Deals of the Week: An Update On A Potential Pfizer Split-Up

Pfizer's Chairman and CEO Ian Read doesn’t make himself available for interviews readily, so a March 26^th note from Sanford Bernstein’s esteemed pharma analyst Tim Anderson caught our attention pronto. The note describes a teleconference call Anderson held with Pfizer’s top management team, including Read and R&D chief Mikael Dolsten. Also on the call were Geno Germano, president and general manager of specialty care and oncology; John Young, president and general manager of the primary care business unit; and Amy Shulman, EVP and general counsel and business unit leader for consumer health. 

Much of the call revolved around management’s perspectives on splitting up the company. The topic is by no means new, but the strategy continues to fascinate, particularly given the implications it has going forward for the bigger is better argument that dominated the industry for decades, and Pfizer’s leading role in embracing the pro-scale argument, not to mention its gargantuan 2009 acquisition of Wyeth. 

The shifting commercial landscape and concerns about the difficulties of managing massive global R&D units are two key factors underlying the motivation for a split, Read told Anderson. No news there, as Read has said this before, but Anderson’s conversation illuminates how management’s thinking is evolving and what its choice points are likely to be. Anderson believes Pfizer is very much still considering a split, although it has not yet made a firm decision. One possibly telling note about the timing: It has not hired consultants to help the process along. Such a move would seem a logical step, given the complexity of the undertaking. Moreover, it is closely following whether investors sustain their positive reaction to the Abbott Laboratories/AbbVie split.

To do so, Pfizer is taking several steps, including installing different management structures for its two core businesses: one for the innovative medicines and the other for the ‘value’ or established products businesses. These structures are largely in place already, although not yet in emerging markets, Pfizer management told Anderson.

Still, dividing up various aspects of Pfizer’s businesses would be complicated. Pfizer’s manufacturing plants serve multiple purposes, for example, separating them operationally “so they can be managed by two divisions would be a long and difficult process,” management told Anderson. Manufacturing also ties into how profits from individual products are taxed, he noted.

The company is also still considering a compromise as a draw for investors. Anderson calls it a ‘virtual split,’ in which Pfizer retains both businesses, but provides more transparency around each, including separating their P&Ls. This is likely to happen in 2013, Anderson speculates; management has not defined a deadline, but said it would likely take this step ‘soon’. A full break up, should that be the ultimate choice, could take three years to completebecause of SEC requirements for three years of audited financial data and the operational complexities. 

The pros and cons of a split are already well known to Pfizer followers. On the plus side, each business has very different growth drivers, with different cultures required, time lines for getting products to market, and regulatory and commercial strategies. The cons are: loss of scale for back office operations and added costs of two standalone companies, and the complexities of sorting out how to divide up manufacturing operations. 

The company has been evaluating a split for at least two years — almost as long as Read has been at the helm. It has already spun out or sold its animal health, drug formulation and delivery, and international pediatric nutritionals businesses, adding tens of billions of dollars to its coffers. It is now the most cash-rich company of a cash-rich industry, a position investors laud. (Statistically-minded investors might note that two of these deals took place in consecutive Aprils — 2011 for Capsugel, and 2012 for the $11.9 billion sale of the pediatric nutritionals business to Nestle. However, divesting consumer health, one of Pfizer’s growth drivers, is not on the table, management told Anderson and has previously told the Street. Wall Street seems favorably inclined toward current management, a sharp turnaround from the dissatisfaction that helped drive previous CEO Jeff Kindler from his post in December 2010 and paved the way for Read’s ascent. But, given the success of other pharma spin outs and divestitures, it’s itching for this split to occur.

Other nuggets from Anderson’s call: Pfizer’s goal for its newly launched anti-coagulant Eliquis is to reach equivalent formulary positioning to earlier entrants, Boehringer Ingelheim’s Pradaxa and Johnson & Johnson/Bayer AG’s Xarelto by year end. The company’s other new specialty drug, Xeljanz, an oral medication for rheumatoid arthritis, is ”getting consistent uptake in the post anti-TNF portion of the market.” Direct-to-consumer advertising is expected to begin in mid-2013.  Breast cancer pipeline drug palbociclib, a CDK 4/6 kinase inhibitor, is on investors’ radar following release of strong clinical data in December 2012.--Wendy Diller

Who's splitting up, buying, selling, licensing, or partnering? It's all in this week's installment of...

Lundbeck/Otsuka: Just weeks after partners Lundbeck and Otsuka launched their first joint product in the U.S. derived from a 2011 collaboration, they expanded their 2011 alliance for yet the second time in a month, focusing  on Lundbeck’s novel Phase II compound for Alzheimer’s disease, LuAE58054. In March 2013, the companies launched the once-monthly injectable anti-psychotic Abilify Maintena, a long-acting formulation of Otsuka’s blockbuster Abilify, which is set to lose patent protection in 2015. Just days after the launch, the partners expanded the original agreement to include co-promotion of all Abilify formulations (including tablets and oral solutions) in certain European countries. The companies are also jointly developing Otsuka’s brexpiprazole, now in Phase III for multiple psychiatric disorders. The latest expansion adds $150 million from Otsuka to Lundbeck’s coffers upfront, and could result in regulatory and sales milestone payments of up to $675 million. In exchange, Otsuka gets co-development and commercialization rights to Lu AE58054 in the U.S., Canada, East Asia (including Japan), major European countries, and Nordic countries. Phase II studies of the asset recently completed, and three Phase III trials are expected to begin later in 2013. The compound, a selective 5HT 6 receptor antagonist, is in development as an adjunct to donepezil for Alzheimer’s disease. The drug is expected to begin three Phase III trials later this year involving 2,500 patients. – Lisa LaMotta

Shire/SARcode: Shire's CEO-designate Flemming Ornskov hasn’t officially taken over the reins at the specialty pharma but he is already pulling the strings when it comes to business development. The company announced its second acquisition within two weeks in ophthalmology – a therapeutic area Ornskov knows well, but one that is new to the company. The Irish specialty pharma announced on March 25 that it acquired SARcode Bioscience Inc. and its lead asset lifitegrast for dry eye disease for $160 million upfront and undisclosed milestones. That announcement follows the March 12 acquisition of Premacure AB, the developer of a rare neonatal eye disease treatment, for an undisclosed amount. Ornskov called ophthalmology a 'very attractive' therapeutic area in an interview with “The Pink Sheet” DAILY. Prior to Bayer, Ornskov worked at the eye specialist Bausch & Lomb as global president of pharmaceuticals and OTC, and previously headed Novartis's ophthalmology business. For SARcode investors the deal is an attractive exit. The process was competitive, with multiple potential acquirers coming forward after the first Phase III trial read out last year, according to Sofinnova Ventures partner Garheng Kong, who also sits on SARcode’s board of directors. Sofinnova led SARcode’s $44 million Series B financing, completed in July 2011 to fund the Phase III program.–Jessica Merrill

Edison/Dainippon: Mountain View, Calif.-based biotech Edison Pharmaceuticals has scored a regional partnership with Japan’s Dainippon Sumitomo. On March 28. Edison announced that Dainippon is providing it with $15 million upfront, as well as $35 million in research funding for the Japanese development and commercialization rights to EPI-743 and EPI-589. The Japanese pharma will pay up to $35 million in development milestones for each indication, as well as another $460 million in commercialization milestones and royalties. Edison will use the funds from the deal to conduct late-stage development and commercialization of EPI-743, its lead product candidate, which it intends to commercialize itself in the U.S. and possibly Europe during the 2015 timeframe. Edison has been raising small sums of money since its inception in 2005, but had been considering the best possible way to transition from a pure development company to one with a commercial orientation as well. “We’ve been in private board discussions on how to capitalize Edison through commercialization,” said Edison CEO Guy Miller in an interview. “We had been considering different options including a regional deal or even an IPO.” – L.L.

