Wednesday, November 27, 2013

Happy Thanksgiving from Deals of the Week!

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why the post is called Deals of the Week ... (cont.)

As always, thanks for reading. Happy Thanksgiving!

Bayer/Algeta: Not quite a deal just yet, but we give thanks for the heads up this slow holiday week: On Nov 25 details began trickling out about Bayer's NOK14.8 billion ($2.4 billion) bid to buy Xofigo partner Algeta. The companies have high hopes for Xofigo, the recently launched prostate cancer therapy, and it's unsurprising that Bayer might move to control 100% of the potential blockbuster. The NOK336 per-share bid represents a 27% premium to Algeta's price before the brouhaha. Analysts expect Bayer to sweeten the bid for the Norwegian biotech -- of course they do! -- with which it has been partnered since 2009. For now, neither company is talking (someone's leaking, of course, but talking? Not so much). Not about the potential and probable deal anyway. Algeta's been out talking to analysts and investors during its recent Capital Markets days, pointing out its technological prowess and pipeline of assets beyond Xofigo. All that chatter might be helpful especially if Bayer decides it only wants Xofigo (sometimes the Bayer gets only part of you? Sorry). We'll have more in next week's issue of "The Pink Sheet". -- CM

Merrimack/Actavis: Merrimack Pharmaceuticals’ stock got a boost Nov. 26 from back-to-back announcements including encouraging Phase II data on one of its lead cancer drugs, the HER3 blocker MM-121, and a drug delivery technology deal with Actavis Inc. The stock closed the day up about 11% at $3.50, though that's only half what it debuted at in March 2012. Still that's some trick, considering one of the announcements was for a trial that didn't meet its primary endpoint. Most of the bump probably came from that Phase II data, which only trended in favor of MM-121 in patients with ER/PR+ and HER2- breast cancer, but suggested even better results in a subpopulation of patients with an undisclosed biomarker. That asset is partnered with Sanofi, which has seen its share of bad luck in its oncology pipeline lately, so the silver lining is particularly welcome. Meanwhile, the deal with Dublin-based Actavis offers revenue upside, the company said. Under the arrangement, Actavis will pay the cancer specialist $2 million upfront. In exchange, Merrimack will use its nanoliposomal technology platform to develop and manufacture various drugs for Actavis. It already uses the technology in some of its own drug candidates. Merrimack is eligible to receive another $13.5 million in funding and milestone payments tied to development, regulatory and sales milestones related to the first product to come out of the collaboration. It will also receive a double-digit share of profits on future sales of any commercialized products. -- Jessica Merrill

Egalet/Shionogi: Egalet Corp. will get access to cash ahead of a planned IPO in a deal with Shionogi & Co. Ltd. announced Nov. 26. The Danish specialty pharma will receive $10 million upfront from Shionogi, which has also agreed to buy approximately $15 million in common stock in a private placement to close with the IPO. In exchange, Shionogi gets rights to multiple oral abuse-deterrent hydrocodone opiod product candidates in preclinical development. Egalet specializes in abuse-deterrent technology and has developed two drug delivery systems that can be applied to multiple drug candidates. The deal will give Egalet some cash and breathing room as it prepares for the IPO while still allowing the company to retain its priority assets, two abuse-deterrent formulations, one morphine and one oxycodone, both in clinical development. In its registration statement filed with the Securities and Exchange Commission Oct. 16, Egalet said it had just $3 million in cash. Egalet could also receive $300 million in development and regulatory milestone payments and tiered royalties on sales, as well as $100 million in sales-based milestones. For Shionogi, the deal builds on the company’s existing presence in pain. The company manufactures the hydrocodone product Xodol, the oxycodone product Magnacet and several other pain therapeutics it acquired from Victory Pharma Inc. in 2011. On Nov. 19, Shionogi announced a licensing deal with Mundipharma International Ltd. under which Shionogi would sell Oxycontin Neo tablets, a tamper-resistant version of oxycodone, and an oxycodone/naloxone combination product in Japan. -- JM

SillaJen/Jennerex: The Korean CRO SillaJen is buying the cancer vaccine company Jennerex for up to $150 million (no specifics on the breakdown of payments have been disclosed). News of the deal came Tuesday from the french biotech Transgene, which is both a Jennerex shareholder as well as its partner in development Jennerex's lead vaccine Pexa-Vec, which did not meet its primary endpoint in a Phase IIb study in advanced liver cancer earlier this year. Transgene said that the companies' Pexa-Vec development and commercialization deal will "remain intact," with SillaJen taking over Jennerex's end of the bargain, and the companies plan to continue development of the GM-CSF vaccine in multiple other indications. SillaJen has been a partner and "major investor" in Jennerex since 2006, according to the latter company's web site.  -- CM

Myriad Genetics/Crescendo Bioscience: On Tuesday, Myriad Genetics expressed its desire to merge with fellow molecular diagnostics maker Crescendo Bioscience, under a three-year option it obtained as part of a $25 strategic debt investment in Crescendo in 2011. (We wrote then about how the deal strengthened Myriad’s expertise in protein-based testing and would potentially help diversify its revenues beyond oncology [Crescendo launched its Vectra DA rheumatoid arthritis test in November 2010].) The move by Myriad, which is subject to completion of due diligence, was triggered by Crescendo’s having reached a minimum revenue milestone set under the 2011 agreement: as noted in a November 27 Myriad 8-K filing, the purchase price will be based on a multiple of revenue determined by the revenue growth rate of Crescendo at the time of option exercise. If Myriad ultimately declines the option, Crescendo might opt for an initial public offering, an event that would allow Myriad to convert the debt to equity at the IPO price. An IPO would be tempting given the recent IPOs of several standout molecular diagnostics firms including Veracyte and Nanostring. -- Mark Ratner

Friday, November 22, 2013

Deals Of The Week Wonders: Will Pharma Ever Pay More For Companion Diagnostics? 

Two deals this past week between pharmas and diagnostics developers put a spotlight on the ever-growing focus on the importance of companion diagnostics in drug development.

Eli Lilly & Co. and Qiagen NV announced a deal Nov. 18 to develop and commercialize a companion diagnostic for a novel undisclosed Lilly lung cancer compound. BioMarin Pharmaceutical Inc. announced a collaboration with Myriad Genetics Inc. Nov. 20 to use Myriad’s Homologous Recombination Deficiency test to identify tumors that might be sensitive to its investigational PARP inhibitor BMN 673.

In the last five years, pharma’s acceptance of companion diagnostics has gone from a lukewarm handshake to full embrace, with pharma acknowledging that the tests are useful tools that can help speed drug development, increase the chance of getting a new drug to market and support commercial reimbursement. As a result, deal-making in the space is moving earlier-stage and increasingly into therapeutic areas outside of oncology, areas such as autoimmune disease, neurological conditions and anti-infectives.

But there is still little in the way of hard evidence to show pharma’s softer side is showing up at the deal-making table. Given the increasing importance of a companion diagnostics to the success of a drug, it would seem intuitive that pharma might need to share more risk or give up more of the long-term financial reward or so its friends on the diagnostic side might argue. But, so far, that doesn’t seem to be the case, in part because it can be difficult for diagnostics companies to demonstrate they’re providing something unique to a pharma partner.

It’s hard to know for certain because the economics of companion diagnostic deals are rarely disclosed, but most if not all diagnostic companies are being paid by their pharma partners to develop the test in a fee-for-service style arrangement or through fixed milestone payments. Diagnostic companies also would like to receive royalties on sales of the drug or sales-based milestones as a way to share some of the long-term value of the product.

Qiagen appears to have established a valuable partnership with Lilly, through what it deems a “master agreement,” under which Qiagen will develop companion diagnostics for multiple drugs across all of the pharma’s therapeutic areas. The two previously were partnered on the KRAS test for Erbitux (cetuximab), which was approved in 2012, and partnered in 2011 to develop a test for a clinical-stage Janus kinase 2 inhibitor for blood cancer. They broadened their partnership to include the master agreement in February, and the Nov. 18 collaboration was the first to come out of that framework.

But during an investor meeting the same day, CEO Peer Schatz acknowledged the company depends on securing strong pricing and reimbursement for companion diagnostics to get a return on its investment.

