Deals of the Week Watches The Stakes Rise

The wide-open IPO window has given private companies more liquidity options, so maybe it’s no wonder that pharmas are willing to pay more than usual for closely-held start-ups. Judging by some recent acquisitions, pharmas are digging deep to buy assets they believe will become blockbuster cancer drugs. The mid-June buyout of Aragon Pharmaceuticals by Johnson & Johnson for $650 million up front is among the cancer sector’s largest takeouts of a privately-held, clinical-stage company ever – and comes despite a lingering lawsuit and a prominent competitor.

Among purchase prices for pure-play oncology start-ups, J&J’s down payment for Aragon is nearly peerless. Daiichi Sankyo's buyout of Plexxikon in 2011 leads the pack at $805 million up front; if Plexxikon wasn’t technically a pure-play, virtually all of its value was tied up in a key cancer asset. Like the Aragon deal, the Plexxikon deal was heavily front-loaded: Just $130 million was tied to milestones, while J&J will be on the hook for $350 million more if Aragon hits all its marks. And compared to other cancer deals in recent memory, such as Amgen Inc.’s 2011 purchase of cancer immunotherapy developer BioVex Inc. ($425 million up front) and Gilead Sciences Inc.’s 2011 deal for Calistoga Pharmaceuticals Inc. ($375 million up front), it’s a giant step richer. 

Catherine of Aragon, via Wikimedia commons

Aragon CFO Paul Cleveland declined to discuss specifics of Aragon’s earn-out, but the deal centers on Phase II program ARN-509, an androgen receptor inhibitor for castration-resistant prostate cancer. For its hefty purchase price, J&J gets an asset that’s already withstood one court challenge from rival Medivation Inc., and could face another. Medivation’s Xtandi (enzalutamide) shares lineage with ARN-509; both were discovered based on the research of University of California, Los Angeles professor Charles Sawyers, and Medivation alleged that the school hid ARN-509’s existence while out-licensing Xtandi. A judge affirmed that Aragon owns ARN-509 in January, but Medivation is appealing the ruling; a resolution might not come until next year.

Apparently the uncertainty wasn’t enough to spook J&J, but it’s possible that a different uncertainty spurred it to buy: Aragon’s choice regarding whether to conduct an IPO. The queue for new biotech listings is a long one, and it might be as easy as ever to go public. Even bluebird bio Inc., a mid-clinical-stage company in the once-untouchable gene therapy field, priced above expectations in mid-June, signifying that appetites are high for new offerings – even ones that carry a lot of risk. Indeed, Cleveland told “The Pink Sheet” that Aragon had a “very feasible go-it-alone strategy” that included a partnership and/or an IPO. (The strategy has apparently been in place for awhile, as CEO Richard Heyman told us last year.) Rather than risk letting Aragon brave the public markets, J&J moved to buy now.

In the end, J&J gets a drug that could succeed its existing prostate cancer therapy Zytiga (abiraterone), whose key patents expire in 2016. In the process, it extends a franchise that will compete with Xtandi, a drug S&P Capital IQ equity analyst Herman Saftlas said could deliver $2.5 billion in annual sales by 2015. And Aragon’s investors? Well, they get liquidity at a handsome multiple, but as part of the arrangement, they’ll also roll over some of their cash returns into a new company, Seragon, into which Aragon will spin out its Phase I selective estrogen receptor degrader ARN-810. -- Paul Bonanos

We know you have choices of your own, so thanks for choosing….

MedImmune/NGM: MedImmune, the biologics arm of AstraZeneca, signed on with privately held NGM Biopharmaceuticals June 17 to collaborate on the discovery and development of novel peptide or antibody therapeutics for type 2 diabetes and obesity. No financial terms were disclosed, but NGM will receive an up-front payment and research funding with the potential to earn development, regulatory and commercial milestones, as well as worldwide royalties on any products resulting from the partnership. The deal is the latest by MedImmune’s Innovative Medicines Unit for cardiovascular and metabolic diseases. Currently, bariatric surgery, which bypasses part of the patient’s intestines, is not reversible, and presents an array of gastrointestinal side effects, is reserved mainly for morbidly obese patients, who sometimes also suffer from out-of-control type 2 diabetes. “It’s not for every individual,” Christina Rondinone, chief of MedImmune’s cardiovascular and metabolic disease IMED said. “What we plan to do is develop a product that will mimic the benefits of surgery, avoid the side effects, and that every individual with diabetes can use. Our goal is not to treat the disease but reverse it with a drug.” Founded in 2008, South San Francisco, Calif.-based NGM now has signed three partnerships around its technology for understanding the roles that hormones play in certain diseases. In 2012, it partnered with Daiichi Sankyo to discover and develop drugs for type 1 and type 2 diabetes that modulate beta cell regeneration. Then, in January, NGM agreed to an exclusive collaboration with Janssen Pharmaceuticals Inc. to discover and develop novel therapeutics for type 2 diabetes. - Joseph Haas  

