Deals Of The Week: Whose Mind Is On Deals Anyway?

To rehash The Event of this week: the Supreme Court ruled 5-to-4 to uphold the constitutionality of the Patient Protection and Affordable Care Act June 28, including the mandate requiring individuals to have health insurance.

The decision seems favorable to the pharmaceutical industry, and may have surprised a few who already were scheming of ways to get back the billions spent on that excise tax to the federal government in 2011. We look forward to sorting out the implications for the pharmaceutical and biotech industries in the weeks and months ahead. Our sister publication, “The Pink Sheet,” DAILY did an initial review here, making the point that many changes already were set in motion by the passage of the act itself. And we'll have much more to say in the days and weeks ahead.

The pharma industry stands to benefit from the expected increase in insured patients. The Centers for Medicare & Medicaid Services project about 22 million newly insured patients, and that spending on prescription drugs by public and private payers will increase 8.8% in 2014 over 2013 – the year major coverage expansions under the ACA are scheduled to begin – compared to 4.1% growth if it had not passed.

Still, there’s no guarantee of the volume trends newly insured patients will deliver when it comes to pharmaceuticals. “The actual volume upside may be lower and more modest then some expect,” noted Barclays Capital analyst Anthony Butler in a same-day note. A significant portion of the uninsured are believed to be young people who may not use health care services or pharmaceuticals. “The addition of these segments into the coverage pool through the individual mandate may be a smaller net positive from the volume perspective for the pharma sector than some have expected,” Butler said.

There will be plenty of uncertainties as we navigate through health care reform, but for now isn’t it about time to celebrate the federal government’s executive, legislative and judicial branches in action, by heading to the beach for July 4? – Jessica Merrill

Merck Serono/Compugen – The corporate venture arm of Germany’s Merck Serono is collaborating with Compugen to establish a new company, Neviah Genomics, to discover, develop and market novel biomarkers for drug toxicity, with the aim of bringing a product to market within a few years. The Neviah collaboration, announced June 25, is the first investment under Merck Serono Ventures’ Israel Bioincubator program, established by Merck Serono in 2011 with initial funding of €10 million over seven years. Compugen, a Tel Aviv-based biotech with a pipeline of preclinical protein therapeutics and monoclonal antibodies, will bring its predictive discovery technologies to the partnership. The deal is structured so both Merck Serono Ventures and Compugen will be shareholders in Neviah, which will have its own board that will determine how any product profits will be distributed. Compugen also will earn royalties from product sales. Further financial details were not disclosed, including the amount of Merck Serono’s initial investment. The companies have worked together as part of a 2008 partnership to co-develop CGEN855, a GCPR peptide investigated in inflammatory disease. – Joseph Haas

Lilly/PrimeraDx – Massachusetts-based PrimeraDx has entered into a multi-year collaboration with Eli Lilly to develop companion diagnostics for several unspecified clinical candidates, initially focusing on oncology. Neither terms nor timelines were disclosed. PrimeraDx, will develop multiplexed assays using its proprietary ICEPlex system, which is capable of simultaneous detection and quantification of numerous target types such as mRNA, miRNA, SNPs and DNA. Founded in 2004 and formerly known as Primera Biosystems, Inc., the company sells instrumentation, software, assays and consumables. Primary customers are clinical labs at large academic research centers and reference laboratories and biopharmaceutical companies. PrimeraDx is backed by venture investors including Abingworth, InterWest, CHL Medical, MPM Capital, Burrill & Co., and the Malaysian Technology Development Corporation. It last raised a $20 million series C in September 2009. – Mike Goodman

Celgene/Inhibrx – Drug-discovery firm Inhibrx has signed a notable partner, announcing June 27 that Celgene has licensed a preclinical antibody program. The target of the program was not disclosed. The potential value of the deal is $500 million, including upfront, clinical and regulatory milestones. Inhibrx, based in La Jolla, Calif., is focused on the discovery and development of novel drugs for cancer and inflammatory disease. – J.M.

Merck/AstraZeneca – Merck and AstraZeneca announced an agreement to extend their longstanding partnership June 27 after coming to terms that could benefit both parties. The original partnership dates back to 1982 when Sweden’s Astra AB tapped Merck to market its proton pump inhibitor drugs in the US. Nexium (esomeprazole), which is expected to post dwindling sales once losing patent protection in 2014, and Prilosec (omeprazole), which is now sold as an over-the-counter medication, remain the only drugs still under the agreement. AstraZeneca now will have the option to buy the remainder of Merck’s stake in the drugs in the first quarter of 2014 for $347 million plus an amount equal to 10 times Merck's average 1% annual profit allocation in the partnership, which AstraZeneca estimates to be about $80 million. The price paid by AstraZeneca also could include the net present value of up to 5% of future U.S. sales of the painkiller Vimovo (naproxen/esomeprazole). While the extension of the deal will have no immediate effect on AstraZeneca’s earnings, it will help Merck deal with the patent expiration of the blockbuster allergy drug Singulair (monteklast) by adding $200 million in revenues to the 2012 top line. – Lisa LaMotta

Biogen Idec/Isis – Antisense drug-discovery platform operator Isis Pharmaceuticals has partnered prolifically over the years. Its latest deal with Biogen Idec is the second collaboration between the two companies, an arrangement to develop and commercialize a treatment for myotonic dystrophy type 1. The disorder, also known as Steinert disease, is a form of muscular dystrophy that afflicts adults. Biogen Idec will pay $12 million up front to enter the collaboration, but could pay much more over time if it licenses the drug at the end of Phase II. The deal includes $59 million in milestone payments prior to licensing, as well as up to $200 million for a licensing fee and and further clinical milestones. The companies will attempt to develop a drug that repairs a repeating defect in the coding of the dystrophia myotonia-protein kinase gene that results in abnormally long strands of RNA, leading to buildup in cells. Isis and Biogen already have an alliance in spinal muscular atrophy, revealed in January. – Paul Bonanos

Sanofi/Oxford – The UK's Oxford BioMedica announced June 29 that it has earned a $3 million option exercise payment from Sanofi, which has decided to acquire worldwide license to a pair of Phase I/II gene-based treatments discovered by Oxford. Under terms of an agreement signed in 2009, Sanofi has acquired rights to develop, manufacture and commercialize StarGen for Stargardt disease and UshStat for Usher syndrome type 1B. Oxford discovered and developed both candidates using its proprietary LentiVector platform technology. – Joseph Haas

Photo credit: Wikimedia Commons

Financings of the Fortnight's Gut Check

Has the signal-to-noise ratio of the Obamacare decision already blown out your transistors? Are you sick of “SCOTUS,” which sounds like a region where half the population wouldn’t want to get kicked?

FOTF has a suggestion: Dive into the microbiome, one of the most fascinating ongoing scientific revelations of our lifetimes. Anyone who, as a kid, loved Ray Bradbury’s creepy short story “Fever Dream,” in which a deliriously ill child becomes bit by bit something other than himself, immediately grasps the existential import of the microbiome research: We might need to rethink what it means to be human, because most of the genetic material we’re carrying around isn’t actually ours. (Wait a second, am I typing this, or is it the microbes?)

