2013 Alliance of The Year Nominee: Amgen/Astellas

It's time for the IN VIVO Blog's Sixth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A of the Year, Alliance of the Year, and Financing of the Year. We'll supply the nominations (about a half dozen in each category throughout over the next week or so) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

In announcing a strategic alliance with Astellas Pharma in May, Amgen has placed an economic bet on Japan. It is also, indirectly, a bet on economic recovery in the U.S. and Europe, Japan’s two biggest export markets.

In fact, Amgen has been talking up its Asian ambitions since first broaching the idea at a business review meeting in New York last February. After rapid-fire acquisitions in Brazil and Turkey, and a partnership in Russia, “expanding into Japan and China are next on the Agenda,” said CEO Robert Bradway.

Four months later, Amgen inked a two-pronged alliance with Astellas. In the first stage, the partners co-develop and co-commercialize five Amgen drugs for the Japanese market: one in cardiovascular, one in  osteoporosis, and three oncology candidates. Among them are AMG145, the Phase III antibody against PCSK9 for hyperlipidemia and Phase II blinotumomab, the anti-CD19 bispecific BiTE antibody against hematological tumors picked up in its 2012 acquisition of Micromet. At a recent Credit Suisse event, Amgen CFO and EVP Jonathan Peacock projected the first launch in 2016.

The second stage, a joint-venture that is 51% owned by Amgen, opened in Tokyo in October. Operating as Amgen Astellas BioPharma KK, the JV is structured to allow Amgen to turn the operation into a wholly-owned Japanese affiliate as early as 2020, and a direct channel into Japan for any molecule in its portfolio including its six biosimilars in development. Eiichi Takahashi, a cardiologist in Pfizer’s Japan subsidiary who led Pfizer’s medical affairs organization for the Asia Pacific region, will head up the JV.



The move feels like a do-over. Amgen had launched a JV with Kirin Brewery in 1984, and in 1992 it formed Amgen KK in Japan, as a wholly owned subsidiary. It pulled the plug on Amgen KK in 2008, selling shares in the subsidiary to Takeda as part of an agreement in which it licensed 13 molecules to Takeda for development and commercialization in the Japanese market. Takeda paid $200 million upfront and is on the hook for over $700 million in development costs and success-based milestones, as well as Japan-specific royalties. Back in 2008, then-Amgen R&D chief Roger Perlmutter insisted to IN VIVO that Amgen was not "abandoning Japan." Rather, partnering was the answer.

And to be sure, partnering is still the answer. The Big Biotech knows first-hand the challenges, particularly as regards recruitment, in establishing a de-novo presence in Japan. But it is confident that it’s chosen the right partner in Astellas, whose strong cardio franchise and whose savvy moves in oncology recommended it to Amgen.

And it is confident that it’s targeted the right region in Japan, whose economy was the fastest growing in the developed world this year, goosed by the fiscal expansionary policies of Abenomics and by a recovery in exports – particularly car shipments, which grew 31% year-over-year last October. And according to Evaluate Pharma, Japan was the best performing region – using government-reported data – in terms of US$ Rx sales, posting 17% growth in 2010/2011 compared to 3.8% for Europe and 1.5% for the US, and likewise clobbering the US and Europe in terms of local currency growth.

And while the Japanese drug market has recently been slowed by biennial price reductions, generic inroads, and a price constraining national health budget, the future holds an easing of regulatory burden, an aging demographic, and a strong pipeline. Traditional regulations protecting the domestic market have crumbled over the past two decades, ushering in western investment and the presence of western firms. Takeda’s recent announcement naming GSK vaccines chief Christophe Weber as COO, putting him in line to succeed Yasuchika Hasegawa as CEO, is a symptom of this larger opening to the west.

In a canny move, Amgen, in its bold deal with Astellas, finds itself at the intersection of these global trends, and poised to cash in. Definitely worthy of our alliance of the year accolade. 

Thanks to Eddie O. for the flickr image // creative commons

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

Market Access: Pharma's Hot Potato?

Strangely enough, given that market access is nowadays probably the single most important determinant of near-term (and indeed any-term) commercial success for pharma, there weren't that many companies attending a recent event dedicated to this topic. Instead, it was mostly consultants -- gearing up one supposes to later suck hefty fees out of said absentee firms by relaying information on how to convince payers to reimburse their drugs. (Which is what market access is, in case you'd also missed it).

Then again, maybe it was understandable that many pharma stayed away: the messages aren't happy ones. The various overhauls of Europe's market access systems (that's to say, health technology assessment methods and processes) have already had "major consequences" on drug pricing, said Pierre-Phillippe Sagnier, VP Global Market Access at Bayer Schering Pharma.

Yet it remains unclear precisely what criterial those overhauling systems use to judge the value of new drugs. Thus, in Germany, Europe's largest and arguably most influential market, all new products are now subject to a compulsory cost-effectiveness exam after just six months on the market. Moreover, while this exam determines a drug's pricing fate, the marking system remains opaque.

That matters because many European countries look to Germany when making their own pricing decisions and drug-value judgments. Thus, a bad mark in Berlin could spell disaster for a product in Europe as a whole. (Tip: Germany's hot on relative cost-effectiveness, so you can mostly forget placebo-controlled trials.)

On the other hand, most European countries do nevertheless now have their own HTA systems, with their own particular methods and biases. That means each requires a bottom-up information feed from local execs and a degree of regional tailoring. Pharmas still aren't that comfy with the trend towards regional empowerment even at the marketing level; now it has to consider regional input during development to make sure it generates appropriate data.

Partly because of the complexities required to account for these regional difference and partly because big drug makers are resistant to change, pharma apparently have little idea how to fit the market access function into their traditional basket of activities. "Market access works across all functions; it's essentially an integrating function," commented Janice Haigh, Senior Director, Pricing & Market Access for Astellas Pharma Europe. She's trying to figure out market access for the Japanese firm, which has shifted from part of Operations to Marketing. She and other executives suggest that, at the moment, no-one's really managed to position market access right. Bayer has moved it about from development to commercial and is now trying to integrate the two. "It will take some time," says Sagnier.

