Deals Of The Week: A New Sound For The Fourth Of July

Certain sounds signify the Fourth of July season in the U.S. – the pop and boom of fireworks, the sizzle of burgers and hot dogs on the grill, the crack of the bat as baseball reaches mid-season. And, oh yes, the sound of the other shoe dropping in the pharma/biotech M&A arena.

Wait, the next shoe dropping in biopharma M&A? That’s exactly what the industry and its followers are awaiting in the immediate aftermath of Bristol-Myers Squibb’s $5.3 billion buyout of Amylin Pharmaceuticals just prior to the holiday. Now, industry analysts are studying that and other recent deals for trends or clues about what is coming.

Near-term, Wall Street awaits the outcome of GlaxoSmithKline’s bid for its Benlysta (belimumab) partner Human Genome Sciences. On June 29, GSK extended its hostile, $13-per-share offer for the Maryland biotech through July 20, while HGS again turned down the bid and said it is accepting counter-offers until July 16.

Salveen Richter, managing director, biotechnology equity research, at Cannacord Genuity Securities, pointed to recent pharma buyouts of biotechs such as Gilead Sciences/Pharmasset, Bristol/Inhibitex, Amgen/Micromet and AstraZeneca/Ardea Biosciences, saying pharma seems to be focused on acquisitions that offer later-stage assets or proven revenue generation or profitability.

“Overall, we’re seeing pharma be opportunistic, picking assets to build their R&D engines or showing interest in later-stage, proven assets, but they have avoided limited-product companies in the initial drug launch phase,” she said.

AstraZeneca/Ardea clearly was a continuation of the U.K. pharma’s interest in bolt-on acquisitions, she added. “AstraZeneca obviously made an investment in rheumatology through its partnership with Rigel Pharmaceuticals, but the recent Ardea acquisition was a bolt-on as they could just add that asset for gout right onto the rheumatology franchise – and they have publically stated they are looking for more,” Richter noted. “If a company is in a therapeutic area with built-out commercial infrastructure or plans to [build], bringing in an asset in the same category is highly leveragable.”

With some speculating that the Amylin purchase will lead to a run on companies focused on diabetes or obesity, Stephen Willey, director, equity research, biotechnology, at Stiefel Nicolaus, wondered if such assets, particularly in the diabetes space, are in plentiful supply.

“The diabetes space is tough only because you don’t see a lot of companies playing in it,” he said. “That’s because it’s a large, primary care market and one of these opportunities whereby the acquirer is going to be held hostage to finding a partner. I’m not sure there’s necessarily a ton of read-through on the Amylin take-out; to me that was company-specific.” Buying Amylin was a response by Bristol to its clinical setbacks with dapagliflozin, which created a hole in its revenue projections for 2015-2016, he explained.

But to the extent M&A interest turns to diabetes, as it did with hepatitis C in 2011, Willey cites Lexicon Pharmaceuticals as a potential target. “Their Phase III-ready asset [LX-4211, an oral dual inhibitor of sodium-dependent glucose transporters 1 and 2 (SGLT1/SGLT2)] is probably better than any other diabetes asset that we’ve seen in development,” he asserted. “I would argue that the way that drug works, once-daily oral, has the potential for making the GLP-1 analogues obsolete in five years.”

Simos Simeonidis, senior biotechnology analyst with Cowen & Co., does not see any unusual trends in this year’s M&A activity – just a further recognition by big pharma of its ongoing need to respond to the patent cliff in varying ways.

“It’s part of a continuum – we’ve seen a lot of pharma acknowledge that their internal innovation engines are not working well and they’re cutting,” he said. “They’re realizing that they’re not effective, so they’re saying ‘let’s cut some of the R&D function’ and out-source it to their business development and M&A budgets because there are some late-stage assets they should bring in instead of waiting for their own programs to happen.”

If there is a wave coming, though, Simeonidis thinks it may be in the obesity space. Arena Pharmaceuticals recently obtained FDA approval of weight-loss drug Belviq (lorcaserin), but was required to delay launch because the drug is classified as a controlled substance. That means Vivus still has a chance to beat lorcaserin to market with Qnexa (phentermine/topiramate), which has a July 17 PDUFA date.

“Qnexa is an asset that should be in the hands of big pharma,” Simeonidis said. “I think it’s the best obesity drug of the three [Orexigen Therapeutics’ Contrave (naltrexone/bupropion) is a third candidate]. Lorcaserin is approved but it won’t be on the market for four to six months, so Vivus could [have its drug] approved and on the market before Arena, assuming there is not a similar delay. And there’s a big difference between the two drugs – the Vivus drug is a lot more effective so if big pharma looks into obesity, it will grab Vivus.”