Lofty questions, indeed; we’re also pondering more practical ones, such as whether the nascent knowledge of our bugs and ourselves can be turned into tests, drugs and other products that improve our health. Only a few investors have made that bet so far.

The latest group is Flagship Ventures, which recently discussed with our “Pink Sheet” colleagues a few details of its under-the-radar start-up Seres Health. Homegrown and fully funded by Flagship, Seres is aiming for what Flagship partner David Berry calls “a new class of drugs,” neither small molecule nor biologic, and why not: If the microbiome has us reconsidering our identities, couldn’t it also lead to new categories of therapeutics?

We’ll have to reserve judgment; Berry wouldn’t say much more about Seres’ activities, although he was eager to discuss the implications of fecal transplantation, a topic that, let’s just say, doesn’t go over well at dinner parties.

You can read more about Seres here, and to hear more from investors about the promises and cautions of translating the microbiome into therapeutic products, stay tuned for the next Capital Matters column in START-UP. Meanwhile, FOTF will be off for the 4th of July week, refreshing itself in the mountains, about as far from the Washington, DC, punditry and sophistry as possible. Just us and our microbes under the stars.

Pitch your tent, kick off your boot and crack open your yogurt, we're lighting the fire under another edition of...

Tesaro: With its $81 million debut June 28, the maker of drugs for cancer and chemo-related nausea became the first life science firm to price an IPO in nearly two months. Tesaro sold 6 million shares at $13.50 a piece, which nets the company $75 million after fees. Tesaro is run by the top executives of MGI Pharma, who formed the company two years after Eisai bought MGI in 2008. Launched in 2010, the firm has been on an IPO fast-track from day one, raising $120 million in two rounds by the end of March 2012. By far the largest shareholder is New Enterprise Associates, which led the Series A with the founders, who told NEA they wanted to create “a new MGI.” Before the IPO, the mega-venture firm owned 50% of the company and, according to regulatory filings, it is one of at least three venture insiders to buy shares at the IPO. Other major shareholders’ pre-IPO shares included InterWest Partners (13%), Kleiner Perkins Caufield & Byers (9.5%) and Tesaro CEO Lonnie Moulder (5%). As much as 1.86 million shares were set aside for insiders, which continues a common theme for biotech IPOs, although the insiders’ percentage of the total is modest compared to other IPOs this year. Underwriters led by Citigroup and Morgan Stanley have the option to sell up to 900,000 more shares. – Alex Lash

Omeros: Speaking of biotech IPOs, the firm that cracked the ice of The Great Recession has raised $30 million on the public markets. The firm sold 2.9 million shares at $10.25 a piece June 27, netting the firm $28 million after fees, and underwriters led by Cowen & Co. and Deutsche Bank can sell up to $4.5 million worth of shares in an overallotment. Omeros has two programs in Phase III, both low-dose combinations of generic drugs to reduce pain and inflammation that occurs during and after surgery. The first is for use during arthroscopic joint surgery, the second for use during ophthalmological procedures. With its October 2009 IPO that raised $68 million, despite a lawsuit brought by its former CFO, Omeros was the first “pure-play” biotech to debut in a year and a half. Since that debut, the Seattle company has raised $25 million in an unusual deal that combined $20 million from Microsoft co-founder Paul Allen’s Vulcan Capital and $5 million from a Washington State development grant to support Omeros’ G-protein-coupled-receptor program in exchange for future royalties that might stem from the program. – A.L.

Neviah Genomics: The corporate venture arm of Germany’s Merck Serono is collaborating with Compugen to establish a new company, Neviah Genomics, which will discover, develop and market novel biomarkers for drug toxicity. Announced June 25, the Neviah collaboration is the first investment under Merck Serono Ventures’ Israel Bioincubator program, established in 2011 with initial funding of €10 million over seven years. MSV Head Roel Bulthuis told “The Pink Sheet” the incubator initially will invest in eight to 10 seed projects, but that doesn’t mean the Neviah investment necessarily equals one-eighth or one-tenth of the €10 million total. “We believe we’ve put Neviah in a good position to execute on its business plan and potentially over time access other sources of capital,” he said. Both MSV and Compugen will be shareholders in Neviah, and Compugen will earn royalties from product sales. Compugen, a Tel Aviv biotech with preclinical biologics, will bring its predictive discovery technologies to the partnership. The goal is for Neviah to provide both software and a kit to let biopharma companies evaluate their own candidates for drug-induced toxicity. The partners hope Neviah can produce a marketable product within a few years. Like all Israel Bioincubator Fund investments, Neviah will be headquartered in Merck Serono’s new state-of-the-art Interlab facility in Yavne, Israel. – Joseph Haas

Aegerion Pharmaceuticals: Another public biotech in the post-recession class tapped the markets to raise cash this past fortnight. Aegerion on June 14 priced 3.4 million shares at $14.75 per share for a net total of $47.3 million after fees. Underwriters led by Jeffries & Co. and JP Morgan have the option to sell up to 510,000 shares. Aegerion has applications before US and European regulators for lomitapide, a treatment for homozygous familial hypercholesteremia, a rare genetic cholesterol disease. The drug originally was developed by Bristol-Myers Squibb and ultimately in-licensed by Aegerion. The firm will use the cash to prepare for launch in both the US and EU in 2013, if the regulatory reviews go well. Aegerion shares closed at $14.22 on June 28, down 3.5% from the sale price. – A.L.

Photo of lovably mischievous microbes courtesy of Googlisti under a Creative Commons license.

Things Mike Pearson Has Learned

It’s always interesting to hear Mike Pearson, the blunt CEO of Valeant, expound on how nimbly his company is responding to Pharma’s complicated business environment. At an analyst meeting on June 21—coincidentally the last day of BIO 2012 – he took a few minutes for reflection on Valeant’s current strategy, as well as lessons learned from his four years at the helm: Only compete in attractive markets, defined as those in which competition is manageable and overall sales are growing. 

No direct mention of health care reform in the U.S. or market access issues in Europe crossed his lips, but clearly reimbursement and pricing hurdles are behind Valeant’s decision to almost entirely exit Western Europe (a move made prior to the current melt-down), its declining presence in the U.S., which will account for roughly 50% of sales in 2012, down from 65% in 2010, and its de-emphasis of innovative drugs in favor of OTC and branded generics ( 71%, 9% and 20% in 2010 to 59%, 14%, and 27%, respectively, in 2012).  An increasing proportion of Valeant revenues comes from products and geographies that have a heavy out-of-pocket component, even on the innovative side. 

Pearson cited several critical priorities for the company, which relies on a blend of organic and business development activities for growth. If Valeant does not deliver on a 15% return on shareholder value over three years, management takes a hit. With that kind of mandate, Valeant executives can not afford to wait out long R&D cycles.

That approach stands in contrast to Forest Laboratories,which on June 20 also provided investors with an update of its strategy, and which is also somewhat contrarian. Slightly larger than Valeant, although with a significantly lower market cap ($9.2B versus Valeant’s $13B), Forest also avoids risky early stage research in favor of a strong emphasis on business development with a focus on clinical assets.