There are some ideas trickling through, including better mechanisms to address the global vs. local disconnect that can arise in market access. Astellas, for instance, groups payers into five or six types, according to Haigh, which share similar priorities.

But there are also signs of a wait-and-see attitude that most pharma can ill afford. Regarding the the German system, for instance, where the first outcomes are expected in August 2011, "we're quite glad we are not launching anything in 2011/2012; we're happy to see how other drugs get on, " admitted Bayer's senior market access manager, Jens Lipinski.

Top management at several Big Pharma are talking big talk about market access. It's unclear, from this blogger's lunch chats during the above-mentioned meeting, that this world view has trickled down through the ranks.

In reality shifting the commercial mentality away from pushing drugs at doctors and towards building relationships with national and regional payers requires new skills. So too, does dreaming up risk-sharing deals and embracing integrated care contracts. It's tough stuff that will remain a hot potato no one department wants to own -- let alone a subject that can attract conference attendees.

image by flickrer Jess Gambacurta used under creative commons

Deals of the Week's Dead Presidents Edition

As many Americans prepare for their three-day weekend celebrating the birthdays of two great Presidents, Deals of the Week cynically notes that a lot of Americans don’t really love their Presidents until after they’re dead – specifically, the ones whose visages have been enshrined on legal tender. Little Walter sang an amusing blues number about a nation’s love for currency and the commanders-in-chief who adorn it, conveniently glossing over the presence of several non-Presidents, including Alexander Hamilton and Benjamin Franklin, on commonly circulated bills.

It takes far more than even a rarely-seen Salmon P. Chase to get a pharma deal done, but sometimes it also takes more than mere dollars – or euros, pounds, or whatever you like – to keep everyone satisfied. Witness Sanofi-Aventis SA’s bid for Genzyme Corp., a once-hostile overture sweetened with contingent value rights, or CVRs – in this case, options for further payments based on regulatory and manufacturing milestones on Genzyme drugs – that could account for nearly a sixth of the deal’s value. The CVRs primarily relate to pipeline considerations, and a new study shows just how crucial they are to Sanofi and its peers.

According to a report issued Thursday by Bernstein Research’s Tim Anderson, Sanofi’s pipeline was expected to contribute less than 3% of its overall revenues by 2015, the smallest share among nine Big Pharmas studied – at least, prior to the Genzyme deal, which includes a potential blockbuster in multiple sclerosis. Bristol-Myers Squibb, by contrast, can expect nearly 18% to come from its pipeline by 2015, thanks to R&D spending approaching $4 billion annually in the coming years as well as a relatively small revenue base, according to Bernstein’s report. Meanwhile, Eli Lilly & Co. is expected to be among the biggest R&D spenders relative to revenue, though it can expect the fewest returns in total Benjamins from drugs currently in its pipeline, and only a middle-of-the-pack performance as a percentage of overall 2015 sales.

Where do exciting pipeline drugs come from when they're not homegrown? Why of course, it's...


Sanofi/Genzyme: Preliminary conversations between Sanofi and Genzyme last summer gave way to a publicly announced bid to shareholders in August, then a hostile overture in October, protracted negotiations in the following months, and finally a deal in February. The French pharma will pay $74 per share for Cambridge, Mass.-based Genzyme, along with CVRs entitling each shareholder to payouts based on drug development milestones for pipeline drug Lemtrada (alemtuzumab) for multiple sclerosis and production volumes for approved orphan drugs Cerezyme (imiglucerase) and Fabrazyme (agalsidase). While the $74 per share bid exceeded Sanofi’s rejected bid by $5, the CVRs are thought to have been the key to completing the deal, potentially adding $14 per share – $13 from Lemtrada milestones – to its value. Sanofi, whose massive diabetes franchise is balanced by diverse offerings including vaccines and soon-to-be-off-patent anticoagulant Lovenox (enoxaparin), gets Genzyme’s expertise in rare diseases, as well as its manufacturing capabilities. Though some believe it may have overpaid, the aggressive milestone timeline will bear out the deal’s true value – suggesting that the real work, including a potentially tricky integration process, is yet to be done. – P.B.

Astellas/AVEO: In one of the richest oncology deals in the past few years, Japan’s second-largest pharma placed a big bet on AVEO Pharmaceuticals Inc.’s most advanced compound, the Phase III drug tivozanib. Astellas Pharma Inc. paid $125 million up front, while committing to a milestone schedule that could add more than $1.3 billion to the deal, to license tivozanib worldwide, save for Asian territories already licensed to Kyowa Hakko Kirin under an existing agreement. The deal includes $575 million for clinical and regulatory milestones and $780 million in commercial payments, and covers all indications of the drug, currently farthest along in studies for renal cell carcinoma. The two companies will split profits 50/50 in North America and Europe, where they will also share development costs and sales forces, although Astellas is expected to lead commercialization in Europe while AVEO does so domestically. Phase III results are due in mid-2011 for tivozanib, a blocker of vascular endothelial growth factor (VEGF), although an NDA isn’t expected until 2012, pending a favorable clinical outcome. The agreement extends Astellas’ ongoing commitment to oncology beyond its $4 billion acquisition of OSI Pharmaceuticals last year. – P.B.

