Deals Of The Week: New Remedies Sought From Nature And Old Technologies

To help calm many a frazzled J. P. Morgan attendee trying to get to grips with new ideas, technologies and market entrants announced each year at that key U.S. conference, there’s nothing like a return to tried and tested modalities, particularly in drug discovery.

Two deals announced this week in Europe appear to herald just such a return to basics, although on closer inspection these older drug discovery methods – searching through natural product libraries for active substances -- and the use of high throughput screening -- have never really gone away.

The first Europe-centered agreement, between France’s Sanofi and Germany’s applied research institute, the Fraunhofer Institute for Molecular Biology and Applied Ecology, involves  identifying potential therapeutic substances from natural sources, mainly micro-organisms, to boost the number of antibiotics in development.

It might seem old hat: the venerable old-timer penicillin was isolated from natural sources, for example.  Still, the collaborators are introducing a couple of new twists. They are going to work together, as one team in shared labs on analyzing the genetics of micro-organisms, stimulating them to produce new active substances, and identifying those substances with therapeutic potential. It’s part of Sanofi’s drive to get  closer to cutting-edge science and external collaborators.

A new facility will be built on the Institute’s campus to house the researchers. Cross-pollination between this collaboration and Sanofi’s on-going alliance with venture-backed biotech Warp Drive Bio, which is scouring the genome of soil samples for examples of natural products with therapeutic potential could be possible. Under that 2012 deal the French pharma gets right-of-first-refusal for all candidates stemming from the target area of the biotech’s first genomic search.

The German researchers have a secret weapon: access to Sanofi’s huge (150,000-plus samples) collection of micro-organisms built up by predecessor companies like Hoechst and Synthelabo, as well as by its own labs.  The Fraunhofer Institute, a network or more than 60 research centers mainly based in Germany, with 30% of its funding from the German government and 70% from  industry partners, gains from the deal by being able to exploit Sanofi’s collection for non-medical uses with its own partners. In the crop protection area, for instance, Sanofi could develop compounds that have potential as human or animal medicines.

The lack of new classes of anti-infectives nearing the market has horrified many public health experts, who are concerned by the emergence of bacterial resistance to commonly used agents. Thereis  not a lot left in the locker to treat life-threatening infections. So it’s good news that other companies, such as Roche, have re-energized their research efforts in the field.

The week’s second European deal involves the setting up of a European joint venture called Hit Discovery Constance GmbH to conduct high-throughput screening (HTS) for biotech and academic partners, and to act as a storage and management facility for compound libraries.

HTS has been a disappointment to some; nonetheless it is now commonplace throughout industry and is often used to narrow down the choice of compounds likely to bind to targets, which are then refined through computer-based analysis and other processes.

Hit Discovery Constance is based in facilities in Constance, Germany, that have had a long line of previous owners – most recently Takeda Pharmaceutical Co. Ltd., and before that Nycomed SPA and Altana Pharma GmbH. Three European companies – Germany’s Lead Discovery Center, Italy’s Axxam SRL and Belgium’s Centre for Drug Design and Discovery - have set up the joint venture to run a fully-automated robotic screening system using a library of compounds assembled by the partners. Combined with other novel biochemical, bioassay and HTS technologies developed by the three partners, Hit Discovery Constance will be one of the largest screening hubs worldwide.

The revival of technology previously thought to be a disappointment was also featured in the standout deal that kicked off the J. P. Morgan meeting, between RNAi developer Alnylam Pharmaceuticals Inc. of the U.S. and Sanofi’s biotech unit Genzyme.--John Davis

Now, time to get on with deals on other fronts. In a week that saw far more than its fair share of activities, we've culled some of the highlights, below:

Moderna/Alexion: A number of deals were made and broken within the RNA space during the J.P. Morgan gathering, including Moderna Therapeutics Inc.’s news it landed another major partner for its preclinical messenger RNA technology. Rare disease specialist Alexion Pharmaceuticals Inc. will pay $100 million upfront to purchase 10 product options and is taking a $25 million equity stake in the company. Moderna will use its mRNA platform to discover molecules for rare diseases and then transfer all rights to Alexion, which will handle preclinical and clinical work on the molecules. Moderna will be eligible for clinical-stage and regulatory milestones as well as high-single-digit royalties on any resulting products.