Whoever grabs what, Deals of the Week will be there to record and interpret the action. Now on to  …

Janssen/CorImmun: Johnson & Johnson subsidiary Janssen-Cilag revealed that it has acquired German biotech CorImmun for an undisclosed amount. The deal, which came to light June 28, nets Janssen a Phase II drug candidate for heart failure. CorImmun had been investigating the small cyclic peptide COR-1, which is thought to reduce the autoimmune effects of antibodies that act against the beta-1 adrenergic receptor, thereby improving heart function and mitigating myocardial damage in patients in the midst of heart failure. A mid-stage trial of the drug began in September 2011. Janssen will assume responsibility for further development in exchange for an upfront payment, although it may owe a further payment based on a clinical milestone as well. Investors in CorImmun included MIG Verwaltungs AG, Bayern Kapital, BioM AG, HighTech Gruenderfonds and KfW Bank; the company raised a €7.45 million ($9.23 million) second round of funding in October 2010. – Paul Bonanos

AstraZeneca/Cellworks: AstraZeneca said it will collaborate with Saratoga, Calif., start-up Cellworks to discover and develop new combination therapies for drug-resistant forms of tuberculosis. The collaboration also will receive support from Wellcome Trust, the U.K.’s largest medical charity. Cellworks, which has an R&D center in Bangalore, India, will use its platform to identify potentially efficacious drug combinations with few toxic side effects. AstraZeneca will “validate” the 10 best models using both in vitro and in vivo techniques, according to a company statement issued July 2. Although the companies initially will address drug-sensitive and resistant tuberculosis, they say they will aim to treat multi-drug-resistant TB (MDR-TB) down the road. Founded in 2005, Cellworks already has used its predictive platform to identify oncology and autoimmune drugs, including a rheumatoid arthritis treatment it says is ready for clinical development. Artiman Ventures backed the company in a $7.5 million Series A round during early 2009. – P.B.

Ferring/Albireo: Gastroenterology-focused Ferring Pharmaceuticals licensed a Phase III-ready constipation drug from AstraZeneca spinout Albireo on July 3 in a deal involving an undisclosed upfront fee, milestones and tiered double-digit royalties on sales. Ferring, which also is taking over development costs for the drug, elobixibat, gains worldwide rights except for Japan, South Korea, Thailand, Indonesia, Vietnam and Taiwan. Albireo licensed Asian rights to the compound to Japan’s Ajinomoto, also for undisclosed terms, in April. Elobixibat, a first-in-class compound that modulates enterohepatic circulation of bile acids by partially inhibiting the ileal bile acid transporter, increasing colonic fluid secretion and motility, is about to enter Phase III in chronic idiopathic constipation and Phase IIb in irritable bowel syndrome with constipation. Ferring said the drug will strengthen its gastroenterology portfolio, led by the inflammatory bowel disease drug Pentasa (mesalazine). Sweden-based Albireo was founded in 2008 when AstraZeneca spun out a set of gastrointestinal compounds into the new company, which was backed in a $27 million Series A by Nomura Phase4 Ventures, TVM Capital and Scottish Widows Investment Partnership.  – Joseph Haas

ADC Therapeutics/Cancer Research UK: Switzerland-based antibody-drug conjugate developer ADC Therapeutics has revealed one of the sources of the antibodies required to target its "warheads" to cancer cells. It has signed an agreement, announced July 6, with Cancer Research Technology, the commercial arm of charity Cancer Research UK, to exploit antibodies and peptides identified by researchers working for the charity, and one antibody co-owned by the University of Copenhagen, Denmark. These will be combined with warheads and linkers obtained from Spirogen Ltd. under an agreement signed in March 2012, through which ADC Therapeutics can use Spirogen's pyrrolobenzodiazepines (PBDs) against 10 specific targets, cancer-associated receptors and the like. The PBDs are released when the conjugates are internalized into cells, and bind deep in the minor groove of DNA to block replication. But the neat bit is that they usually are overlooked by DNA-repair enzymes, so they might not be associated with the development of resistance. The antibody-PBD conjugates will be taken forward into preclinical studies initially funded by ADC Therapeutics and conducted in the laboratories of three London universities, Queen Mary, UCL and King's College London. Financial details of the collaboration were not disclosed. ADC Therapeutics, which was established at the start of 2012 by the private equity firm Celtic Therapeutics Management LP, also is the majority owner of Spirogen. – John Davis
 Photo credit: Wikimedia Commons

Deals Of The Week: Pfizer Goes For An IPO

The big news this week was the deal that didn’t happen: the sale of Pfizer’s animal health division. Pfizer announced June 7 that it will split off the business into a new standalone company to be called Zoetis instead and that it is preparing to file an initial public offering of a minority ownership stake in the new company.

Investors had been anticipating either a sale of the business or a split-off since CEO Ian Read announced plans to shed the business last year along with its nutrition business, so the news isn’t exactly a surprise.

Still, Pfizer inked a deal for its nutritionals business with Nestle S.A. in April, offloading the business for $11.85 billion, a price that reflects a pretty premium over the $9 billion to $10 billion some analysts had predicted.

Pfizer’s decision to spin-out the business means rival big pharmas like Merck and Eli Lilly won’t be expanding with Pfizer’s assets. The chiefs at both companies have said they remain committed to animal health and the diversified business model. Of the three, Pfizer’s business is the largest with $4.2 billion in sales in 2011. Merck’s animal health business brought in $3.25 billion in sales and Lilly’s $1.67 billion.