“We make money off the development process, but not really a lot,” he said. “We are more focused on the kit coming forward.” The hope is that FDA-approved companion diagnostics will be able to secure better reimbursement than those that don’t go through the rigorous process, important because tests are easily reproduced and often have limited intellectual property protection.

In an interview, Myriad’s Mark Capone, president of Myriad Genetics Laboratories, said most companion diagnostics deals include development milestones and require the diagnostic company to obtain reimbursement once the product is commercialized to receive a return.

“We know there are discussions of pharmaceutical companies compensating diagnostic companies in the commercial phase, and that could come either in the form of royalties or direct reimbursement in the case that the pharmaceutical company wants to distribute the diagnostic, but I think most of those discussions are theoretical in nature,” he said.

He declined to discuss the financials of any deals Myriad has to develop companion diagnostics. It has several non-exclusive deals, primarily for its BRACAnalysis test to identify patients with BRCA-mutated breast and ovarian cancer, with partners including BioMarin, AstraZeneca PLC and AbbVie Inc.

“We have seen some baby steps,” diagnostics consultant Kristen Pothier said during a panel at IN VIVO’s very own PSA: The Pharmaceutical Strategy Conference in September. That includes some instances in which pharma companies have agreed to foot the bill for a voucher program to cover the cost of the test once it is on the market to alleviate some of the risk if the test does not get reimbursed at a high price.

But as for royalties, she said that remains a “dream” of diagnostic firms. What, we wonder, will it take to make that wish come true?

Clovis/EOS: Boulder, Colo.-based Clovis Oncology Inc. enjoyed a June bump in its share price, after it received positive data on two compounds. Now, the company is putting its Street strength to work by making an acquisition. The company agreed to buy Italian cancer drug developer EOS SPA for $200 million upfront, netting Clovis territorial rights to lucitanib, a Phase IIa inhibitor of fibroblast growth factor and vascular endothelial growth factor tyrosine kinases that has shown promise in breast cancer and other cancers. Most of the purchase price was paid in stock, as EOS shareholders received $190 million worth of Clovis shares and $10 million in cash. If lucitanib is approved in the U.S., Clovis will pay an additional $65 million in cash; EOS shareholders will also receive an additional €115 million ($155 million) in cash based on further milestones, under an existing agreement with Servier SA. Clovis shares have kept most of their recent gains, and the company has been planning to make moves for some time. EOS licensed lucitanib’s rights in Europe and most of the world to Servier in a 2012 deal; the acquisition gives Clovis full rights in the U.S. and Japan, and Clovis plans to collaborate with Servier on development and commercialization in other territories. Servier is obligated to pay for the first €80 million in lucitanib’s clinical development costs, and the two will share further costs. Clovis also stands to receive €350 million plus royalties from Servier if the drug achieves downstream milestones. -- Paul Bonanos

Versant/Celgene/Bayer: Two deals announced this past week demonstrate Versant’s willingness to develop drug assets, instead of full-blown companies, with single buyers holding options to acquire each one. On Nov. 19, Versant unveiled plans for a biotech incubator in downtown Toronto to draw from the neighboring medical research community. If all goes well, the incubator, which Versant has named Blueline Bioscience, will spin out at least two single-asset companies by the end of 2014. And if all goes really well, those companies will be bought by Celgene Corp., which already has agreed to fund the incubator in exchange for option rights. Versant and Celgene are familiar partners. In 2011, the two firms launched genomic analysis firm Quanticel Pharmaceuticals Inc., with Celgene holding a series of time-based options to acquire the company outright. Celgene will invest an undisclosed amount, but will not receive equity in Blueline or, initially, in the companies it incubates. The second deal Versant announced this week is the spin-out of a new single-asset company from Versant’s wholly owned drug-discovery group, Inception Sciences Inc. The spin-out is simply named Inception 4 Inc., and it houses an ophthalmology program; Bayer AG has an exclusive option to acquire it down the road at undisclosed milestones. Inception Sciences is a hybrid of a drug-discovery firm and holding company. The company discovers drugs with a team of scientists and spins each program into a separate corporate entity, typically with $5 million to $10 million in initial funding. The numbered spin-outs are positioned for eventual sale, while the discovery engine remains housed within Inception Sciences. -- Alex Lash

Vertex/Janssen: It’s not a new deal but the end of a long-existing one. Vertex Pharmaceuticals Inc. announced Nov. 20 it had sold its royalty rights for sales of protease inhibitor telaprevir outside of North America to Janssen Inc., the company that holds marketing rights to the hepatitis C drug, branded as Incivo, in Europe, South America, the Middle East, Africa and Australia. Janssen acquired those rights in a 2006 co-development agreement under which it paid Vertex $165 million upfront along with annual royalties in the mid-20% range. Under the revised arrangement, Janssen will pay Vertex $152 million during the fourth quarter of 2013, then cease paying any further royalties on Incivo sales beginning in 2014. Vertex’s decision is in line with planning outlined on its Oct. 29 third quarter earnings call as the Cambridge, Mass., firm, which markets telaprevir as Incivek in North America, decreases its emphasis on the HCV space to focus more on its cystic fibrosis franchise and other pipeline projects. In a Nov. 20 note, analyst Geoff Meacham of J.P. Morgan said the move made sense for Vertex and should help bolster the company’s finances. He forecast royalty revenue of $115 million this year for ex-North American sales of telaprevir, falling to $25 million in 2014 and $11 million in 2015. -- Joseph Haas

Pfizer/GSK: Pfizer Inc. and GlaxoSmithKline PLC are making good on industry promises to test cancer drugs in combination, even across big pharma’s research halls, with a research collaboration announced Nov. 21. The companies have agreed to test GSK’s MEK1 and MEK2 inhibitor trametinib, approved in the U.S. as Mekinist for melanoma, in combination with Pfizer’s investigational palbociclib, an inhibitor of cyclin dependent kinases 4 and 6 in a Phase I/II study in patients with BRAFV600 wild type advanced metastatic melanoma. The open-label trial is designed to determine a recommended combination regimen and also will study the effect of the combination on tumor biomarkers and anti-cancer activity and safety. GSK will run the study and the terms of the deal were not disclosed. Palbociclib is a cornerstone of Pfizer’s cancer pipeline and is being developed for the treatment of breast cancer after demonstrating significant improvement in progression-free survival in patients with ER+, HER2- breast cancer.

Patheon/DSM Pharmaceutical Products: Consolidation is afoot in the CRO market, with news that Canada’s Patheon Inc. is merging with Royal DSM NV’s pharmaceutical division, DSM Pharmaceutical Products (DPP), to create a whole new company that will aim to product full-service outsourcing for the pharma industry. “Our customers have indicated a strong desire to streamline their outsourcing network, at the same time, increasing their outsourcing,” said Jim Mullen, current CEO of Patheon. “They want to work with fewer companies with broader capabilities and capacity.” The new company, which will be based in Durham, N.C., will have a global footprint of 23 sites across North America, Europe, Latin America and Australia. Mullen, who held the top slot at Biogen Idec Inc. for seven years prior to joining Patheon, will be CEO. Patheon shareholders will receive $9.32 per share in an all-cash transaction that is expected to close within three to four months. The deal is subject to approval of various regulatory authorities in several countries, including the U.S., Canada, Turkey and Mexico. The per-share price values the deal at $2.6 billion and is a 64% premium to Patheon’s closing price on the Toronto Stock Exchange on Nov. 18, the day before the deal was announced. Private equity firm JLL Partners will own a 51% stake in the new company and DSM will own the remainder. JLL currently is the largest shareholder of Patheon with a 66% stake in the company. The deal requires the majority approval of Patheon’s minority shareholders to proceed. -- Lisa LaMotta

