program, which is already impacting Big Pharma’s development decisions, as indicated by their deal-making activities in the country. At the same time, Domain’s commitment to the joint effort has also been intense, but the relationship is worth the effort because it’s potentially so lucrative, according to Domain partner Brian Dovey.

The size and structure of the partners’ deals are noteworthy: Rusnano, which has a mandate to broadly invest in nanotechnology around the globe, and Domain, the quintessential US VC, are investing up to $330 million each in Domain’s portfolio life sciences companies and up to $190 million to build a manufacturing facility in Russia for the products that would be sold in Eastern Europe out of the Domain companies.

The aim is to “spur modernization of the Russian healthcare market” by providing that country, along with Eastern Europe and the former Soviet Commonwealth of Independent States, with next-generation pharmaceuticals, medical devices and diagnostic products, Rusnano executives said at the time of the announcement. Under the agreement, roughly 20 existing and potentially new US-based Domain portfolio companies will benefit from the collaboration, and the partners can also co-invest in third-party technology.

In July, after months of review, the partners announced their first beneficiary: Domain’s wound-healing biotech CoDa Therapeutics. The San Diego-based company is licensing rights to its technology in Russia and the CIS to the new Domain/Rusnano-backed Russian pharma company. In exchange, Domain, along with current CoDa investors GBS Ventures and BioPacificVentures, and new investor Rusnano, committed nearly $40 million to CoDa, closing a Series B financing that began in 2011.  The VC syndicate and Rusnano are each contributing equal amounts. CoDa, as with all Rusnano life sciences investments, has to establish R&D operations in Russia as well.

Domain isn’t the only US investor Rusnano is working with, nor is Rusnano the only tool the Russian government is working with to entice US venture capitalists and biotech entrepreneurs. It’s also established a business school and life sciences incubator, Skolkovo, in a collaboration with Massachusetts Institute of Technology, and has other stimulus programs aimed at building a biotech industry. But by bringing in US innovators and offering them the carrots they need most: attractive financing, potential market opportunities, and acknowledgement of American’s entrepreneurial savvy, Russia may be demonstrating a new model for building a much needed ecosystem.

--Wendy Diller

image via

Tuesday, December 18, 2012

M&A Deal of the Year Nominee Bristol-Myers/Amylin/AZ

It's time for the IN VIVO Blog's Fifth 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™.

For size alone, the $7 billion acquisition of Amylin Pharmaceuticals jointly by Bristol-Myers Squibb and AstraZeneca deserves consideration as 2012's M&A deal of the year. But there's more to 2012's largest acquisition than size. Among the fascinating features: an innovative, two-part, three-party structure; two rather troubled Big Pharma companies aiming to turbocharge their push further into diabetes; and a U.S. biotech facing stiff competition now and in the near future for its lead products.

BMS paid $5.3 billion to purchase Amylin, and assumed $1.7 billion in net debt and a contractual obligation to Amylin's former partner Eli Lilly & Co. Then, AstraZeneca paid $3.4 billion to BMS to acquire 50% of Amylin, and later paid an additional $135 million to have equal governance over the asset.

The deal was said to be set up this way to simplify it: in the business world, it's complicated for a seller to deal with two buyers who want to buy an asset jointly. Much easier all round for Amylin to deal with one buyer, and for the acquirers to flesh out their own arrangements later. Even if one assumes that all adverse eventualities were covered contractually, the rarely used arrangement must still have required more than a soupçon of good faith and trust between the parties involved. If only for the reason that faith and trust, which are so rare to find these days, played their part, the acquisition deserves your vote.

It’s usually true that two heads are better than one. (Except, of course, in politics, where coalitions invariably go sour, but that's another story.) BMS and AstraZeneca are hoping to use their expertise, across different physician groups (primary care, secondary care) and geographies (Western countries, emerging markets) to maximize the potential of Amylin's diabetes GLP1-agonist therapies, twice-daily Byetta (exenatide) and once-weekly Bydureon (extended-release exenatide).

Some might quibble the acquisition smacked of desperation, that the joint marketing of the oral antidiabetic DPP-4 inhibitor Onglyza (saxagliptin) by BMS and AZ under an alliance formed in 2007 was already going nowhere, and their other innovative antidiabetic, the SGLT-2 inhibitor, Forxiga (dapagliflozin), was floundering at the regulators. Others said that at $31 a share, the companies had overpaid, which they could ill-afford.

We're having none of it. BMS and AZ fervently believe they can re-invigorate the sales growth of the once weekly GLP1 agonist Bydureon, which is the launch phase, by not only the deployment of their marketing assets but also through the development of new formulations and administration devices.

It’s a tough challenge because of the tremendous competitive pressure expected in the market from already launched competitors like Novo Nordisk with its GLP1 agonist, Victoza (liraglutide) and those nearing the market with GLP1 offerings, such as Sanofi/Zealand (lixisenatide), GlaxoSmithKline (albiglutide), Lilly (dulaglutide) and others.

But it's not as if either BMS or AstraZeneca lack recent experience in assimilating companies and products, at least on their own. In 2012, AstraZeneca also bought U.S. biotech Ardea Bioscience for $1.26 billion to gain access to its Phase III gout therapy, lesinurad, and BMS acquired Inhibitex for $2.5 billion, for its hepatitis C targeted nucleotide polymerase inhibitor, INX-189.