However, it has an entirely different commercial and portfolio management mindset, with deep roots in primary care: it has no problem building support gradually for drugs that demonstrate incremental improvements over standard of care, continuing to back them despite slow launch trajectories-- an approach that worked brilliantly but now makes analysts jittery, given worries that once-proven tactics won't work in today's vastly constrained markets. 

And while Pearson struck a contrite tone with investors, who have been questioning him lately about lack of visibility on organic growth and ex-U.S. exposure, Forest’s management, led by founder Howard Solomon had a 'hold the fort' message. That message: the company's overhaul of its product development portfolio has succeeded and the current mode of operating is to stay the course.

Of course, Forest has patent cliff issues (80% of revenues at risk by 2015), which Valeant, by eschewing innovative molecule research and early clinical development, strives to avoid. And it is Valeant we’re looking at in this note. In fact, in the four years since he assumed the helm, Pearson said explicitly that he's learned to avoid primary care 'tail' products, such as the anti-depressant Wellbutrin, which did not perform to expectations after it was acquired as part of Valeant's 2010 takeover of Biovail. Also critical is discipline on integration costs. 

That said, company’s returns on its acquisitions has been “phenomenal” Pearson says, and it sees business development opportunities as “quite large” – a contrast to some others in the industry who bemoan the lack of attractive late-stage deals. So the plan is to shift capital deployment from half acquisitions and half share repurchase to more emphasis on the former. And it prefers to buy assets over full companies due to favorable tax treatment, though both are in the cards. In business development, it expects a 20% return, statutory tax rates and a cash payback within six years.

In the past year, Valeant has become a leader in certain sub-segments of dermatology and ophthalmology – and moved into podiatry and dental care, all businesses with a heavy out-of-pocket pay component. Likewise, geographically, its play in Russia is particularly aggressive, as its sales have gone rapidly from less than $40 million to $200 million. Even within that market, though, it is not selling innovative medicines, so much as branded generics and OTC products. In fact, if an asset has government ownership or reimbursement, Valeant walks away.

That sort of flexibility and aggressive rush into non-patent protected franchises implies a willingness to forgo a high-value certainty in favor of operational complexity and the vagaries of economically sensitive products. Its success--Valeant's stock has more than doubled in two years, compared to Forest, which is up only 25% in the same time frame -- is indicative of the climate in which pharma currently operates as it navigates patent cliffs, healthcare reform, and European market access hurdles. It may be an attractive way forward for mid-sized pharma right now but it is a bet on execution and opportunism over innovation and long-term commitment--currently hard-to-reach goals for an industry under siege.

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Deals of the Week: These Boots Are Made For Buying

Are you ready, Boots? Pharmacy chain Walgreen Co. may not have been ready to acquire international drugstore operator Alliance Boots outright, but it did acquire a 45% stake in the company for $6.7 billion in cash and stock this week. The deal includes an option for Walgreens to acquire Boots outright for an additional $9.5 billion, within a six-month window that will begin in 2015. Boots has been owned by private equity firm Kohlberg Kravis Roberts since 2007.

The deal gives Walgreens a vast international presence beyond its 7,890 U.S. stores. Boots currently operates 3,330 locations in 11 countries. The vast majority of its revenues from health and beauty products came from the UK; that amounted to £6.7 billion ($10.4 billion), compared with £965 million from Norway, Thailand, Ireland, the Netherlands and other territories. Headquartered in Zug, Switzerland, Boots also has wholesale pharmaceutical operations that delivered £16.8 billion in revenue last year, giving it a presence in 25 countries total.

The agreement comes as Walgreens struggles to replace U.S. market share it lost over the past several months, particularly due to an ongoing dispute with pharmacy benefit manager Express Scripts. By allying with Boots, the pharmacy stands to gain purchasing power, particularly for generics; Walgreen says it will become the world’s largest buyer of prescription drugs upon completion of the deal. Cost savings from the alliance could reach $1 billion by 2016, the companies say.

Investors reacted to the deal with some consternation, as Walgreens was thought to be taking a risk by entering Europe at a time of economic uncertainty. (“You keep losing when you oughta not bet.”) The prescription drug business could also be rocked by the Supreme Court’s impending decision on the constitutionality of the Affordable Care Act, due as soon as early next week. Walgreens shares dipped to a 52-week low of $28.53 on Wednesday, after having traded above as $32 on Monday.

You keep saying you got something for me, and sure enough, we’ve got something for you in return. It’s…

Sanofi/Joslin Diabetes Center: Sanofi has teamed up (pdf) with Joslin Diabetes Center, a research arm of Harvard Medical School, to discover new biologics and small molecule drugs for the treatment of diabetes. The collaboration is expected to begin mid-summer and is currently set to last three years with the option for an extension; Sanofi VP of external innovation Sridar Nateson said that the French pharma intends to extend the contract at that time in an even bigger collaboration. The company would not reveal the current level of funding that it will be providing to Joslin. Sanofi and Joslin will be working to develop compounds that can treat both type 1 and type 2 diabetes, focusing on four areas. The first is treatments for diabetes complications, specifically nephropathy. Researchers will also be looking into tissue-specific insulin – the first being liver-specific. The next area of focus for the collaboration will be insulin sensitivity; Joslin already has targets that could address this issue. Other projects will delve into personalized medicine for diabetes, using Joslin’s significant efforts in genomics to try to pinpoint why certain patients develop complications when others do not and why other patients development them at different times. Sanofi has been pursuing other collaborations with academic institutions more avidly since 2009, knowing that most of these deals will not produce results until years later. – Lisa LaMotta

Merck/Ambrx: Interest in antibody-drug conjugates remains high, in the wake of Seattle Genetics' launch of Adcetris (brentuximab vedotin) and encouraging late-stage data for Genentech's T-DM1 compound. The latest pharma to strike a deal in the area is Merck, which paid $15 million up-front for access to Ambrx's medicinal chemistry technology in order to discover and develop new drugs. Milestone payments could add $288 million to the deal, and San Diego-based Ambrx could receive additional royalties if a drug is approved and marketed. The companies haven't yet said what therapeutic areas they'll pursue, but both made it clear that they'll seek mutually-selected targets beyond oncology, potentially including autoimmune disease, cardiovascular disorders, inflammation and metabolic disorders. Ambrx has previously partnered with Pfizer-owned Wyeth and Bristol-Myers Squibb to develop specially targeted therapies that carry a therapeutic payload to a specific target by binding antibodies to drugs. As with the other deals, Merck will discover antibodies, then send them to Ambrx for optimizing; the arrangement won't cover any of Merck's existing pipeline candidates. - Joe Haas and Paul Bonanos