A split-off offers tax advantages of a sale, which Read called out in a press release. “Our focus continues to be on taking the actions that will generate the greatest after-tax value for our shareholders,” he said. Analysts had valued a potential sale of the business at around $15 billion.

With the decision to spin-out the business, Pfizer is following a similar route to the one Bristol-Myers Squibb took when it spun-out its Mead Johnson nutritionals business in 2009. That move has been well-received on Wall Street. The initial offering was $24 per share and the stock closed June 7 at $81.12, representing around 70% growth.

Pfizer hasn’t priced the IPO, so it remains to be seen how much it will cost to buy into Zoetis, but Read has vowed to make the company independent by July 2013 so there is plenty of time to analyze the numbers and start wagering.

Elsewhere in the news, GlaxoSmithKline announced June 8 that it has extended its offer to buy Human Genome Sciences from the prior deadline of June 7 to June 29. Otherwise, it was a slowgoing week on the business development front ...

Merck KGaA/ Dr. Reddy's Laboratories – India's global generics firm Dr. Reddy's Laboratories, announced June 6 it was linking up with Merck Serono, the pharmaceutical division of Germany's Merck KGaA, to develop and commercialize biosimilar cancer products, principally monoclonal antibodies. The collaboration will exploit Merck Serono's expertise in biologics manufacturing, development and marketing, which includes the MS therapy Rebif (interferon beta-1a) and the anticancer Erbitux (cetuximab), and Dr. Reddy's pioneering role in biosimilars (it already markets four such products in India). No money is changing hands and the collaborators will share risks and rewards, with Dr. Reddy's conducting early development through Phase I, and Merck Serono taking over further clinical development and manufacturing. Merck Serono will commercialize the biosimilars globally, with Dr Reddy's receiving royalties, except for the U.S., where the companies will co-commercialize on a profit-sharing basis, and certain unspecified emerging markets, where marketing will be co-exclusive, or where Dr Reddy's will have exclusive rights. Biosimilars is a new sphere of activity for Merck KGaA, and one it can enter at a relatively low cost. That's important for the company, as it has just started an efficiency program which calls for R&D facility closures and job losses in order to make around €300 million in costs savings by 2014. For Dr Reddy's, it provides a source of research funding while keeping its options open outside of the oncology sector. – John Davis

Onyx/ Anderson Cancer Center – In just the latest of its research ties to biopharmaceutical companies, the MD Anderson Cancer Center at the University of Texas announced June 4 that it will collaborate with Onyx Pharmaceuticals in an effort to delineate the potential of that company’s anti-cancer candidates carfilzomib and oprozomib in multiple myeloma and lymphoma. Financial terms of the two-year research agreement were not disclosed. Carfilzomib, to be marketed under the brand name Kyprolis, is under review at FDA for relapsed and refractory multiple myeloma. Oprozomib, like carfilzomib, is an oral proteasome inhibitor, is Phase Ib/ II study in hematological malignancies. Onyx and MD Anderson personnel will oversee the collaboration together in a joint steering committee, with MD Anderson conducting all studies related to the agreement. The focus will be on the potential of proteasome inhibitors in tandem with other novel, early-stage cancer candidates, as well as to increase the biological understanding and enhance the clinical profile of the two Onyx compounds. MD Anderson’s most recent deal with private industry was the licensing of an experimental folate-binding protein (FBP) E39 vaccine for the prevention of recurrence of gynecological cancer to Galena Biopharma. – Joseph Haas

Picture credit: Wikimedia Commons

Deals of the Week Ponders The Complications

Sometimes, a pharma partnership is a prelude to a buyout deal. Other times, as some lovelorn users of one newsworthy social network like to say, it’s complicated. For GlaxoSmithKline, its relationships with three different companies show how one kind of deal can lead to another – or not.

This week, GSK acquired one longtime partner, wrestled with another after it rejected a hostile bid, and raised its stake in a third. First, it paid GBP 61 million ($99 million) to acquire the portion of proteomics drug discovery company and longtime partner Cellzome that it does not already own. GSK will pay cash for just over 80% of Cellzome shares; it previously owned a shade less than 20% of the company, thanks to a 2001 deal in which GSK sold its Cell Map division to the privately-held German start-up, then just a year old. The deal, expected to close Monday, gives GSK access to additional tools to assess interactions between drugs and proteins, potentially leading to better visibility into drug successes and failures during the discovery process. The two are already familiar with one another: They’ve been collaborators in an inflammatory disease partnership since 2008.

The first-comes-love-then-comes-marriage arrangement doesn’t seem to be happening for GSK and Human Genome Sciences, though. As we noted last week, that deal turned hostile as HGS rejected a $13-per-share bid that valued it at $2.6 billion. Now, HGS is trying to remain independent by adopting a poison-pill strategy, a shareholder rights plan that would kick in if a third party acquires 15% of HGS stock. While HGS is still retaining banks to explore strategic options, the new provision would allow its stakeholders to thwart a takeover attempt; it reiterated that it believes GSK’s offer is inadequate this week as well. GSK and HGS are already partners on the lupus drug Benlysta (belimumab), as well as a pair of pipeline drugs including Phase III cardiovascular drug darapladib.