AstraZeneca/Actavis: Actavis gained the right to launch its generic version of AstraZeneca PLC’s blockbuster Crestor on May 2, 2016 – 67 days before Crestor’s patent protection expires – in a deal announced March 25. In return, the generics maker agreed to pay a fee of 39% of its net sales during this early marketing period. The terms were part of a settlement agreement to resolve patent litigation. Actavis (formerly Watson Laboratories Inc.) will also be able to launch its zinc salt formulation of the cholesterol-lowering drug, which it developed under an NDA as a way to circumvent the Crestor patent, at the same time ([A#00130218011]). The companies noted in separate March 25 releases that the entry date may be earlier and the fee eliminated under certain circumstances, which they did not specify. In December 2012, the U.S. Court of Appeals for the Federal Circuit affirmed a district court decision that the substance patent covering Crestor is valid and enforceable. The patent expires following pediatric exclusivity on July 8, 2016. Crestor is AstraZeneca’s top-selling drug with 2012 revenue of $6.25 billion, of which $3.16 billion was in the U.S. The companies announced the settlement agreement on the same day the Supreme Court heard oral arguments in Federal Trade Commission v. Actavis, which addresses whether patent settlements in which the brand pays the generic to delay launching its product are anticompetitive. It is unclear whether the AstraZeneca-Actavis deal would spark opposition by the FTC as it did not involve a “reverse” payment from defendant to plaintiff. —Brenda Sandburg

Sanofi/Transgene: French biopharma companies Sanofi and Transgene will collaborate on the development of a new industrial platform for the production of clinical and commercial batches of Transgene’s immunotherapy products, including its modified vaccinia Ankara (MVA vaccine), a reengineered virus used as a vector for the production of recombinant proteins. Genzyme’s polyclonals facility in Lyon-Gerland will serve as the site for the platform, and is targeted for an investment of €10 million ($13 million), to be equally shared by Sanofi and Transgene. The platform will remain Sanofi’s exclusive property. Under the agreement, Sanofi will essentially serve as Transgene’s contract manufacturing organization, and Transgene will be a preferred customer for 15 years. The Genzyme site is already manufacturing polyclonal antibodies and has the necessary capabilities to support the registration of immunotherapy products for the EU and U.S. markets.  Construction will start in the third quarter of 2013, with completion scheduled for 2015. Transgene expects to file its first BLA in 2016. In 2010, Novartis AG licensed an exclusive option for global rights to Transgene’s TG4010 vaccine (MVA-MUC1-IL2) against MUC1-positive NSCLC and other types of cancer. The decision to option will be based on Phase IIB results, which should be available in the second half of 2013. The biotech is also advancing JX594, an oncolytic virus candidate licensed from Jennerex Biotherapeutics Inc. for hepatocellular carcinoma and other tumors; Phase II data will be presented in the first half of this year.—Michael Goodman

Novartis/Clinigen: British specialty pharma Clinigen Group is building a portfolio of hospital-only drugs it believes will thrive in its hands. In its latest deal, the Burton-on-Trent, U.K., company said March 26 it had acquired from Novartis rights to Cardioxane, a cardioprotective agent used to combat complications of anthracycline chemotherapy in advanced breast cancer patients. The Swiss pharma agreed to sell its rights to the drug for $33 million in cash, which Clinigen will pay in two installments. Novartis had owned rights to dexrazoxane since its 2006 acquisition of Chiron, but the drug has been approved since 1992.  It’s been marketed by several companies under a variety of names, but since 2011, its usage has been restricted to the breast cancer indication in the EU and U.S. Clinigen plans to market the drug with emphasis on certain European, Asian and Latin American markets where it believes it can stimulate sales. Last week, Clinigen licensed antiviral drug Vibativ (telavancin) from Theravance Inc. to treat nosocomial pneumonia infections stemming from methicillin-resistant staphylococcus aureus infections. The company licensed Foscavir (foscarnet sodium) from AstraZeneca PLC, an anti-bacterial drug combatting cytomegalovirus in bone marrow transplant patients, in 2010. Clinigen went public in September 2012.—Paul Bonanos



Lilly/Galapagos: Eli Lilly has returned the rights to an osteoporosis program to Galapagos NV, the smaller company announced during an R&D update on March 27. The alliance was initiated in December 2007, when Lilly agreed to pay an upfront of €3 million ($4.32 million) in exchange for an option to take over worldwide development and commercialization for up to 12 proprietary osteoporosis targets and drug-discovery programs. The goal of the program was to develop oral, bone-building drugs that could serve as follow-ons to Lilly’s osteoporosis franchise, which includes Evista and Forteo. Under the original terms of the deal, Galapagos was tasked with developing the drug candidates through Phase IIa proof of concept in exchange for the upfront and €88 million ($126.6 million) in milestones. It was also eligible for €130 million ($187.1 million) in commercial milestones. Galapagos said in a statement that the “alliance did not yield the expected results within an acceptable timeframe, and therefore Galapagos decided to end the alliance.” The smaller company had received €11 million in milestones from Lilly as of the end of the collaboration.—L.L.

 

Deals of the Week Wants Cash on the Barrelhead

 

For pharmas making all but the largest acquisitions, cash is king. From speculative buyouts of preclinical start-ups all the way through bolt-on deals worth a few billion dollars, pharmas typically spend cash rather than swap stock to make their acquisitions. Except in the cases of mega-mergers, a pharma’s purchasing power lies on its balance sheet, not in its share price.

So when Moody’s Investor Service issued a March 18 study of the U.S. companies whose cash coffers were the richest, Deals of the Week couldn’t help but turn an eye to the seven health care companies named in the report. None of them has disclosed a pharma acquisition yet in 2013, but rumors are swirling that one will strike soon.

Pfizer was the wealthiest in the bunch, with $46.9 billion in the till at the end of 2012. That’s enough to place it fourth across all industries, behind only Apple, Microsoft and Google. And although Pfizer had the world’s best-selling drug for several years running until Lipitor (atorvastatin) lost patent protection in 2011, not all of its bounty came from product sales. It did, after all, pare off its nutrition business in an $11.85 billion sale to Nestle SA last year, not to mention its Capsugel unit to private equity firm Kohlberg Kravis Roberts in 2011. Pfizer hasn’t done a pharma acquisition since its (all-cash) takeout of NextWave Pharmaceuticals Inc. in November.

Ninth-place Amgen made four large cash buys in 2012, including deals for Micromet Inc., deCODE genetics EHF, KAI Pharmaceuticals Inc., and Mustafa Nevzat Pharmaceuticals that totaled more than $2.5 billion. But those made a small dent on Amgen’s balance sheet; Moody’s said the big biotech had $24.1 billion at year’s end. The report also noted that 78% of Amgen’s liquidity is located overseas; two of its four large 2012 deals were for non-U.S. companies.

Beyond Amgen, Johnson & Johnson wasn’t far behind at 13th place with $21.1 billion, while Merck was 15th with $16.1 billion. (J&J-owned Cordis made one device acquisition this month, buying Flexible Stenting Solutions Inc. for an undisclosed sum.)

Moody’s reported that Abbott had $15.2 billion in cash on Dec. 31, enough for 17th on the overall list, but a day later, the company split in two. Its pharma descendant, AbbVie, had $7.98 billion upon launch, according to a March 15 regulatory filing. Rounding out the top pharmas were Lilly at 23rd with $12 billion and Bristol-Myers Squibb at 40th with $6.4 billion.