Unilife/Hikma: Unilife Corp. which specializes in the production and sale of injectable drug-delivery systems, announced a 15-year commercial supply contract with Jordan-based Hikma Pharmaceuticals PLC Nov. 20. Under the agreement, Unilife will supply Hikma with customized prefillable delivery systems from its Unifill platform. Hikma, focused on the production and sale of a range of branded and non-branded generic products principally in the Middle East and North Africa, as well as in the U.S. and Europe, will use the syringes with a range of generic injectable drugs, beginning with an initial list of 20 generic injectables. The deal reflects the growing market preference for prefilled syringes over vials. Unilife CEO Alan Shortall sees the deal with Hikma as an entrĂ©e for his products into the fast-growing market for generic injectables. Unilife will begin product sales to Hikma in early 2014, and going forward, will supply Hikma with a minimum volume of 175 million units/year following a rapid, high volume ramp up period. In addition to an undisclosed share of product sales, Hikma will pay Unilife $40 million in staggered upfront payments beginning with $5 million immediately and $15 million during 2014; the final $20 million will be paid in milestone-based installments in 2015. In return, Hikma gets exclusive global rights to Unifill’s prefilled syringes. Unilife can use the payments: It has been in the red for the past 11 years. In fiscal 2013, the York, Pa.-based company made $2.74 million in sales and reported a net loss of $63.2 million. -- Mike Goodman

Amicus/Callidus: In what it is calling a “highly synergistic strategic combination,” rare-disease focused Amicus Therapeutics Inc. has acquired privately held Callidus Biopharma Inc. for $15 million in Amicus common stock plus earn-outs pegged to Phase II development of Callidus’ enzyme-replacement therapy for Pompe disease and to late-stage development, regulatory and approval milestones related to three products. Shareholders in Callidus, which raised a $4.6 million Series A round from undisclosed investors in May, can earn up to $10 million for the Pompe disease Phase II work and up to $105 million related to that program and two others being added to the Amicus pipeline. The deal was announced on the same day that Amicus said GlaxoSmithKline PLC would give back rights to its lead drug candidate (see below); the biotech also simultaneously announced a $15 million private placement, a planned $25 million debt financing and a staff cut down to 91 employees that is expected to save the biotech $4 million next year. -- JAH

Amicus/GSK: Amicus and partner GSK are parting ways, kind of, but the biotech didn’t describe its new relationship with GSK as a “highly synergistic strategic no-deal.” We’ve done that for them. Instead, also on Nov. 21, New Jersey-based Amicus described the handover as a “revision” of its partnership with GSK around the pharmacological chaperone program migalastat (monotherapy and co-administered with enzyme replacement therapy), which was focused on Fabry disease. During a same-day conference call with analysts, Amicus CEO John Crowley noted a $3 million equity investment by GSK in Amicus (it had made two prior equity purchases, giving it a 19.9% ownership stake) and called the company a “passive partner” in migalastat. So GSK isn’t entirely gone – for now, it remains an Amicus shareholder. But it’s a shareholder that clearly sees its own future in the rare diseases space a lot differently than it did only a couple years ago, a view that should have other GSK partners on alert. Nevertheless, the big pharma retains some upside potential around migalastat: GSK is entitled to a mix of royalties and commercial milestone payments on monotherapy and combination products in certain territories. Crowley described the family of transactions as a culmination of events that will re-make the biotech into a “better resourced” firm focused more sharply on biologic therapies for rare disorders. -- JAH

image via flickr user Jordan Colley Visuals used under creative commons license

Friday, November 15, 2013

Deals of the Week Gets Disruptive

One needs to look no further than today’s pharma industry to prove that “necessity is the mother of invention.” Acute challenges swamping the sector are forcing previously insular players to abandon their silo thinking and engage customers, employees, payers, providers, and even suppliers and competitors to make strategic leaps.

That seemingly inevitable evolution was the theme at the 5th INSEAD Healthcare Alumni Summit held in late October in Zurich, Switzerland. Participants discussed these kinds of disruptive collaborations, examining how co-operation can help overcome insularity in health care, and what structural and cultural factors characterize successful collaborations.

A keynote interview session put two pharma CEOs on the spot: to sustain healthy businesses, what approaches and deal-making strategies were they considering today that were unavailable or unappealing to them only a decade ago?

Roberto Gradnik, CEO of Stallergenes SA, is attempting to launch his France-based company – which develops treatments for allergy-related respiratory diseases – out of its regional European orbit and take it global. The group currently devotes around 20% of its annual gross sales – which in 2012 totaled €240 million ($323 million) – to R&D, a large proportion for a company Stallergenes’ size.

Gradnik told the INSEAD conference that it’s crucial to change a small-to-mid-sized company’s mindset to be successful at expansion – a process that’s clearly disruptive and necessitates big change on the inside and often demands untried approaches. “Sure, if I don’t go down this path then I would avoid a cultural clash – but I would also not be able to build a successful company,” he told the conference. “At the same time, we need to find new commercial and development models, and be increasingly creative in our partnering ideas,” he added.

Riccardo Braglia heads his family’s Swiss drug and device business, Helsinn Group, which began life in his grandfather’s garage in the late 1940s but today operates in 90 countries with 63 partners using a core business model of what he terms “integrated in-licensing” of late-stage pharmaceutical compounds, medical devices and nutritional supplement products. He told the conference that Helsinn’s business model is based on three pillars: in-licensing, developing products and obtaining marketing authorization on international markets, and out-licensing products through a network of partners worldwide. Its main business areas are cancer supportive care, pain and inflammation, and gastroenterology.

Braglia, who has been at the helm of Helsinn for a decade, recounted a recent cultural challenge he faced when Helsinn took over U.S. biotech Sapphire Therapeutics in 2009, to expand the group’s pipeline in therapeutic areas, notably in cancer care, and give it a foothold in the U.S. But the takeover quickly presented problems that he hadn’t foreseen and which took him more than two years to put right.

“We figured, ‘well, they speak English there so what’s the problem?’ But oh boy, it was a nightmare to implement our culture, that of a family-business, our strategy, our products, and reconciling their biotech culture within the pharma industry. It was really tough, partly because I didn’t want to have any expats running the show there, because I always want to work with local people, because the culture of a country is very important. So what I did was spend half of every month in the United States to make it work – and it eventually did.”

Braglia said his integrated in-licensing business model means his company is essentially a virtual corporate entity with limited infrastructure. “It also means that half of my 500 employees are not in the office but rather in airplanes on business trips.” He said that in the last decade, Helsinn was focused increasingly on licensing alliances, manufacturing alliances, scientific alliances and commercial alliances. An example is an injectable manufacturing joint venture using a plant owned by Pierre Fabre Group of France but paid for by Helsinn.

Gradnik’s company has just secured a U.S. partner – Greer Laboratories Inc. – for its key grass allergy vaccine Oralair, which he hopes to launch there in early 2014, pending FDA approval. Under the deal, announced Oct. 31, Greer will lead the sales and marketing of Oralair, a grass pollen sublingual immunotherapy tablet that includes five grasses -- sweet vernal grass, orchard grass, perennial rye grass, timothy grass, and Kentucky bluegrass -- while Stallergenes will be responsible for manufacturing and supply. Stallergenes will receive regulatory and commercial milestone payments totaling up to $120 million, plus royalties. Oralair will be reviewed by FDA’s Allergenic Products Advisory Committee Dec. 11.

Both Braglia and Gradnik said CEOs of small to mid-sized biopharma companies need to be involved in such collaborations.

“I need to know that the other CEO shares the same philosophy and vision,” Helsinn’s Braglia said.

Gradnik said it should also be the chief executive’s role to know when collaboration has gone sour and take remedial action. “It’s best to cut your losses and end it. I have one like that currently going but will refrain from saying who that’s with,” Stallergenes’ CEO told the conference.

Perhaps a topic for a future “No Deal of the Week.” Until then, enjoy our takes on the not-yet-sour ...