This deal is similar to one Moderna struck with AstraZeneca PLC in March 2013 for the rights to more than 40 cardiovascular assets. The British pharma paid $240 million for the options. In both deals, Moderna will be eligible for undisclosed clinical and regulatory milestones, as well as royalties on any products that result. Moderna’s technology is designed to use messenger RNA to spur the production of therapeutic proteins. A day later, Moderna also announced that it was spinning out a satellite company, Onkaido Therapeutics to focus exclusively on oncology. Moderna is providing Onkaido’s first $20 million in capital.--Lisa Lamotta
Regeneron/Geisinger: Cash-rich Regeneron Pharmaceuticals Inc.’s collaboration with Geisinger Health System on studying genetic determinants of human disease is one of the most ambitious efforts to date by a drug company to systematically apply genomic sequencing to the discovery of new drugs.

The deal is broad and long-ranging, initially signed for five years, but with a horizon that could go out 10 years. Announced on Jan. 13 at the start of the J.P. Morgan meeting, it calls for Regeneron to perform the heavy lifting on sequencing and genotyping and for Geisinger to provide samples collected from its patient volunteers.  From Regeneron’s perspective, correlating genetic variations and human diseases could yield insights about disease and biomarkers leading to development of better drugs. Geisinger, at the same time, is looking for funding for its own research programs and to incorporate genetic advances into clinical care of its patients. Regeneron separately but simultaneously said it was creating a subsidiary, the Regeneron Genetics Center LLC, based at its Tarrytown campus, to pursue both large-scale and family-specific genomics studies.

The research collaboration will seek to sequence a minimum of 100,000 patients who are part of Geisinger, which treats three million people a year.  During the initial five-year collaboration term, the Regeneron Genetics Center will perform sequencing and genotyping to generate de-identified genomic data. The size and scope of the study are meant to allow great precision in identifying and validating the associations between genes and human disease. No money changed hands, but Regeneron will pay Geisinger for its services. Down the road, if drugs or diagnostics come to market, Geisinger will receive small royalties on sales of products.--Wendy Diller

Prosensa/GlaxoSmithKline: For our top “No-Deal of the Week,” GlaxoSmithKline has exited its 2009 collaboration in Duchenne muscular dystrophy (DMD) with Prosensa Holding BV, but the Dutch biotech is determined to continue advancing a portfolio of DMD candidates on its own, at least for now.

Few observers were surprised when GSK decided to terminate the partnership Jan. 13, but Prosensa says it hopes to continue developing drisapersen, a Phase III RNA antisense oligonucleotide exon-skipping compound which failed a Phase III trial last September.

In theory, drisapersen and Prosensa’s other candidates, three of which have reached mid-stage clinical development, address the underlying cause of DMD with exon-skipping technology that restores the expression of dystrophin protein. GSK paid $25 million upfront, with the potential for up to $665 million in milestones, in October 2009 for exclusive worldwide rights to drisapersen, as well as options on three other exon-skipping candidates. Although drisapersen demonstrated efficacy, as measured by improvement in the six-minute walk test (6MWT) in two other placebo-controlled trials, the companies announced Sept. 20 that it failed to meet its primary efficacy endpoint in the Phase III DEMAND III study.

Prosensa CEO Hans Schikan did not specify whether Prosensa paid GSK anything to re-acquire its intellectual property rights, including the options GSK had held, but said the multinational pharma holds no downstream rights for any of the DMD candidates. Prosensa earned at least $28 million in milestones under the collaboration with GSK, but Schikan said that cash was secondary in importance to the role GSK played in advancing drisapersen. “After this collaboration with GSK, and thanks to their commitment, we now have the largest database in DMD,” he said. He noted Prosensa probably never would have been in a position to develop this compound in this way. More than 300 patients have been treated in various clinical trials.

Schikan would not be pinned down on whether Prosensa will seek another co-development partner for drisapersen. The first order of business is to meet with stakeholders to see if there is a regulatory path forward for the compound, he said.--Joseph Haas

McKesson/Celesio: Our other notable “No-Deal” was McKesson Corp.’s announcement Jan. 13 that it had failed to complete the acquisition of Germany-based drug wholesaler Celesio AG because it did not attain the necessary 75% share position through its tender offer, despite raising its bid to €23.50 per share from the original €23. The acquisition was an effort to expand McKesson’s global reach, but the outcome was contingent on acquiring a minimum of 75% of shares on a fully diluted basis. The bid was announced in October.

McKesson CEO John Hammergren raised the topic during the company’s presentation to the J.P. Morgan Healthcare Conference, also on Jan. 13, and said redoing the tender offer was not a possibility. As a result, the failed offer “clearly puts us back to the drawing board in some respects.”