Is there a middle ground between outright acquisition of a partner and a hostile takeover of one that doesn’t want to be bought? How about what GSK did with its collaborator Theravance this week? The British pharma took that relationship to the next level when it acquired 10 million additional shares of publicly traded Theravance for $213 million, based on terms announced in April. That boosts its ownership stake from 18.3% to 26.8%. The two have been allies since 2002, and have expanded their partnerships around bifunctional muscarinic antagonistic beta-2 agonist (MABA) and long-acting beta-2 agonist (LABA) programs under development for chronic obstructive pulmonary disease, including Relovair (fluticasone furoate/vilanterol).

Sound complicated? Some deals are easier to complete than others, but we've got more news than that to report this week. Now stop hitting 'refresh' and read...

Agilent/Dako: The words “biggest tech IPO in history,” were frequently spoken of Facebook’s offering this week, but it’s worth remembering that the spinout of Agilent Technologies from Hewlett-Packard in a 1999 offering was once ranked among the biggest ever. Agilent made a move in the life sciences May 18, when it acquired Danish cancer diagnostics company Dako for $2.2 billion in cash. Agilent, a Santa Clara, Calif.-based maker of electronics measurement equipment, already markets a variety of life sciences and chemical analysis products. Its microscopes, imaging equipment, software and other laboratory gear allow study of biological samples at the molecular level; they are sold into the commercial pharma, biotech and research market as well as the academic and government markets.  Dako sells antibodies, software and instruments for cancer diagnostics, including diagnostic kits, probes, and reagents used in flow cytometry. It posted revenues of about $340 million in 2010. Swedish private equitiy firm EQT Partners AB acquired Dako from its founding family for about $1.3 billion in February 2007; Novo Nordisk held a minority stake at the time. – Paul Bonanos

Piramal/DRG: Flush with cash from the May 2010 sale of its branded generics business to Abbott Laboratories Inc., Piramal Healthcare Ltd. announced on May 16th that it will acquire life science analytics and consulting firm Decision Resources Group for $635 million. The acquisition is Piramal’s second this quarter; in April it moved to acquire Bayer AG’s molecular imaging business, including florbetaben, a Phase III molecular imaging agent for diagnosing Alzheimer’s disease. Last August, the company made a significant investment in Vodafone’s Indian operations. The DRG acquisition price represents a 4x multiple of DRG’s projected 2012 top line sales of $160 million. The beneficiary of the sale is Provident Equity Partners, which focuses on the media, communications, education and information sectors, and has over $23 billion under management. Provident took a majority stake in DRG for $193 million in May 2010, investing out of its $4.25 billion Fund V. The sale to Piramal, expected to close in the second quarter, will bring Provident a 2.1x return on investment. Piramal chairman Ajay Piramal cited rising demand in the pharma sector for “specialist information” during a time of rising research costs and increasing complexity in accessing global markets. In particular, he emphasized Piramal Healthcare’s reputation and relationships with global life science companies and its knowledge of emerging markets. DRG CEO Peter Hoenigsberg echoed the demand for information about emerging markets, which he called “the primary avenues for growth in the pharma industry” – and mentioned Piramal’s experience in emerging markets as a factor in the deal. - Michael Goodman

Bristol-Myers Squibb/Tsinghua University: Bristol-Myers Squibb has teamed up with China’s Tsinghua University to develop novel targets for oncology and immunoscience on May 14. The partnership will focus on 3D protein structure mapping of biological targets, as well as structural biology research. "This is Bristol-Myers Squibb's first discovery collaboration in China and is an example of the company's deepening commitment to the country," said Francis Cuss, senior vice president of research at BMS. "We are delighted to be working with Tsinghua University, a world-renowned and highly esteemed research-based academic institution with expertise in target identification and structural biology that will support the discovery of new medicines to fight serious diseases in China and around the world," he said. The multi-year partnership is one of many that have popped up in recent years between innovation-hungry Big Pharma and the academic community. - Lisa LaMotta

Newron/Zambon: Two Italian companies struck a licensing deal around safinamide, a novel Parkinson's treatment that showed safety and efficacy in a recent Phase III trial. Chemical and pharmaceutical company Zambon paid a total of €20 million ($25.4 million) to Newron Pharmaceuticals of Milan to option and license the drug worldwide, not including Japan and other Asian territories already covered by a deal with Meiji Seika Pharma. (One-time rights holder to safinamide, Merck-Serono, returned the drug to Newron in October 2011, throwing a wrench in Newron's previous corporate development plans.) Newron will also receive milestone payments of unspecified size, as well as double-digit royalties if the drug is commercialized. Zambon will shoulder further development costs of the drug. Newron had been lining up safinamide for approval in 2013. The compound is expected to be marketed as an add-on treatment administered alongside dopamine agonists in patients with various stages of Parkinson's disease; Newron says it has both dopaminergic and non-dopaminergic properties. Separately, Newron said new chief executive Stefan Weber will replace founding CEO Luca Benatti, who stepped down from the position after 13 years. - P.B.