Genentech/AC Immune: Genentech must like what it sees in the monoclonal antibodies of Swiss company AC Immune. In a June 18 announcement, Genentech, a division of Roche, says it has turned again to AC Immune to develop antibodies against a target implicated in Alzheimer's disease, this time zeroing in on abnormal Tau protein. In a deal valued at just over $400 million, the two companies will work together to produce anti-Tau monoclonal antibodies, with Genentech taking responsibility for preclinical and clinical development, manufacturing and commercialization. AC Immune will receive an undisclosed upfront payment, development milestones and royalties on sales. Genentech originally partnered with AC Immune back in 2006, to develop monoclonal antibodies against amyloid-beta, another protein thought to be involved in Alzheimer's disease. The Swiss company uses antigens expressed on liposomes to create its molecules, and its anti-amyloid-beta research has produced one antibody, crenezumab, which is in Phase II clinical studies. The so-far benign side effect profile of crenezumab was apparently key to it being selected by the U.S. National Institutes of Health and others for evaluation in a trial aimed at preventing the onset of Alzheimer's, which will take place in a family group in Colombia with an inherited disposition to develop the condition. - John Davis

GSK/Liquidia: GlaxoSmithKline forged a deal with privately-held Liquidia Technologies under which it will use the startup's nanotechnology platform to develop vaccines and inhalable product candidates. Terms weren't released in the June 20 announcement (pdf), but the companies revealed that the up-front payment included both cash and equity, as well as research and development funding. With additional components of the transaction, including milestone payments, licensing fees, and royalties, the deal's value could spiral into the hundreds of millions of dollars over several years, the companies said. Founded in 2004 and based in Research Triangle Park, N.C., Liquidia has created a platform it calls PRINT (particle replication in non-wetting templates), with which it engineers and fabricates nanoparticles, most often used in vaccines thus far. While it retains rights to its own programs, the company also has a 2009 partnership with Abbott to discover particles that deliver siRNA-based drugs. Investors in Liquidia include PPD, Canaan Ventures, New Enterprise Associates, Morningside Venture Investments, Pappas Ventures, and Firelake Capital. - P.B.

Roche/Seaside: Privately-held Seaside Therapeutics has made considerable progress in researching neurological disorders such as Fragile X syndrome and autism spectrum disorder. Now, Roche has partnered (pdf) with the start-up, licensing patents that are the basis for one key drug while taking an option on another. For an undisclosed amount, Roche took rights to patents on a glutamate receptor subtype 5 (mGluR5) antagonist, RG7090, currently entering Phase II for Fragile X; the patents are also of interest for ASD. Roche also obtained an option to license Seaside's GABA-B agonist, known as STX209 or arbaclofen, in Phase III for Fragile X and Phase IIb for autism. Seaside will continue to develop the latter drug with funds received in the deal, but Roche will be able to license it upon completion of certain milestones. Novartis has a competing mGluR5 drug, AFQ056, in late-stage development for Fragile X as well. - P.B.

We're indebted to Scott Steinke for his report on the Walgreens/Boots deal in "The Pink Sheet" DAILY, though he didn't mention Nancy Sinatra. As for Eileen, thanks to the Aquarium Drunkard.

A Pleasantly Familiar BIO 2012 Approaches…

Even as the health care world and nation, for that matter, await a landmark U.S. Supreme Court decision, BIO 2012 approaches June 17-21 in Boston. Its stresses and routines are, in light of the momentous changes underway in the macro-environment, for once pleasantly familiar. There are so many panels on the typical hot topics -- ranging from partnering and finance, to structuring companion diagnostics deals, to real-world evidence and health outcomes research, meetings with key contacts, and festivities -- that they almost dissipate discussion of the implications of the post-SCOTUS decision for biopharma.

That said, there’s a prevailing sense in the industry and on Wall Street that many marketplace trends accelerated by the Affordable Care Act were in the works prior to its passage and are likely to continue regardless of what happens to the act itself. The decision will obviously have very specific implications for biopharma as a whole and for individual companies and products, but the winds of change are in the offing.

At top levels of pharma, contingency planning has been ongoing, with companies and lawyers strategizing in great detail. One conversion for example concerns the legal basis for recouping money already paid out to government because of various ACA provisions in the event the court overturns all or parts of ACA. Our reimbursement team in Washington has been tracking the discussions, most recently a notable report by CMS Office of the Actuary released on June 12 in an online version of Health Affairs. 

Regardless of the political and judicial tides, the stats help firm up a picture of the stakes at hand for biopharma. As reported in "The Pink Sheet" DAILY, the Centers for Medicare & Medicaid Services projects that spending on prescription drugs by public and private payers will jump 8.8% in 2014 over 2013 -- the year major coverage expansions under the ACA are scheduled to begin. If the ACA had not passed at all, that jump would have been only 4.1%. 

The prescription drug industry, in short, stands to benefit more than most healthcare sectors – and CMS believes that this is because many of the newly insured (22 million estimated) who are driving the spending jump are younger and healthier individuals. Thus, they are more likely to utilize physician services and drugs than hospitalizations and medical devices, which are domains of the aging. Notably, most of the newly insured will benefit because they qualify for Medicaid as a result of the ACA (19.6 million), and only a minority will take advantage of the new state-based health insurance exchanges (3.1 million).  

The message from some corners of Wall Street has been that whether the ACA survives or not, the reforming U.S. landscape presents some investors with abundant opportunities. Provider consolidation, cost-cutting, coordination of patient care, and re-allocation of risk are trends well underway in the marketplace. 

At a recent Jefferies & Co. investment conference, private equity leaders drove home that point: Despite the ACA’s importance -- one panelist summed it up as the most important healthcare legislation since Congress passed legislation creating Medicare in 1965 -- they also noted that the “horse is out of the barn” in terms of reform. 

The private equity investors -- who have a bias for buying ongoing businesses with revenues -- do not, for a variety of reasons, play heavily in the world of early-stage discovery and innovative R&D-driven companies (too much risk, few choose to have internal clinical expertise that is necessary to make long-term bets on innovation). That said, the deals they make now have implications down the road for biopharmas, as drug companies see their customer bases consolidate and everyone in healthcare looks to cut costs, and as consumers take a more active role in shaping their own health care decision making. All on the panel agreed, for example, that employer-sponsored health care insurance, now the source of insurance for less than half of the U.S. population according to statistics presented an ISPOR meeting earlier this month, will go away. The replacement is likely to be defined plans, along the lines of current retirement plans.