More broadly, the pharma industry holds about 14% of the $1.45 trillion corporate cash pile, a share which has remained roughly the same for several years. It’s the second largest sector behind technology, which gained share to 38%, while energy is among the industries losing share.

If Big Pharma isn't yet striking, some companies are still buying, licensing, and partnering. You won't get thirty days in the jailhouse, but you won't be abreast of this week's dealmaking news without...

Valeant/Obagi: Canada’s Valeant Pharmaceuticals is again strengthening its dermatology business through acquisition, this time by buying Obagi Medical Products, the maker of several proprietary aesthetic and prescription skin-care lines sold through physician offices. The companies announced Valeant’s plans to acquire the Long Beach, Calif., company March 20 for $19.75 per share in cash, or about $360 million. Valeant’s offer represents a 42% premium to Obagi’s closing share price March 14, the last trading day prior to the disclosure of its fourth quarter and full-year 2012 earnings. The company generated sales of $120.7 million in 2012. Obagi’s portfolio includes a range of skin-care lines, including Obagi Nu-Derm, Obagi-C Rx, Obagi Condition & Enhance and ObagiCLENZIderm M.D. acne therapeutic system. Valeant has built itself into one of the world’s leading dermatology players through acquisitions. Last year, Valeant announced plans to buy Medicis Pharmaceutical for $2.6 billion, positioning it as the largest dermatology player in the U.S. and second in the world behind only Galderma. - Jessica Merrill

AstraZeneca/Moderna: Along with its new R&D strategy and organizational restructuring, AstraZeneca unveiled a massive bet on an early-stage biotech platform March 21 that suggests the big pharma has taken to heart its new CEO’s directive to be more willing to embrace risk. The deal, an option agreement for up to 40 programs across several therapeutic areas with privately held Moderna Therapeutics, carries an eye-catching price tag: $240 million up front, plus potential earn-outs. All told, Moderna, which aims to use messenger RNA (mRNA) as therapeutics, could earn more than $1 billion under the deal with AstraZeneca, announced March 21. That same day, AstraZeneca also unveiled a research partnership in cardiovascular, metabolic and regenerative disease with Sweden’s Karolinska Institute, one of several collaborations between those two groups in recent years. Beyond the $240 million upfront payment – the largest this year in a biotech/pharma collaboration and one of the biggest ever for a deal built around preclinical assets – Moderna also can earn up to $180 million in “technical milestones,” an arrangement Moderna CEO Stephane Bancel described as almost a secondary, contingent upfront payment. Moderna also could bring home development, regulatory and commercial milestones for each drug candidate licensed by AstraZeneca, as well as sales royalties ranging from the high single digits to low double digits. - Joseph Haas

Merck/Cerecor: Well-funded Baltimore start-up Cerecor has licensed a portfolio of neurology drugs from Merck that have shown potential in treating Parkinson’s disease. The program includes more than 2,000 molecules that inhibit catechol-O-methyltransferase, or COMT, a compound that breaks down dopamine in the brain and is linked to improving brain functions such as cognition, motivation and emotion. In a March 20 statement announcing the deal, Cerecor said Merck’s research has improved toxicity issues related to other COMT inhibitors. Marketed drugs in the class include Novartis’s Comtan (entacapone) and Valeant’s Tasmar (tolcapone), which typically are prescribed with levodopa, a synthetic form of the natural dopamine-producing chemical L-dopa. Terms of the Merck-Cerecor arrangement weren’t released, although Cerecor said it will pay milestones and royalties “consistent with other preclinical licenses in neuroscience.” The start-up has a Phase I anti-tussive drug, as well as a group of preclinical D-amino acid oxidase inhibitors obtained from Johns Hopkins University’s Brain Science Institute, in its pipeline. Last April, Cerecor raised $22 million in a Series A round using placement agent Maxim Group; the specific investors weren’t named. Former Celgene CEO Sol Barer is Cerecor’s chairman. - Paul Bonanos

Celgene/bluebird bio: Speaking of Celgene, the Summit, N.J., gene- and protein-regulation specialist has teamed up with 2012 Deals of the Year nominee bluebird bio in a gene-therapy deal (pdf) that will target oncology. Specifically, the two companies will collaborate to develop therapies that modify a patient’s own chimeric antigen receptor T-cells, then re-introduce them to target cancer cells. Although bluebird bio will foot the bill for Phase I trials on clinical products, Celgene will have the option to obtain a global license for each for an unspecified fee; bluebird bio retains the right to share U.S. rights in exchange for reduced milestone payments. Celgene’s upfront payment wasn’t revealed, but total fees including milestones for each product could total $225 million plus royalties. Celgene also agreed to collaborate on CAR T-cell research with scientists at the Center for Cell and Gene Therapy at Baylor College of Medicine, Texas Children’s Hospital and The Methodist Hospital, Houston. The team at bluebird bio also will have access to the scientists, led by Baylor professor Malcolm Brenner. - P.B.

NPS/Takeda: Two assets came full-circle March 19 as NPS Pharmaceuticals re-acquired ex-U.S. rights to a pair of rare disease drugs in a deal that will increase the equity position of Japanese pharma Takeda Pharmaceutical. NPS previously out-licensed the rights to teduglutide and PTH 1-84 in separate deals with Nycomed Pharma, which then was acquired by Takeda. In an unusual deal structure, NPS, which is marketing teduglutide in the U.S. as Gattex and hopes to file PTH 1-84 under the brand name Natpara later this year as a biologic therapy for hypoparathyroidism, brought the ex-U.S. rights to those two compounds in-house in exchange for $50 million in common stock. Down the road, Takeda can earn an additional $30 million, which will be either cash or additional equity at NPS’ discretion, when the two drugs achieve combined worldwide, single-year net sales of $750 million. Takeda holds an equity position of about 7% following this deal, NPS President and CEO Francois Nader said. Both the licensing fee and the sales-based milestone were structured as equity (although the milestone can be paid out as cash if NPS opts) partly to preserve cash, Nader said. An ex-U.S. license to both drugs is just the start of what NPS gains under the deal. The transaction also transfers an inventory of active pharmaceutical ingredients for both drugs to NPS, a less-expensive method for making teduglutide, a glucagon-like peptide 2 (GLP-2) analog, and a pen delivery system that could be used with PTH 1-84. - J.A.H.

CRT/Janssen: Cancer Research Technology, the technology transfer arm of world’s largest charity Cancer Research UK, and Janssen Biotech have joined in the search to find potential new multiple myeloma drugs. The duo hope they can identify molecules and develop potential medicines that block a key protein on a cell-signaling route called the unfolded protein response (UPR) pathway. Teams at The Institute of Cancer Research (ICR), led by Ian Collins in the Cancer Research UK Cancer Therapeutics Unit and Faith Davies in the Division of Molecular Pathology, will work alongside a team at Janssen. Together, Cancer Research UK and Janssen will fund up to 25 scientists, with Janssen providing some of the funding to support the research at the ICR in London. Janssen also will pay future milestones and royalties and take the lead on the clinical development of any potential drugs. The two sides announced their deal on March 21 but gave no financial details. CRT long ago moved beyond simply commercializing and managing the intellectual property generated by the £500 million in research funding provided by Cancer Research UK to five core research institutes across the U.K., as well as to researchers at dozens of other universities and organizations. The breadth of CRT’s academic network – it has sourced and managed IP from more than a dozen global charities and institutes, as well as that of Cancer Research UK-funded research and drug discovery – positions it as an important gateway to cancer-focused research in the U.K. It has a strong in-house drug-discovery capability and access to clinical development capabilities in conjunction with Cancer Research UK’s drug development office. Janssen Biotech is part of the Janssen Pharmaceutical Companies of Johnson & Johnson. J&J earlier this month opened an innovation center in London but a spokesperson for the U.S. drug company said Janssen’s alliance with CRT was not the result of that center’s establishment. - Sten Stovall