Helsinn/Chugai: In its latest partnership, Helsinn has chosen Chugai Pharmaceutical Co.'s U.K.-based European marketing subsidiary to help sell its ghrelin receptor agonist anamorelin in Europe.
Under the deal announced on Nov. 12, Chugai will get rights in certain major European markets to commercialize the oral drug for anorexia-cachexia syndrome related to advanced non-small lung cancer. Financial details were not disclosed. The pact follows Helsinn's agreement in January with Mexican pharmaceuticals company Especificos Stendhal SA de CV for anamorelin's development in selected Latin American markets. Anamorelin is a first-in-class, once-daily drug previously studied in around 500 patients, including four completed Phase II trials. It is currently being tested in two Phase III studies, ROMANA 1 and ROMANA 2, for the treatment of anorexia-cachexia syndrome in patients with advanced NSCLC.
Chugai will distribute and commercialize the product in Germany, France, the U.K., Ireland, Belgium, the Netherlands and Luxembourg. Chugai's European subsidiary already has direct operations in the U.K., France and Germany, marketing products there from Chugai or Swiss parent Roche. Helsinn retains responsibility for all product development activities including clinical trials and regulatory affairs and will supply the drug to Chugai, which will carry out all work related to commercialization. Phase II results of the drug presented to this year's European Cancer Congress in Amsterdam showed a significant rise in body weight from baseline in patients receiving the medicine compared with placebo, and a favorable overall safety/tolerability profile. Cancer-associated anorexia-cachexia is a muscle wasting and weight loss condition that occurs in around a third to half of cancer sufferers. There are as yet no approved therapies for the condition. Ghrelin, also known as the "hunger hormone", is secreted by the stomach and is targeted by anamorelin to stimulate multiple pathways involved in regulating body weight, appetite and metabolism. -- Sten Stovall

Roche/immatics: People have begun to sit up and take notice of immatics biotechnologies GMBH after the company announced on Nov. 13 a cancer vaccine collaboration with Roche that could lead to the German immunotherapeutics biotech receiving research and milestone payments of up to $1 billion, in addition to a relatively modest up-front payment of $17 million. The high “biobucks” figure takes into account the multiple products and indications likely to be explored in the collaboration, the second announced by Roche in the immunotherapy field in the past two months. Immatics, a Tubingen-based firm with strong backing from local German entrepreneurs and VCs, has developed a technology, XPRESIDENT, to identify cancer antigens recognized by T lymphocytes, and has a tumor-associated peptide (TUMAP)-based cancer vaccine targeting renal cell carcinoma, IMA910, already in a Phase III study. Roche is keen to evaluate preclinical TUMAP vaccines alone and combined with checkpoint inhibitors and other modulators of the immune response, specifically in the areas of gastric, prostate and non-small cell lung cancer. Immatics' Phase I-ready gastric cancer vaccine candidate, IMA942, is the most advanced product covered by the agreement, and Roche will be responsible for clinical development and commercialization of this and other immunotherapies generated in the research collaboration.-- John Davis

Oncodesign/UCB: French drug discovery and pharmacology services firm Oncodesign SA is to collaborate with European mid-sized biopharma UCB SA on identifying selective kinase inhibitors with potential in the treatment of neurodegenerative diseases, in a deal announced Nov. 13. Oncodesign’s Nanocyclix technology generates potent and highly selective kinase inhibitors based on macrocyclization of small molecules, and the two companies will collaborate on identifying such inhibitors that cross the blood-brain barrier and interact with a UCB-selected kinase target. UCB will have an exclusive option to license the joint program, with worldwide development and commercialization rights, upon successfully reaching certain discovery milestones. Oncodesign will, in turn, get research funding, and upon exercise of the license option, research, regulatory and commercial milestones involving the development of molecules in two or more indications, and tiered royalties on net sales. Dijon-based Oncodesign was set up in 1995 and has previously forged collaborations with several other pharmaceutical companies including Sanofi and Ipsen to apply its drug discovery technology in various therapeutic areas, including tissue repair and Parkinson’s. -- John Davis

Novartis/Immunogen: ImmunoGen Inc. announced on Nov. 11 that Novartis AG has taken its third license to use the biotech’s antibody-drug conjugate technology on an undisclosed cancer target. It is the fifth license around Immunogen’s ADC targeted antibody payload (TAP) technology this year by a major drug company.
The Novartis license dates back to a 2010 deal in which the Swiss Pharma licensed exclusive rights to use Immunogen’s TAP technology to develop antibodies against a predetermined number of oncology targets.
For each license, Immunogen receives an up-front payment and is entitled to receive milestone payments potentially totaling some $200 million plus royalties on the sales of any resulting products. Novartis is responsible for the development, manufacturing and marketing of any products resulting from the license. Immunogen’s pipeline consists of four wholly owned ADC programs and eight partnered ADCs in 10 different cancer indications. The best known partnered ADC is Roche’s Kadcyla (ado-trastuzumab emtansine), which was approved by FDA in February as a second-line option after Herceptin (trastuzumab) and a taxane, but labeling left a window for broader use in some first-line patients. A safety signal in a Phase II trial of the biotech’s lead asset, IMGN901 for NSCLC, was disclosed last April, followed by its discontinuation on Nov. 5 on the recommendation of the trial's independent Data Monitoring Committee. -- Mike Goodman

Merck KGaA/BeiGene: Big pharma is increasingly in-licensing compounds from Chinese companies, and the biopharma arm of Merck KGAA, Merck Serono SA, inked a second global licensing, co-development and commercialization deal with BeiGene (Beijing) Co. Ltd. for oncology compound BeiGene-290.
BeiGene-290 is in preclinical development and is expected to enter the clinic in 2014. Under terms of the agreement, announced Nov. 13, BeiGene will be responsible for developing and commercializing the poly (ADP-ribose) polymerase (PARP) inhibitor in China first and Merck will be responsible for the development and commercialization of the compound for the rest of the world. In return, BeiGene will receive an undisclosed up-front payment and is eligible to receive further payments of up to €170 million ($232 million) for clinical development milestones and potential commercial milestones in both China and globally, as well as royalties on net sales. Specific indications for the oncology compound were not disclosed. Both deals, while global, have been structured to ensure BeiGene leads development in China, which should enable the companies to take advantage of regulatory consultations with China FDA as part of the agency’s accelerated approval pathway. The new agreement signals a milestone for biotech innovation in China, said BeiGene Co-founder Xiaodong Wang during the signing ceremony in Beijing. Wang is also the director and architect of China’s National Institute of Biological Science. -- Brian Yang

Shire/ViroPharma: The big M&A news this week was London-listed Shire PLC’s agreed takeover of ViroPharma Inc. for an eye-watering price of $4.2 billion cash, which would give the Ireland-based specialty drug maker access to the U.S. target’s C1 esterase inhibitor Cinryze for treating Hereditary Angioedema, a genetic immune disorder. The proposed acquisition may attract anti-competition resistance from regulators, given Shire’s possession of HAE treatment Firazyr (icatibant injection), but the acquirer says it is confident that these two products are in two different marketplaces. If allowed to proceed, Shire expects the marriage to generate annual cost synergies of around $150 million by 2015, over and above the improved operating leverage already being driven by the ongoing One Shire reorganization.-- STS

Cell Therapeutics/Baxter International: Beleaguered oncology company Cell Therapeutics Inc. has inked a deal for its Phase III mylefibrosis asset pacritinib that it sees as a vote of confidence. CTI announced Nov. 15 that it has signed an agreement with Baxter International Inc. for full commercialization rights outside the U.S., as well as joint commercialization rights in the U.S. The $60 million up-front payment will include a $30 million equity investment in the Seattle-based biotech company, which may also receive clinical and regulatory milestones up to $112 million, including $40 million in clinical milestones that are expected in 2014 and another $27 million expected in 2015. Baxter will handle 75% of costs through submission. CTI acquired pacritinib, an oral tyrosine kinase inhibitor that acts on the JAK2 and FLT3 pathways, in April 2012 from Asia’s SBIO Pte. Ltd. CTI paid $30 million upfront and is on the hook for a total of $132 million in regulatory and sales milestones. Prior to CTI getting the rights to pacritinib, the drug was licensed to Onyx Pharmaceuticals Inc., which opted not to development it in 2011. Pacritinib is CTI’s latest hope after two late-stage pipeline failures – first FDA shot-down non-Hodgkin’s lymphoma treatment Pixuvri (pixantrone), followed by a clinical hold for the blood cancer drug tosedostat. -- Lisa LaMotta

Financings Of The Fortnight Does Bollywood On A Budget

With IPOs still the twitter, er, talk of the town, the relative lack thereof the past couple weeks in our little corner of the world was noticeable. So forgive us if we were distracted from our IPO perusings by a particular firm that emerged from the roadshow scrum: top Indian film producer Eros International. Your FOTF correspondent has a soft spot for Indian cinema, having visited a couple local movie houses for the full Bollywood experience on a monthlong trip to India in late 2004. (We’ve ever since lobbied for chaat vendors to roam the aisles, sport stadium style, in American movie theaters.)