Deals of the Week: GSK Goes Hostile

How easy it is to push friendship aside when money gets in the way. GlaxoSmithKline PLC has pushed its two-decades long friendly partnership with Human Genome Sciences Inc. aside and is taking its acquisition bid hostile. The company commenced a tender offer for HGS May 10, taking its $13 per share offer directly to shareholders after the company’s board of directors rejected it in April.

The offer represents an 81% premium over HGS’ closing share price of $7.17 April 18, the last trading day before the offer was publicly disclosed, but shareholders aren’t likely to see the value the same as GSK. Just a year ago, HGS closed trading at $27.82 on May 10, 2011. But the company’s stock has been under pressure as sales of the company’s first marketed drug, the lupus treatment Benlysta, have failed to take off the way some investors hoped.

The fiasco makes the timing right for GSK. The two companies are partnered on Benlysta, as well as on two late-stage pipeline drugs. The tie-ups leave HGS particularly vulnerable to a takeover by GSK since it is unlikely another suitor will step up for a company that is already so deeply engaged with a another big pharma.

Still, HGS is trying to pull what levers it can. The company retained Goldman Sachs and Credit Suisse to explore strategic alternatives. And shareholders have already pushed the stock over $14, suggesting they see a chance GSK will push its bid higher. But GSK is putting the pressure on HGS now, and says it has no interest in being part of the strategic review process.

The hostile turn has added fuel to speculation that GSK’s interest in the pipeline drug darapladib is greater than the company is letting on. For a Phase III drug in development for cardiovascular disease, darapladib has been flying under the radar. It is an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2), a first-in-class drug candidate, but its mechanism of action is largely unknown, and investors have thus been skeptical of the program. It’s high-risk, but it could also be high-reward.

GSK’s sudden decision to acquire HGS after such a lengthy partnership has sounded some alarms among HGS shareholders, who are wondering if GSK is looking to get full control of darapladib before Phase III data read out. HGS stands to receive a 10% royalty on worldwide sales, and has an option to co-promote the drug in North America and Europe with a 20% profit share. Management at HGS has been talking up the darapladib opportunity in the meantime, while GSK CEO Andrew Witty has done just the opposite. “It will be two years before anybody can really call a judgment of whether or not this molecule is actually capable of being developed into a drug,” he warned during an April conference call.

The drug is being studied in two large Phase III outcomes studies, but after conducting an interim analysis, an independent data monitoring committee recommended the studies continue. A positive sign in any event.

The other Phase III drug, albiglutide, is a once-weekly injectable GLP-1 agonist for type 2 diabetes that hardly seems worth fighting over given the number of entrenched rivals already on the market.

The question now is if HGS shareholders will be willing to settle for $13 per share and accept the offer with a sigh that includes some relief or hold out for a few dollars more in the hopes GSK is willing to bet higher on darapladib too. The offer is set to expire on June 7.

In other news, it was a ho-hum week on the deal-making front. But don't let that spoil your enjoyment of the next edition of ...

Daiichi Sankyo/Coherus: Daiichi Sankyo Co. Ltd., the latest in a long line of Japanese pharma to make some noise in the increasingly busy biosimilars space, has tapped a California virtual start-up to help it develop etanercept and rituximab biosimilars. Daiichi has partnered with Coherus BioSciences, which will retain rights to the molecules outside of Japan, Taiwan, and South Korea. Further terms weren’t disclosed. Although Coherus itself was only founded in 2010, “its founders are in fact an elite group of biotech pioneers who helped build America’s first-generation biotherapeutics industry, including companies like Amgen, Genentech, Roche and Immunex," Daiichi Sankyo told PharmAsia News. Coherus is lead by CEO Denny Lanfear, a long-time Amgen employee, and co-founder Stuart Builder, formerly of Genentech. Builder was the start-up director for the biotech Alnara Pharmaceuticals, which was sold to Eli Lilly & Co. for $180 million in cash plus up to $200 million in milestones. This isn’t Daiichi’s first foray into biosimilars. The company already has biosimilar capabilities through subsidiary Ranbaxy, which is developing versions of filgrastim and molgramostim, and through the $16.9 million acquisition of biosimilar firm Zenotech Laboratories in Aug. 2010. Coherus says to expect more deals in the not too distant future and that it has five oncology and inflammation focused biosimilars in development. – Dan Poppy