Merck Serono/Nordic Bioscience and Merck KGaA/BMS: Merck Serono, a unit of Merck KGaA, said on March 18 it formed a strategic alliance with Denmark-based Nordic Bioscience AS around the German drug maker’s investigational therapy sprifermin, or recombinant human FGF-18, in osteoarthritis of the knee. Under the terms of the agreement, Nordic Bioscience will provide Merck with clinical development services on a shared-risk basis in exchange for a payment structure that includes service fees and potential milestone and royalty payments on the program. Financial terms of the collaboration were not disclosed; however. Merck retains full responsibility for the development and commercialization of the investigational drug. According to the World Health Organization, more than 5% of adults over 40 in developed countries, or more than 30 million people, suffer from osteoarthritis of the knee. A multi-national Phase IIb trial, dubbed the FORWARD study, is expected to begin enrolment in the second half of 2013 to evaluate further sprifermin for inhibition of the progression of structural damage, reduction in pain and improvement of physical function in patients with osteoarthritis of the knee. Sprifermin is a protein thought to induce chondrocyte stimulation leading to matrix synthesis and chondrocyte renewal. It is delivered by intra-articular injection. Two phase I trials in moderate/severe osteoarthritis of the knee previously were completed; a Phase II trial to evaluate the efficacy and safety in patients with cartilage injury of the knee is ongoing. The program was originally was in-licensed in 2004 from ZymoGenetics, a Bristol-Myers subsidiary. The next day, on March 19, Merck KGaA said it inked a deal with Bristol to promote type 2 diabetes drug Glucophage (metformin hydrochloride) under different formulations in China. Under terms of the agreement, Merck Serono and Bristol will co-promote Glucophage in China through a profit-sharing arrangement. Glucophage has been marketed by Bristol-Myers Squibb-SASS in China since 1999. The two companies will tap existing resources and complementary strengths, with Bristol-Myers Squibb-SASS continuing to manufacture Glucophage’s IR (immediate release) formulation. The collaboration will seek to expand the geographic distribution of Glucophage and provide diabetes-related health and medical information including education for health professionals. In addition, the co-promotion will significantly increase outreach to hospitals. Other terms of the agreement were not disclosed. -- S.S.

Thanks to YouTube user cweiandnd for uploading the Louvin Brothers clip. Keep clicking, there's more where that came from.

Financings Of the Fortnight Sees Drug Companies Making It Rain

When the Nasdaq’s biotech index topped 1,600 late last week, many people noted it was an all-time high, even higher than the 2000 bubble. (Not adjusting for inflation, however.)

It has stayed above 1,600 all week, and no surprise, the money-chasers have followed. As of this writing, two biotechs have gone public the past few days, and the waiting room is starting to fill up. Companies recently joining the queue include Omthera Pharmaceuticals, Chimerix, and GW Pharmaceuticals. 

Meanwhile, a new study shows that seven of the top 50 cash-rich US corporations are drug companies: Pfizer, Amgen, Johnson & Johnson, Merck, Abbott Laboratories, Eli Lilly and Bristol-Myers Squibb. (Abbott has since split into device and drug companies, but the drug spin-out AbbVie has enough cash to qualify for the list.)

Much of that cash is held overseas, and it’ll likely stay there. Cash earned abroad and brought back to the US carries a 35% tax rate. Drug firms and other corporate lobbyists convinced the US government to grant a tax holiday – a temporary 5% rate -- in the mid-2000s in large part on the grounds that all that cash coming home would create jobs. The Congress said – nudge, nudge, wink, wink – well, sure, who doesn’t love jobs? Instead, we saw massive cuts in the drug business. The legislation was called the “American Jobs Creation Act,” a title so patently false it still serves as a convenient reminder to arch an eyebrow or three whenever the drug industry launches cries of duress. With apologies to Mark Twain, the demise of Big Pharma is always greatly exaggerated, often by the industry itself.

Even if much of the cash underscored in the Moody’s report is “locked” overseas, cash is plentiful at home, too, for certain sectors of the life sciences world. Debt is dirt cheap, and the stock market is booming. When a Big Pharma decides to divest a non-core asset, rewards await. Bristol-Myers Squibb did just fine spinning out its Mead Johnson nutritionals group in early 2009 and divesting its 83% stake before the end of that year. Earlier this year Pfizer floated its animal health division as the public company Zoetis but retained an iron grip on ownership and board control; its stake has gone up 29% in less than two months.

Farther down the food chain, public investors were choosy about which biotechs got through the IPO looking glass in 2012, but those that squeezed through have fared extremely well. At the closing bell March 20, the class of 2012 (biopharma and diagnostics companies, IPOs on US exchanges only) is up 57% as a portfolio, 13 companies in all. Only three are in the red; one, coincidentally, is Verastem, a cancer stem-cell company brought to you by some the same people who cofounded OvaScience, which just raised $35 million in a private placement after going public last year via a different route than Verastem (see more below). 

Below the IPO threshold, amongst the private biotechs, it’s hard to argue that there’s plenty of cash from the traditional source of early-stage venture capital. But then something like Savara Pharmaceuticals comes along; as we note below in our roundup, the Austin, Texas company working on powdered drug delivery has now raised $19 million, mainly from angels, through its Series B round. We did a double-take, too, when we saw that number. When angel networks can pony up those kinds of sums, are reports that bemoan the funding struggles of early-stage biotech greatly exaggerated?

And while you’re mulling that over, answer this, too: Was the coldest winter you ever spent really a summer in San Francisco? Mark Twain was always good for an aphorism, but when it came to the biotech money scene, he could never match…

Savara Pharmaceuticals: The Austin, Texas developer said March 20 it has landed a $7.4 million second tranche of its Series B round, bringing the total to $16 million. New investors include Tech Coast Angels and North Texas Angel Network, and Central Texas Angel Network is a returning investor. The B round began with angels, too: The Keiretsu Forum, the largest angel “community” in the world, led the first tranche of $3.2 million in the round with participation from 117 investors. To add to the juiced-up B round, the firm also has brought in non-dilutive funding – a three-year, $4 million grant from NIH’s National Heart, Lung and Blood Institute. Initially founded in 2007 on a plan to build an out-licensing business centered on the NanoCluster dry powder aerosol delivery platform in-licensed from the University of Kansas, Savara changed directions along the way to focus on developing its own drug-delivery solutions for pulmonary conditions. It raised a $1.4 million Series A mainly from angels in 2009. The new cash will help fund a Phase II trial for AeroVanc, Savara’s dry-powder inhalation formulation of vancomycin intended to treat MRSA (methicillin-resistant Staphylococcus aureus)  infections in cystic fibrosis patients. AeroVanc, which includes a capsule inhalation device in-licensed by Savara, has been granted orphan drug designation by FDA, meaning it will have seven years of market exclusivity if approved. – Joseph Haas 

OvaScience: The infertility treatment company announced March 13 a private placement of its over-the-counter shares that raised $35 million. The firm, which went public in 2012 without an initial public offering, sold 3.9 million shares at $9 each to Adage Capital Management, Deerfield Management Company, EcoR1 Capital Fund, Jennison Associates and other institutional investors. Leerink Swann served as placement agent. We highlighted OvaScience in a column last year
for a few reasons: It has high-profile founders, it went public via an odd route that has gained some attention recently, and among its dozens and dozens of individual investors were several standout names. Also, it gave us the chance to crack a few egg puns. OvaScience is one of several companies recently to attract to their private fundraising crossover investors who normally stay in the public realm. (OvaScience had hedge fund RA Capital in its Series B round in early 2012.) The firm's lead product AUGMENT is a process to revitalize a woman’s mitochondria in her eggs, improve their viability, and boost the chances of success during in-vitro fertilization. -- Alex Lash