Other goodies likely to accrue to BMS and AstraZeneca from the Amylin acquisition are operating synergies and tax advantages too, making it a standout acquisition for those reasons as well. What are you waiting for? Vote for this acquisition.

--John Davis

Financing Deal of the Year Nominee: bluebird bio

It's time for the IN VIVO Blog's Fifth 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™.

With its cummingsesque orthography and ornithological name, bluebird bio has a certain innocuousness at first blush. But bluebird bio is certainly serious about its gene therapies for rare diseases, which have attracted serious capital to make it a very serious contender for this year’s Roger in the exit/financing category.

Closed in July, bluebird bio’s $60 million Series D round was a little like a few other Roger contenders. Like Warp Drive Bio, backed with $125 million in a January Series A round, bluebird bio enjoys close ties to early-stage powerhouse investor Third Rock Ventures. And like Intarcia Therapeutics, bluebird bio raised its latest round largely from institutional investors including Ramius Capital Group, Deerfield Partners and RA Capital rather than traditional venture firms. But bluebird bio’s round was a standout unlike any other, for several reasons.

First, bluebird bio’s investors doubled down on the company just weeks before uniQure BV’s Glybera (alipogene tiparvovec) received European approval, becoming the first gene therapy cleared for marketing in the world. The approval of Glybera, which uses a viral vector to insert genetic material into cells containing malfunctioning genes, is thought to pave the way for more gene therapy approvals.

The approval has emboldened a sector once regarded as terribly risky, but now considered viable by some investors, thanks to larger data sets and a more transparent regulatory process. And while bluebird bio’s original investors, including Forbion Capital Partners (also a uniQure investor), Third Rock, ARCH Venture Partners and TVM Capital, had already poured $50 million into the company prior to this summer, the massive Series D round would be a prescient investment if VCs increasingly look to the sector and drive valuations north.

Moreover, bluebird bio showed forethought by rejecting the second tranche of its April 2011 Series C round, for which it had negotiated a call option, then offering the same Series C investors the choice of participating in the Series D round at a higher valuation. The unusual step resulted in bluebird bio giving away a pinch less equity in the deal, while receiving the same amount of cash from those VCs.

Cambridge, Mass.-based bluebird bio will focus initially on its Phase II/III program in childhood cerebral adrenoleukodystrophy, as well as Phase I/II programs in beta-thalassemia and sickle-cell disease. The company’s approach involves extracting a patient’s bone marrow stem cells, modifying them ex vivo by inserting a lentivirus containing genetic material, and reintroducing the cell’s to the patient’s body. The technique is somewhat unlike uniQure’s, which uses a non-dividing adeno-associated virus that has been stripped of its replicating abilities.

Though development is costly, bluebird bio says its manufacturing process has been streamlined heavily over the past couple of years, allowing it to create therapies at what its executives call “industrial scale.” Those techniques could be very important in the future, especially if gene therapies are eventually approved for disorders other than rare diseases. (Glybera is approved for lipoprotein lipase deficiency, an orphan disease.) And since bluebird bio aims to address sickle-cell disease, a widespread disorder in some geographies, manufacturing and production at a reasonable cost will be vital.

In a year when one gene therapy was approved, other companies such as Celladon raised big rounds, and more gene therapy start-ups are known to be raising money, bluebird bio’s round was the biggest in the promising sector. Consider it for the Roger as it takes flight.

--Paul Bonanos
flickr image via petrazone // creative commons

Monday, December 17, 2012

M&A Deal of the Year Nominee: Amgen/Decode

It's time for the IN VIVO Blog's Fifth 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™.

Put aside, for the moment, the exit deCODE Genetics’ recap investors will receive; more than a 5x* return on a just under three-year, $50 million investment in a bankrupt company that hasn’t, in that time, shown any clear or remarkable new ability to generate revenues. A vote for last week’s $415 million cash buyout (scroll down one post to last week’s Deals of the Week for a description) as the M&A deal of the year starts with a binary decision: you either think Amgen is onto something by bringing this gene association-driven discovery engine in-house to bolster its target validation for drug discovery, or you don’t.

While we are not presupposing deCODE will not bring anything near-term to Amgen’s bottom line (its revamped business model called for a focus on corporate partnerships), its direct contribution would be minimal. As an internal R&D capability, deCODE won’t have the same pressure to monetize its discoveries as it had as an independent operating firm. And it’s unlikely Amgen would acquire deCODE only to change how it approaches its biomarker discovery research.

The assumption is Amgen will take deCODE on its own terms, with its founding CEO and VP, research, Kari Stefansson, to continue at the helm.

“I think Amgen gets that they have a special jewel here and are going to work with it accordingly,” says Terry McGuire of Polaris Ventures, which along with ARCH Venture Partners came to deCODE’s rescue in late 2009. “They completely understand that deCODE has created a unique environment and they want to be as respectful as possible of that and at the same time recognize that there have to be commercial applications of the science,” he says.