“Although we remain optimistic that we will continue to find ways to add value to our company through capital deployment and continued scale, it's not clear to us that Celesio will be part of that,” he said. However, asked if a joint venture with Celesio might be an option, he observed, “We obviously have been talking to Celesio for some time about various alternatives. I think clearly there is an opportunity for us to venture with them and jointly buy. In the past, we had the view that an acquisition and the complete control of the asset would give us faster and better throughput than a joint venture would, but clearly a joint venture would be an alternative to consider.”--Scott Steinke













 

Versant Looks For "Off-The-Beaten-Path" Deals In Canada, Europe

Versant Ventures has been deepening its commitment to international expansion lately. The firm is replicating its San Diego-based discovery engine, Inception Sciences, in Vancouver, tightening its ties with the Canadian research community and spinning out new companies as its predecessor has been doing for almost two years. And with new partners in its Basel, Switzerland office, the firm expects to forge new deals in Europe -- especially in off-the-beaten-path areas -- while enjoying closer proximity to both academic scientists and European acquirers.

Operating principal Jerel Davis says the firm has had some presence in Europe dating back to 2008, when venture partner Thomas Woiwode established a beachhead.  But new partners Guido Magni and Gianni Gromo, both former Roche colleagues of Versant partner Brad Bolzon, have arrived in recent months to flesh out the Basel office. The firm backed genetic vaccine start-up Okairos in September 2010, but more deals are expected soon. Stay tuned – the “Pink Sheet DAILY” expects to have full coverage of what’s on the way, and the next issue of START-UP will feature a deeper look at Versant’s international strategy.

The European office hopes to extend its reach throughout the continent and into Israel, while the Vancouver office will be in close touch with the Montreal research community while remaining “a short flight away from San Francisco and San Diego,” Davis says. He adds that the Canadian arm of Inception will likely spin out new companies in a fashion similar to Inception’s third project, which included an option for Roche to acquire it as it files an IND.

Financings of the Fortnight Comes Bearing Gifts

This will be the final FOTF of the year, so we’d like to take a moment to wish everyone warm, peaceful and happy winter solstice holidays, no matter which festivities you celebrate. 



We're grateful for your readership, and if there's anything you'd like us to do differently in 2013, or if you just want to wish us a Merry Hannukwanzamas, we're all ears. You can always leave comments below, or more privately, send an email to a - dot - lash at elsevier dot you know the rest. (No happy holidays for you, spambots!) We're also grateful this week to Sten Stovall, European bureau chief, for his help with the column.

In Europe, holiday lights in biotech circles should burn brighter with the news that Sofinnova Partners, based in Paris, has raised $312 million for a new life science fund, tapping almost exclusively into European sources. The venture capital group began life in 1989 and is now on its seventh fund. It raised the money from LPs including insurance companies, pension funds, fund-of-funds, financial institutions and high net worth private individuals, 90% of which are based in Europe (including 22% from France).

That’s a big shift, Sofinnova founder and managing partner Denis Lucquin tells FOTF: “Ten years ago 50 percent of our financial means came from the US. This time, we didn’t have any. They’re too nervous about the situation in Europe and the Eurozone, and they just don’t have the confidence to put money into Europe.”

Its previous fund closed in 2009 with $370 million committed, so willfully or not, the group has scaled back a bit. (Sofinnova Partners is not to be confused with the US-based Sofinnova Ventures, which closed a new $440 million fund in late 2011.)

No matter where they’re located, investors are nervous about early stage life sciences, but Sofinnova Partners made a contrarian pitch: Sofinnova Capital VII fund will be invested in early-stage life science companies, with about two-thirds going into Europe and one-third into the US. The fund will target biopharmaceuticals, devices and industrial biotechnology. As part of the comprehensive coverage of biotech crossover investment in the November START-UP, we heard from VCs, under pressure from impatient limited partners, who are looking to public investments for faster exits. “One of the ways to compress the timelines is through participating in public financings,” Sofinnova Ventures’ Jim Healy told our colleague Stacy Lawrence.

If Lucquin is feeling similar pressure, he’s not letting on: “We will eventually exit these investments by either selling them to big corporations or by floating them on a stock market. We usually do that after five to six years, on average, but sometimes it takes a bit longer.”

Then again, the firm’s recent track record gives its partners some breathing room. The latest fundraising follows a three-year period in which Sofinnova completed the trade-sale of portfolio companies Corevalve, to Medtronic Inc. for up to $850 million; Novexel SA to AstraZeneca for up to $505 million; Movetis to Shire PLC for €428 million; Fovea to Sanofi for up to €370 million; and PregLem SA  to Gideon Richter for up to CHF445 million. Portfolio firms Stentys and DBV also went public on the Paris Euronext stock market. For all those, says Lucquin, Sofinnova had been the initial and largest investor from start to exit, representing a total enterprise value (stock market capitalization plus debt) of $3.6 billion.