AdventRx/SynthRx - About two years ago, AdventRx Pharmaceuticals had placed its lead clinical programs on hold and cut staff twice, to a headcount of five. Now, the San Diego-based firm has an FDA action date for its lead program, chemotherapy drug Exelbine (vinorelbine injectable emulsion), and is acquiring privately held SynthRx in an all-stock deal to move into the sickle cell disease (SCD) space. AdventRx, focused on a growth-by-acquisition strategy, will acquire Texas-based SynthRx through an equity deal in which more than 75% of merger consideration is based on NDA acceptance and approval of SynthRx’s lead program and more than 95% is based on milestone achievement. In exchange for an upfront consideration giving SynthRx’s shareholders a 4% interest in AdventRx, SynthRx becomes a wholly owned subsidiary of AdventRx, giving the latter firm ownership of the Phase III poloxamer 188 program. Initially advanced into Phase III in myocardial infarction by CytRx, 188 is a purified form of a rheologic and antithrombotic agent to be studied first in pediatric SCD and thought to have potential in other illnesses involving microvascular flow abnormalities, such as heart attack, stroke and hemorrhagic shock. During an investor call Feb. 14, CEO Brian Culley explained that if every milestone in the deal is paid out fully, SynthRx shareholders would end up with a 40% stake in AdventRx. “If the NDA is accepted and approved, [that is] something I think we would be happy to make these equity payments for,” he added. – Joseph Haas

Bayer/Philogen: The crumbling of one European deal led to the cancellation of a potential bellwether IPO. Swiss-Italian biotech Philogen SpA might be searching for an aspirin after its oncology deal with Bayer AG came apart, prompting Philogen to cancel its anticipated IPO. Bayer abruptly walked away from its licensing arrangement for Philogen’s L19 therapies, vascular-targeting immunocytokine drugs that are being investigated for several different cancers. The two companies’ association dates to 1999, when Schering AG took an option on Philogen’s research into antibodies that inhibit angiogenesis, leading to a formal worldwide license in 2003. Despite the extended relationship, Bayer gave no specific reason for unraveling the deal. Philogen, which says it has six clinical antibodies targeting cancer as well as a rheumatoid arthritis drug and a preclinical ophthalmology program for age-related macular degeneration, was expected to list on the Milan exchange February 18, but instead scuttled what was expected to be Europe’s first IPO of 2011. In the offering, thought to be a signal of a warming climate for biotech listings, Philogen had anticipated raising as much as €65.3 million ($89.3 million) by floating 23% of its shares. The failed listing is Philogen’s second IPO cancellation; it withdrew a planned offering in 2008 as well, citing unfavorable market conditions. – P.B.

Mt. Rushmore image courtesy of Flickr user dclamster, used under Creative Commons license.

A Deals Of The Week Valentine

The most anticipated deal of the week – Sanofi Aventis’ multi-billion take-out of Genzyme – has yet to come to fruition. That’s not to say the deal is a no go (wouldn't the aftermath of THAT be fun to watch). Indeed, public statements by the French pharma’s Viehbacher suggest Sanofi still desires the big biotech, but is being measured in its diligence.

The months long saga has been more “he said/he said” than SEC-leaked endearments; still for journos avidly covering the “news” the nothings have been sweet. In advance of Monday's Hallmark holiday, perhaps its time for Viehbacher to dial up the Canadian charm, and send a love letter (containing the desired contingent value rights to Campath/Lemtrada, of course) to Termeer and company. (If the deal goes through, does this makeTermeer Viehbacher's work spouse?)

IN VIVO Blog suggests borrowing a line or two from Robert Browning's famous missive to one lovely Elizabeth Barrett. You know, the one that spawned Sonnets From The Portuguese and the immortal question "How do I love thee?" Perhaps something like this..

I love your verses drugs with all my heart, dear Miss Barrett Henri, -- and this is no off-hand complimentary letter that I shall write, --whatever else, no prompt matter-of-course recognition of your genius and there a graceful and natural end of the thing: since the day last week summer when I first read your poems realized the worth of Cerezyme and Fabrazyme despite the manufacturing snafus, I quite laugh to remember how I have been turning again in my mind what I should be able to tell you of their effect upon me (especially after this recent earnings report) ... Perhaps even, as a loyal fellow-craftsman (and CEO honor-bound to return shareholder value) should, try and find fault and do you some little good to be proud of herafter!

Of course, said fault-finding comes with its own ulterior motives, but whether Sanofi's shareholders will be proud of the outcome depends on the deal's final price tag. In the spirit of reciprocity, we suggest Termeer start counting the ways he loves Sanofi, not least because of the exit package he stands to receive if the deal goes through.

In the interim, if you can't say it with contingent value rights, at least remember to say it with flowers. Oh, and make sure to read another edition of...


Cephalon/Alba Therapeutics: Hours before reporting full-year results on Feb. 10, Cephalon said it signed an option agreement for Alba's treatment of the autoimmune disorder celiac disease. Cephalon will pay $7 million upfront and extend a credit line to Alba to fund a Phase IIb trial of the drug, larazotide acetate. After completion of the study, the Frazier, Pa.-based Cephalon will review results with the option to purchase assets related to the drug for $15 million. Beyond the $22 million in upfront and option fees, Alba is eligible to receive unspecified regulatory and sales milestones should Cephalon bring the drug to market. Celiac disease, also known as sprue, is caused by an autoimmune reaction to the ingestion of gluten, found in certain grain-based products such as bread and pasta. It affects more than 2 million people in the US. Cephalon said on a conference call that is sees significant revenue opportunities for larazotide. The deal is Cephalon's first since founder and CEO Frank Baldino passed away late last year after a four-month medical leave of absence. New CEO Kevin Buchi was previously Cephalon CFO and COO and a longtime colleague of Baldino. -- Lisa LaMotta