As is well known, that unique environment is grounded by the detailed genealogical and health care records and samples contributed by the citizens of Iceland, the starting point for deCODE’s gene association studies and the identification of variants that cause or influence the course of disease. No other company can offer such a unique, extensively annotated data set, and mining those data has led to a plethora of publications: As McGuire blogged the day the deal was announced, deCODE researchers have published over 400 major studies in peer reviewed journals, and their work has been cited in more than 5000 other manuscripts. In 2012, the company published on gene variants found to confer high risk of acquiring the late-onset form of Alzheimer’s disease and that protect against AD and cognitive decline in the elderly. It’s been active in gene-based disease target discovery in cardiovascular disease and cancer, and since the recapitalization, has been collaborating with Illumina, the leading supplier of sequencing equipment now eying clinical diagnostics, in cancer and gout and with Pfizer to search for variants associated with risk of lupus.

What it has failed to do is translate those discoveries into meaningful revenues, except as a provider of contract services and, to a small extent, through the offering of genetic diagnostics. (And with Amgen, expect that diagnostics business to wither.)

Genomics overall has failed to live up to its promise of reshaping drug discovery, but the $415 million Amgen is paying to access deCODE’s capabilities pales against some of the colossal collaborations of the late 1990s – remember Bayer’s $465 million, five-year licensing deal, including $130 million up front, to access Millennium’s discovery technologies?

McGuire says deCODE is “really starting to throw off meaningful insights that will change medicine.” Amgen agrees, and sees near-term opportunities in its areas of strength including CV and osteoporosis (see comments from its head of R&D, Sean Harper, here). In addition to the roughly $14 million it cost Polaris and ARCH to recapitalize deCODE, the investors added in about $36 million more, evening out to a $12 million annual spend. Amgen spends $800 million in R&D per quarter.
Amgen is not adding to product pipeline with this transaction, nor is it getting blockbuster IP. But for those who think genomics is here at last, it may a shrewd and opportunistic spend. You decide.

*(Fortune’s The Term Sheet says more than 6x, which we now understand is pretty close.)

--Mark Ratner

Friday, December 14, 2012

Deals Of The Week Sings Of An Icelandic Saga And The Path Forward

Our knee-jerk reaction to Monday’s announcement that Amgen is buying deCODE Genetics for $415 million in cash was “Say what?” It’s hard to get past the unlikely mix of cultures between Amgen, the most button-down of biotechs, and deCODE, whose irascible founder and CEO, Kari Stefansson, is anything but.

On second thought, though, the combination makes sense.  For Amgen, it’s a buy-versus-build way to install a broad-based, genetics-oriented discovery and target validation engine.  For deCODE’s investors Polaris Ventures and ARCH Venture Partners, it’s a timely and profitable exit: they put down roughly $14 million to bring the Icelandic genomics specialist out of bankruptcy in November 2009 and have been carrying it since.  And for deCODE’s scientists, it’s an opportunity to continue discovery research using population genetics and armed with blood samples from Icelanders and the country’s conserved genealogical and health care records.

As Polaris’ Terry McGuire blogged the day the deal broke: “Almost all of the other companies that started in this space gave up and moved to safer ground – developing drugs.  Kari Stefansson never lost sight of what was truly important, which is pioneering the genome.”

Equally true is that Stefansson’s broad vision caused his reach to exceed his grasp. As we wrote three years ago, the fundamental issue was one of business strategy – an overly optimistic view of the rate at which discoveries made with its genomics platform could convert into tangible drug and diagnostic assets, including IP, and justify the infrastructure investments the company had made.

deCODE's troubles stemmed from a combination of factors including a fragmented set of operations ranging across gene-based drug and diagnostics discovery and development as well as a foray into consumer genomics. As an Iceland-based company, it also had been especially sensitive to the impact of the global financial downturn in the latter half of the 2000s, which hit that country's banking industry very hard. Plus, an arrangement with Lehman Brothers to manage its money had left deCODE with essentially worthless paper.

Stefansson’s unwavering faith in deCODE’s expansive – and expensive – approach to discovery finally has paid off. “This was a 16-year saga,” says McGuire. "But true to the saga, Kari’s has been one of finding the path forward.” Polaris and ARCH together (via the aptly named Saga Investments, organized for the deCODE recapitalization) owned about 65%, roughly one-third each, of deCODE.  They’d put in around $50 million all told (plus some noncash obligations to turn the firm around), netting what appears to be more than a 5x return.

The business model for the recapitalized deCODE focused on establishing corporate partnerships, which is where Amgen came in.  The companies were discussing ideas for partnerships when, as sometimes happens, “there was a moment where they could see the breadth of this engine,” says McGuire.  Some of deCODE’s insights will directly relate to Amgen’s therapeutic areas of interest, he says, but as important will be deCODE’s long-term contribution to R&D.