Pozen/Desitin: Pozen, which has built a business strategy around developing fixed-dose, combination drugs comprising low-cost generic compounds, has sold EU rights for MT 400, its Phase III migraine candidate, to Desitin Arzneimittel GMBH of Germany for a nominal upfront payment, modest milestone payments and potential sales royalties. In structure, the deal resembles a previous agreement the North Carolina-based firm reached last year with Johnson & Johnson unit Cilag AG for manufacturing and marketing rights to ‘400 in Brazil, Columbia, Ecuador and Peru. The pact with Desitin, which covers the 27 EU nations as well as Switzerland and Norway, calls for $3 million in pre-commercialization payments, including a $500,000 upfront. The agreement, which also stipulates double-digit royalties on net sales of ‘400 that will increase based on annual sales volume, will expire on a country-by-country basis on the 15^th anniversary of the product’s first commercial sale in each market licensed to Desitin. The Cilag deal, which included an undisclosed small upfront payment, provides for expiration at 15 years after the first product sale in each market, with royalties in the high single digits for the first 10 years, then in the lower single digits for the final five. MT 400 is a proprietary combination of sumatriptan and naproxen sodium – Pozen also licenses U.S. rights to a different dose of the combination, known as Treximet, to GlaxoSmithKline.—Joseph Haas

Evotec/4-Antibody: European drug discovery platform companies Evotec AG and 4-Antibody AG have teamed up to provide collaborative antibody discovery services to Evotec’s customers. The deal will allow Hamburg-based Evotec to offer an improved early-stage antibody selection service, along with its existing high-throughput and high-content screening offering. Evotec will use 4-Antibody’s proprietary Retrocyte Display technology, a platform which allows expression and screening of antibody libraries to identify antigen-specific antibodies. The two companies will share profits from services and discoveries made under the agreement. Evotec will also pay Basel, Switzerland-based 4-Antibody a €2 million ($2.56 million) up-front access fee, although the companies said that cost will be fully reimbursable from returns under the partnership. The deal is expected to give 4-Antibody access to a wider field of customers, while improving Evotec’s antibody selection capabilities. Evotec says the agreement will allow it to better differentiate between antagonist and agonist antibodies, while improving attrition rates. – Paul Bonanos

image from flickr user alebonvini

Deals of the Week Looks At Illumina’s Roche Rebuff: There Will Be Time To Revisit This Deal

With the news this week that shareholders of Illumina had rebuffed Roche’s efforts to expand and stack its board of directors, the latter withdrew its hostile tender offer for the company.

No surprises there. Illumina’s management has been stalwart in its belief in the company’s positioning and prospects for rebounding from the dent in its earnings resulting from the global economic slowdown and cutbacks in government spending for its genome sequencing equipment.  That view is obviously shared by the institutions that own its stock, who were unmoved by Roche’s most-recent $51 per share ($6.8 billion) offer.  Roche, for its part, tried to use Illumina’s market-weakened position to highlight the risks of the business. As we wrote in IN VIVO in February, its interest in Illumina is strategic, but also opportunistic.

At one point during the parties’ back-and-forth letter writing to shareholders, Illumina alluded to its being called “the Apple of the genomics business.”  But while Apple’s products appeal to a “seemingly endless consumer base,” Roche replied, Illumina’s sequencing tools serve a much smaller and highly regulated market.  “Not even Illumina has projected any surge in revenues from its products in any specific foreseeable time period,” it said.  “As a standalone company, Illumina’s future is far from certain… Roche has the infrastructure, expertise, sales force, and market share required to successfully bring Illumina’s products to the broader Life Science and Diagnostics market and the combined capabilities of our two companies will accelerate the transition of Sequencing into clinical and routine diagnostics.”  Fair points.

As we’ve written, the how and when of applying sequencing to clinical diagnostics is debatable, especially when trying to show that complex patterns of genetic differences – the kind that rapid and inexpensive whole genome sequencing can uncover – can help guide therapy decisions (see here and here). But there’s no debating the research interest, nor that Illumina is the market leader and a continuing innovator in the field.  And while competitors are selling and developing small, fast next-generation sequencing instrumentation for smaller sequence read lengths, including Roche through its own 454 Life Sciences unit, it’s fair to think that large research and clinical labs will continue to invest in the workhorse machines Illumina has placed so successfully, especially as the costs of whole genome sequencing continue to fall.

Roche has called its $51 per share offer a starting point for negotiations, suggesting it would go higher once it has access to Illumina’s internal documents.  Illumina has resisted, presumably because it does not think Roche would pay what it would want as fair value – and that it will be in a much stronger negotiating position down the road.

That’s called being a true believer.  We think Roche is, too – in both the technology and in Illumina itself.  However the next year or so shakes out, Illumina should remain a good fit for Roche, to round out its genomics offerings and provide a channel for them to the clinical community.  The question is only at what price. (The discussion could also revert to some form of equity investment plus collaboration, which is what Illumina thought Roche’s intention was when it first came calling last November.)  The tender offer is set to go away at 6 pm tonight, but the two are still negotiating. – Mark Ratner

As one hostile saga wraps, another unfolds. Read all about it in this week's edition of ...