Salix/Progenics: Progenics Pharmaceuticals this week found a new development partner in specialty player Salix Pharmaceuticals for its subcutaneous injection to treat opioid-induced constipation, Relistor, one of the casualties of the Pfizer/Wyeth deal. Recall that Wyeth, which initially licensed the compound in 2005, paid Progenics a $10 million break-up fee in 2009 to take back product rights. During an extended transition period, the world’s biggest pharma has continued to sell Relistor via a 1700-member sales force, but 2010 worldwide sales were an anemic $16 million. Thus, the entrance of new suitor Salix via a sweetheart of a deal is undeniably good news for Progenics. As part of the alliance announced February 7, Salix pays $60 million upfront plus milestones for worldwide rights (excluding Japan) to Relistor, and will assume all development, registration, and commercialization costs for the drug. Salix, which only intends to market the drug state side, will also pay Progenics 60% of the revenue earned by contractors on ex-US sales. Salix is confident its GI-focused sales force can fully monetize Relistor’s value, thanks in part to an oral product formulation currently in Phase III development. CEO Carolyn Logan told investors February 7, "Relistor just [did] not receive all the attention it would receive in an organization like ours." – Joseph Haas & Ellen Licking

Pfizer/Ferrosan: From Russia and Norway and Eastern Europe with love? Pfizer’s acquisition February 7 of Danish firm Ferrosan’s consumer health care unit shows diversification is alive and well within the world’s biggest pharma, even as the company pulls back on R&D. Exact financial terms of the deal weren’t disclosed, but sister publication "The Tan Sheet" reports executives from Ferrosan's owner, Altor Equity Partners, said the deal was larger than €100 million ($136 million according to same-day conversion rates); analysts with UBS Investment Research, meanwhile, assume a price around $600 million based on Ferrosan's recent yearly sales figures. The deal gives Pfizer some key brands -- including Multi-tabs multivitamins, Bifiform probiotics and the Imedeen skin care supplement line – in Nordic countries as well as the rapidly growing market of Russia. More importantly, it expands Pfizer’s global footprint, allowing for the expanded distribution of its own nutritional brands, such as Centrum multivitamins and Caltrate calcium and vitamin D supplements. – Elizabeth Crawford

Danaher/Beckman Coulter: The big deal of the week was diversified med-tech play Danaher’s $6.8 billion acquisition of Beckman Coulter, which has struggled to get its testing business back on track after an FDA-triggered withdrawal of its cardiac troponin test last spring. The sale isn’t unexpected; following the resignation of Beckman CEO Scott Garrett in September 2010 and ongoing quality issues, speculation about a possible deal has been rampant since December, when it was widely repored the firm had retained Goldman Sachs. Nor is it surprising that Danaher is the ultimate buyer; Beckman is not known as a particularly innovative company and has been very slow to move into the molecular diagnostics space. It therefore makes sense that its assets, heavily centered on consumables and services in clinical chemistry, would be of greater interest to a company like Danaher, a noted acquirer of established instrumentation plays. In addition to pushing forward with ongoing clinical trials supporting two 510(ks) required for the market reentry of Beckman’s AccuTn1 troponin test, Danaher’s other main priority as the testing firm’s new owner will be completing quality control fixes and cutting $250 million in costs. – Jon Dobson

Optimer/Astellas: Promising new Phase III data surrounding its antibiotic candidate fidaxomicin has Optimer Pharmaceuticals preparing for a possible summertime launch of the drug, pending approval and a PDUFA date of May 30. While Optimer intends to keep the drug in-house in the US, the San Diego biotech has partnered with Astellas to advance and commercialize the drug in Europe, selected Middle Eastern and African nations, and the Commonwealth of Independent States. (In addition to US rights, the biotech has for now also retained Asian rights, although it may partner those territories soon.) Astellas paid $68 million up-front for the rights to fidaxomicin, with a further $156 million in milestone payments and tiered sales royalties that range above 20%. Optimer is positioning fidaxomicin as a first-line treatment for patients at risk of recurrence of C. difficile infections, which cause severe diarrhea often in hospitalized patients and those who have received other antibiotic treatments that have disrupted the balance of flora living in the gut. Robert W. Baird analyst Thomas Russo pegged the market for the drug at nearly $250 million annually by 2018. – Paul Bonanos

Needy Candy Hearts image courtesy of flickrer piratejohnny

DotW: Wishful Thinking

The biotech M&A storm is coming. Really. So sayeth the good attorneys at the UK patent firm Marks & Clerk, based on survey data of 381 pharmaceutical execs who predict industry consolidation as various players attempt to hurdle the looming patent cliff.

Added to IN VIVO Blog’s To-Do List: Call Marks & Clerk to determine where to purchase the rose-colored glasses apparently so in fashion.

We admire the glass-half-full sentimentality. It’s cheaper than Prozac or Paxil (though purchasing either would help sales at certain pharmas). We’re just a bit skeptical that the patent cliff will translate into a big-pharma buying spree of innovative biotechs. Here's why: For starters, the big acquisitions of 2010 have mainly been about diversification, marketed products, generics, emerging markets or some combination thereof. Innovative pipeline material? Not so much. Big pharmas want revenue.

According to Elsevier’s Strategic Transactions database, the top deals of 2010 have been Merck’s acquisition of Millipore, Teva’s purchase of ratiopharma, Astellas’ flight into oncology with OSI, and Charles River’s take-out of WuXi. Of these, only the Astellas/OSI transaction fits the patent-cliff theory, in which a drug maker pays top dollar for a biotech to replace revenues lost to looming--or current--generic competition. And companies like OSI, with money-making products far from patent expiry, remain a relative rarity, which as we’ve pointed out in our reporting, is one reason that biotech’s price tag climbed as high as it did.

We’ve said it before. On the private side, companies can’t rely on the stalking horse of IPOs to force pharmas into acquisitions; M&A--when it happens-- will likely to be in the guise of earn-out heavy deals, with eye-popping returns (think >5X when all the milestones are factored in) for the future. (Want data? See here and here.)