Becoming part of Amgen presumably puts an end to deCODE’s aspirations as a developer of clinical diagnostics, an area very much in its sights when the firm relaunched.  In that respect, the deal speaks to the relative value of genomics in drug discovery versus clinical diagnostics development. – Mark Ratner

Teva/Xenon – In an effort to streamline its business, Teva Pharmaceuticals has decided to take a more focused approach to R&D, with an emphasis on respiratory diseases and central nervous system disorders (including pain and neurodegenerative disorders). A deal announced with Xenon Pharmaceuticals on Dec. 11 will fit snugly into the Israeli company’s new strategy. In exchange for the global rights to Xenon’s pain drug XEN 402, Teva will pay the Vancouver-based company $41 million upfront, as well as development, regulatory and sales milestones of up to $335 million. Xenon also will be entitled to royalty payments and have the chance to participate in U.S. commercialization, although details of the commercialization split were not disclosed. XEN 402, a Nav1.7 inhibitor, blocks sodium channels that are found in abundance at nerve endings and contribute to chronic pain conditions. Xenon has taken it through the start of Phase II for both inflammatory and neuropathic pain and in topical and oral formulations. Teva, which now has rights to both versions of the drug, plans to begin a full Phase IIb development program immediately. Xenon hasn’t been the only company working on Nav 1.7 inhibitors – a space that has drawn interest because its potential to be an alternative to opioid-based pain drugs. – Lisa Lamotta

Biogen Idec/Isis – Biogen Idec continues to demonstrate faith in antisense technology, announcing a third deal with Isis Pharmaceuticals Dec. 10. Much like the two previous deals between the companies, the recent tie-up focuses on neuromuscular targets. In exchange for access to three early-stage targets, Biogen will pay Isis $30 million upfront. The work is currently in the discovery phase. Once Phase II has begun, Biogen will have the right to option each of the three programs and continue development and commercialization activities. Isis is eligible to receive $200 million in total milestones per program, as well as double-digit royalties should any products be commercialized. In January, Biogen signed its first deal with Isis, agreeing to pay $29 million upfront as well as $45 million in potential milestones for the option to license Isis' Phase I spinal muscular atrophy compound. In late June, Biogen agreed to pay $12 million upfront for the right to a treatment for myotonic dystrophy type (DM1). Early-stage milestone payments could total $59 million. At the end of Phase II, Biogen has the option to license the drug; subsequent payments for meeting certain regulatory milestones could add up to $200 million. – L.L.

AstraZeneca/Isis – Antisense drug-discovery company Isis Pharmaceuticals also landed a second partnership on Dec. 11, an oncology deal with AstraZeneca that will address five targets including one program upon which clinical trials are already underway. For $25 million upfront, plus a $6 million near-term payment due in the second quarter of 2013 if research is ongoing, AstraZeneca gets rights to the Phase I/II clinical compound ISIS-STAT3Rx, as well as one preclinical program and options on other programs. AstraZeneca will fund ongoing research on the programs covered under the partnership, save for a small Phase II trial Isis is still conducting on ISIS-STAT3Rx for lymphoma. Isis also is eligible for $75 million in milestone payments over the next two years, including a $50 million payment if the ongoing study is completed; Isis would receive additional clinical and approval-related milestone payments, licensing fees and royalties on marketed drugs, but the companies didn’t provide further financial information. The partnership covers drugs that use Isis’ proprietary antisense technology, which destroys RNA that creates disease-causing proteins, as well as its Generation 2.5 technology that strengthens the potency of drugs. – Paul Bonanos

Bristol-Myers Squibb/The Medicines Company – In an example of a big pharma out-licensing deal, The Medicines Company has agreed to pay $115 million upfront to Bristol-Myers Squibb for the global rights to Bristol’s already-marketed topical recombinant thrombin product, Recothrom, which is used to stop non-arterial bleeding during surgical procedures. Approved in the U.S. in January 2008, Recothrom brought in $65 million in revenues in 2011. The Medicines Company plans to drive growth by seeking  approval of the drug in other countries. Bristol, which will be responsible for manufacturing, will receive royalties on the product during the two-year collaboration period. After that time, The Medicines Company will have the option to acquire Recothrom. Bristol said its decision to outlicense the drug is part of its effort to streamline operations and improve efficiency. For The Medicines Company, the deal bolsters its offerings in the hospital settings. The company also announced the same day that it has agreed to pay $115 million to acquire Incline Therapeutics, the maker of a needleless, patient-controlled analgesia device used in the hospital setting. – L.L.

Gilead/YM Biosciences – Gilead furthered its diversification strategy with expansion into oncology with the acquisition of Canadian cancer company YM BioSciences, announced  Dec. 12. Gilead will buy YM for $2.95 per share in cash, or about $510 million, with the transaction expected to close in the first quarter. YM had cash and equivalents of $125.5 million as of Sept. 30. The acquisition will give Gilead its sixth clinical-stage oncology compound, a Janus kinase (JAK) inhibitor, CYT387, which has shown promise in treating myelofibrosis. Gilead plans to initiate a Phase III study in the setting in the second half of 2013. The deal represents a solid exit for YM, which gained CYT387 when it merged with Australia’s Cytopia Ltd. in 2010 in a stock transaction that valued Cytopia at around $11 million. YM released results of a 166-patient Phase I/II clinical trial of the drug, its lead product, at the American Society of Hematology meeting Dec. 9, showing that treatment with CYT387, improved transfusion independence rates and spleen response in patients with myelofibrosis. But CYT387 will have to compete with a JAK1/JAK2 inhibitor already on the market for myelofibrosis. Incyte’s Jakafi (ruxolitinib) was approved by FDA for myelofibrosis in November 2011, and was the first JAK inhibitor approved for any indication. CYT387’s second-in-class status could dampen investor enthusiasm for the acquisition, but the fact the drug has been shown to increase hemoglobin and reduce the need for blood transfusions means it could offer a competitive advantage as the preferred treatment for the roughly 30% of myelofibrosis patients who have anemia. – Jessica Merrill