What all this means in the biopharma deal making world will be food for thought for years to come. Meanwhile, ordinary deal-making in pursuit of material matters continues: immediate revenues, long-term innovation, or goals in between, with all its routine pleasures and tribulations, as the latest crop of partnering news shows in …

Upsher-Smith/ Proximagen - After teaming up twice since 2008 with Proximagen and acquiring a 16% stake in the U.K. biotech, Upsher-Smith Laboratories announced on June 13 that it is buying out its partner for £223 million (~$347 million). The proposed acquisition includes additional contingent-value rights that could boost the deal value to nearly $555 million, based on the “future success” of two Proximagen compounds: a vascular adhesion protein-1 (VAP1) inhibitor, which is entering Phase I in rheumatoid arthritis, and PRX00933, in Phase III for obesity and diabetes. Privately held Upsher-Smith has obtained unanimous support for the purchase from Proximagen’s board of directors as well as irrevocable undertakings from shareholders representing 72% equity in the biotech to accept the deal. That 72% includes the 16% already owned by Upsher-Smith. For each Proximagen share, Upsher-Smith has agreed to pay £3.20 (about $4.98), representing a 16% premium over Proximagen’s closing share price on June 12 (£2.75/$4.28). A relationship between the two companies dates back to 2008, when Upsher-Smith agreed to a potential $232 million collaboration with Proximagen for an undisclosed upfront payment plus development and sales milestones to obtain worldwide rights to PRX1, a levodopa prodrug still in preclinical development for Parkinson’s disease. Nearly two years later, in April 2010, Upsher-Smith licensed North American rights to tonaberstat, a neuronal gap junction inhibitor now in Phase II for epilepsy in refractory patients. Under that deal, Upsher-Smith took over development, regulatory and commercial responsibilities for the compound, with Proximagen retaining commercial rights in Europe. The companies would split royalties and milestones evenly if tonaberstat were sub-licensed outside of North American or Europe.--Joseph Haas

Novo Nordisk/ JDRF --Novo Nordisk has partnered with the Juvenile Diabetes Research Foundation to develop novel immunotherapies for the disease, the partners announced June 13. As part of the agreement Novo anticipates taking over select JDRF-funded research programs to move them into the clinic faster. “The money flow is entirely one way from Novo Nordisk to JDRF,” said Novo Nordisk’s Matthias von Herrath, the director of the Danish company’s newly opened Type 1 Diabetes R&D Center in Seattle. In exchange, JDRF will share its databases and research expertise with Novo Nordisk and potentially hand off certain research projects, currently in the hands of small biotechs or academic researchers, to the specialty pharma. In the area of type 1 diabetes, Novo Nordisk’s main research emphasis is on the development of immunotherapies that direct the immune system to protect, rather than attack, beta cells. Type 1 diabetes occurs when the body’s immune system attacks and destroys the glucose-responsive, insulin-secreting beta cells of the pancreas. The disease usually occurs in childhood and requires lifelong use of insulin. JDRF is invested in several vaccine projects for type 1 diabetes, including research partnered with Selecta Biosciences and Parvus Therapeutics.--Jessica Merrill

Newron Pharmaceuticals SpA/ NeuroNova AB -- In the autumn of 2011, the future outlook for Newron Pharmaceuticals was looking bleak; rights to its lead product, safinamide, an add-on therapy for Parkinson's disease, had just been returned by the licensee, Merck Serono, and subsequently a planned merger with Finland's Biotie Therapies had been taken off the table. But fast forward nine months, and its prospects are decidedly more promising, with new licensees found for safinamide and now another merger in prospect. On June 13, Newron announced the proposed acquisition of Swedish neurogenesis company NeuroNova AB in an all-share transaction valued at €15.4 million ($19.3 million). The acquisition will bring two potential growth factor-based products to Newron – these compounds, when infused directly into the ventricles of the brain, may be active in stimulating stem cell proliferation and be potential therapies for neurodegenerative diseases, Newron says. But perhaps more importantly, NeuroNova's venture capital backers, Investor AB and HealthCap, along with grants from the EU Commission, are expected to provide a further €16 million in funding for Newron. The hugely experienced Nordic life sciences investors have vowed to support Newron's desire to become a European-based CNS-focused biotech.--John Davis

 

Stiefel/Basilea -- Stiefel, the dermatology unit ofGlaxoSmithKline, has acquired global rights to the eczema drug Toctino (alitretinoin) from Swiss drugmaker Basilea  as the compound nears approval in the U.S. The Research Triangle Park-based derma paid £146 million ($228.5 million) in cash for rights to the oral drug, which is already approved in 29 countries for severe chronic hand eczema in patients who do not respond to topical corticosteroids. Toctino is sold in 14 of those countries, and Stiefel acquired distribution agreements in Europe, Canada, Mexico, Israel and Korea as part of the deal. If FDA approves Toctino, currently in Phase III, Basilea will receive a milestone payment of £30 to £50 million, as well as low double-digit royalties after three years have passed. Basilea reported CHF 31 million ($32.6 million) in Toctino sales during 2011; the company said it will use the proceeds from the drug’s sale to support ongoing development of a portfolio of anti-infectives, including ceftobiprole for treatment of pneumonia in hospitals and isavuconazole for fungal infections. – Paul Bonanos

Polyphor/ Boehringer Ingelheim -- In a research collaboration and licensing agreement announced on June 12, Polyphor Ltd will apply its MacroFinder drug discovery technology to targets selected by Boehringer Ingelheim to identify and optimize novel macrocyclic drugs. Although specific terms were not disclosed, Polyphor will receive an upfront payment, research funding, and milestone payments as candidates progress through development and onto the market.  The Swiss-based biopharma is also eligible for royalties on sales of approved products.  Although the targets were not disclosed, a scan of the literature shows macrocyclic drugs addressing a wide spectrum of disease states. The MacroFinder platform generates synthetic, macrocyclic molecules able to modulate extracellular protein-protein interactions and other complex biological targets, enabling optimal activity, selectivity, and ADMET properties such as cell permeability and oral bioavailability. Macrocyclic chemistry is enjoying a resurgence in the industry; two weeks ago, Genentech inked a similar deal with macrocyclic specialist Ensemble Therapeutics. For Polyphor, backed by Biomedinvest and Novartis Venture Fund, the tie-up with Boehringer is its fifth discovery deal since 2008. Boehringer has also been active, signing a spate of recent discovery deals, the most significant being with Forma Therapeutics to screen and optimize oncology candidates.

image by flickr user zelenyoko via creative commons

Financings of the Fortnight: Less Talk, More Rock

Third Rock Ventures has topped itself. One of biotech’s few ready sources of early-stage capital, the firm has announced its backing of three firms in the past week, and all of them one way or another fly in the face of the caution so many life-science VCs move with these days. One of those investments, announced Thursday, June 14, is Third Rock’s largest solo Series A funding to date, which is saying something. This is a firm that has previously flown solo in launching companies such as SAGE Therapeutics ($35 million), Blueprint Medicines ($40 million), Ember Therapeutics ($34 million), and Lotus Tissue Repair ($26 million).

Now it's making a big bet -- no, a huge bet -- of $40.7 million on Global Blood Therapeutics, and our colleagues at "The Pink Sheet" have all the details. The company will seek to develop orally available small-molecule drugs that affect blood disorders; its first target is sickle-cell disease. GBT believes it can use allosteric modulation to overcome the single mutation in hemoglobin that causes the misshapen, sticky clusters of red blood cells, and help patients produce healthy, round ones.

No syndication? No problem. GBT CEO and Third Rock’s newest partner, Mark Goldsmith, says “there are significant advantages [in acting] as a single investor.” A few other VCs will sometimes launch a firm solo with seed or early-A money – check out this profile to read how Avalon Ventures does it – but not with the firepower Third Rock brings to bear. Formed by former Millennium Pharmaceuticals executives, the firm is now investing from its second fund, which closed at $426 million in 2010.