Other forces are lined up to stifle the oft-predicted M&A storm. On the public side, many smaller biotechs are still struggling to attract investor love. (Will ASCO help?) For European companies, the debt crisis isn't going to help. With biotechs’ stock prices trending down, there’s simply not much pressure for Big Pharm to get involved in pricy bidding wars. Moreover, big pharma buyers are burdened with infrastructure and more early stage programs than they can afford to develop, suggesting that when they do bring programs in it will be via alliances not acquisitions.

Does IN VIVO Blog think there will be some M&A? Absolutely--and if there isn't, this column will get awfully lonely. But are we talking Perfect Storm? Boom Times? That smacks of wishful thinking. Any doubt? Take a look at this week’s round-up of deals, which emphasize R&D on the cheap, EMs, and branded generics.

Astellas/OSI: Japanese drug maker Astellas' pursuit of OSI Pharmaceuticals was rewarded on May 17, 2010 with a $4 billion merger agreement supported by both companies' boards. At $57.50 per share, the deal cost $500 million more than the original hostile bid that Astellas launched in late February, and it will consume roughly half of the drugmaker's available cash. It seems no other white-knight bid emerged to counter Astellas' hostile offer, which turned semi-friendly at the end of March. Astellas, meanwhile, had made OSI the linchpin of its strategy to become a global oncology player. To walk away empty-handed would have raised serious questions about Astellas management, especially in the wake of its previous hostile bid, an unsuccessful run at CV Therapeutics. The newly sweetened price is a 55% premium to OSI's stock price on February 26, 2010, the day before the Japanese firm publicly disclosed its $52-a-share hostile offer for the biotech. The price is also 50 cents more than the informal offer in the $55-to-$57 range that Astellas originally suggested in 2009, according to SEC filings. With its ability to do further big deals limited for now, Astellas must extract full value from both Tarceva and OSI's earlier stage molecules. The key will be retaining and integrating OSI's management team into Astellas' U.S. operations.—Ellen Foster Licking

Abbott/Piramal: Rumors have been circulating for weeks that Piramal, one of India's leading biopharma players, was up for sale. There was quite a bit of truth to the rumor mill, except the buyer wasn't one of the usual suspects: GlaxoSmithKline, Sanofi-Aventis, or Pfizer. The ultimate winner was Abbott, which also made waves with last week's collaboration with Zydus Cadila and the creation of its established product unit. Abbott says the deal gives it the numero uno position (in Hindi, that's nambara ēka) with 7% market share in the Indian pharmaceutical market. It doesn't come cheap. Abbott will pay a total of $3.7 billion for Piramal, but not all is upfront cash. Piramal gets an initial payment of $2.12 billion and then $400 million annually for the next four years starting in 2011. (A hedge, perhaps, to mitigate the snafus Daiichi Sankyo has encountered with Ranbaxy?) Structured this way, Abbott says the all-cash transaction will not impact its ongoing earnings per share guidance. The strategy behind Abbott's deal is obvious and one familiar to IN VIVO Blog readers. Indeed, it can be summed up in three catch phrases: diversification, branded generics, and emerging markets. --EFL

Pfizer/Washington University: The R&D belt continues to tighten, and nervous companies ask more loudly how best to cheaply and efficiently identify innovative medicines? What about academia? What about new uses for existing medicines? Why not combine the two? This week Pfizer announced a five-year collaboration worth $22.5 million with Washington University in St. Louis in what is essentially a re-profiling experiment of 500 compounds originated at Pfizer. Don Frail, the chief scientific officer of Pfizer’s Indications Discovery Unit and the brains behind the deal, said the partnership could result in the university participating in clinical trials and holding downstream financial rights to drug candidates. Pfizer, meanwhile, can tap the thinking of a different group of researchers, and it won't spend an additional dime (beyond the $22.5 million) developing idle programs. Indeed, just one moderately successful product from the tie-up could cover Pfizer’s investment many times over. Wash U researchers will submit proposals for studies of compounds to a joint advisory committee. Pfizer researchers will work with Wash U scientists, with the university owning rights to its discoveries and the ability to negotiate terms for their development and commercialization.--Joseph Haas and EFL

Quintiles/Kaiser Permanente: It's not the kind of deal we normally cover, but we were intrigued by a collaboration between a major CRO and a leading insurer/health provider. With a dearth of details in the press release, IN VIVO Blog is still intrigued. We thought perhaps this deal augured a future wave of partnerships, in which pharmaceutical companies—or their CROs—ally with groups to develop outcomes-based data to support the commercial prospects of drugs under development. While this may be one of the longer term outcomes of the project, for now the emphasis is on enhancing the quality and productivity of clinical research. As such, Kaiser’s Southern California Permanente Medical Group becomes Quintiles’ fourth global prime clinical research site, joining the University of Pretoria in South Africa, Queen’s Mary College in the UK, and Washington D.C.'s Washington Hospital. Adam Chasse, Quintiles’ head of global prime sites, says the interests of both groups are mutually aligned since SCPMG wants to expand its clinical research efforts while the CRO hopes to tap the physician expertise within Kaiser--as well as its diverse patient base.--JH and EFL

Sanofi/Nepentes: Once again Sanofi-Aventis is expanding its consumer products business with a $130 million offer for the Polish drug, dietary supplement, and cosmetics firm, Nepentes Group. Sanofi announced May 19 it would pay approximately $8-a-share to Nepentes’ main shareholders and $8.60-a-share to minority shareholders in order to establish a presence in Europe’s fifth leading consumer health care product market. According to “The Tan Sheet," Sanofi believes it can boost Nepentes’ growth by extending distribution of its products, which include Selsun Blue, Melisana Klosterfrau supplements, and the Marimer line of nasal sprays, to additional markets. The Nepentes transaction marks the seventh consumer deal for Sanofi since CEO Chris Viehbacher outlined plans in February 2009 to double the drug maker’s OTC offerings in five years, primarily through bolt-on acquisitions. The most costly so far is Sanofi’s acquisition of Chattem for $1.9 billion. It’s all part of Sanofi’s larger strategy to diversify into arenas less risky than branded pharmaceuticals while simultaneously tapping those necessary "pharmemerging" markets.--Malcolm Spicer

Image courtesy of flickrer furiousgeorge81.