Somaxon/Pernix – Somaxon’s search for strategic alternatives has come to an end, but not exactly a lucrative one. Specialty pharma Pernix will acquire the sleep disorder company for $25 million in stock. That’s a small fraction of the at least $224 million that’s been invested in Somaxon since its 2003 inception. On Dec. 10, the day before the deal announcement, Somaxon’s market cap was a mere $10.5 million. It was trading just above its cash of $8.2 million at Sept. 30. During the third quarter, Deerfield Management initiated a position of 4.5 million shares in the company; that’s almost two-thirds of its shares outstanding. Somaxon shareholders still have to sign off on the deal. It’s been a steady slide for Somaxon. In September 2011, Procter & Gamble, the U.S. marketing partner for Somaxon insomnia drug Silenor (doxepin), terminated an August 2010 deal due to insufficient sales to support marketing expenses. Then in January, Somaxon said it was looking at strategic alternatives after a disappointing Silenor launch. The selling point for Silenor was supposed to be its approval for sleep maintenance, staying asleep into the seventh and eighth hours of sleep. But it’s proven difficult to gain a foothold in an insomnia market awash with generics, particularly of Ambien (zolpidem). Somaxon reported net product sales of $7.8 million in the first nine months of 2012. For its part, Pernix is adding a product to its ranks of generic, branded and OTC products. Until recently, the company has focused on pediatrics. But last month, it bought Cypress Pharmaceuticals for $101 million in cash and stock, thereby diversifying its product offerings. – Stacy Lawrence

Nuron/Pfizer – In another deal that has a big pharma unloading a non-priority asset, Pfizer sold its Meningitec vaccine to Exton, Pa.-based specialty biologic and immunotherapy developer Nuron Biotech. The vaccine is aimed at preventing bacterial diseases such as meningitis, sepsis and pneumonia caused by Neisseria meningitides serogroup C. The product is currently registered in 23 countries, and Nuron plans to expand its availability to markets with unvaccinated and under-vaccinated populations, the company said. N.meningitidis is estimated to cause 500,000 cases of disease annually worldwide with a 10%-20% fatality rate. The company previously acquired the HibTiter Haemophilus influenza Type b conjugate vaccine from Pfizer in April 2011 and is looking to relaunch the product, marketed in the 1990s by Wyeth, in the U.S. following discussions with FDA. Nuron has several vaccines and biologics in development. Terms of the deal were not disclosed. – J.M.

Financings of the Fortnight Comes Bearing Gifts

This will be the final FOTF of the year, so we’d like to take a moment to wish everyone warm, peaceful and happy winter solstice holidays, no matter which festivities you celebrate. 

We're grateful for your readership, and if there's anything you'd like us to do differently in 2013, or if you just want to wish us a Merry Hannukwanzamas, we're all ears. You can always leave comments below, or more privately, send an email to a - dot - lash at elsevier dot you know the rest. (No happy holidays for you, spambots!) We're also grateful this week to Sten Stovall, European bureau chief, for his help with the column.

In Europe, holiday lights in biotech circles should burn brighter with the news that Sofinnova Partners, based in Paris, has raised $312 million for a new life science fund, tapping almost exclusively into European sources. The venture capital group began life in 1989 and is now on its seventh fund. It raised the money from LPs including insurance companies, pension funds, fund-of-funds, financial institutions and high net worth private individuals, 90% of which are based in Europe (including 22% from France).

That’s a big shift, Sofinnova founder and managing partner Denis Lucquin tells FOTF: “Ten years ago 50 percent of our financial means came from the US. This time, we didn’t have any. They’re too nervous about the situation in Europe and the Eurozone, and they just don’t have the confidence to put money into Europe.”

Its previous fund closed in 2009 with $370 million committed, so willfully or not, the group has scaled back a bit. (Sofinnova Partners is not to be confused with the US-based Sofinnova Ventures, which closed a new $440 million fund in late 2011.)

No matter where they’re located, investors are nervous about early stage life sciences, but Sofinnova Partners made a contrarian pitch: Sofinnova Capital VII fund will be invested in early-stage life science companies, with about two-thirds going into Europe and one-third into the US. The fund will target biopharmaceuticals, devices and industrial biotechnology. As part of the comprehensive coverage of biotech crossover investment in the November START-UP, we heard from VCs, under pressure from impatient limited partners, who are looking to public investments for faster exits. “One of the ways to compress the timelines is through participating in public financings,” Sofinnova Ventures’ Jim Healy told our colleague Stacy Lawrence.

If Lucquin is feeling similar pressure, he’s not letting on: “We will eventually exit these investments by either selling them to big corporations or by floating them on a stock market. We usually do that after five to six years, on average, but sometimes it takes a bit longer.”