Adimab/Gilead and Adimab/unnamed partner: Antibody specialist Adimab has built a business on drug discovery partnerships over the past three years, while avoiding drug development of its own. Numerous pharmas have struck discovery deals in which Adimab uses its yeast engineering platform to identify antibodies against specific targets, allowing Adimab to build a cash-flow-positive business without taking on any development risk. This week, the venture-backed company struck two new deals, although it released fairly few details about either. First, Adimab will discover antibodies against two targets selected by Gilead Sciences in exchange for an undisclosed up-front fee plus preclinical and development milestones and royalties, if either is commercialized. The companies did not identify a therapeutic area, nor did they release any further financial details. For its other deal, Adimab didn’t even name the partner, only saying that it will discover bi-specific antibodies against two distinct targets selected by the partner, which can commercialize one or more in exchange for technical milestone payments, licensing fees, clinical development payments and royalties. The arrangements with Gilead and the other stealthy partner join a long list of Adimab deals, including agreements with Merck, Roche, Novo Nordisk, Biogen Idec, Lilly, Genentech and Pfizer. Adimab’s backers include SV Life Sciences, Polaris Venture Partners, Google Ventures, OrbiMed Advisors and Borealis Ventures. – Paul Bonanos

GlaxoSmithKline/Human Genome Sciences: It's not quite a deal yet, but it looks like there might be a silver lining for GlaxoSmithKline from the weak sales of Benlysta (belimumab) for lupus. The big pharma now has the chance to buy its Benlysta commercial partner, Human Genome Sciences, and gain full ownership over Benlysta and two other drugs the two have in development. GSK disclosed an unsolicited bid for HGS April 19, offering $13-per-share, or roughly $2.6 billion. HGS’ board of directors promptly rejected the unsolicited bid, saying it does not reflect the inherent value of the company, and hired the investment banks Goldman Sachs & Co. and Credit Suisse Securities to explore strategic alternatives for the firm. The $13-per-share cash offer represents an 81% premium over the company’s closing share price of $7.17 April 18. It also represents a 66% premium over the 30-day trading average closing price of $7.83 and a 58% premium over the ninety-day trading average, according to GSK. Nonetheless, while HGS investors may be relieved to see an offer on the table that represents immediate and certain value, $13-per share is a far cry from where the stock was trading a year ago. Last April, the stock was trading close to $29, riding high on the FDA approval of Benlysta for systemic lupus erythematosus March 2011. But it’s not likely a white knight is going to step forward. GSK splits rights to Benlysta with HGS, and owns rights to two other pipeline assets: albiglutide, a once-weekly injectable GLP-1 agonist for type 2 diabetes, and daraplatib, an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2) in development for cardiovascular disease. That’s likely to deter a competing bidder and limit HGS’ negotiating power. The history between HGS and GSK is long, dating back to the SmithKline Beecham days. SmithKline Beecham partnered on with HGS in 1993 on rights to a gene sequencing technology. The companies expanded on that original alliance several times over. In 2006, GSK paid HGS $24 million for rights to belimumab. --Jessica Merrill

Cell Therapeutics/S*BIO: With an EU regulatory approval potentially on the horizon for Pixuvri (pixantrone) and Phase III trials ongoing for that drug as well as tosedostat, Cell Therapeutics might appear to have more than enough activity at the moment. But on April 19, it paid $30 million upfront to S*BIO Pte. Ltd. for global rights to JAK2 inhibitor pacritinib, giving the Seattle-based biotech three Phase III candidates in blood cancer. CTI will pay S*BIO $15 million in cash and issue $15 million in unregistered preferred stock convertible to common stock – giving the Singapore firm nearly a 5% interest in its partner – and could pay milestones up to $132 million and single-digit sales royalties in exchange for the Phase III-ready myelofibrosis (MF) candidate. S*BIO could realize approval milestones based on regulatory outcomes in the U.S., Europe and Asia, along with sales milestones pegged to reaching amounts such as $200 million, $400 million and $500 million in a calendar year. CTI is not the first company to partner with S*BIO on pacritinib. In 2009, Onyx Pharmaceuticals paid $25 million upfront to acquire an option to the compound, then known as SB1518, as well as another preclinical JAK2 inhibitor, SB1578. With the potential for up to $525 million in milestones, it was among the most lucrative biotech deals seen in Asia to that point. However, in 2011, Onyx declined its option on both compounds, returning all rights to S*BIO. CTI believes pacritinib, as a selective JAK inhibitor, should have a better safety profile than the only FDA-approved drug for myelofibrosis, Incyte Corp.’s Jakafi (ruxolitinib), a JAK1/JAK2 inhibitor launched in late 2011.—Joseph Haas

Eli Lilly/Vanda: In its first in-licensing transaction since 2004, Vanda Pharmaceuticals has acquired development and commercialization rights to a Phase I-ready neurokinin 1 receptor (NK-1R) antagonist from Eli Lilly & Co. for an upfront payment of $1 million and up to $99 million in milestones. The 2004 deal with Novartis gave Vanda worldwide rights to iloperidone, which FDA approved for schizophrenia in 2009; it is now on the market as Fanapt, though sales have been weak. Vanda, focused on central nervous system therapies, has only one other clinical candidate in its pipeline, tasimelteon (VEC-162), in Phase III study for circadian rhythm sleep disorders. In its deal with Lilly, announced April 16, Vanda acquires VLY-686, an NK-1R antagonist that demonstrated proof-of-concept for controlling alcohol dependence in an NIH study. The company said it will complete technology transfer related to ‘686 this year and examine the oral compound’s clinical profile, to determine potential indications for an early-development clinical program. In addition to the upfront fee, Lilly could earn up to low double-digit royalties on sales, up to $4 million in pre-NDA milestones and up to $95 million in regulatory and sales milestones under the deal.—JH