Deals of the Week Keeps Its Friends Close and Its Enemies Closer

Some say that everything you truly need to know in life you learned in kindergarten: take naps, share with others, don't pick your nose in public.

It's also true that most M&A can be described in the language of the high-school homeroom. Those two CEOs are having such a bromance; they totally think they're BFFs! That company's outside counsel was so lame sauce!

And a hostile bid that goes friendly... kind of? Frenemies!

The latest drug-industry frenemies are OSI Pharmaceuticals and Astellas Pharma. Recall Astellas began stalking OSI more than a year ago, informally offering to buy the biotech for $55 to $57 per share. When OSI wanted nothing to do with the Japanese firm, Astellas announced Mar. 1 a hostile $52-per-share bid. Investors thumbed their noses by immediately running the share price to $60, where it mainly has stayed. OSI has been open to a white knight offer, but none has emerged.

Astellas's tender offer was supposed to end yesterday, but the firm said earlier this week it would extend it to April 23. Separately Astellas said it would accept OSI's offer to check out its data room under a confidentiality agreement. Was this the daylight Astellas needed to slide over to OSI in the cafeteria? Ask it to the prom?

Astellas seemed ready to do its part to be, you know, more than friends. It promised that until May 15 it wouldn't pursue its lawsuit against OSI, press forward with its proxy fight to replace OSI's board, or acquire any tendered shares. (Not that there were many to acquire: as of Mar. 30, OSI owners had tendered 38,000 out of about 58 million outstanding shares.)

But as Astellas shakes with one hand, in the other it still grips a blunt instrument -- perhaps a 竹刀, しない? -- with which to deliver the occasional thwack upside the head. The latest blow came Apr. 1, no fooling, in a presentation in which Astellas aggressively defended its $52-per-share offer. It said OSI management has consistently failed to please Wall Street and warned that a rejection of Astellas's bid could send OSI down the same value-destroying path Biogen Idec traveled after it rebuffed Carl Icahn in late 2007.

For good measure -- though our grandmother would have called it chutzpah -- Astellas cited its own failed hostile $1.1 billion bid for CV Therapeutics as proof of its successful negotiating style: "As evidenced by the CV Therapeutics process in 2009, Astellas is a disciplined buyer that understands intrinsic value, and it will not pay beyond that value simply to win an asset."

How convincing is Astellas's argument? Judge for yourself. The entire presentation is here. Of course, this time around Astellas has painted OSI and its lucrative cancer fighter Tarceva as a key to building a top oncology business in five years. Shouldn't Astellas work a little harder on the "friend" part and not so much on the "enemy"? How about brushing up on its German, Italian, French, and Romansch to see how Roche pulled off two hostile deals for Ventana and Genentech?

As for you, dear reader, you have access to our data room anytime of the day... or night. In fact, come on up right now, and have a long look at...


GlaxoSmithKline/Isis: GlaxoSmithKline added to its option-based development portfolio as well as its RNA drug-discovery capabilities with an alliance with Isis Pharmaceuticals, which it unveiled March 31. The firms will apply Isis's antisense platform, which develops compounds that bind to messenger RNA and inhibit the production of disease-causing proteins, to develop new drugs against five targets including infectious diseases and conditions causing blindness. The emphasis will be on orphan drugs, an area where the big pharma has been building its efforts. Isis will receive $35 million upfront to develop the compounds through Phase II proof of concept, at which point GSK will have an option to license and take over development and commercialization. On average, Isis can reap up to $20 million in pre-PoC milestones per program, with total biobucks for the deal running to $1.5 billion. GSK has been making deals in the RNA space for some time. Partners include Sirna Therapeutics before it was bought by Merck & Co., Santaris Pharma and Isis spin-off Regulus Therapeutics. For GSK, option-based deals are nothing new, either, but this is the first for Isis. "GSK gets access to our technology, but in the meantime, we stay in control, moving through drug discovery in a much more expeditious way," Isis CEO Stanley Crooke told "The Pink Sheet" DAILY. Isis expects to move a first drug from the collaboration into clinical development this year. -- Jessica Merrill

MDRNA/Cequent and Ipsen/Dicerna: What is this, RNAi week? The so-called "second generation" of RNA interference companies, trying to maneuver around the patent shadows cast by Alnylam Pharmaceuticals and Merck's Sirna, are cutting deals of their own as the big guys have fallen quiet. Both deals we're highlighting this week relate to an "alternative" RNAi technology based on the Dicer substrate, an enzyme complex that lies "upstream" in the chain of events that lead to gene silencing. Both MDRNA and Dicerna licensed the technology from the City of Hope research center near Los Angeles. But MDRNA, whose CEO Michael French was a top exec at Sirna before the Merck acquisition, is grabbing a second RNAi platform. The suburban Seattle firm once known as Nastech is buying privately held Cequent Pharmaceuticals of Cambridge, Mass. for $46 million in stock, which comes to about 37.4 million shares based on MDRNA's $1.23 share price just before the deal was announced. Cequent's engineered non-pathogenic bacteria both manufacture and deliver RNA molecules into the target cell. MDRNA nabs the platform and an early stage pipeline with a lead candidate soon to enter Phase 1 for the genetic disorder familial adenomatous polyposis. Perhaps more importantly, it also gets cash. It didn't say how much, but it made clear that Cequent's green will fund the combined firms' operations into December. In the second deal, French specialty firm Ipsen is paying an undisclosed amount to Dicerna Pharmaceuticals to build RNAi-peptide conjugates that focus on oncology and endocrinology. Unlike a previous license deal with Kyowa Hakko Kirin, Dicerna keeps a lot more downstream rights but also bears some of the price tag-- a 50/50 split of costs and profits, in fact.--Alex Lash