Eros went public this week, but only after taking a small haircut, so we figure a more budget-conscious approach to Bollywood spectacle is a better way to go.

FOTF is all about self-improvement, if you hadn’t noticed. We always make the healthy lifestyle choices: organic sustainable olives in the martini, strengthening those abs and buns to a bhangra beat, and regular salon visits.

Haircuts have been in the news for biotech, too, after a summer of letting it all hang out. Considered the highest profile of the current road-show warriors, Relypsa finally priced late last night after a couple of downgrades – or, if you prefer, a haircut a la Sweeney Todd. (For more, see our roundup below.) Antibody firm Xencor has amended terms, too, looking to raise $75 million by doubling its shares offered to 10.7 million and cutting its proposed price range in half. (As of this writing it hasn’t yet priced. 

Others have flat-out tabled their IPO efforts: Both gene therapy firm Celladon and diagnostic firm CardioDx postponed due to market conditions. That makes three four withdrawals or postponements in the past month. [UPDATE - On November 15 Xencor postponed its IPO.]

Companies that have made it out this year are also feeling a pinch. At the end of October, the biotech IPO class of 2013 was the best performing industry sector, up 47% as a group. (High tech, by comparison, was up 41%.) The past two weeks, however, those post-IPO biotech gains have slipped to 27% and now trail several other sectors. Still not too shabby. Who wouldn’t want a portfolio of stocks that are up 27% for the year? But the biotech slump, which actually started at the end of summer, is unmistakable.

Is it just a blip, a bump, or is it a big yellow flag? If we knew the answer, we wouldn’t be journalists, we’d be day traders working from home in our sweatpants, leaving after the final market bell at 1pm (FOTF is a West Coast shop all the way, dude) to do our Bollywood workout.

But here’s something to chew on. All those biotechs that went public this spring and summer? From right about now through December or so, their lock-ups are about to end. And a whole bunch of VCs who feel the hot breath of limited partners on their necks (yuck) will be looking to cash out. It won’t happen all at once, of course. Many venture investors can afford to cool their heels, as our colleague Stacy Lawrence reported in June.

But many can’t. And what might that do to stock prices? In an upcoming feature in Start-Up, Stacy dives into three recent biotech IPOs as well as the recent market dynamics. Two biotechs from the class of 2012 IPOs, Intercept Pharmaceuticals and Chimerix, recently saw their VCs sell directly into the public market, with mixed effects on the company’s shares. Will other VCs looking to sell to the public be staring down the barrel of a buyer’s market in the coming months? OrbiMed Advisors’ co-head of global equity Jonathan Silverstein doesn’t think so. “We’ve been approached on a number of IPOs by public investors who say they only have a 2% position and they want 5%. We are not necessarily interested in selling, but it’s nice to hear now.” OrbiMed's LPs don't seem too worried. That Silverstein quote comes from a recent story in “The Pink Sheet” DAILY about the firm’s new $735 million venture fund.

In the next START-UP, we break down the recent IPOs and acquisitions in OrbiMed’s portfolio to see what helped them sell that new fund. Until then, break it down old school style. Time for the Electric Slide.

At least it’s better than doing the Biotech Slump. If you prefer the Harlem Shake, well, there’s not much we can do for you. Get it out of your system, then crunk on over to the latest edition of…

Relypsa: The polymeric therapeutic specialists priced their initial public offering late Thursday, November 14, selling 6.85 million shares at $11 each for net proceeds of $67.4 million. It’s quite a comedown from the firm’s initial plans, which aimed for a top goal of $138 million back in October. The ambitious target was driven in large part by the amount of cash venture backers have sunk into the company:  more than $180 million over three financing rounds, according to Strategic Transactions. The firm spun out of Amgen in 2007 after that company bought Relypsa’s predecessor Ilypsa for its phosphate binder to treat hyperphosphatemia. That drug stalled soon after, but Relypsa carried on with former Ilypsa employees. 5AM Ventures and New Leaf Venture Partners led the $33 million Series A and were joined by the Sprout Group, Delphi Ventures, CMEA Ventures, and Mediphase Venture Partners. OrbiMed Advisors, which came in to lead the massive $70 million Series B round, is the largest shareholder going into the IPO, with a 44% stake. 5AM is next with 22%. Existing investors – including a limited partner of the venture investors – have said they could buy as much as $20 million worth of the IPO shares, according to the company’s final registration statement. Underwriters led by Morgan Stanley, BofA Merrill Lynch and Cowen have the option to sell 1.03 million additional shares. – A.L.

Synta Pharmaceuticals: The small molecule oncology developer raised $52 million in a sale of 14 million shares of common stock at $3.75 each as it moves toward a pivotal trial for its lead program, ganetespib in non-small cell lung cancer. It’s the second time around for the Massachusetts firm, whose first lead drug, elescomol, failed in Phase III trials for stage IV metastatic melanoma. The company learned in 2009 that more people died on an elesclomol/chemotherapy combination than on chemo alone. It went into restructuring mode and emerged with ganetespib, a heat shock protein 90 (hsp90) inhibitor. Its most advanced hsp90 competitor, retaspimycin from Infinity Pharmaceuticals, has been terminated, which leaves ganetespib breathing room but also raises questions whether the entire class is compromised. Synta told analysts earlier this month about adjustments to its Phase III trial, dubbed GALAXY-2, that will shift the patient enrollment away from Eastern Europe and boost the study population. The disclosures didn’t stop the slide in Synta’s share price, which has fallen nearly 50% since late October. The firm is also working on a small molecule drug conjugation platform to link an hsp90 inhibitor to a toxic payload. Underwriters led by Jefferies have the option to buy up to 2.1 million more shares. – A.L.

ArGEN-X: The Belgian antibody company has raised 5 million Euros ($6.8 million) to extend its Series B round to $44 million. The new infusion of cash comes from Flemish regional investment firm PMV. The cash will go toward ArGEN-X’s preclinical compound ARGX-113, being developed to treat autoimmune disease. The compound is an antibody fragment that aims to clear autoantibodies – the antibodies produced by a patient’s own immune system that go haywire and cause autoimmune disorders. The company’s technology used to create ARGX-113 is dubbed “ABDEG,” or antibodies that enhance IgG degradation. The firm also has two antibodies in the clinic, an anti-CD70 agent and an anti-cMET agent, both in Phase Ib. Both were discovered using a different platform, SIMPLE, based on the immune system of llamas.  The first tranche of ArGEN-X’s B round was co-led by OrbiMed Advisors and Seventure Partners and included existing investors Forbion Capital Partners, Credit Agricole Private Equity, LSP, BioGeneration Ventures, the Erasmus Biomedical Fund, Thuja Capital and VIB. Its Series A round brought in $19 million over two tranches. – A.L. 

Karyopharm Therapeutics: In the fortnight’s only other IPO, Karyopharm netted $101 million by selling 6.8 million shares at $16 a piece. Despite all the talk of haircuts and postponements elsewhere, the offer priced at the top end of its proposed range. The IPO cash matches what Karyopharm raised in two private rounds from institutional investors (Delphi Ventures) and wealthy individuals. Before IPO, Karyopharm was 46% 61% owned by Chione and Plio, two investment vehicles that share the same address on the island of Cyprus and are linked to Slava Smolokowski, a Polish energy baron who has also put his considerable fortune into Broadway. (His big hit was as a producer was Fela!, a hugely acclaimed Broadway show about the legendary Nigerian musician and political activist. According to Playbill, Smolokowski was educated as a musician and played in a rock band for some time.) The firm says it has discovered and developed small molecules to inhibit the nuclear export protein XPO1, which cancer cells amplify to promote the transmission of tumor suppression proteins from the nucleus to the cytoplasm. Getting those suppression proteins out of the nucleus gives a tumor cell a better chance to survive. By inhibiting XO1, Karyopharm believes it can trap the suppression proteins in the nucleus and let them do their job – trigger apoptosis. Karyopharm’s technology was brought out of Epix Pharmaceuticals, which was liquidated in the late ‘00s. Epix CEO Michael Kauffman and SVP of drug development Sharon Shacham are behind Karyopharm, and they licensed key IP from Epix. The company says half the IPO proceeds will help pay for Phase II/III trials for selinexor, its lead candidate, which Karyopharm says in its filing documents has already administered to more than 170 patients in three Phase I trials for various malignancies. Phase II/III could start in two cancer indications in the first half of 2014. – A.L.

