Friday, February 15, 2013

Deals Of The Week Notes Bayer's Partnerships Are Paying Off

Bayer Healthcare’s pharmaceuticals division has certainly had its ups and downs, and some ultra-tense relationships with partners—notably the very public lawsuit Onyx Pharmaceuticals filed against it, which the partners settled in October 2011.
News announced in recent days however, puts Bayer in a very different position. The company's pharma business is flourishing, based on its partnerships--as well as the fortunate position it is in because it lacks any big drugs going off patent. Bayer's alliance with the Norwegian biotech Algeta ASA, now more than three years old, is at a turning point. On Feb. 13, FDA granted priority review for the investigational oncology drug radium-223 dichloride (formerly Alpharadin), for which Bayer and Algeta submitted an NDA (and an MAA in Europe) in December.

That drug would be indicated, initially, for chemotherapy-naïve castration-resistant prostate cancer patients with bone metastases. CRPC is one of the more crowded areas of oncology, but radium-223 demonstrates a survival benefit that other bone-targeted agents haven’t shown. 

Also kicking in are sales of Eylea, the drug for wet age-related macular degeneration that Bayer licensed from Regeneron in 2006, after Regeneron’s partner Sanofi decided not to pursue ophthalmology indications for the compound. (The oncology version of the drug is Zaltrap, which received approval in the US in August.)  Bayer has exclusive ex-US rights for all eye indications to the drug, which it launched late in 2012 in Australia and Japan, and which it is slowly rolling out across Europe as payers make reimbursement decisions. The partners have a 50-50 arrangement, both on sales and profits. 

For a variety of reasons, Eylea has been an immediate hit in the US, where Regeneron launched it in November 2011, and where it is the third most successful drug launch ever, according to Robert Terifay, SVP commercial, who briefed analysts on Eylea’s status on an earnings call on Feb. 14. Bayer believes the ex-US market presents a similar opportunity and is in the process of rolling out the drug globally. 

The German health care company reports full year 2012 financials on Feb. 28, but  Regeneron executives, without giving away much detail, said they’re pleased with Eylea’s ex-US performance so far. Eylea’s sales ex-US for the fourth quarter, its first on the market outside of the US, were $19 million. EU decisions on two additional indications, diabetes macular edema and central retinal venous ocolusion are also expected in 2013, Deutsch Bank analysts estimate these are smaller opportunities, each worth less than $500 million in Bayer's territories.

In addition, Bayer is in the midst of a global launch of the Factor Xa inhibitor Xarelto, which it developed internally, and which it licensed in 2005 to Johnson & Johnson to develop and sell in the US. The drug is currently approved in Europe for a range of indications, including venous thromboembolism prevention in orthopedic surgery and for stroke prevention following atrial fibrillation. It is pending approval in Europe for acute coronary syndrome, which analysts see as a long shot.  And FDA granted Bayer approval of Stivarga, an oral multi-kinase inhibitor, in September, for metastatic colorectal cancer. The drug is pending review in the EU.  

Many of the deals now bearing fruit were signed before the company’s current head of global business development and licensing, Nigel Sheail, joined it from Roche in November 2011 and certainly before he undertook a reorganization that consolidated business development functions across the healthcare subsidiary into one unit, with the aim of fostering a focus on integrated care across Bayer’s diverse health care subsidiaries. In an interview published in IN VIVO in September 2012, Sheail outlined where he sees health care heading and provided some insights into his business development priorities. His efforts have yet to prove themselves, but meanwhile Bayer has some solid launches to buttress the cash flow- and importantly, no patent cliff before it.  

Bayer’s overall stock is trading in the 90s, close to a 52-week high, partly because of the performance of its pharma division. Even though its chairman, Joerg Reinhardt, has left to become chairman of rival Novartis, and its former chief marketing officer, and global head of strategic planning, Flemming Ornskov, is settling in at Shire PLC, where he assumes the top spot in May, its near-to-mid-term future looks more secure than many of its peers.

Even as Bayer rushes to maximize the value of its deals, others are forging their own way. It's time for this week's edition of ....