Tetraphase Pharmaceuticals: The antibiotic maker became the fifth health care company and the third biopharma (for humans, that is) to go public in 2013. It raised $75 million on March 20 by selling 10.7 million shares at $7 each, which missed the revised target range of $8 - $10. Tetraphase first filed in February and is the first biotech to jump to the public markets since the national biotech indices hit record highs in March. If it hadn’t gone public, Tetraphase likely would have raised another round of venture funding, a choice another antibiotic developer Rib-X Pharmaceuticals made in 2012. With $80 million raised in three previous rounds, Tetraphase needs cash to begin Phase III studies of its lead candidate eravacycline – a synthetic next-generation tetracycline – for multi-drug resistant Gram negative infections including intra-abdominal infections. It should benefit from a more favorable regulatory climate, including new draft guidance from FDA that allows sponsors to run two Phase III studies in different patient populations, one in patients with intra-abdominal infections and the other in patients with complicated urinary tract infections. Previously sponsors would have been required to conduct two Phase III studies, enrolling 500 to 600 patients each, in intra-abdominal infections. The new guidance gives sponsors an opportunity to go after two indications at the same time, and the different patient populations could make the trials faster to enroll. – Jessica Merrill and Alex Lash

Pharmacyclics: The small-molecule oncology company said March 8 it raised $207 million in a secondary share offering. Like Tetraphase, the Sunnyvale, Calif.-based Pharmacyclics is striking quickly in the wake of good regulatory news. In February, the FDA granted its ibrutinib, partnered with Johnson & Johnson, breakthrough status in two blood cancers. Pharmacyclics sold 2.2 million shares, about 3% of outstanding shares, at $94.20 each, capping for now a remarkable run that saw the firm’s share price nearly quadruple in 12 months. It closed March 8, 2012 at $25.40. Most of that rise came before the FDA’s breakthrough designation for ibrutinib, the first for an oncology drug. FDA’s Office of New Drugs Director John Jenkins has described as reserved for drugs with early results that are “so impressive, so unexpected and ha[ve] such a dramatic impact on the treatment of patients with that disease” that the sponsors and drug regulators should do all they can to move it forward. One of the few clear criteria for breakthrough status is that there is early clinical evidence of substantial improvement over existing therapy. FDA granted breakthrough designation to ibrutinib for two B-cell malignancies: relapsed/refractory mantle cell lymphoma (MCL), for which there are an estimated 5,000 new cases in the U.S. per year, and Waldenstrom’s macroglobulinemia (WM), an even rarer disease with about 1,500 cases in the U.S. per year. Ibrutinib is a Bruton’s tyrosine kinase inhibitor. J&J’s Janssen Biotech licensed rights to the drug in December 2011 in a deal that included a $150 million upfront payment, the largest paid for a single asset that year. Vertex Pharmaceuticals' Kalydeco (ivacaftor) was the first drug to receive breakthrough designation. - Alex Lash and Emily Hayes

All The Rest: With participation from Celgene and Novo AS, PTC Therapeutics (small-molecule therapies) snagged $60 million in its Series G round, the largest venture financing of the fortnight… Research-focused Nabsys brought in $20mm through a Series D financing… UK regenerative medicine company Progenitor Labs received $5.8 million in seed funding from SR One’s UK Fund… KannaLife Sciences, a start-up developing phyto-medical pharmacological products derived from botanical sources rolled up $1.5 million in a Series A investment from Medical Marijuana and CannaVest…To commercialize its biopharmaceutical affinity purification technology, Avitide completed a $1.4 million Series A round led by Borealis Ventures, and joined by SV Life Sciences, Polaris Venture Partners, OrbiMed Advisors, and Angeli Parvi… In a private placement by public Australian stem cell developer Mesoblast, the company issued new shares priced at AU$6.30, for $174.6mm in proceeds to fund a clinical trial program… Public Evolva Holding SA (small molecules), through a rights offering and subsequent private placement, took in $33 million... In a PIPE of 113mm common shares @ $0.145 to lead investors Opko Health and Frost Gamma Investments Trust, RXi Pharmaceuticals (RNAi therapies) grossed $16.4 million… Renal-focused Rockwell Medical plans to sell 4.3 million shares at $3 in a registered direct offering for net proceeds of about $12 million… Public Canadian spec pharma Cynapsus (CNS drug delivery) completed a 13. 1 million unit placement, taking in $5.6 million…The $3.1 million in proceeds from Stem Cell Therapeutics’ PIPE will allow the company to conclude its acquisition of Trillium Therapeutics (announced in February) and also triggers a condition of a December 2012 deal that enables SCT to exercise its option for an exclusive license to University Health Network/MaRS Innovation's tigecycline, an FDA-approved antibiotic capable of selectively targeting leukemia cells… Hyperion Therapeutics (urea cycle disorders) netted $65.4 million in a FOPO of 3.3 million shares @ $20.75 – including the overallotment…Women’s health care-focused TherapeuticsMD reaped $50 million through a public offering of 29 million common shares at $1.70… Inovio Pharma (cancer and infectious disease therapeutics) netted $14.2 million through the follow-on public offering of 27.4 million units, priced at $0.55 each…Oculus Innovative Sciences (dermatology and wound care) netted $3.2 million in a public offering of 8.6 million shares, including the overallotment, priced at $0.40…Infectious disease-focused Enanta Pharmaceuticals priced its IPO of 4 million shares at $14, the low end of its $14-16 range… Israeli biotech Alocobra set terms for its Nasdaq IPO at $10-12 for 1.4mm shares… Animal health company Aranata Therapeutics also announced plans to go public…Chinese drug distributor Sinopharm Group plans to issue $640mm worth of five-year corporate bonds on the Shanghai Stock Exchange. -- Maureen Riordan

Big thanks to Stacy Lawrence for help with this fortnight's column. 

Deals Of The Week: Exit From Ambit Tie-Up Just A Blip In Astellas’ Oncology Aspirations

Despite ambitions to become the “global category leader in oncology,” Astellas Pharma has decided to pull the plug on a promising collaboration in acute myeloid leukemia with privately held Ambit Biosciences, potentially throwing a wrench into the machinery of the latter’s upcoming initial public offering. On March 12, Ambit announced that Astellas has exercised its right to opt out of the partnership, effective Sept. 3, at which time all program rights revert to the biotech.

The two firms have been partnered since 2009 to co-develop FMS-like tyrosine kinase-3 (FLT3) inhibitors for cancer, with a focus on lead compound quizartinib (AC220), which showed off promising Phase II data at the American Society of Hematology meeting this past December. Quizartinib, seen as a potential competitor to Novartis' Gleevec (imatinib), was discovered by Ambit using its KINOMEscan high-throughput small-molecule kinase screening engine, since off-loaded to DiscoveRx Corp. in a 2010 transaction so that Ambit could focus on drug development.

Astellas paid $40 million upfront in 2009 for worldwide rights to quizartinib and other FLT3 inhibitors for cancer and non-cancer indications, although Ambit retained a right to co-promote all deal-related compounds. The Japanese pharma also was on the line for up to $350 million in pre-commercialization milestones as well as sales milestones and tiered double-digit royalties. The partners were sharing quizartinib development costs in the U.S. and Europe while Astellas was to shoulder rest-of-world costs.

Concurrent with the deal, Ambit has been trying to go public. It first announced plans to file an initial public offering in November 2010, but withdrew in June 2011 citing the ubiquitous unfavorable market conditions.  However, in February, it announced new plans for an IPO.