Sanofi-Aventis/AgaMatrix: Sanofi-Aventis is bolstering its diabetes business through an agreement announced March 31 with privately-held AgaMatrix to co-develop and commercialize blood glucose monitoring devices. The deal follows soon after Sanofi's Feb. 10 year-end earnings call, during which executives said the addition of blood glucose monitors and insulin pumps would give their diabetes business a competitive edge as they cast a wary eye on the market debut of Novo Nordisk's long-acting GLP-1 Victoza (liraglutide). New Hampshire-based AgaMatrix will develop BGMs exclusively for Sanofi using its WaveSense technology, which aims to improve the accuracy of glucose readings. In return, AgaMatrix should benefit from Sanofi's global brands and marketing reach. Sanofi's long-acting insulin Lantus brought in $4.2 billion in sales in 2009, while short-acting insulin Apidra reaped $185 million. Sanofi is AgaMatrix's largest partner to date. Financial terms of the agreement were not disclosed, though AgaMatrix cofounder Sonny Vu told "The Pink Sheet" DAILY the five-year contract does not give Sanofi rights to acquire AgaMatrix or take an equity stake.--Carlene Olsen

Takeda/AMAG Pharmaceuticals: On Thursday April 1, Takeda and AMAG Pharmaceuticals announced the Japanese firm would commercialize ex-U.S. the smaller co's Feraheme, an intravenous iron already approved in the U.S. to treat iron deficiency anemia (IDA) associated with chronic kidney disease (CKD). A deal was not unexpected: AMAG has been saying for months that one of its top goals is to partner rest of the world rights to a company with global reach. Under the agreement's terms, Takeda gets exclusive rights to the iron deficiency anemia drug in five regions, including Europe and Canada. It will pay AMAG $60 million up front and another $220 million tied to downstream milestones for the privilege. Interestingly, AMAG will continue to oversee and pay for ongoing clinical trials of the medicine--even in the territories Takeda licensed. (Phase III trials in the U.S. and Europe to demonstrate Feraheme's utility treating non CKD anemia are due to begin later this year.) The tie-up is logical for both partners. There's no doubt Takeda has global ambitions, and its adding capability in critical areas--i.e. the U.S. and Europe--primarily via the dealmaking table. A commercial stage product that Takeda can sell alongside the synthetic ESA Hematide in-licensed from Affymax makes a lot of strategic sense. Similarly, Takeda's knowledge of the ESA market implies AMAG can have confidence the Japanese firm has the marketing chops necessary to sell the drug in Europe's CKD market. Moreover, Takeda's primary care and oncology focus should stand in AMAG's favor as it tries to move Feraheme into newer markets including the treatment of abnormal uterine bleeding, GI bleeding, and cancer-caused anemia.--Ellen Foster Licking

Photo courtesy of flickr user Tabercil.

Deals of the Week Takes the Rock to the Rack

It’s mid-March, which means there is nuttiness and squeaky sneakers afoot. It’s the time of year when grown men and women burn megajoules of brain power filling out NCAA tourney brackets to win a few hundred bucks and bragging rights in the office pool. We can only shake our heads at the effort expended; everyone knows it’s the person least knowledgeable about the game who always ends up winning the pot. DoTW is rather partial to powder blue... hmm... should we go with North Carolina or UCLA? What do you mean, neither team made the tournament? We have to root for another color? In the immortal words of Lear, “that way madness lies.”

It also lies in China. A front-page article in the Wall Street Journal suggests that despite the hype about boundless opportunity, there’s a growing realization that for foreign entities China's a tough place to do business. In the biopharma world, for example, compulsory licensing provisions hamstring multinationals trying to compete with state-owned drug companies. How can foreign firms really afford R&D in China if, as one law stipulates, they must pay Chinese employees at least 2% of the profit derived from their inventions -- unless the workers waive their rights?

Interesting, then, how AstraZeneca highlighted Poland and Mexico at its emerging markets confab on March 16, which followed on the heels of AZ's March 11 deal with Indian drug maker Torrent to develop 18 branded generics.

Lest we congratulate ourselves too much for being a first-world capitalist paradise, note how easily sophisticated thieves in recent months have targeted trucks and warehouses of several drug companies. Last weekend they reportedly rappeled down ropes from holes cut in the ceiling of an Eli Lilly facility in Connecticut and made off with $75 million in product. We're guessing that company execs and their supply-chain managers aren't humming this exciting tune, but perhaps they can take comfort that the strong arm of the FDA -- its office of criminal investigations -- is on the case. Sound the trumpets! Hamburg, Sharfstein, and now... Friday. Just the indications on the label, ma'am. How do you spell it again? Z-Y-P-R....

Speaking of Friday, it’s time for us to wear out some shoe leather and get on the case. All you have to do is embrace the madness associated with another edition of...

Teva/ratiopharm: When it comes to fighting for generics businesses, you don’t want Teva in your bracket. On March 18, Pfizer and the PE-backed Icelandic Actavis officially lost out to the world’s largest generic maker in the months-long war for the German firm ratiopharm, which apparently could no longer afford capital letters for its name. With this purchase, Teva catapults from nearly nothing to #2 generics player in the coveted German market. Analysts generally regarded Teva's offer of nearly $5 billion (€3.6 billion), including the assumption of $820 million (€600 million) in debt, as fair but exceeding their predictions. The acquisition is in keeping with Teva’s business development strategy; in less than a decade the Israeli giant has become the world’s largest generics market primarily through M&A, followed by rapid integration of acquired assets. (Remember Barr?) But Teva will have to execute flawlessly this time around, say analysts, given drug pricing in the German market is likely grow more uncertain in the coming year. And there’s already plenty of uncertainty thanks to the country’s new Minister of Health, Philipp Roesler, who recently announced a proposal to introduce a mandatory rebate on drugs ('The Pink Sheet' DAILY, March 10, 2010). Teva made no secret of its interest in ratiopharm from the get-go, but competitive bids from Pfizer and Actavis prompted all sorts of whispers from media and investors. Speculation only grew after Pfizer CEO Jeff Kindler was spotted in Germany at the beginning of March, much too early to be Oktoberfest-related. In its quest to become the General Electric of pharma, Pfizer is looking to diversify, especially in emerging markets, through the bolt-on acquisitions of generics players. In the hours after Pfizer’s loss to Teva became official, investors were already linking the New York drug maker to another German generics titan: Stada. -- Wendy Diller