That's a lot of stocking stuffers. If you know a FOTFhead who's not a START-UP subscriber, by the way, don't forget magazine subscriptions always make a lovely present. In fact, the START-UP elves are busy right now in their secure undisclosed sweatshop working on the 2012 A-List, in which we not only break down the year's Series A investment activity, but ask the question What does it all mean? All we can tell you now is that, yes, Virginia, there really is a Père Noël, as the Parisian Sofinnovians would say. And there really are Series A biotech investors despite the early-stage aversion you hear so much about.

Leave some cookies and a glass of milk, put out the fire in the fireplace, and, if you can, clean the soot out of your chimney, 'cause whether you've been naughty or nice, here comes...

Amarin Corporation: Cardiovascular drug developer Amarin is getting ready to launch its FDA-approved fish oil pill Vascepa (icosapent ethyl), and it’s got $100 million in fresh cash to go it alone. The Dublin, Ireland firm said December 6 it raised the non-dilutive capital through Pharmakon Advisors, calling it a “hybrid debt-like instrument.” The funding will allow Amarin to hire 250 to 300 salespeople for an early 2013 launch. Vascepa was approved in July. The delay has raised questions about Vascepa’s future. CEO Joseph Zakrzewski said on a conference call that Amarin will continue discussions with potential acquirers and partners. But absent a deal, the company will prepare to market the primary-care drug itself, an enormous challenge for a small organization that has no other marketed products, lacks revenue, and had just 31 employees at the end of 2011. Approved for patients with very high triglycerides, Vascepa will enter a market against a variety of competitors. Most prominent is the blockbuster Lovaza (omega-3-acid ethyl esters), sold by Pronova BioPharma ASA and GlaxoSmithKline PLC and known as Omacor in Europe. A generic version of that drug will be sold in the US by Apotex beginning in 2015. Vascepa is thought to have an advantage over some competitors, in that it does not contain docosahexaenoic acid (DHA) and thus does not raise LDL cholesterol. Amarin shares nearly doubled in value in April 2011, when it reported Phase III data showing that Vascepa lowered LDL cholesterol, but as IP issues and muddy launch plans weighed on the shares, they lost those gains within six months. Its share price was hammered again on the financing news and as of the closing bell December 12 was down 21%. The new debt vehicle can be paid back via a series of small installments until November 2013, at which point payments will increase until 2017. Zakrzewski said the payments are tied to Amarin’s revenue forecasts, and are capped if sales are less than expected – Paul Bonanos

Moderna Therapeutics: The developer of messenger RNA therapeutics emerged from incubation with the announcement of a $40 million financing on December 6. Flagship Ventures is leading the financing joined by what Moderna CEO Stephane Bancel called “high net worth individuals interested in going after very disruptive innovation.” Moderna is adapting research by Harvard University’s Derrick Rossi and Ken Chien and Massachusetts Institute of Technology’s Robert Langer to create treatments that aim to let the human body restart or increase the production of naturally occurring therapeutic proteins inside their own cells without triggering an innate immune response. The company was founded in October 2011, and by June 2012, Moderna was conducting preclinical studies of two drugs in primates. “In the body, we have a huge number of secreted proteins,” Bancel told our “Pink Sheet” colleagues. “What we have demonstrated in the serum, across several drugs and several animals, is that we are able to inject by intramuscular or subcutaneous [administration] and around the injection site get the body’s cells to uptake the RNA, make the proteins of interest and then secrete them to the bloodstream. It’s a very novel way of thinking about drugs.” The $40 million will be used to demonstrate safety with a goal of advancing two drugs in undisclosed indications into Phase I, he added. Moderna emerges from the Flagship Venture Labs think tank and incubator, which earlier this year launched microbiome-focused Seres Health. The new company's board will be chaired by Flagship co-founder Noubar Afeyan. The plan is to develop, make and sell mRNA drugs for rare diseases in-house while partnering out opportunities in larger patient populations. The firm thinks its technology offers significant promise in cardiology and oncology because of its ability to penetrate specified cells and trigger the production of proteins in those cells, but not outside of them. – Joseph A. Haas