Mylan/Biocon: Close to a year after Pfizer walked out of a deal with India’s Biocon for development and commercialization of a range of insulins, the Indian company has sprung back forming what it called an “exclusive strategic collaboration” with the world’s fourth-largest generic drug maker Mylan. Under the deal, the two companies will develop biosimilars of Sanofi’s Lantus (glargine), Eli Lilly’s Humalog (lispro) and Novo Nordisk’s Novolog (aspart), the three major insulin analogs. The combined global sales of the three brands reached $11.5 billion in 2012, making it a compelling business plan as regulatory pathways for biosimilars across nations gain further clarity. Lantus alone crossed sales of $6.6 billion last year. But the terms of the deal with Mylan differ substantially from the deal Biocon signed with Pfizer in 2010. Biocon didn't disclose financials, except to note that the deal includes an upfront and cost sharing, backed by a profit sharing arrangement, and no milestones; the Pfizer deal consisted of a $200 million upfront and $150 million in milestones. Unlike the Pfizer deal, the Mylan deal does not include recombinant human insulin, which Biocon is developing on its own. --Vikas Dandekar

Merck/Lycera: The two companies, which have been partnered since May 2011 on an oral interleukin-17 discovery deal, announced Feb. 12 that they have agreed to a second collaboration to discover and develop other treatments for autoimmune disorders. The new deal will focus on multiple targets that are known to play a role in autoimmune diseases, including psoriasis, rheumatoid arthritis, and multiple sclerosis. The companies would not identify the exact targets it will be focusing on under the collaboration. Merck will pay the Ann Arbor-based biotech an undisclosed upfront, as well as $300 million in milestones.  Merck and Lycera first began working together in the field of autoimmune disease in March 2011, when Merck paid $12 million upfront and agreed to $295 million in milestones in a similar discovery and development collaboration. Work under the original partnership is still in preclinical development; that initiative is focused on a specific target -- the retinoic acid related orphan receptor (RORyt), a transcription factor responsible for the differentiation of T-helper 17 (Th17) cells. Th17 cells produce interleukin-17 (IL-17), a pro-inflammatory cytokine that is understood to play a role in autoimmune diseases. Lycera received its first milestone payment from Merck under this collaboration, an undisclosed sum, in December 2011. – Lisa LaMotta

Lilly/Qiagen: Eli Lilly has broadened its relationship with diagnostic developer Qiagen NV by signing a “master collaboration” under which Qiagen will develop companion diagnostics for Lilly medicines across all of the pharma’s therapeutic areas. In what has become a hallmark of deal-making between pharmaceutical manufacturers and diagnostic firms, terms of the arrangement were not disclosed. Lilly and Qiagen are comfortable bed fellows. The two have been partnered on the development of single tests, including a September 2011 partnership to develop a test for Lilly’s clinical-stage Janus kinase 2 inhibitor. Last year, Lilly/Bristol-Myers Squibb Co.’s Erbitux secured approval in newly diagnosed KRAS wild-type metastatic colorectal cancer patients with Qiagen’s companion diagnostic kit for the drug. Work on those tests led to the expanded deal, Qiagen said, announcing the deal Feb. 13. The new partnership will all allow for efficiencies in future development programs by standardizing interfaces and processes between the organizations, the firm said.--Jessica Merrill

MorphoSys/Heptares: In a bid to develop more G-protein coupled receptor (GPCR)-targeted monoclonal antibodies, German drug discovery company MorphoSys is to use Heptares' stabilized GPCRs as targets to screen its Ylanthia monoclonal antibody library, in a deal announced Feb. 13. AstraZeneca, Takeda, and Cubist Pharmaceuticals have already licensed Heptares' technology to use in their drug discovery programs. GPCRs are the site of action of more than 25-30% of marketed small-molecule drugs, but they've never been a popular target for monoclonal antibodies. That's because the receptors are unstable when taken out of membranes and difficult to use as antigens to produce antibodies when injected into animals. The only marketed monoclonal antibody that interacts with a GPCR is Kyowa Hakko Kirin's Poteligeo, which is indicated for adult T-cell leukemia-lymphoma and which was launched in Japan in  May 2012. It binds to chemokine receptor 4 (CCR4). MorphoSys will propose GPCR targets, which will then be generated by U.K.-based Heptares and used to screen MorphoSys' Ylanthia monoclonal antibody library. MorphoSys will have the right to sublicense to pharmaceutical companies the identified targets and therapeutic antibody candidates, with Heptares receiving upfront and research funding payments, plus a share of those sublicense revenues. Heptares, which is building up its own pipeline, will also select a GPCR target of its own against which to screen MorphoSys's Ylanthia library. MorphoSys will receive license fees, milestones and sales royalties on any Ylanthia antibody developed by Heptares as a result of that work.--John Davis