Ambit had only $14.5 million in cash on hand at the end of 2012, nowhere near enough to advance an AML candidate by itself, but recently raised $25 million in the first tranche of a planned $50 million Series B financing. In the meantime, it is working on a companion diagnostic to identify suitable patients for the drug with Novartis unit Genoptix.

FLT3 inhibitors are not a crowded class at present. Novartis has midostaurin (PKC412) in a Phase III trial (RATIFY) in newly diagnosed AML patients with FLT3 mutations, as well as in Phase II in aggressive systemic mastocytosis. Bayer’s multi-kinase inhibitor Nexavar (sorafenib) for renal and liver cancer and Pfizer’s Sutent (sunitinib) for renal and pancreatic cancer are multiple kinase inhibitors that affect FLT3.

Teva has lestaurtinib (CEP-701), also a multi-kinase inhibitor that has been investigated in relapsed AML, under its 2011 buyout of Cephalon. However, the compound was not referenced in a December 2012 pipeline review for investors by the Israeli pharma.

Meanwhile, China’s SBIO licensed worldwide rights to multi-kinase inhibitor SB1317 to Tragara Pharmaceuticals in 2009 in a deal that could bring SBIO a combined $112.5 million in upfront cash and milestones. Now known as TG02, the compound is being developed in multiple myeloma, chronic lymphocytic leukemia and acute leukemia by San Diego-based Tragara.

In a release to announce the split, Astellas President and CEO Yoshihiko Hatanaka said the decision was made for strategic reasons. “We remain committed to the field of oncology as a major area of focus for the company,” he added. Indeed, in an interview with “The Pink Sheet” a little over one year ago, the exec talked up Astellas’ prospects in cancer, thanks in part to intellectual property obtained in its 2010 buyout of OSI Pharmaceuticals.

That transaction brought Astellas the non-small cell lung cancer drug Tarceva (erlotinib), for which Astellas continues to seek label expansions, including first-line lung cancer. In addition, with Medivation, Astellas obtained FDA approval last September for Xtandi (enzalutamide) in prostate cancer, a setting where it is expected to compete with Johnson & Johnson’s Zytiga (abiraterone).

Another big oncology opportunity for Astellas is renal cell carcinoma candidate tivozanib, partnered with Aveo Pharmaceuticals. FDA’s Oncology Drugs Advisory Committee is scheduled to review the compound, which showed an unfavorable survival trend in a pivotal study, on May 2. An oral tyrosine kinase inhibitor, tivozanib previously out-performed Nexavar in a head-to-head study measuring progression-free survival in RCC patients.

In the meantime, DOTW fanatics await Ambit’s next move, be it the pricing of its IPO or a search for a new development partner for quizartinib. But while we wait, we also can mull this new collection of

Shire/Premacure: Shire’s acquisition of Swedish biotech Premacure announced March 12 is the first deal the specialty pharma has completed since Flemming Ornskov was appointed CEO designate. The former Bayer executive began working at Shire in January as part of a phased-in succession plan to replace CEO Angus Russell, who will leave the company at the end of April. Shire has said it will continue its M&A strategy under the new leadership regime, but Russell has been particularly adept at winning investor confidence in that area. The acquisition of Premacure for an undisclosed upfront and milestones is the most recent in a string of deals that has diversified Shire’s pipeline with interesting assets in niche market opportunities. Premacure brings Shire a Phase II protein-replacement therapy for a rare eye disease that affects premature infants, retinopathy of prematurity (ROP). It expands Shire’s Human Genetic Therapies rare disease unit into neonatology. The product in development, a formulation of recombinant human insulin-like growth factor 1 (IGF-1) combined with a recombinant version of its naturally occurring binding protein, insulin-like growth factor-1 binding protein-3 (IGFBP3), is potentially the first preventive treatment for ROP. - Jessica Merrill

AbbVie/Receptos: San Diego-based Receptos has licensed an antibody to treat the rare disease eosinophilic esophagitis from AbbVie, although the Chicago pharma retains an option to reacquire some rights to the drug. In a March 13 deal, Receptos received global rights to an interleukin-13 antagonist now known as RPC4046, for which it plans to perform a Phase II trial. Upon receipt of Phase II data, AbbVie can exercise an option for a pre-negotiated fee, under which it would obtain full rights to the drug outside the U.S., and split U.S. proceeds equally with Receptos in a co-promotion agreement. The two companies would also split the costs of Phase III trials equally. AbbVie predecessor Abbott Laboratories previously had studied the drug’s safety in a Phase I trial in mild-to-moderate persistent asthma. Receptos typically focuses on immune and metabolic disorders; the start-up’s lead program, RPC1063, is in Phase II for multiple sclerosis and ulcerative colitis. The company raised $50 million in a 2012 Series B round, and has G protein-coupled receptor discovery partnerships with Eli Lilly, Ono Pharmaceutical and Ortho-McNeil-Janssen Pharmaceuticals. Other drugs targeting IL-13, a protein linked to airway diseases and inflammation, include Genentech’s Phase III lebrikizumab and Rigel Pharmaceuticals' R256, the subject of a partnership with AstraZeneca. Receptos said about 300,000 patients in the U.S. and EU suffer from eosinophilic esophagitis, which affects swallowing and can lead to food impaction; the disease typically is treated with topical steroids. - Paul Bonanos

Merck/Luminex: Merck & Co. has signed on a second partner to make a companion diagnostic for its mid-to-late-stage Alzheimer’s disease drug, MK-8931. The New Jersey-based pharma announced March 13 that it will team up with Luminex Corp. on a diagnostic device that will use the Austin, Texas-based company’s xMAP technology to test patients for the presence of two biomarkers – total-tau and Aβ42. The diagnostic will use samples of cerebrospinal fluid (CSF) obtained through a spinal tap from patients to test for the biomarkers. Financial terms of the deal were not disclosed. MK-8931 is an oral beta amyloid precursor protein site cleaving enzyme (BACE) inhibitor that is meant to slow the development of beta amyloid plaque in the brain. The drug is being tested in a 200-patient Phase II safety study that is expected to advance into a larger Phase III that includes 1,700 to 1,800 patients later in the year. Merck announced in December that it also signed a deal with GE Healthcare to create a companion diagnostic for MK-8931 that would use flutemetamol – a positron emission tomography (PET) imaging agent – to detect beta amyloid deposits in the brain. Both diagnostic tests will be used in the Phase III trial to help determine secondary endpoints. The diagnostics also will be used for patient selection in a trial of prodromal Alzheimer’s patients; a timeline for this trial is not yet determined. - Lisa LaMotta

Theravance/Clinigen: In its first deal since floating on the U.K.’s Alternative Stock Market (AIM) in September 2012, England-based Clinigen Group has licensed Theravance’s antibacterial Vibativ (telavancin) for marketing in the EU and certain other countries, including Switzerland and Norway. In return, Theravance will receive a $5 million upfront payment and tiered royalties on net sales ranging from 20% to 30%. Vibativ is unusual in that its marketing in the EU was suspended in May 2012 because of concerns about its then-manufacturer Ben Venue Laboratories not meeting cGMP standards. However, Clinigen can offer expertise in manufacturing, already has recruited another supplier and expects to meet with regulators shortly in order to get the suspension lifted. Clinigen usually acquires a product in order to revitalize its marketing in new geographies and indications, but the strength of the Vibativ license is that it lasts for 15 years and the product is patented until 2026, said Clinigen CEO Peter George. Clinigen also has an option to extend its license. The company also is looking to acquire or license several other products, as noted at its initial public offering last year. Telavancin is indicated in Europe for the treatment of hospital-acquired pneumonias (HAPs) due to methicillin-resistant Staphylococcus Aureus (MRSA) infections that are refractory to other therapies, and should fit well with Clinigen’s other infectious disease product, Foscavir (foscarnet sodium), which is indicated as a last-line treatment for HAPs due to viral infections. Foscavir was acquired from AstraZeneca in 2010. The antibiotic is marketed in the U.S. for complicated skin infections and received a favorable recommendation for use in HAPs from an FDA advisory panel in November 2012. - John Davis