Teva/MicroDose: The Israeli firm Teva Pharmaceutical Industries Ltd. said June 17 it would acquire privately held MicroDose Therapeutx Inc. for $40 million up front and up to $125 million more in post-acquisition milestones. The New Jersey company’s two unpartnered clinical candidates are MDT-637, a treatment for respiratory syncytial virus, and a nerve agent antidote, both delivered via the company’s own inhalation technology platform. It acquired the anti-RSV candidate from ViroPharma Inc. in 2009. The firm has other delivery platforms, but Teva highlighted MicroDose’s respiratory technology and pipeline, saying the acquisition would strengthen its respiratory franchise. Underscoring Teva’s focus, the firm said it would also pay sales-based milestones and royalties upon commercialization of MDT-637 and an earlier stage asthma/COPD compound. Teva has expanded its generic empire as well as the branded side of its business through acquisition, although it has kept a fairly low profile since its $6.8 billion takeover of Cephalon Inc. in 2011. The firm has three branded respiratory products: QVAR for asthma, ProAir HFA for bronchospasm, and QNASL, a nasal spray for allergies. - Alex Lash  

Perrigo/Fera: Michigan-based Perrigo Co. said June 17 it would add to its smorgasbord of generic, over-the-counter, and animal health products by licensing a portfolio of nine generic ophthalmic offerings from specialty firm Fera Pharmaceuticals LLC of New York. Perrigo will pay $93 million, with $36 million more in contingent payments if more products are licensed. The portfolio includes sterile ointments and solutions and brought in more than $30 million in net revenue in 2012, according to Perrigo. Fera launched in 2009 with an ophthalmic portfolio that it acquired from Fougera Pharmaceuticals Inc., then the US arm of Nycomeduntil Takeda Pharmaceutical Co. Ltd. bought Nycomed in 2011. Fougera was owned by a private equity group until 2012, when Sandoz, the generics division of Novartis AG, bought it. Fera CEO Frank DellaFera and other top management were formerly with Sandoz. Perrigo claims to be the largest manufacturer of over-the-counter pharmaceuticals for the private label or “store brand” market. - A.L.  

Sanofi/Curie: A research collaboration between Sanofi and Institut Curie will revisit the basic biology that leads to ovarian cancer, according to the two entities’ joint statement issued June 19. Financial terms weren’t disclosed. The companies plan to identify targets that lead to cancer by revisiting a library of tumor samples that the Institute has preserved. Sanofi’s oncology division will work with Curie-Cancer, the Institute’s partnership organization, to address ovarian cancer using a translational approach. Sanofi plans to select targets based on tumor genome sequences, which are compared with healthy tissues to identify molecular alterations. It’s the second partnership Paris-based Curie-Cancer has formed with a major pharma this year. Roche and Curie-Cancer said in May that they would expand an existing four-year research deal reached in 2009, which had given Roche access to Curie’s pre-clinical research models. - P.B.  

DARA Biosciences/T3D Therapeutics: As it aims to focus wholly on oncology support therapeutics, North Carolina-based DARA BioSciences Inc. has spun out the last of its unrelated assets. DARA announced June 18 that T3D Therapeutics has licensed the worldwide rights to DB959, an oral, dual nuclear receptor agonist whose primary target is peroxisome proliferator activated receptor delta (PPARd). DARA has already developed the drug through Phase I for diabetes and dyslipidemia. T3D, which was founded by DARA’s former Chief Scientific Officer John Didsbury, intends to refocus the molecule as a treatment for Alzheimer’s disease. T3D is paying $250,000 up front, another $250,000 before the end of the year, plus commercial and development milestone payments. DARA will now focus solely on the commercialization of products that help with the side effects of cancer treatment – the company currently has three marketed products that fit this category, including a cream for skin irritation caused by radiation treatments. The company is looking to in-license other commercial-ready products and to find a partner that will develop the cancer support product it has in its pipeline. - Lisa LaMotta  

Protalix/Fiocruz: Israel’s Protalix BioTherapeutics Inc. reached an agreement with Brazil’s Ministry of Health that will allow the Brazilian government to manufacture the Gaucher disease treatment Uplyso (alfataliglicerase). The June 19 supply and tech-transfer agreement between Protalix and Fundação Oswaldo Cruz, known as Fiocruz, calls for the Brazilian health group to purchase $280 million worth of Uplyso from Protalix. Fiocruz will construct a facility and receive a license to manufacture its own Uplyso after seven years, once the purchase agreement is fulfilled. Uplyso, known in the U.S. and Israel as Elelyso, is an enzyme replacement therapy for Gaucher disease, a lysosomal storage disorder. Pfizer Inc. had licensed the drug locally and received Brazilian marketing approval in March, but returned rights to Protalix in exchange for $12.5 million in annual payments. Fiocruz is obligated to buy $40 million worth of Uplyso during the first two years of the agreement, and $40 million each year subsequently until it reaches the full $280 million. The seven-year agreement may be amended to add an additional five-year term to fulfill the financial terms. - P.B.