Friday, September 28, 2012

Deals Of The Week Looks For A Replacement

Few deals are as relieving as the National Football League’s labor settlement with its “real” refs this week. Though it’s little consolation to fans of the Green Bay Packers, who were robbed of a victory as Monday night's game crew displayed a unique combination of blindness and temporary insanity, the need to replace the replacements with the genuine article couldn’t have been more plain.

But for Cardiome Pharma, the dismantling of its partnership with Merck & Co. on Sept. 26 won’t provide much relief at all – and might leave Cardiome scurrying to find a replacement as well. Merck returned rights to Cardiome’s atrial fibrillation drug, vernakalant, ending a three-year-old agreement, during the lifetime of which the drug was approved in September 2010 and marketed in Europe as Brinavess. Vernakalant is approved in the EU specifically for rapid conversion of recent onset atrial fibrillation to sinus rhythm in adults.

Merck once saw such promise in the therapy that it expanded its original deal. The pharma initially paid Cardiome $60 million upfront in April 2009 to obtain global rights to the oral version of vernakalant, as well as rights to the intravenous version outside North America. Then, in July 2011, it bought out Astellas’ partnership with Cardiome, which covered the intravenous drug in North America. Cardiome received two additional milestone payments totaling $45 million from Merck for the submission and eventual approval of the intravenous drug in Europe, as well as $26 million total to date from the Astellas deal.

But worries mounted for the drug, as its safety was called into question when one patient receiving the intravenous version died. Its regulatory path was complicated by requests for more data and a narrower patient population, and safety concerns surrounding Sanofi’s rival drug Multaq (dronedarone) shadowed Cardiome’s compound. Meanwhile, sales of the drug appear to have slowed; neither company breaks out sales of the drug, but Cardiome’s partnership revenue from Merck totaled barely $1 million in 2011, according to its annual report (pdf, see note 15).

Merck finally said in March that it would discontinue trials on the oral version; Cardiome since has laid off most of its staff, and CEO Doug Janzen left the company in July. While it seemed to be holding onto hope that it could find a new partner for the drug, analysts weren’t optimistic. “It’s likely that any partner the company could find for the drug would have the same issues as Merck,” Morningstar’s David Krempa told "The Pink Sheet" DAILY in March.

Cardiome interim CEO Bill Hunter tried to provide clarity in a Sept. 26 conference call discussing Merck’s decision to end the deal, saying that Cardiome would attempt to move the drug forward on its own. But he said Cardiome’s remaining management had not yet hashed out the details of the drug’s transition back from Merck, and never mentioned trying to forge a partnership with someone new.

Hunter did, however, hint that the company could be sold. “[A]s a company with a small market capitalization, one that has a pharmaceutical product in a major market in a major disease indication for sale, that is a pretty unique position,” he said. Now unencumbered by partnerships, Cardiome could represent a clean, fire-sale takeout, but only for a buyer willing to bear its risks. That’s a mildly ironic fate for a company that partnered with Merck expressly “to de-risk our business,” as Janzen put it three years ago, then deemed its own pipeline too dangerous to develop.
There are plenty of other companies waiting to be picked off this week, whether they get the call or not. See which deals we’ve flagged in this week’s installment of…

Roche/Galaxy: About four months after Takeda returned rights for an anti-hepatocyte growth factor (HGF) antibody program for cancer, Galaxy has found a new pharma partner, licensing exclusive worldwide development and commercialization rights to antibodies targeting fibroblast growth factor 2 (FGF2) to Roche. Under the deal announced Sept. 24, Roche will pay privately held Galaxy $8 million upfront, with the potential for preclinical, clinical and regulatory development milestones, as well as royalties on product sales. Roche said FGF2 is over-expressed in many types of cancer and is known to stimulate both angiogenesis and lymphangiogenesis, which can play an in important role in metastasis. For some tumors, a high level of FGF2 has been found to correlate with poor clinical outcomes, the Swiss pharma said in a release. While the deal covers an entire program, key to the transaction is a novel humanized monoclonal antibody discovered by Galaxy that has demonstrated inhibition of certain tumors in animal models. In 2006, California-based Galaxy licensed an HGF antibody to Takeda for $2 million upfront plus milestones and royalties. This past June, Takeda ended the collaboration and returned all related intellectual property to Galaxy. — Joseph Haas

Covidien’s Mallinckrodt/CNS Therapeutics: Mallinckrodt, the soon-to-be spun-out pharmaceutical arm of Covidien, announced Sept. 24 that it has agreed to purchase privately held CNS Therapeutics for $100 million. The acquisition is expected to close in the fourth quarter. St. Paul, Minn.-based CNS currently has one marketed product, Gablofen (baclofen injection) – the generic version of Novartis AG’s Lioresal. The drug is approved for the treatment of severe spasticity. CNS also offers Mallinckrodt a pipeline of pain and spasticity products, including other concentrations of Gablofen. Representatives at the company would not discuss the pipeline. Covidien announced in December its plans to spin out Mallinckrodt as a public company by mid-2013. Covidien will retain its medical products and devices businesses, which posted sales of about $9.6 billion in 2011; Mallinckrodt brought in about $2 billion during the same time period. “Our medical devices and pharmaceuticals both hold industry-leading positions. They have quite different business models, sales channels, customers, capital requirements and talent basis. They also have innovation pipelines that differ substantially in length, regulatory approval requirements, possible risks and potential returns,” said Covidien President and CEO Jose Almeida during a December conference call. – Lisa LaMotta

Valeant/QLT: The ravenously acquisitive Canadian pharma Valeant struck again on Sept. 24, taking global rights to an ophthalmologic drug from QLT. Valeant paid $112.5 million total for rights to Visudyne (verteporfin for injection), approved to treat certain forms of wet age-related macular degeneration. The purchase price included $62.5 million for US rights and $50 million for the right to receive royalties from sales in the rest of the world, where QLT has partnered the drug with Novartis. Sales of the drug were $21 million and $14 million in and out of the US, respectively. Valeant also agreed to make contingent payments of $5 million covering development of QLT's laser program in the US, $15 million related to the Novartis royalties, and unspecified royalties if Visudyne is approved for new indications. Currently, the drug is sold in 80 countries to treat two forms of subfoveal choroidal neovascularization, the formation of leaky blood vessels that occurs in patients with wet AMD. QLT, which is weathering a turbulent year that included the takeover of its board by activist investors, said it will return cash to shareholders and continue developing its synthetic oral retinoid program. - P.B.

Clinipace/Paragon: Contract research organization Clinipace expanded its global presence by acquiring Paragon Biomedical, a CRO with offices in Irvine, Calif.; High Wycombe, U.K.; and Trivandrum, India. The Sept. 25 deal, for which terms were not disclosed, doubles Clinipace's size, giving it 430 employees worldwide. Clinipace now has 12 offices in eight countries. The Morrisville, N.C.-based company already had strengths in oncology and digital platform technology; the addition of Paragon gives it further expertise in the cardiovascular, immunology, infectious diseases, CNS, respiratory, dermatology and medical-device areas. The companies will join forces without laying off any staff, and key members of Paragon management will assume positions at Clinipace. Privately held Clinipace raised $13.3 million in debt earlier this month, according to an SEC filing, and was backed by Morgan Stanley Expansion Capital, Hatteras Venture Partners and Brook Private Equity Advisors in a $15 million Series C round last year. - P.B.

Official thanks to Flickr user yourdon, who kept us from being penalized by sharing his photo via Creative Commons.

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