The Third Rock proposition of big bets on ambitious biomedical science hasn't proven itself out with knockout exits. Then again, they've only been at it for five years. And knowing many of their investments will require the patience of life-science saints, they've also built in clearer, perhaps faster, paths to exits in a few cases, such as Sanofi's equity stake and two-way options in Warp Drive Bio; or the LLC structure for antibody platform firm Ablexis that makes license fees and milestone payments more easily distributable to investors.

As we saw this week, Third Rock doesn’t always work alone. The firm re-upped in a $25 million Series B round for Rhythm Pharmaceuticals, which is built around ghrelin and melanocortin agonists for GI and metabolic diseases in-licensed from Ipsen. TRV was part of the $21 million Series A syndicate, but in the B round, Ipsen is taking the lead and building upon the 17% equity stake it acquired as part of the original in-licensing deal. Rhythm is more specialty play than science experiment, but the risk lies in the indication: metabolic disease has proven a thorny field, despite the screaming unmet need, for product development. Recent FDA decisions for two weight-loss drugs have given the field a lift, but overall the climate still seems to favor more regulation, not less.

Our Third Rock edition of FOTF ends with Igenica, a low-profile antibody firm that pulled in a $33 million C round with Third Rock in the lead. It was Third Rock’s first involvement in Igenica, which hasn’t said much until now about its twin oncology discovery platforms: one analyzes the surface proteins of tumor cells and provides data on the relative abundance of antigens; a second uses mouse models not just to screen antibodies against those antigens for affinity, but to measure anti-tumor effect.

More on Igenica below in our roundup, but we’ll end with a FOTF challenge: If Third Rock really wants to be on the cutting edge of biomedical innovation, how about funding some microbiome start-ups? With the wealth of data coming out of this week’s microbiomapalooza, surely there’s a way to put those Third Rock millions to use. We can see the headlines now: “Venture Firm Follows Gut For Latest Launch.”

You’ve got an appetite for bad puns and tasty fundings? Belly up to the latest edition of…

Igenica: Preclinical antibody firm Igenica said June 12 it has raised a $33 million Series C round led by new investor Third Rock Ventures, one of the rare instances of Third Rock waiting a few years and stepping in for a later round. But Igenica is no late-stage investment. The new cash brings total venture fundraising to $55 million, and the goal is to have clinical data in hand from a lead program and an IND filed for another before raising more money, says chief business officer John Celebi. The firm says it is going after drug targets that have not previously been investigated for cancer, using both an antibody discovery platform and a target discovery platform.  The firm has been lying low, rumored to be involved in antibody-drug conjugate development, but to date it has said very little about its programs. Third Rock moved with “such alacrity,” says Celebi, that the final tranche of the firm’s $24 million Series B round was rolled into the C round, which also included previous investors The Column Group, 5AM Ventures, and OrbiMed Advisors , The firm’s executive chairman is David Goeddel, a founding scientist at Genentech and Tularik, and now a partner at The Column Group, and both Celebi and the firm’s VP of research Guoqing Chen are Tularik alumni. – Alex Lash

PhaseBio Pharmaceuticals: PhaseBio announced a $25 million Series B financing in December 2010 to advance its diabetes and cardiovascular drug candidates, but on June 5 the privately held biotech said it had raised an additional $23 million from existing investors. It called this funding a third tranche of its Series B, which brings the round’s total to $48.4 million. “It’s really not our objective to consider another [venture] round,” said CEO Christopher Prior. The money will be used to fund, among other things, a Phase IIb head-to-head trial of lead candidate Glymera, using Novo Nordisk’s Victoza (liraglutide) as a comparator. Glymera is a recombinant GLP-1 analogue for type 2 diabetes. Using an elastin-like biopolymer (ELP) delivery technology acquired from Duke University, PhaseBio seeks to create drug candidates that offer steady-state absorption and longer half-lives than potential competitors. Backers include Johnson & Johnson Development Corp., Astellas Venture Management, New Enterprise Associates, Hatteras Venture Partners and Fletcher Spaght Ventures. The new money also will be put toward a Phase I study of Vasomera for acute and chronic heart failure and pulmonary hypertension, and a Phase I/IIa study of Insumera, a fully mature native insulin formulated to be long-acting with the ELP technology. -- Joseph Haas

Seldar Pharmaceuticals: We wouldn’t be surprised if “Drais” were Japanese for “outsource.” That’s because Drais Pharmaceuticals is quickly becoming the virtual developer of a mini-pipeline of products spun out of Astellas Pharma. Seldar is the name given to the latest outsourcing vehicle under Drais’ auspices, and it works like this: Astellas’s venture arm, along with a familiar syndicate of Sutter Hill Ventures and InterWest Partners, have put $13 million into Seldar to develop a single asset, ASP7147, a bombesin BB2 receptor antagonist to treat irritable bowel syndrome. ASP7147 comes from Astellas, and Drais’ management team will oversee it, with a Phase I trial ready to start soon. It’s another example of a growing comfort with single-asset entities that have short, defined development timelines, all the better to sell or partner without the complicated infrastructure of a full-fledged biotech. It’s also an example of VCs and management sticking to familiar faces who’ve done right by each other in the past: Drais is run by two executives who once ran a US outpost of one of Astellas’ corporate predecessors. Seldar owns all rights to the compound, but Astellas can receive a milestone payment and royalties on future sales. Astellas also has first shot at negotiating partnerships for ASP7147, the right of first refusal for Japan, and the non-exclusive right to negotiate in other regions. The deal follows hard on the heels of a similar arrangement, dubbed Telsar, in which Astellas transferred ownership of an ulcerative colitis treatment to the Drais team and took part in a $14 million Series A round. The Seldar syndicate also invested in Telsar – as well as in Drais, and before that, in AkaRx, which brought its backers a lucrative return in 2009. -- A.L.

BioMarin Pharmaceutical: In its first public offering in five years, orphan disease drug developer BioMarin raised nearly $236 million in a May 31 sale of 6.5 million shares at $36.28, giving the company a post-market cap of $4.4 billion. If underwriters exercise the 650,000-share overallotment, proceeds will be $259 million. The healthy stock valuation appears to be a result of growing investor optimism for BioMarin’s Phase III enzyme replacement therapy GALNS (N-acetylgalactosamine-6 sulfatase) to treat the rare autosomal disorder Morquio A syndrome (MPS IV). GALNS recently topped Leerink Swann’s predictions of the ten most successful near-future product launches. Joe Schwartz, Leerink’s managing director of biotech, believes enzyme replacement therapies are a big opportunity, and he calls GALNS a potential “miniblockbuster." It would be the only therapy for MPS. BioMarin’s financing is the most raised in a follow-on public offering in the past five years among biotechs with $400-500 million in revenues, a crowd that includes Regeneron Pharmaceuticals, Onyx Pharmaceuticals, Myriad Genetics, and The Medicines Co. It was also the second triple-digit offering of the month in the rare disease space, following Alexion Pharmaceuticals and its $462 million sale of 5 million shares that priced at $93.02 each. (Alexion had sales of $783 million in 2011.) Rumors have also circulated this week that GlaxoSmithKline has eyes on BioMarin as a possible acquisition target. – Maureen Riordan

Kick-ass photo courtesy of Lidal-K.