RQx Pharmaceuticals/Genentech: Just weeks after buying the entire kinase-inhibitor discovery program at Afraxis, Genentech announced Feb. 12 it is collaborating with RQx Pharmaceuticals on a discovery and development tie-up to create novel antibiotics that kill Gram-negative bacteria while avoiding the multi-drug resistance plaguing many of today’s antibiotics. Including an undisclosed upfront payment and earn outs, the deal could total $111 million along with the potential for sales royalties on any product reaching market. The transaction eventually will create an exit for RQx’s primary backer, the hybrid venture capital firm Avalon Ventures, which provided seed funding and a majority of its Series A financing. This makes the third exit already this year for an Avalon portfolio company, following January deals in which BioMarin purchased Zacharon for $10 million plus potential earn-outs, as well as the Genentech/Afraxis agreement. RQx’s work derives from research conducted at the Scripps Research Institute in La Jolla, Calif., to unlock the secret of why an exploratory antibiotic, arylomycin, no longer was effective against bacteria, said RQx CEO Court Turner. Arylomycin, discovered by Eli Lilly in the early 1980s, was used as a chemical scaffold for RQx antibiotic candidates against a novel, undisclosed target, he said. “This is kind of a standard Avalon investment, where we see an old target that gets new completely new insights from a very reputable lab,” explained Turner, also a venture partner at Avalon. Arylomycin addresses signal peptidase, a target that big pharma had wanted to direct antibiotics against for years, but never developed any successful candidates. Turner would neither confirm nor deny that RQx’s work with Genentech will focus on the signal peptidase pathway.—Joseph Haas

Bristol-Myers Squibb/ Reckitt Benckiser: After announcing a change in strategy last year to intensity investment in higher-growth consumer and emerging markets, Reckitt Benckiser entered into a $438 million three-year agreement with Bristol-Myers Squibb to expand its consumer health foothold in Latin America. The deal, announced on Feb. 12, gives Reckitt marketing rights to seven BMS OTC brands for a period of three years. Reckitt will pay BMS a $438 million fee for the right to license the products, and an additional $44 million for an option to acquire them outright after the three-year period at a price to be determined by net sales during the preceding three years. The products included in the deal include Dermodex (nystatin) for diaper rash, Luftal (simeticone) anti-gas treatment and Naldecon (phenylephrine) cough/cold remedy, all sold primarily in Brazil. The products sold mainly in Mexico are Graneodin-B (benzocaine) sore throat remedy, Micostatin (nystatin) antifungal, Picot (sodium bicarbonate) antacid and Tempra (acetaminophen) analgesic. Combined, they brought in an estimated $102 million in 2012 sales, Reckitt said. Slough, U.K.-based Reckitt hopes the BMS brands create a foundation forhealth care product distribution and growth in Brazil and Mexico, where the firm’s business currently is weighted toward household cleaners and other home care products. For BMS, the deal represents its latest move away from non-core consumer businesses to refocus energy and resources on biopharmaceuticals. In 2009, it spun off pediatric nutritionals maker Mead Johnson in an initial public offering and sold its Asian OTC assets to Taisho. --Michael Goodman

GSK/ Vanderbilt University – GlaxoSmithKline is expanding its Discovery Partnerships with Academia program, which itlaunched in 2011, in a new deal with Tennessee-based Vanderbilt University. The collaboration will focus on the discovery and development of treatments for severe obesity. The team will target the melanocortin-4 (MC4) receptor, which plays a role in energy homeostasis. Vanderbilt will be responsible for pre-clinical activities, while the pharma will handle development. The collaboration is expected to bring a compound into the clinic by 2016. Vanderbilt scientists have developed positive allosteric modulators that increase activity to the MC4 receptor. It’s believed that activity at this receptor plays a role in early-onset obesity. GSK and Vanderbilt are hoping to develop a compound that will not raise a patient’s blood pressure like some of the other recently developed therapies for obesity. GSK will provide research funding under the three-year collaboration, as well as undisclosed milestones and royalties on any products that are commercialized. - LL

AstraZeneca/ N.N. Petrov Institute of Oncology: AstraZeneca has signed a research collaboration with one of Russia's leading cancer research institutions, the Petrov Institute, to identify genetic mutations in cancer patients. The deal, announced Feb. 12, will pave the way for scientists from both organizations to identify specific types of cancer tumors that have potential drug-sensitizing gene mutations; specifics were not disclosed. AZ will be able to analyze data generated by the Institute's archive of tumor samples, which is one of the largest in Europe, with more than one million samples from over 270,000 patients.  The Institute scientist who will direct the collaboration with AZ helped establish EGFR testing of AZ's Iressa patients in Russia and Eastern Europe. The deal also bolsters AZ's efforts to help the Russian government build a local world-class innovative biopharma industry. --WD 

image by flickr user sam_goody500 // creative commons

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