Eli Lilly/Acrux: To bolster late-stage product offerings, Lilly this week pulled out its battle axe. Actually, it’s Axiron. On March 16, Lilly announced a global licensing deal with Acrux to commercialize an experimental underarm testosterone solution currently being reviewed by the FDA for treatment of low testosterone levels, aka hypogonadism. If approved, this would become the first testosterone as handy to use as deodorant. (Does that mean the commercial launch will be a roll-out or a roll-on? We only hope it doesn’t leave a white powdery residue. Talk about killing the mood. If it does, perhaps Lilly can bundle the product with a couple of these.) Here's the nitty-gritty: Acrux gets an upfront payment of $50 million, plus $3 million once manufacturing assets are transferred. If the FDA approves the cream, Acrux gets another $87 million and up to $195 million more in potential commercialization milestones and undisclosed sales royalties. (It’s all about the milestones.) We all know improving men’s sex lives has been a big business opportunity. Even with spiraling health care costs and increased payer scrutiny, Lilly is betting that sex will continue to sell. In explaining its decision to invest in Axiron, Lilly cited IMS data indication global sales of testosterone therapies now exceed $1 billion. -- Ed Silverman

Pfizer/Tekmira: Fresh from their own almost-March madness, Vancouverites probably weren't celebrating quite as hard this week when local firm Tekmira Pharmaceuticals teamed up with Pfizer in an RNA interference deal. (Though we're always tickled by a sighting of the RNAi beast in the biopharma wild these days.) No financial terms were discussed, but it's easy to imagine Pfizer’s CSOs and research heads being wowed by the biotech’s stable nucleic acid-lipid particle technology, which promises to solve the pesky RNAi delivery problem in a snap (or should we say SNALP). Announced March 16, the deal is the first between the two companies. But Tekmira has license agreements or collaborations with seven other biopharmas, including Merck, Roche, and Alnylam. (The latter two companies also hold equity stakes in the biotech.) Tekmira bolstered its delivery technology IP in a 2008 merger with privately-held Protiva Biotherapeutics in what was a family affair; both Canadian biotechs were spin-offs of the now defunct liposomal drug delivery firm Inex Pharmaceuticals. Of course, as Exelixis showed last week, it’s tough to create value with early stage discovery deals; you’ve also got to have a product. To that end, Tekmira is advancing two of its own: a next-generation ApoB SNALP for hypercholesterolemia that will enter Phase I trials later this year, and a preclinical anti-tumor biologic called PLK-SNALP. -- Ellen Foster Licking

AstraZeneca/University of Pennsylvania: Another week, another corporate/academic tie-up. This week the collaborators are AstraZeneca and the University of Pennsylvania, coming together to develop tau-targeted therapies for Alzheimer’s disease. As usual with these kinds of deals, financial details were light, but the arrangement includes potential royalties and milestones linked to successful clinical development. As we wrote in this November 2009 START-UP feature, academic-industry partnerships are one of the many ingredients in the R&D secret sauce as big pharmas seek to hedge their development risk and look for more externally sourced programs. AZ already has collaborations with Columbia University Medical Center in two therapeutics areas: obesity and mood/cognitive disorders. It also has a partnership with Virginia Polytechnic Institute & State University (Virginia Tech) and the Mayo Clinic College of Medicine to develop novel compounds for treatment-resistant depression. In many ways it makes sense for AZ to seek an academic partner to get access to novel AD compounds. As notable late-stage failures such as Pfizer/Medivation’s Dimebon show, there’s still considerable uncertainty in this therapeutic area. Even as companies have pursued drugs designed to disrupt the amyloid plaques that are the hallmark of AD, there’s also considerable effort to understand how neurofibrillary tangles comprised primarily of misfolded tau protein contribute to the destruction of brain nerve cells. -- EFL



Astellas/OSI: As expected, OSI officially responded to Astellas’ unsolicited $3.5 billion offer this week with a firm “nai keiyaku." (Because the last thing the biotech wanted was for its answer to get lost in translation.) Arguing that Astellas’ bid ignores the value of OSI’s cash and pipeline, the biotech instructed its bankers to look for a better deal. Apparently OSI believes the Astellas bid discounts the biotech’s financial asset portfolio, which includes cash, securities, and tax-friendly losses estimated (by OSI) to be worth $1.3 billion. Astellas gave no quarter, responding in a statement that it continues to believe in its proposed transaction and will press on with a tender offer of $52-a-share to OSI shareholders. Astellas also made good on its previous threat to nominate its own slate of independent directors at OSI’s next annual meeting. The Japanese drugmaker’s nominees include some well known biotech execs, such as Aptuit founder Michael Griffith and Alpharma board member Jill Kanin-Lovers. Investors seem confident that a white knight bid -- or a sweeter offer from Astellas -- could be in the offing. OSI’s share price quickly shot up above the initial tender price and has remained there. Assuming no other bidder emerges, Astellas will have to wait until the end of March to discover if it’s won the OSI betting pool. The tender offer expires March 31. -- Alex Lash

Basketball photo courtesy of flickr user Erik Charlton.

Badge image courtesy of the Food and Drug Administration.