Best of the Rest (Highlights of Other Financing Activity This Fortnight): Liquidia Technologies spun out ophthalmic-focused start-up Envisia Therapeutics, which received $25M in Series A financing and will use Liquidia’s PRINT technology to develop a new glaucoma treatment…less than a year after reverse merging to go public, Ocera Therapeutics completed a $28M PIPE to fund studies of its oral and IV hepatic encephalopathy candidate OCR002…to fund commercialization of Esbriet in Europe and various other development and regulatory activities surrounding the IPF drug, InterMune raised $84M in a FOPO…After reporting growth in the Q3 2013 net product sales for its sold marketed myelofibrosis product Jakafi, Incyte sold two $350M series of convertible senior notesTVM Capital officially announced (as Start-Up reported in September) that it is no longer investing in IT,  but instead focusing on life sciences and health care. -- Amanda Micklus

Friday, November 08, 2013

Deals Of The Week Road-Tests Biopharma Options

More options are always better, right? Obviously, that’s a “yes” when it comes to building our dream Tesla Model S. But big biopharma is getting nowhere fast with deals that build in options to license drug candidates.

The number of option-to-license deals executed peaked at more than 30 in 2009, when biotech financing had dried up in the wake of the 2008 U.S. economic meltdown, and has declined every year since, according to data from Elsevier’s Strategic Transactions database. That’s only counting deals with an option-to-license as the main component. What has big biopharma accomplished with its slew of option deals in the last decade and a half? Not much, so far. Even though option-based partnerships can be cheap, they also rarely offer results.

Option-to-license deals, or option-alliances, are often a way of making a half-hearted bet on biotechs’ riskiest, early-stage candidates and technologies. For small biotechs, the extent to which they rely upon these deals can be a sign of their relative fiscal desperation. Option-alliances lock up biotech assets very early, with a high level of continued uncertainty (and development costs) for the biotech and a capped future potential upside.

For pharma, these deals are a bargain – pay a little upfront and part of early-stage R&D costs and then pick up rights to a candidate, or not, typically after clinical proof-of-concept data emerges. Biotechs are able to retain control of their assets for a while longer, potentially allowing them to move development forward faster.

We analyzed all R&D-based option-alliances with a disclosed potential value of $100 million or more. That’s almost 120 deals, some dating back as early as the late 90s. Many of the more recent ones remain active, of course; these deals typically extend over at least three or four years. Most of the remaining deals either expired or were terminated. We could only find seven of these $100M+ deals that actually resulted in option exercises, and some of those later blew up in the clinic.

GlaxoSmithKline is a nice case in point. It has been one of the most active R&D options dealmakers, with at least 18 of these deals, most of which were initiated from 2006 through 2009. A few of GSK’s option-alliances have resulted in abject disappointments – most prominently with Nabi Biopharmaceuticals for the smoking cessation product NicVax, which failed in Phase III. Last year, Nabi merged with Biota.

Others got shunted to the side due to changes in GSK priorities (a $1.5B bio-bucks deal w Targacept was terminated in 2011 as the pharma left neuroscience) or as biotechs became defunct (after a $1.2B bio-bucks deal in 2007, Epix Pharmaceuticals then slid out of existence in 2009). Several of GSK’s option-to-license deals were done under its Center of Excellence for External Drug Discovery (CEEDD), which silently sank under waves of corporate restructuring around 2010.

(GSK is undeterred from experimenting with its approach to external, early innovation. This week it picked the first set of winners from a discovery-stage academic competition. See below for further details.)

The pharma does have several ongoing option-alliances, including at least four with companies that recently IPO’d. One is an option to back-up compounds for Duchenne muscular dystrophy (DMD) from Prosensa; GSK is partnered with the biotech on lead compound drisapersen, which failed in Phase III testing to treat DMD in September. Optimists are hoping its exon skipping technology has progressed since the first iteration and are looking for an effective DMD treatment among Prosensa’s back-up compounds, some of which GSK can option. Prosensa is the worst-performing 2013 IPO, down 72%.

GSK also has an anti-inflammatory and HCV deal with microRNAi company Regulus Therapeutics, initiated in 2008 and expanded in 2010; an anti-cancer stem cell antibody deal with OncoMed Pharmaceuticals that was for four candidate originally from 2007, but was cut down to two candidates in 2011; and a discovery deal with Five Prime Therapeutics for skeletal muscle diseases and muscle wasting targets and candidates that was originated in 2010 and expanded in 2011.

GSK has exercised its options at least twice, but both times candidates were returned. In 2010, it optioned Anacor Pharmaceuticals’ Gram-negative infection treatment and then subsequently returned it a few years later. That same year, it optioned Traficet-EN (now vercirnon) from ChemoCentryx. This September, GSK returned rights to the candidate for all indications. The pharma retained CCX354 for rheumatoid arthritis, which it also optioned. It may still option a third candidate under the 2006 deal.

Despite keeping a lot of options open, no one’s going anywhere fast. But we’re keeping our eyes on the road, moving ahead to all the latest deals (including loads of academic and discovery partnerships) in this edition of…

Salix/Santarus: The union of Salix Pharmaceuticals with Santarus creates a billion-dollar gastrointestinal specialty pharma that holds U.S. rights to fast-growing diabetes drug Glumetza (metformin extended release). Salix agreed Nov. 7 to pay $32 per share in cash for San Diego-based Santarus, valuing the company at $2.6 billion; its combined annual revenues would be about $1.3 billion based on their most recent quarterly performances. Salix has relied heavily on Xifaxan (rifaximin) for traveler’s diarrhea caused by Escherichia coli infections and hepatic encephelopathy; it produced $514.5 million in 2012 revenues, about 70% of the company’s total product sales. But it says the conjoined entity will be more diversified, with no drug accounting for more than half its revenues. Glumetza, a drug Santarus shares with Depomed, has delivered $131.4 million in revenue to Santarus in the first nine months of 2013. The buyout price represents a 37.8% premium over Santarus’s Nov. 7 closing price of $23.22. Raleigh, N.C.-based Salix had about $817 million in cash at the end of the third quarter, but intends to finance the deal with $1.95 billion in debt and a $150 million revolving credit facility from Jefferies Finance, as well as nearly all of its cash on hand. - Paul Bonanos

Roche/Polyphor: Switzerland-based Roche signed an exclusive global licensing deal to develop and commercialize Swiss biotech Polyphor's investigational antibiotic POL7080 against certain hospital-acquired superbug infections known as Pseudomonas aeruginosa, signaling Roche’s first foray back into antimicrobial development for three decades. Roche will pay up to CHF 500 million ($548 million) for the experimental antibiotic, which has only just entered Phase II testing, the companies said Nov. 4. The world’s largest maker of cancer drugs, which is trying to diversify into other disease areas, will make an upfront payment of CHF 35 million and milestone payments of up to CHF 465 million to the Swiss biotech. Roche said POL7080 belongs to a new class of antibiotics that kills P. aeruginosa, a bacterium found in hospitals and resistant to many antibiotic treatments, by a novel mode of action. It’s the first of a number of novel antibiotic candidate drugs being assembled by research and early development group pRED, which is now under the new leadership of John Reed and focusing on three main areas of unmet medical need: Hepatitis B, Influenza and Antibiotics. The pact with Polyphor is the first demonstration that Roche is back in antibiotics. In contrast, other Big Pharma companies have cut back, including former field leader Pfizer, which closed its antibiotic R&D center in Connecticut in 2011, as well as Bristol-Myers Squibb and Eli Lilly. AstraZeneca, GSK, and Merck remain active in the space. Privately-owned Polyphor discovers and develops macrocycle drugs intended as a complement to classical small molecules and large biopharmaceuticals. Although Polyphor, whose main shareholders are private individuals, doesn’t have any products on the market, its pact with Roche is its sixth deal since 2008. Its three drug candidates developed using its protein epitope mimetics (PEM) drug discovery technology are POL7080; POL6326, a CXCR4 antagonist currently in Phase II and ear-marked for several indications; and POL6014, an elastase inhibitor that’s in pre-clinical studies. PEMs are “medium-sized…, fully synthetic cyclic peptide-like molecules that mimic the two most relevant secondary structure patterns involved in Protein-Protein Interactions (PPIs),” according to the company’s Web site. It adds that they are “among the most potent and selective molecules known to modulate PPIs, GPCRs with large ligand-binding domains, and enzymes.” - Sten Stovall