Then again, the firm’s recent track record gives its partners some breathing room. The latest fundraising follows a three-year period in which Sofinnova completed the trade-sale of portfolio companies Corevalve, to Medtronic Inc. for up to $850 million; Novexel SA to AstraZeneca for up to $505 million; Movetis to Shire PLC for €428 million; Fovea to Sanofi for up to €370 million; and PregLem SA  to Gideon Richter for up to CHF445 million. Portfolio firms Stentys and DBV also went public on the Paris Euronext stock market. For all those, says Lucquin, Sofinnova had been the initial and largest investor from start to exit, representing a total enterprise value (stock market capitalization plus debt) of $3.6 billion.

That's a lot of stocking stuffers. If you know a FOTFhead who's not a START-UP subscriber, by the way, don't forget magazine subscriptions always make a lovely present. In fact, the START-UP elves are busy right now in their secure undisclosed sweatshop working on the 2012 A-List, in which we not only break down the year's Series A investment activity, but ask the question What does it all mean? All we can tell you now is that, yes, Virginia, there really is a Père Noël, as the Parisian Sofinnovians would say. And there really are Series A biotech investors despite the early-stage aversion you hear so much about.

Leave some cookies and a glass of milk, put out the fire in the fireplace, and, if you can, clean the soot out of your chimney, 'cause whether you've been naughty or nice, here comes...

Amarin Corporation: Cardiovascular drug developer Amarin is getting ready to launch its FDA-approved fish oil pill Vascepa (icosapent ethyl), and it’s got $100 million in fresh cash to go it alone. The Dublin, Ireland firm said December 6 it raised the non-dilutive capital through Pharmakon Advisors, calling it a “hybrid debt-like instrument.” The funding will allow Amarin to hire 250 to 300 salespeople for an early 2013 launch. Vascepa was approved in July. The delay has raised questions about Vascepa’s future. CEO Joseph Zakrzewski said on a conference call that Amarin will continue discussions with potential acquirers and partners. But absent a deal, the company will prepare to market the primary-care drug itself, an enormous challenge for a small organization that has no other marketed products, lacks revenue, and had just 31 employees at the end of 2011. Approved for patients with very high triglycerides, Vascepa will enter a market against a variety of competitors. Most prominent is the blockbuster Lovaza (omega-3-acid ethyl esters), sold by Pronova BioPharma ASA and GlaxoSmithKline PLC and known as Omacor in Europe. A generic version of that drug will be sold in the US by Apotex beginning in 2015. Vascepa is thought to have an advantage over some competitors, in that it does not contain docosahexaenoic acid (DHA) and thus does not raise LDL cholesterol. Amarin shares nearly doubled in value in April 2011, when it reported Phase III data showing that Vascepa lowered LDL cholesterol, but as IP issues and muddy launch plans weighed on the shares, they lost those gains within six months. Its share price was hammered again on the financing news and as of the closing bell December 12 was down 21%. The new debt vehicle can be paid back via a series of small installments until November 2013, at which point payments will increase until 2017. Zakrzewski said the payments are tied to Amarin’s revenue forecasts, and are capped if sales are less than expected – Paul Bonanos

Moderna Therapeutics: The developer of messenger RNA therapeutics emerged from incubation with the announcement of a $40 million financing on December 6. Flagship Ventures is leading the financing joined by what Moderna CEO Stephane Bancel called “high net worth individuals interested in going after very disruptive innovation.” Moderna is adapting research by Harvard University’s Derrick Rossi and Ken Chien and Massachusetts Institute of Technology’s Robert Langer to create treatments that aim to let the human body restart or increase the production of naturally occurring therapeutic proteins inside their own cells without triggering an innate immune response. The company was founded in October 2011, and by June 2012, Moderna was conducting preclinical studies of two drugs in primates. “In the body, we have a huge number of secreted proteins,” Bancel told our “Pink Sheet” colleagues. “What we have demonstrated in the serum, across several drugs and several animals, is that we are able to inject by intramuscular or subcutaneous [administration] and around the injection site get the body’s cells to uptake the RNA, make the proteins of interest and then secrete them to the bloodstream. It’s a very novel way of thinking about drugs.” The $40 million will be used to demonstrate safety with a goal of advancing two drugs in undisclosed indications into Phase I, he added. Moderna emerges from the Flagship Venture Labs think tank and incubator, which earlier this year launched microbiome-focused Seres Health. The new company's board will be chaired by Flagship co-founder Noubar Afeyan. The plan is to develop, make and sell mRNA drugs for rare diseases in-house while partnering out opportunities in larger patient populations. The firm thinks its technology offers significant promise in cardiology and oncology because of its ability to penetrate specified cells and trigger the production of proteins in those cells, but not outside of them. – Joseph A. Haas