ArmaGen Technologies: The Santa Monica, Calif. start-up said November 29 it has secured a $17 million Series A from an unusual syndicate: Three pharma corporate venture groups and the finance arm of a Japanese conglomerate. Corporate venture has played an increasing role in biotech funding, reaching down into early rounds more often in the past couple years, but a Series A exclusively from corporate is still rare. Boehringer Ingelheim Venture Fund is the lead investor, with participation from Shire, Takeda Ventures, and Mitsui & Co. Global Investment. What’s caught their attention is ArmaGen’s recombinant protein technology to create drugs that penetrate the blood-brain barrier. The near-term goal is to go after rare CNS diseases such as Mucopolysaccharidosis (MPS) Type I (Hurler's syndrome) and MPS Type II (Hunter's disease). Both BI and Shire’s funds are relative newcomers to the venture scene. When it launched in 2010, BI’s fund director anticipated about three deals a year, a push for board seats – which it has with ArmaGen – and made clear a goal of eventually partnering or acquiring the investee. Shire unveiled its investment group in September 2010 and has been aggressive; we counted at least eight investments since its debut. ArmaGen is run by UCLA endocrinologist William Pardridge, who spun it out of his lab in 2004. Until now he has raised government and military grants, but no venture financing. ArmaGen’s “Trojan Horse” technology creates fusion proteins that both bind to blood-brain-barrier receptors to sneak through, and bind to targets once inside the brain. – Alex Lash
 
Flexion Therapeutics: When its founders created Flexion in 2007, they didn’t plan on pursuing late-stage drug development. Times have changed. The company said December 4 it raised $20 million in a Series B funding earmarked in part for a Phase III trial of an osteoarthritis compound. It’s a significant shift away from the company’s original goal. The founders, former Eli Lilly executives who pioneered Lilly’s Chorus program, intended for Flexion to acquire compounds that pharmas were neglecting, develop them through Phase II, and strike partnerships with pharmas for late-stage trials. But partnering terms have proven onerous in the general market, even for drugs that have displayed promise in Phase II data, Flexion CEO Michael Clayman told “The Pink Sheet” DAILY. Novo Ventures partner Heath Lukatch said the company might even attempt to support development of a product through NDA registration. For now, Flexion has cash to sustain itself through 2013. First-time backer Novo Ventures led the new round, which also included returning investors 5AM Ventures, Pfizer Venture Investments, Sofinnova Partners and original seed investor Versant Ventures. The syndicate supplied $55 million in Series A funding, spread out over three closings between 2009 and early 2012. Based in Woburn, Mass., Flexion’s primary focus is on FX-006 and FX-005, a pair of osteoarthritis drugs. FX-006 is a sustained-release reformulation of a steroid that can be injected directly into a joint, and is a potential first-line therapy.  – P.B.
 
The Best of the Rest: A $50 million Series D investment for 23andMe, led by the king of late-stage social-media investments Yuri Milner, will let the company reduce the cost of its personal genome service to $99… Led by Flemish investment firm PMV, Biocartis raised €34.5 million in its Series D… Infinity Pharmaceuticals raised $150 million in a secondary offering… Zafgen closed a $21 million Series D round to support Phase II trials for obesity candidate beloranib… Rare disease start-up River Vision Development also completed a $17 million A round involving corporate backers… New investors Morgan Stanley and AllianceBernstein joined NanoString’s $15.3 million Series E… After raising an initial $15 million in December 2011, Cerulean Pharma reportedly added $13 million to its Series D… Working on a cloud application for electronic medical records, Modernizing Medicine closed a $12 million placement… Galera Therapeutics grossed $11 million in a Series A co-led by NEA and Novartis Venture Fund… Avelas Biosciences’ real-time metastatic node visualization tools will get funded via the company’s $7.65 million A round… New investor Astellas Venture Management joined the syndicate for Bicycle Therapeutics’ £3.75 million Series A… Biomatrica raised $5 million to back its SampleMatrix technology for ambient biological sample storage… To help complete Phase III trials for Parkinson’s agent pimavanserin, Acadia Pharmaceuticals grossed $86 million in a private placement… Cel-Sci is using a $10.5 million RDO for Phase III studies of Multikine for head and neck cancer… Applied DNA Sciences raised $7.5 million from institutional investor Crede CG II… Israeli biotech Redhill Biopharma completed a $6.5 million financing… Developer of inhaled respiratory therapeutics Aradigm grossed $6 million in a PIPE… CNS-focused Supernus publicly raised $48 million… AcelRx completed a $41.4 million FOPO to support acute and breakthrough pain projects… To help pay for Phase II trials of diabetic foot ulcer candidate DSC127, Derma Sciences grossed $31.7 million in its follow-on… Pain drug developer Durect’s follow-on resulted in $12.6 million… Cancer immunotherapeutics company Northwest Biotherapeutics closed a $12 million public offering… NovaBay raised $7.4 million publicly for its anti-infectives work… As it prepares for Phase II of its oral insulin capsule, Oramed Pharma completed a $5 million FOPO… and Arrowhead Research publicly sold $4.1 million in stock for its peptide drug conjugate platform.  – Amanda Micklus