Boehringer Ingelheim/Presidio: Germany’s privately held Boehringer Ingelheim is teaming up with Presidio Pharmaceuticals in a non-exclusive collaboration to test three direct-acting antiviral candidates in combination therapy in hepatitis C patients with genotype 1a infection. No deal terms were released for the collaboration announced March 12. San Francisco-based Presidio will have primary responsibility for running the Phase IIa trial, slated to start during the second quarter, and each firm will retain rights to their proprietary compounds. The collaboration will team PPI-668, a pan-genotypic NS5A inhibitor from Presidio with two BI Phase III compounds – protease inhibitor faldaprevir (BI201335) and non-nucleoside polymerase inhibitor BI207127. Patients will be dosed the combination with or without ribavirin – the trial will be interferon-free. The trial will measure on-treatment antiviral response and sustained virologic response (SVR) rates, with SVR data for four and 12 weeks post-treatment expected to be available in the fourth quarter, Presidio said. Presidio Chief Medical Officer Nathaniel Brown said the study will focus on genotype 1a patients, because that variant has proven more difficult to treat in various companies’ HCV trials to date than genotype 1b. Genotype 1 virus is the most prevalent form of HCV in North America. - Joseph Haas
Photo credit: Wikimedia Commons

CMEA 8 Is "Dissolved"

Hark back to the golden days of JP Morgan, all of two months ago. The sun was shining, the cable cars were whirring, and CMEA Capital was touting its long-awaited CMEA 8 fund. It even had posted Web pages for two new partners, who were bellying up to the table with a lot of optimism about the new fund and a string of early-stage biotech successes on their resumés. We wrote about it here.
 
Two months later, the fund's plug has been pulled, according to all three partners involved. In response to inquiries, Troy Wilson, the cofounder of PI3 kinase developer Intellikine, Kent Hawryluk, an Indianapolis-based VC, and CMEA life sciences managing director Karl Handelsman issued a joint statement to our sister publication START-UP: “CMEA 8 is dissolved. The decision was mutual and we have amicably parted ways.”
 
CMEA has had on-again, off-again plans for this fund, going back to 2010 when it was pitching prospective investors on an asset-centric biotech fund, backed in part by Eli Lilly and code-named "Velocity." START-UP wrote about those plans here.

In 2011, CMEA jettisoned plans for Velocity as a standalone fund -- around the same time managing general partner Jim Watson said there would be no eighth fund -- instead carving Velocity out of CMEA VII and making it one of many VC experiments that, in the past couple years, have prioritized lean-and-mean development of in-licensed compounds. (In its current incarnation, Velocity's tag line is "We build drugs, not companies.")

We shouldn't go any further without mentioning the elephant in the room: the sexual harassment suit against CMEA and one of its former executives that went public March 7. Let's be clear: there is no indication that the unraveling of CMEA 8 is linked to the lawsuit, and the two new would-be partners, Wilson and Hawryluk -- no longer listed on CMEA’s Web site, by the way -- are not mentioned in the legal complaint.

After the suit became public (you can find more details and the full text of it here), Wilson, Hawryluk and Handelsman would make no comment except for the statement previously noted.
 
So what's next? Handelsman referred all inquiries about the lawsuit to CMEA’s lawyer, Lara Villareal-Hutner, who responded with a prepared statement that other media outlets have also received in recent days. It read, in part: “CMEA acted at all times professionally and with integrity, underscored by the fact that for the last eight months the administrative assistants continued working for the Firm, and resigned only after retaining an attorney and filing this lawsuit. While the statements asserted in this lawsuit are salacious, CMEA is confident that the true facts supported by evidence - not others' self-interested mudslinging - will determine the outcome of this case. As such, CMEA is fully prepared to vigorously defend itself and its reputation, and is supremely confident in its ability to prevail.”

Reached in Indianapolis, Hawryluk declined to comment. Meanwhile, Wilson has been busy building, with the help of his former Intellikine colleagues, a self-described “drug discovery incubator” called Wellspring Biosciences, a variation on the increasingly common theme of asset-centric biotech company creation. We noted Wellspring's first deal -- the spinout and partnership of its offshoot Araxes Pharma -- in the March 4 Deals of The Week column. On Wilson’s now-defunct CMEA page, he’s quoted as saying that Wellspring is “exactly the sort of company we want in CMEA 8.”

 We'll have a full report on all these doings in the upcoming START-UP.
 
Photo courtesy of flickr user Eschipul.

Deals Of The Week Untangles The String of Pearls

Speculation has abounded of late that Bristol-Myers Squibb is looking to do its largest acquisition ever – to add a crown jewel to its string-of-pearls. That’s the pharma’s loving nickname for an aggressive deal-making strategy in which it has lined up a series of about two dozen acquisitions and partnerships to complement its internal pipeline and existing products. These deals have largely been focused on cancer, cardiovascular disease, immunology, neuroscience, and virology.

BMS has made only three acquisitions worth more than $1 billion since 2007 when the pharma first put this strategy in place, according to Elsevier’s Strategic Transactions database.  Two out of three of them may eventually contribute substantially to the top-line.

The most recent, of course, was the $6.8 billion joint acquisition in August of Amylin alongside BMS’ existing diabetes partner AstraZeneca. The idea was that the pair would put their marketing muscle behind a trio of classes of diabetes drugs. In the fourth quarter, its first full quarter of U.S. sales, BMS reported revenues of $55 million for Bydureon (exenatide extended-release) and $92 million for Byetta (exenatide). The partners hope to ramp up revenue as they expand their marketing effort internationally and roll-out a pen for Bydureon.

Another BMS buy for over $1 billion was HCV play Inhibitex, which after a $2 billion acquisition early last year took a well-chronicled swan dive. Safety problems forced BMS to halt a trial for the lead acquired candidate. But BMS hasn’t given up on HCV; it’s targeting genotype 1b, which is prevalent in Japan where it accounts for 70% of HCV infection. BMS is currently in Phase III combination testing with NS5A inhibitor daclatasvir and NS3A inhibitor asunaprevir. Both of these are internal BMS candidates.

BMS expects to present data from the trial at the American Association for the Study of Liver Diseases conference in November and to file for approval of the combo in Japan by year-end. The company is also testing that regimen in genotype 1b patients in the U.S. and Europe and pursuing triple and quad HCV combination treatments. Part of these could be Peginterferon lambda-1a, which BMS gained with its 2010 acquisition of ZymoGenetics for $841 million.

So, that gives BMS one possible marketing-driven success and one outright failure among its big, recent acquisitions. The third big deal, for Medarex, has been an unabashed success. BMS acquired the biotech in 2009 for $2 billion, when its ipilimumab was in Phase III trials for metastatic melanoma. After a 2011 approval, Yervoy (ipilimumab) had 2012 sales of $706 million; it’s expected to become a blockbuster.

BMS is looking to expand upon Yervoy's success. Immuno-oncology and HCV are its two top pipeline priorities, BMS said at this week’s Cowen Health Care Conference. Its immune-oncology line-up includes Medarex candidate anti-PD1 antibody nivolumab (in Phase III testing for melanoma as well as lung and kidney cancers) and elotuzumab (in Phase III testing for multiple myeloma). BMS has rights to the latter with partner AbbVie under a 2008 deal. The original deal was with PDL Biopharma, which then spun-out Facet, which was acquired by Abbott, which itself then spun out AbbVie.