ArmaGen Technologies: The Santa Monica, Calif. start-up said November 29 it has secured a $17 million Series A from an unusual syndicate: Three pharma corporate venture groups and the finance arm of a Japanese conglomerate. Corporate venture has played an increasing role in biotech funding, reaching down into early rounds more often in the past couple years, but a Series A exclusively from corporate is still rare. Boehringer Ingelheim Venture Fund is the lead investor, with participation from Shire, Takeda Ventures, and Mitsui & Co. Global Investment. What’s caught their attention is ArmaGen’s recombinant protein technology to create drugs that penetrate the blood-brain barrier. The near-term goal is to go after rare CNS diseases such as Mucopolysaccharidosis (MPS) Type I (Hurler's syndrome) and MPS Type II (Hunter's disease). Both BI and Shire’s funds are relative newcomers to the venture scene. When it launched in 2010, BI’s fund director anticipated about three deals a year, a push for board seats – which it has with ArmaGen – and made clear a goal of eventually partnering or acquiring the investee. Shire unveiled its investment group in September 2010 and has been aggressive; we counted at least eight investments since its debut. ArmaGen is run by UCLA endocrinologist William Pardridge, who spun it out of his lab in 2004. Until now he has raised government and military grants, but no venture financing. ArmaGen’s “Trojan Horse” technology creates fusion proteins that both bind to blood-brain-barrier receptors to sneak through, and bind to targets once inside the brain. – Alex Lash
Flexion Therapeutics: When its founders created Flexion in 2007, they didn’t plan on pursuing late-stage drug development. Times have changed. The company said December 4 it raised $20 million in a Series B funding earmarked in part for a Phase III trial of an osteoarthritis compound. It’s a significant shift away from the company’s original goal. The founders, former Eli Lilly executives who pioneered Lilly’s Chorus program, intended for Flexion to acquire compounds that pharmas were neglecting, develop them through Phase II, and strike partnerships with pharmas for late-stage trials. But partnering terms have proven onerous in the general market, even for drugs that have displayed promise in Phase II data, Flexion CEO Michael Clayman told “The Pink Sheet” DAILY. Novo Ventures partner Heath Lukatch said the company might even attempt to support development of a product through NDA registration. For now, Flexion has cash to sustain itself through 2013. First-time backer Novo Ventures led the new round, which also included returning investors 5AM Ventures, Pfizer Venture Investments, Sofinnova Partners and original seed investor Versant Ventures. The syndicate supplied $55 million in Series A funding, spread out over three closings between 2009 and early 2012. Based in Woburn, Mass., Flexion’s primary focus is on FX-006 and FX-005, a pair of osteoarthritis drugs. FX-006 is a sustained-release reformulation of a steroid that can be injected directly into a joint, and is a potential first-line therapy.  – P.B.
The Best of the Rest: A $50 million Series D investment for 23andMe, led by the king of late-stage social-media investments Yuri Milner, will let the company reduce the cost of its personal genome service to $99… Led by Flemish investment firm PMV, Biocartis raised €34.5 million in its Series D… Infinity Pharmaceuticals raised $150 million in a secondary offering… Zafgen closed a $21 million Series D round to support Phase II trials for obesity candidate beloranib… Rare disease start-up River Vision Development also completed a $17 million A round involving corporate backers… New investors Morgan Stanley and AllianceBernstein joined NanoString’s $15.3 million Series E… After raising an initial $15 million in December 2011, Cerulean Pharma reportedly added $13 million to its Series D… Working on a cloud application for electronic medical records, Modernizing Medicine closed a $12 million placementGalera Therapeutics grossed $11 million in a Series A co-led by NEA and Novartis Venture FundAvelas Biosciences’ real-time metastatic node visualization tools will get funded via the company’s $7.65 million A round… New investor Astellas Venture Management joined the syndicate for Bicycle Therapeutics’ £3.75 million Series A… Biomatrica raised $5 million to back its SampleMatrix technology for ambient biological sample storage… To help complete Phase III trials for Parkinson’s agent pimavanserin, Acadia Pharmaceuticals grossed $86 million in a private placement… Cel-Sci is using a $10.5 million RDO for Phase III studies of Multikine for head and neck cancer… Applied DNA Sciences raised $7.5 million from institutional investor Crede CG II… Israeli biotech Redhill Biopharma completed a $6.5 million financing… Developer of inhaled respiratory therapeutics Aradigm grossed $6 million in a PIPE… CNS-focused Supernus publicly raised $48 millionAcelRx completed a $41.4 million FOPO to support acute and breakthrough pain projects… To help pay for Phase II trials of diabetic foot ulcer candidate DSC127, Derma Sciences grossed $31.7 million in its follow-on… Pain drug developer Durect’s follow-on resulted in $12.6 million… Cancer immunotherapeutics company Northwest Biotherapeutics closed a $12 million public offeringNovaBay raised $7.4 million publicly for its anti-infectives work… As it prepares for Phase II of its oral insulin capsule, Oramed Pharma completed a $5 million FOPO… and Arrowhead Research publicly sold $4.1 million in stock for its peptide drug conjugate platform.  – Amanda Micklus

Thursday, December 13, 2012

M&A Deals of the Year Nominee: Watson/Actavis

It's time for the IN VIVO Blog's Fifth 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™.

At first glance, Watson Pharmaceuticals Inc.’s $5.6 billion acquisition of Switzerland-based Actavis Group seems run of the mill – a big generics player buys another big generics company, continuing a consolidation trend in the sector.

But the deal, announced April 25, 2012, is far more than that. It is the culmination of more than a decade of work that has seen once provincial US generics industry become globally integrated – and Watson’s story in particular shows how hard yet crucial that evolution has been.

The deal comes in the nick of time, coming off a lucrative year for generics companies overall, and Watson in particular. The sector benefited from a record-breaking number of high-value patent expirations, and Watson gained even more from its multi-billion-dollar semi-exclusivity opportunity for generic atorvastatin. 2013 and beyond isn’t going to be as easy, as generics companies begin to face a new era, commonly referred to as a ‘reverse’ patent cliff.