Endo/Paladin: Endo Health Solutions’ new CEO Rajiv De Silva is making good on following in the footsteps of his former employer Valeant by conducting rapid-fire M&A that adds to the specialty pharma’s business. The Pennsylvania company announced Nov. 5 that it will acquire Montreal-based Paladin. The Canadian spec pharma has over 60 marketed products and will give Endo a jumping off point for building its business in Canada, Mexico, and South Africa. The $1.6 billion deal will be an almost all-stock transaction, with Endo paying CAD$77 ($73.70) per share for all outstanding shares of Paladin, a premium of 20% to Paladin’s share price of $63.91 on Nov. 4, the day before the deal was made public. Paladin shareholders will receive 1.6331 shares of the new company in stock and CAD$1.16 in cash, as well as one share of Knight Therapeutics, a new company. Knight will be spun-out of Paladin and be formed around Impavido (miltefosine), a treatment for the parasitic disease leishmaniasis. Impavido received a positive opinion from an FDA advisory committee in mid-October and has a PDUFA date of Dec. 18. Following the deal, the new company will be re-domiciled in Ireland in an effort to take advantage of a more favorable tax rate. Currently, Endo has a tax rate in the high-20% to 30% range. The new company will have a tax rate closer to 20%. - Lisa LaMotta

Pfizer/Juvenile Diabetes Research Foundation: The Juvenile Diabetes Research Foundation (JDRF) said Nov. 4 it would partner with Pfizer’s Centers for Therapeutic Innovation (CTI) to co-fund up to four jointly selected projects in the fields of immune tolerance, diabetic nephropathy and beta cell health. This is JDRF’s first corporate partnership since it announced a collaboration last year with Novo Nordisk, which will run out of the pharma’s Type 1 Diabetes R&D Center in Seattle. JDRF is the largest charitable supporter of type 1 diabetes R&D; it is currently sponsoring about $530 million worth of research, with $110 million in support last year. Pfizer’s CTI was established in 2010 to help further translational science; it hopes to get its first compound into the clinic this year and to bring two candidates into the clinic every year starting in 2014. CTI works with a network of 24 academic and medical institutions. Financial details of the deal were undisclosed. - Stacy Lawrence

Eisai/Arena: Eisai doubled down on Arena’s weight loss drug Belviq (lorcaserin) by expanding its commercialization rights to most of the world from much of North and South America. That’s despite slow sales in the drug’s first full quarter on the market – only $5.4 million. Insurers have been slow to start to reimburse for Belviq and Vivus’ Qsymia (phentermine/topiramate ER). Under the expanded deal, Arena will receive a $60 million upfront payment and up to $176.5 million in regulatory and development milestones. That’s an increase of $123 million from the milestone amount remaining under the prior agreement. Arena will continue to sell Belviq to Eisai for the U.S. and other North and South American territories for a purchase price of 31.5% and 30.75% of Eisai’s net sales in those regions, respectively. For Europe, China and Japan, Arena will receive 27.5% of Eisai’s net sales, while for all other territories the rate is 30.75%. These rates can increase on a tiered basis. Arena also stands to receive a one-time purchase price adjustment of $1.56 billion based on sales in the territories covered by an agreement; that’s an increase of $185 million from the prior deal. Eisai has exclusive commercialization rights in all countries worldwide, excluding South Korea, Taiwan, Australia, Israel and New Zealand. The partners expect also to investigate Belviq as a smoking cessation treatment. - S.L.

GSK/Various Academic Researchers: With a view to front-loading its pipeline, GSK has selected eight winners in its first Discovery Fast Track competition, designed to translate academic research into starting points for new potential medicines. The contest attracted 142 entries across 17 therapeutic areas from 70 universities, academic research institutions, clinics and hospitals in the US and Canada. The program gives certain researchers the opportunity to partner with GSK and jump-start their research into a development program. The winning projects deal with important unmet medical needs, including antibiotics resistance, diseases of the developing world, and certain cancers. The selected scientists will collaborate with GSK’s Discovery Partnerships with Academia (DPAc) team, the sponsor of the competition, to quickly screen and identify novel compounds to test their hypotheses. If advanced chemical testing is successful, the winning investigators could be offered a DPAc partnership to further refine molecules and assess their potential as novel new medicines. GSK devised the contest as a potential engine for accelerating input into its translational research operation, hoping to entice the brightest minds across North America with the promise of lending its potential to their discovery-stage programs. GSK and the academic partner share the risk and reward of innovation, where the U.K. drug maker funds activities in the partner laboratories, and provides in-kind resources to progress a program from an idea to a candidate medicine. Work on the winning Discovery Fast Track projects will begin immediately and the first screens are expected to be completed in mid-2014. - S.S.

Johnson & Johnson/ Evotec: Johnson & Johnson and Evotec are looking broadly, beyond the current focus on beta amyloid and Tau protein-based mechanisms, to identify new targets for Alzheimer’s disease. Under a collaboration announced on Nov. 8, the companies will seek to identify drug targets that could lead to entirely new approaches to treatment using Evotec’s TargetAD database. At best, the drugs in clinical trials today, if successful, will have modest efficacy for treating symptoms of mild-to-moderate patients, and “delay Alzheimer’s symptoms by a few weeks,” said Evotec’s Werner Lanthaler in an interview. The Janssen-Evotec partnership is much more ambitious than current efforts, both in its approach to how it achieves its goals and the goals themselves, he added. The database is derived from analysis of dysregulated genes in high-quality, well-characterized human brain tissues representing all stages of disease progression, Evotec said. It was built off of tissue contributions from The Netherlands Brain Bank and is “systematized, unbiased, and comprehensive,” said Lanthaler, explaining that by being unbiased, it is agnostic to whether the approach is ultimately an antibody, small molecule, or other kind of compound.  No other companies currently have access to the database, and Lanthaler was cagey in stating whether they would or its use would be exclusive to J&J. But he did say that J&J was the first company Evotec approached when it decided to look for licensees, and it jumped on the opportunity – perhaps in part because the companies have had a previous successful relationship in other therapeutic areas. Janssen will reimburse up to $10 million of full-time employee-based research costs and make preclinical, clinical, regulatory and commercial payments, capped at between $125 million and $145 million per program. Evotec will also be entitled to royalties from sales from any products that emerge from the collaboration. The deal runs for three years, and, on J&J’s side, is being conducted through its California Innovation Center. - Wendy Diller

(Thanks to for use of this image of our new Tesla S -- are you paying attention Santa??)

Friday, November 01, 2013

Deals Ot The Week Searches For Meaning In Deal Breakups

 It’s been a ghoulish week for deal-making – only half a handful of deals made it onto our list of noteworthy new transactions.

We could not spot one, large or small, involving big pharma or specialty companies. Nor could we see any particularly compelling reason for the interlude. A number of the largest and most active deal makers are adjusting to new leadership and reorganizations, among them Shire PLC, AstraZeneca PLC, Bayer AG, Merck & Co. Inc., and Teva Pharmaceutical Industries Ltd. Certainly, the abrupt resignation of scientist-executive Jeremy Levin as CEO of Teva was a management deal gone bad, leaving the world’s largest generics company adrift and its board of directors on the defensive against a bewildered and angry Wall Street.