Wall Street expects that Yervoy, along with anti-fibrillation drug Eliquis (apixaban) and diabetes drug Onglyza (saxagliptin), could have blockbuster potential. Both Eliquis and Onglyza were discovered internally at BMS (and both are shared with partners -- Pfizer and AZ, respectively).

But new blockbusters aren’t coming on-line quite fast enough to replace lost revenue. Of its current stable of seven blockbusters, BMS is already losing Plavix sales to generics and stands to lose patent exclusivity on three more within the next few years – anti-psychotic Abilify (aripiprazole), HIV franchise Sustiva and hepatitis B treatment Baraclude (entecavir). Even before the string-of-pearls, dealmaking was essential to portfolio building at BMS. It acquired Sustiva in its largest deal to date – the 2001 purchase of DuPont Pharma for $7.8 billion. Its rights to Abilify stem from a 1999 partnership with Otsuka.

To do an even bigger deal, BMS would have to do some fancy wheeling-and-dealing. To execute on rumored buyouts of Biogen Idec with its $40.5 billion market cap or Shire with its $17.2 billion market cap, the $61.5 billion BMS would have to get creative and come up with a lot more cash than the $6.4 billion it had at year end. But, if nothing else, the Amylin transaction has shown BMS can do some creative deal-making.

For now, Wall Street seems to think BMS has done a good enough job stanching its hemorrhaging sales. Since announcing its 2012 net sales declined 23% to $4.2 billion on Jan. 24, BMS shares have climbed 8%. That brings its year-to-date rise to 16%; a reversal of the 8% decline in 2012.

But rather than speculate further about BMS' dealings, let's take a look at actual deals that have transpired in this edition of . . .

Celgene/Presage: Celgene is looking to identify novel drug combinations for the treatment of solid tumors with the help of Presage Biosciences’ proprietary technology platform. The companies announced they signed a collaboration, the second major deal with a pharma partner for Presage, on March 5. Celgene paid $13 million upfront and agreed to undisclosed milestone payments for access to a drug array platform that allows for micro-doses of multiple drugs to be placed through the skin and directly into a tumor, permitting drug developers to measure and compare drug responses. One advantage of the technology is that it allows a drug manufacturer to compare drug responses in a living tumor rather than in an in vitro model, which can yield misleading results or fail to correlate with what happens to a tumor in the clinic. Celgene will pay $5 million in R&D funding and $8 million in exchange for an equity stake. Presage signed its first significant deal last year with Millennium: The Takeda Oncology Co. The Seattle-based start-up’s near-term goals call for signing one more partner for a total of three technology platform deals. The company plans to focus on executing on those tight-knit relationships and on expanding the uses for its technology in other areas. - Jessica Merrill

ViiV Healthcare/Medicines Patent Pool: This is an example of Big Pharma contributing IP to enable the manufacture of generic versions of HIV drugs for developing nations. In late February, ViiV  –  a GlaxoSmithKline, Pfizer, and Shionogi joint venture focused on HIV – granted MPP a royalty-free license for pediatric formulations of the antiretroviral drug abacavir in 118 developing countries. MPP is a United Nations-backed health care organization that collects intellectual property rights for HIV drugs from originators in order to transfer them to generics companies. It facilitates broader and faster access to HIV drug IP for these generics makers supplying developing markets. MPP first invited companies to contribute HIV IP into its pool in December 2010. In addition to ViiV, NIH and Gilead Sciences have also signed agreements. Johnson & Johnson has declined to participate, but Merck, Abbott, Bristol-Myers Squibb, Boehringer Ingelheim, and Roche are all still considering contributing HIV IP to MPP. - Stacy Lawrence

Array Biopharma/Global Blood Therapeutics: Cancer-focused Array is collaborating with start-up Global Blood Therapeutics in a drug-discovery agreement to focus on small-molecule compounds for chronic blood-related diseases. No deal terms or therapeutic targets were disclosed. Boulder, Colo.-based Array says it will develop assays and screen its proprietary library of 300,000 small molecules to identify active site and allosteric modulators of targets chosen by Global Blood. Array President Kevin Koch said the companies share a goal of accelerating drug discovery and development by combining Global Blood’s expertise in disease biology and computationally supported medicinal chemistry with Array’s lead-generation abilities. Based in South San Francisco, Calif., Global Blood was founded in 2012 with a $40.7 million Series A financed by Third Rock Ventures, under which Third Rock partner Mark Goldsmith took the CEO’s chair at the new company. With a therapeutic focus of using allosteric modulation to change the shape of proteins in the blood, Global Blood’s top priority is developing a therapy for sickle cell disease. - Joseph Haas

Targacept/AstraZeneca: North Carolina biotech Targacept and its Big Pharma partner AstraZeneca have agreed to amend their partnership agreement once again. The companies announced March 5 that AstraZeneca will give back the rights to Targacept’s alpha7 neuronal nicotinic receptor modulating compounds. Previously, AstraZeneca had the right to any compounds Targacept developed for cognitive disorders and schizophrenia. The Big Pharma opted out of development of TC-5619, a selective alpha7 NNR in 2011. The two companies paired up originally in 2005 on AZD3480 (TC-1734). The companies previously chose not to pursue AZD3480 in schizophrenia or Alzheimer’s disease after poor results for two mid-stage studies, but continued development in ADHD. Development of AZD3480 was later stalled in favor of another compound. AstraZeneca has now returned all rights to this compound to Targacept.

AstraZeneca will retain the rights to Targacept’s alpha4beta2 NNR modulators, including AZD1446 . The company now has the right to develop these compounds in any therapeutic area. Previously, AstraZeneca’s rights with regard to these compounds were limited to cognitive disorders and schizophrenia. - Lisa LaMotta

Cancer Research Technology/AstraZeneca: Britain’s Cancer Research Technology - the technology transfer arm of  the charity Cancer Research UK - has extended its alliance with AstraZeneca to develop new oncology therapies in another sign of Big Pharma's growing interest in tapping academics to help overcome chronic R&D productivity difficulties. The deal aims to develop a drug pipeline targeting cancer metabolism. The partnership, initially begun in February 2010 for a three-year period, marked the first time CRT had teamed up with industry to actually seek targets and hunt for viable lead molecules together, rather than just licensing out IP. The alliance has been extended for a further two years, to early 2015. Each side has allocated 30 researchers to their alliance. No financial terms were given. CRT will use its expertise in identifying and selecting new targets from existing CR UK cancer metabolism programs; CR UK's research in this area explores the differences in how cancer cells versus normal cells make and use oxygen and energy. Working at both partners' UK research facilities, the goal of the collaboration is to develop small-molecule drug candidates that can alter a cell's metabolism and potentially starve the cancer cells of nutrients necessary for survival. AstraZeneca will advance the most promising compounds into preclinical and clinical development; for those projects reaching the clinic, it will pay CRT milestones and royalties. The alliance team will continue to work at CRT’s Discovery Laboratories in London and Cambridge, and AstraZeneca’s cancer research centre, Alderley Park, Manchester, in the United Kingdom. - Sten Stovall

Galapagos/Roche: The partners went their separate ways, concluding a discovery partnership that was first started for COPD in 2009 and then broadened into fibrosis in 2010. Roche will pay Galapagos almost €6 million for work completed in 2012, bringing the total Galapagos received under the deal to €16 million in upfront and milestone payments. Galapagos has regained rights to all fibrosis assays and targets discovered; it hopes to find another partner. The biotech chalked up the partnership dissolution to Roche’s shift in therapeutic areas of focus. - S.L.

Entangled string and pearls photo courtesy of Flickr user bhollar.