Deals Of The Week: Pfizer Goes For An IPO

The big news this week was the deal that didn’t happen: the sale of Pfizer’s animal health division. Pfizer announced June 7 that it will split off the business into a new standalone company to be called Zoetis instead and that it is preparing to file an initial public offering of a minority ownership stake in the new company.

Investors had been anticipating either a sale of the business or a split-off since CEO Ian Read announced plans to shed the business last year along with its nutrition business, so the news isn’t exactly a surprise.

Still, Pfizer inked a deal for its nutritionals business with Nestle S.A. in April, offloading the business for $11.85 billion, a price that reflects a pretty premium over the $9 billion to $10 billion some analysts had predicted.

Pfizer’s decision to spin-out the business means rival big pharmas like Merck and Eli Lilly won’t be expanding with Pfizer’s assets. The chiefs at both companies have said they remain committed to animal health and the diversified business model. Of the three, Pfizer’s business is the largest with $4.2 billion in sales in 2011. Merck’s animal health business brought in $3.25 billion in sales and Lilly’s $1.67 billion.

A split-off offers tax advantages of a sale, which Read called out in a press release. “Our focus continues to be on taking the actions that will generate the greatest after-tax value for our shareholders,” he said. Analysts had valued a potential sale of the business at around $15 billion.

With the decision to spin-out the business, Pfizer is following a similar route to the one Bristol-Myers Squibb took when it spun-out its Mead Johnson nutritionals business in 2009. That move has been well-received on Wall Street. The initial offering was $24 per share and the stock closed June 7 at $81.12, representing around 70% growth.

Pfizer hasn’t priced the IPO, so it remains to be seen how much it will cost to buy into Zoetis, but Read has vowed to make the company independent by July 2013 so there is plenty of time to analyze the numbers and start wagering.

Elsewhere in the news, GlaxoSmithKline announced June 8 that it has extended its offer to buy Human Genome Sciences from the prior deadline of June 7 to June 29. Otherwise, it was a slowgoing week on the business development front ...

Merck KGaA/ Dr. Reddy's Laboratories – India's global generics firm Dr. Reddy's Laboratories, announced June 6 it was linking up with Merck Serono, the pharmaceutical division of Germany's Merck KGaA, to develop and commercialize biosimilar cancer products, principally monoclonal antibodies. The collaboration will exploit Merck Serono's expertise in biologics manufacturing, development and marketing, which includes the MS therapy Rebif (interferon beta-1a) and the anticancer Erbitux (cetuximab), and Dr. Reddy's pioneering role in biosimilars (it already markets four such products in India). No money is changing hands and the collaborators will share risks and rewards, with Dr. Reddy's conducting early development through Phase I, and Merck Serono taking over further clinical development and manufacturing. Merck Serono will commercialize the biosimilars globally, with Dr Reddy's receiving royalties, except for the U.S., where the companies will co-commercialize on a profit-sharing basis, and certain unspecified emerging markets, where marketing will be co-exclusive, or where Dr Reddy's will have exclusive rights. Biosimilars is a new sphere of activity for Merck KGaA, and one it can enter at a relatively low cost. That's important for the company, as it has just started an efficiency program which calls for R&D facility closures and job losses in order to make around €300 million in costs savings by 2014. For Dr Reddy's, it provides a source of research funding while keeping its options open outside of the oncology sector. – John Davis

Onyx/ Anderson Cancer Center – In just the latest of its research ties to biopharmaceutical companies, the MD Anderson Cancer Center at the University of Texas announced June 4 that it will collaborate with Onyx Pharmaceuticals in an effort to delineate the potential of that company’s anti-cancer candidates carfilzomib and oprozomib in multiple myeloma and lymphoma. Financial terms of the two-year research agreement were not disclosed. Carfilzomib, to be marketed under the brand name Kyprolis, is under review at FDA for relapsed and refractory multiple myeloma. Oprozomib, like carfilzomib, is an oral proteasome inhibitor, is Phase Ib/ II study in hematological malignancies. Onyx and MD Anderson personnel will oversee the collaboration together in a joint steering committee, with MD Anderson conducting all studies related to the agreement. The focus will be on the potential of proteasome inhibitors in tandem with other novel, early-stage cancer candidates, as well as to increase the biological understanding and enhance the clinical profile of the two Onyx compounds. MD Anderson’s most recent deal with private industry was the licensing of an experimental folate-binding protein (FBP) E39 vaccine for the prevention of recurrence of gynecological cancer to Galena Biopharma. – Joseph Haas

Picture credit: Wikimedia Commons

Deals Of The Week: Icahn And Co. Traverse The Forest Again

Late spring has meant another foray by activist investor Carl Icahn into the forest of biotech board manipulation - literally this time, as Icahn's High River Limited Partnership filed a 13D with the SEC on May 30 announcing an intent to propose a minority slate of new members to the board of Forest Laboratories.

Last year, Icahn unsuccessfully nominated a slate of new board members for the specialty pharma, which staved off the attack and instead obtained enough votes to add three new independent board members of its own liking to the board.

But now, despite Forest's claims that business is going well in the face of patent-cliff woes, Icahn is back for another round. Once again, Icahn is proposing that his associate, Dr. Eric Ende, join Forest's board. Otherwise, his SEC filing does not state how many new board members he wants to nominate, other than clarifying that his would be a minority slate.

Forest CEO and Chairman Howard Solomon, in a May 30 release, said he always welcomes "constructive input" from shareholders but added that he was "puzzled and disappointed" that Icahn chose the threat of a proxy contest for the second consecutive year. Despite the loss this year of patent protection for antidepressant Lexapro (escitalopram oxalate) and the anticipated LOE for Alzheimer's disease drug Namenda (memantine HCl) in 2015, Forest has been offsetting expected revenue losses with new product launches.

“Forest Laboratories is strong and performing well," Solomon asserted. "We are executing on the plan outlined last year. We have continued to advance our late stage R&D pipeline through the FDA, successfully launched Daliresp and Viibryd – our two most recent primary care products – and reported solid financial performance for fiscal 2012 as we managed expected patent expirations. We are optimistic about our future prospects and believe we are well positioned to build on our strong track record of success, while continuing to deliver groundbreaking therapies to the patients and communities we serve.”

During its most recent quarterly earnings call April 17, Forest reported net sales had declined 8.7% to $997 million, which might play into Icahn's pitch to shareholders to back his board slate. With the March 14, 2012, patent expiry of Lexapro, sales of the SSRI already were in steep decline, down to $356 million from $595 million in the quarter one year earlier. Meanwhile, chronic obstructive pulmonary disease drug Daliresp (roflumilast) had posted quarterly sales of $13.1 million, the new SSRI Viibryd (vilazodone HCl) brought in $24.9 million, and another recent launch, broad-spectrum antibiotic Teflaro (ceftaroline fosamil) tallied $7.9 million in net sales.