The problem isn’t of course unexpected – one can detect a dearth of patent expirations for innovative brands years in advance, and the generics industry is historically cyclical. But shifting the business model away from one that is heavily reliant on commodity generics to one that embraces more differentiated, higher margin products has been extremely tough, even for the best capitalized generics companies.

Watson itself recognized the problem years ago and tried to diversify both through in licensing innovative drugs and geographic expansion, but early efforts met limited success. It was not alone - chief competitors such as Mylan Inc., Teva Pharmaceutical Industries Ltd. and Ranbaxy Pharmaceuticals Inc. – also stumbled in serious ways.

The odds of success rose moderately with the arrival in August 2008 of CEO Paul Bisaro, a former president of Barr Laboratories Inc., which Teva bought in that same year. In fact, Watson was able to do the Actavis deal because Bisaro brought in seasoned management, in this case Sigurdur Oli Olafsson, the former CEO of Actavis. Olafsson, from within Watson, helped guide the purchase of Actavis and subsequent post-M&A planning. He will now serve as the amalgamated group’s president for global generics where his intimate knowledge of both Watson and Actavis will prove invaluable.

And the rough-and-tumble story has implications for the much larger branded business, as it looks to buttress its core business through diversification, albeit coming at the opportunities from the opposite end of the spectrum.

Underscoring the need to go global and reinvent itself, Watson will change its name to Actavis from 2013.

Bisaro believes the name change is necessary because too many other companies named Watson exist worldwide. “We couldn’t protect the name in markets around the world,” he said. “We will adopt the Actavis name, which is well-known and respected both inside and outside the United States.”

--Wendy Diller and Sten Stovall
art via clker

Wednesday, December 12, 2012

Financing Deals of the Year Nominee: Foundation Medicine

It's time for the IN VIVO Blog's Fifth Annual Deal of the Year! competition. Once again we're presenting awards in three categories to highlight the most interesting and creative deal making 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 a half dozen nominations in each category throughout December, and you, the voting public, will decide the winners, voting early and often once we've announced all the nominees. Strap yourselves in, it's The Race for the Roger™.

It’s difficult for physicians to access wide-ranging genomic analyses for patients and to then incorporate those into their treatments. But Foundation Medicine aims to make that process simple. It provides oncologists with a genomic analysis of a patient’s tumor. And then takes the next step – offering information on drugs and clinical trials that might be useful based on the patient’s genomic information.

Foundation Medicine made the Deals of the Year short-list with a $42.5 million Series B round to finance the marketing of its first product, FoundationOne. Launched in June, this test identifies all classes of genomic alterations (including copy number alterations, insertions, deletions and rearrangements) in about two hundred cancer-related genes. These are genes known to be altered in solid cancer patients, based on the scientific and clinical literature. FoundationOne also provides a list of drugs associated with the specific alterations that are FDA approved, in clinical testing or likely to enter the clinic in the next 12 to 24 months.

The idea is to delve deeper into a larger number of genetic alterations than is now typically analyzed, thereby enabling more accurately targeted treatment. FoundationOne found at least one genomic alteration that leads to a subsequent actionable treatment in 325 (77%) of 441 solid tumor patients, according to data presented by the company in June. Of these 325 patients, only 35% had genetic alterations that would have been found with currently available “hot spot” or single gene tests.

In addition to data on a specific patient, oncologists will someday be able to access a database about patients with similar genetic alterations as well as their treatments and outcomes.

The logistics of FoundationOne go like this: physicians’ offices send a standard tissue sample from a biopsy that is formalin-fixed and paraffin-embedded via overnight delivery. Then, within 14-21 days, the company provides a paper or online report to the doctor. Pellini said the 21-day deadline is crucial to oncologists, who typically schedule a follow-up patient visit to determine therapy around that time. He added that Foundation is aiming to reduce that gap closer to 14 days.

The list price for FoundationOne is $5,800. The company negotiates with the insurer to determine the reimbursement amount. Commercialization won’t be easy to navigate, as Foundation navigates adoption and reimbursement issues. Plus, major cancer genomics players like Illumina and Life Technologies are likely to get increasingly savvy about making their products more useful for and accessible to physicians, not just scientists. But the quest of the big boys to establish themselves in genomic cancer analysis may also provide a field of potential acquirers for Foundation.

This year’s financing was designed to get Foundation generating sufficient revenue to help push the business to the next level. The company anticipates a 2013 launch of a test for genetic alterations in hematologic malignancies. It also expects to release several datasets supporting the usage of its tests during 2013 and 2014.

In 2012, Foundation was very active on the deal-making front with at least seven newly disclosed partnerships with drug makers to help develop genetic tests for candidates in clinical development.

All the new investors in the Series B round were either public crossover investors or strategic investors. The former include Deerfield Management, Casdin Capital and Redmile Group, while the latter include Roche Venture Fund, WuXi Corporate Venture Fund and one undisclosed investor.

Third Rock Ventures, the founding investor, Google Ventures and Kleiner Perkins Caufield & Byers were all existing investors before the most recent round. Since inception in April 2010, Foundation has raised $86 million in total venture financing.

--Stacy Lawrence

image by flickr user Paul Goyette under creative commons license