That led us to reflect on business deals gone bad and – a trip to the virtual deal cemetery – Deals of the Week’s ‘No Deal’ designation. For the year to date, DOTW has tracked 10 noteworthy terminations, a figure that is in line with stats for the past three years. It’s impossible, or rather meaningless, to speculate much about commonalities among these deals. It’s likewise impossible to extract trends based on, say, the ratio of deals that don’t pan out to those that do. Discarded deals covered a range of therapeutic areas and most involved a big pharma abandoning a biotech collaboration. But breakups occurred at all kinds of points in time and at different phases of development.
A romp among the headstones: GlaxoSmithKline PLC pulled out of a licensing agreement with ChemoCentryx Inc. in September, over Crohn’s disease candidate vercimon following a Phase III miss; ChemoCentryx is trying to figure out why the GSK-led study failed while the Phase II succeeded. Teva itself was the source of several ‘No Deals’ in the course of the year, as its new CEO – now gone – and his management team undertook a pipeline review that resulted in handing back solid tumor therapy Rx 3117 to Rexahn Pharmaceuticals Inc. Also canned was the Israeli generics maker’s much larger, high-profile four-year-old biosimilars pact with biologics manufacturer Lonza Group, which is doing its share of soul-searching and dealing with its own management upheaval.

Amgen Inc. ended a 2009 collaboration around a Type-2 diabetes program with Array BioPharma Inc. Perhaps the fissure with the biggest ramifications was AstraZeneca’s termination of a collaboration with partner Rigel Pharmaceuticals Inc. around the Phase III rheumatoid arthritis drug fostamatinib. Although that deal involved only one asset, it was expensive – AZ paid $100 million upfront – and emblematic of AZ’s ongoing pipeline problems.

But we couldn’t bear to end the week on such a downbeat note, with an energetic meeting like Partnering For Cures about to begin on Monday in New York. This meeting, funded by The Milken Institute, now in its fourth year, is a showcase for venture philanthropy and aims to bring together non-profit disease foundations, patient advocacy groups, investors and biopharma companies in order to look for ways to fund gaps in financial support of innovative medicines for deadly diseases.--Wendy Diller (Thanks to Hollywood Gothique for photo)

Leukemia & Lymphoma Society/ Stemline Therapeutics: One of the few deals announced this week involved one such venture philanthropy initiative. On Oct. 29, the non-profit Leukemia & Lymphoma Society and two-year-old biotech Stemline Therapeutics Inc. announced a partnership to speed up development of a cancer stem cell therapy, SL-401, for the treatment of acute myeloid leukemia and blastic plasmacytoid dendritic cell neoplasm. The latter is a rare hematological disorder with characteristics of both leukemia and lymphoma. LLS is committing more than $3 million to help develop the drug and support an educational program around BPDCN.

The drug has demonstrated efficacy in patients with advanced AML and BPDCN, including multiple durable complete responses in both indications, a greater than 80% overall response rate in BPDCN, and an improvement in overall survival of third-line AML patients relative to historic data, the companies said in a press release.

LLS wouldn’t provide much information about the compound or the deal, but it has a long track record in funding early stage research in blood cancers and getting some of those projects into the clinic.  It awards about $60 million in grants to academic investigators each year, and at any one time has about 300 grant-sponsored projects underway. Because of its close, long-standing ties to academia, it has deep expertise in science and a network of contacts that can facilitate progress of successful development programs, said Louis DeGennaro, the society’s chief mission officer and a scientist by training.

The effort to bring industry closer into the LLS fold began after DeGennaro joined the organization eight years ago, when it had the broad grant program for academics but little else in place to facilitate getting promising research projects through what is referred to as ‘the valley of death’. About 10% to 15% of the projects it funded moved into development, but it was tough to do FDA-compliant studies in an academic environment, he recalled in an interview. In 2008, DeGennaro started the society’s Therapeutic Acceleration Program to assist investigators and companies in filling in that gap, harvesting programs from its research portfolio as well as early-stage programs underway at biotech companies that could be effective in treating blood cancers, but were not being developed because of economic or other concerns.

LLS provides these companies with non-dilutive capital, expertise and access to networks of key opinion leaders and contract research organizations; in exchange, the recipient company has to agree to continue work on the project for a period of time after LLS funding has ended. The largest subsidy to date is $12 million, and the development timeline of interest is from late preclinical through Phase III.

LLS does not ask for equity or take a typical private-sector return; it seeks comparatively small milestone payments tied to approval of the drugs it funds in major markets, as well as a small royalty. The aim is to provide enough capital for companies to advance a compound to the point where they can attract private-sector funding. Nor does LLS retain intellectual property on the products it funds; it wants the asset to be unencumbered when its owners look for outside financing, he added.

One LLS relationship in particular, with Celgene Corp., continues to expand. About a year and a half ago, the organizations entered into a partnership, which Celgene is supporting, and which LLS and Celgene are administering. In its simplest terms, the partners use a grant program to vet and fund early-stage research, and Celgene gets first right of negotiation for intellectual property coming out of the programs over a protected period of time. If it is interested, the big biotech then has the right to negotiate with the academic investigator and his or her institution. LLS does not participate in any deal Celgene works out.--WD

Cancer Research Technology/ Chroma Therapeutics: Cancer Research Technology (CRT), the commercial arm of the charity Cancer Research UK, is accelerating its support of early biotech research through a deal with the U.K.'s Chroma Therapeutics Ltd.

With funding from the CRT Pioneer Fund (CPF), Chroma will move a lead molecule, a mitogen-activated protein kinase (p38) inhibitor, towards clinical trials, with the CPF receiving rights to further develop and commercialize any resulting products, CRT announced Oct. 31. Chroma attaches chemical motifs onto drugs that are freely transported into cells but then cannot exit. The therapeutic molecule then accumulates within tumor-associated macrophages, reprogramming them to attack tumors, the company explained. The deal is the third made by the $80 million asset-centric CPF, which was set up in 2012 by CRT, the charity, and the European Investment Fund.--Sten Stovall, John Davis

Adimab/ Alector: The formation and financing of Alzheimer’s disease-focused Alector LLC ties what its founders call “unique biological insight” with the prolific antibody discovery platform of Adimab LLC – and demonstrates private investors’ appetites for making distinct bets on discovery and development opportunities.  

Alector, which announced an undisclosed amount of Series A financing Oct. 31, is the second R&D-focused biotech to spring in part from Adimab’s antibody discovery engine. The company is not a spin-off of Adimab; instead it holds a license to Adimab’s technology and aims to exploit novel biology elucidated by co-founders Asa Abeliovich and president and CEO Arnon Rosenthal.
The terms of the deal between Adimab and Alector are extremely flexible. In the near term, Alector will cover fee-for-service costs associated with Adimab’s discovery process. But it essentially accesses Adimab’s antibody discovery technology for free. Downstream there are different flavors of project-specific licensing options depending on Alector’s financial and strategic priorities. These range from heavy upfront and milestone deals that are royalty free through to all-royalty deals that are back-end loaded.

Alector and Adimab are separate companies, but the newco is part of the Adimab family tree. Alector’s chairman and co-founder is Tillman Gerngross, co-founder and CEO of Adimab, and co-founder of Arsanis  (a similar Adimab-offshoot in the infectious diseases space) and other companies. Adimab co-founder and COO and Arsanis director Errik Anderson is also an Alector co-founder. And Alector’s backers – the company simultaneously announced an undisclosed Series A financing – are Adimab investors Polaris Venture Partners and Orbimed Advisors; Polaris general partner Terry McGuire and Orbimed general partner Carl Gordon, both Adimab directors, also sit on the Alector board.--Chris Morrison
And then there's the:
Numab/Sucampo: Yes, there’s another “No Deal” this week. The Zurich, Switzerland-based company Numab AG announced Oct. 29 that it had reacquired rights to an investigational bispecific antibody fragment, ND003, from its collaborator, Sucampo AG, a subsidiary of Sucampo Pharmaceuticals Inc., and intended to develop the compound further as an inhaled therapy for severe asthma. Further financial details of the agreement were not disclosed.

The two companies entered into a multi-target collaboration in 2011, just months after Numab was founded, aimed at discovering high-affinity antibodies with sub-picomolar affinities against difficult-to-reach targets. Sucampo would retain exclusive commercial rights to any potential products identified, in return for research funding and other potential payments.

Numab says it is now raising Series A financing to advance ND003 and another compound, the potential anti-inflammatory ND007, to the next value inflection point.  ND003 is expected to be administered by inhalation, thereby attacking lung-resident eosinophils that play a role in severe asthma but are difficult to reach with systemic-administered antibody-based products, the Swiss company noted. ND003 targets interleukin-5 receptors on eosinophils, rapidly depleting their number. --SS, JD