To offset Icahn's potential arguments about earnings potential and management and board governance issues, Solomon also talked up the value of the three new board members elected last year – Christopher Coughlin, a former CFO at Tyco International and Pharmacia, Gerald Lieberman, the former chief operating officer at Alliance Bernstein, and Brenton Saunders, president and CEO of Bausch & Lomb. "These additions have enhanced our board through their operational skills, financial acumen, investor perspective, compliance expertise, and corporate governance experience," he said.

Whatever his rationale, though, it seems likely that Solomon and his team will have to familiarize themselves with Icahn's relentless brand of activism. Icahn apparently believes in the bromide "try, try again," as former Genzyme CEO Henri Termeer and once and former big names across the biotechnology landscape could well tell him.

In the meantime, Forest is continuing with its own business development strategy, looking to enhance its existing portfolio of hospital-based antibiotics through a June 1 option agreement with Austria's Nabriva Therapeutics. Forest is paying Nabriva $25 million upfront and will co-fund and co-develop the novel antibiotic candidate BC-3781, a pleuromutilin, that produced positive Phase IIb data in acute bacterial skin and skin structure infections in 2011. A pivotal Phase III program is planned for next year. Over the next 12 months as the two companies advance '3781, Forest will hold an option, not just on the antibiotic, but to acquire all of Nabriva, dependent on certain (but of course unspecified) contingences.

Well, as the Icahn/Forest and Forest/Nabriva stories heat up, along with the weather as we head into June, get ready for a seasonally steamy edition of ...

Stiefel/Welichem – With novel dermatitis candidates a rarity, GlaxoSmithKline's Stiefel Laboratories division has agreed to in-license a mid-stage, non-steroidal, anti-inflammatory compound from low-profile Canadian firm Welichem Biotech. Announced May 30, Stiefel will pay Welichem C$35 million ($33.9 million) for worldwide development and commercialization rights to WBI-1001, a topical compound currently in Phase II studies in psoriasis and atopic dermatitis. The agreement, subject to approval by Welichem’s board, excludes rights to the compound in China, Taiwan, Macao and Hong Kong, although Stiefel also can obtain a license those rights at a future date if certain undisclosed conditions are met. Those rights would carry an additional price tag of C$15 million. The deal structure also positions Welichem to collect milestones for clinical development and commercial accomplishments related to WBI-1001. Little is known publicly about the compound, called a potential first-line topical therapy for psoriasis and atopic dermatitis by the companies. Welichem discovered ‘1001 using its proprietary Symbiochem technology platform and has run the compound through four clinical trials total in the two indications. Welichem’s website says the compound inhibits the expression of pro-inflammatory cytokines, and that creams at 0.5% and 1.0% strength have proven safe and well-tolerated in psoriasis and atopic dermatitis patients. – Joseph Haas

Bayer/Covance – Bayer and contract research organization Covance have had a business relationship for years, but the two now are formally partners. The German drug developer announced May 30 that Princeton, N.J.-based Covance will provide research and development services related to clinical studies of mid-to-late stage drugs in Phases II through IV in a “long-term” deal. Covance will work alongside Bayer’s HealthCare unit, a subgroup that includes its Consumer Care, Medical Care, Animal Health and Pharmaceuticals division. Specific details and financial terms of the arrangement weren’t disclosed, although Bayer’s announcement suggested that the deal will bring “significant financial benefits” to both organizations while “reducing the overall time and cost of drug development.” Bayer said in 2010 that it would cut 4,500 jobs worldwide, including some in R&D. Also on May 30, Eli Lilly said it had partnered with Covance to discover diabetes treatments at its Lilly China Research and Development Center. – Paul Bonanos
  
Ensemble/Genentech – Ensemble Therapeutics now has scored its third large partner in as many years; announcing May 29 that it is teaming up with Roche’s Genentech Inc. in what it deemed its most attractive deal yet, trumping earlier deals with Bristol-Myers Squibb and Pfizer. Ensemble and Genentech will work together to develop macrocyclic drugs against a variety of targets supplied by Genentech. Using its proprietary DNA-Programmed Chemistry platform, Ensemble produces thousands of what it has dubbed Ensemblins – oral, small molecule macrocyclic compounds that interact with substrates through difficult extended binding motifs to reach targets not adequately reached by small molecules or biologics. While Genentech and Ensemble would not disclose the financial terms of the deal, Ensemble CEO Michael Taylor said that it includes milestones both early and late in the partnership, as well as milestones related to multiple targets. The agreement has no set timeframe, but Taylor said that these collaborations typically last for a couple of years, depending on when the partner wants to internalize the research. Ensemble typically develops molecules against a target until preclinical development and then transfers the drug over to its partner for further development. In 2009, Ensemble received $5 million upfront plus $7.5 million in R&D funding from Bristol to develop Ensemblin candidates against eight undisclosed targets. The biotech can earn up to $29.5 million in clinical development and commercialization milestones plus global sales royalties for each of the eight programs. It also signed a deal with Pfizer in January 2010 to develop Ensemblins for an undisclosed number of targets. Financial details of the deal were not disclosed, but Pfizer provided an upfront payment, research funding and potentially could pay out development milestones and sales royalties. – Lisa LaMotta

The International Immuno-Onocology Network – Bristol-Myers Squibb has formed a collaboration with 10 of the leading cancer research centers in the world to help further research for their immune-oncology pipeline; the alliance has been dubbed the International Immuno-Oncology Network (II-ON). Memorial Sloan-Kettering in New York will be part of the collaboration, as well as Clinica Universidad Navarra in Pamplona, Spain; Dana-Farber Cancer Institute of Boston; Institut Gustave Roussey in Villejuif, France; The Earle A Chiles Research Institute of Portland, Oregon; Istituto Nazionale per lo Studio e la Cura dei Tumori “Fondazione G. Pascale” of Naples, Italy; Johns Hopkins Kimmel Cancer Center in Baltimore; The Royal Marsden NHS Foundation Trust and The Institute of Cancer Research of London; The Netherlands Cancer Institute; and University of Chicago Medical Center. The company is now looking into biomarkers that could indicate some sort of genetic profile that would tip off doctors to the patients who would benefit the most from the therapy. The II-ON will be looking at post-response data to determine a biomarker for Bristol’s recently approved Yervoy (ipilimumab), as well as biomarkers for other treatments that are studied from Bristol-Myers’ pipeline. – LL

Havas/Creative Lynx – No one in pharma needs to be reminded of the future potential of social media for all sorts of health education and digital marketing purposes, even if the initial performance of Facebook's shares post-IPO has disappointed investors. The Paris-based global advertising group, Havas, which includes the Euro RSCG global network of health care agencies, has boosted its resources in this area by acquiring Creative Lynx, one of the European leaders in creating digital and social media campaigns in the health and wellness sector. Creative Lynx is based in Manchester, U.K., has 50 staff and an annual turnover of more than £4 million ($6.2 million). Its digital offerings include producing e-detailing aids for sales reps and exhibition stands, and the design of websites. Clients have included Johnson & Johnson, Merck Serono, AstraZeneca and GlaxoSmithKline. Havas is a public company with a network of health care communication agencies around the world. It handles approximately 30 global brands, including Sanofi, Pfizer and Novartis. – John Davis

Photo credit: Wikimedia Commons