GSK/Aspen: GSK wraps up its final bulk OTC portfolio divestiture, selling 19 international brands to Aspen Pharmacare Holdings Ltd., leaving only the troubled weight-loss drug alli as GSK’s last non-core brand. For £164 million in cash ($263 million under the April 20 exchange rate), Durban, South Africa-based Aspen gets the rights to Dequadin sore throat lozenges, Phillips Milk of Magnesia, Solpadeine analgesics and Zantac antacids, among others, outside the U.S., Canada and Europe. Glaxo said April 20 the non-core OTCs divested to Aspen generated about $95 million in 2011 sales, or a little over 1% of GlaxoSmithKline Consumer Healthcare’s total business of $8.20 billion. GSK declined to provide a full list of the brands included in the Aspen deal. Aspen, Africa’s largest drug maker with a $145 million consumer products business, split the GSK transaction in two: its South African subsidiary acquired the products sold in Africa for about $32 million, while Aspen Global Inc. acquired the rest-of-the-world brands for about $231 million. Aspen CEO Stephen Saad praised the OTCs’ established brand equity and said they “will also provide impetus in territories where Aspen is seeking to grow critical mass, such as Latin America and Southeast Asia.”Full coverage of the deal is in "The Tan Sheet". -- Dan Schiff

Sanofi/Michael J. Fox Foundation: Sanofi has tapped the Michael J. Fox Foundation to run a Phase Ib clinical trial of a potential treatment for cognitive deficits in Parkinson’s disease. MJFF VP if Research Programs, Mark Frasier, said the situation was a unique one. “Sanofi approached us about this molecule that, for internal business reasons, they were not pursuing, but that they thought may have promise for Parkinson’s disease patients,” he added. MJFF will be responsible for costs associated with the trial, but Sanofi will provide the drug at no cost to the foundation, clinicians, or patients. The trial is expected to launch in the latter half of 2012 and data will likely be available in early 2013. MJFF will have all rights to the data and will be able to disseminate that information as they see fit. Sanofi will retain the intellectual property surrounding the molecule and will have the first right of refusal in further development of the compound, based on results of the study. Cognitive deficits like a shortened attention span, trouble multi-tasking, and problems with planning affect 60% to 80% of Parkinson’s disease patients. There are currently no treatments available to help patients with these symptoms. - Lisa LaMotta

Crucell/Royal DSM: Vaccine-maker Crucell N.V. and Netherlands-based Royal DSM have chosen to abandon biosimilar development through their joint venture, Percivia LLC. A spokesman for DSM tells us that "the Shareholders and Board of Managers decided on the restructuring following the lack of agreement on further joint investment in the Company." Crucell is part of Johnson & Johnson, and others have speculated that J&J was simply not interested in financing the JV, which was launched in 2006 and headquartered in Cambridge, Mass. The initial focus of Percivia was to combine DSM’s manufacturing technology with Crucell's PER.C6 cell line for the production of proteins and antibodies within the protein therapeutic and diagnostic field, but the company changed direction in early 2011 to pursue a PER.C6 technology-based biosimilars product development strategy for emerging markets. According to Crucell, all biosimilar work will be terminated. According to a report in BioSpace, thirty employees of Percivia have already been let go and another 10 will remain for the next 30 to 90 days while operations are wound down. Percivia will remain a legal entity for the purposes of continuing the existing PER.C6 technology licensing business, says DSM. –LL

DOTW's 12 Deals Of Christmas

On the first day of Christmas, IN VIVO gives to you an earn-out in a pear tree
On the second day of Christmas, IN VIVO gives to you two consumer deals
On the third day of Christmas, IN VIVO gives to you regional alliances
On the fourth day of Christmas, IN VIVO gives to you hostile deals now friendly
On the fifth day of Christmas, IN VIVO gives to you ON-CO-LO-GY
On the sixth day of Christmas, IN VIVO gives to you biotech spin-offs
On the seventh day of Christmas, IN VIVO gives to you biobucks a plenty
On the eighth day of Christmas, IN VIVO gives to you eight pharma partners
On the ninth day of Christmas, IN VIVO gives to you platform biologics
On the tenth day of Christmas, IN VIVO gives to you billion dollar skin care
On the eleventh day of Christmas, IN VIVO gives to you a new eye care unit

On the twelfth day of Christmas, IN VIVO...needs a break. Please read (instead)...

MedImmune/Evotec: Big pharma’s love affair with primary care is on the wane, making cardiovascular deals as rare as partridges in pear trees. But it’s a different story for metabolic disease, where drug makers see large opportunity in growing waistlines. Think Merck’s take-out of SmartCells or Sanofi’s spate of alliances to build itself into an end-to-end solutions provider. Now comes news that AstraZeneca's biologics group MedImmune is aligning with Evotec in a broad R&D deal centering on regeneration of insulin-producing beta cells. As with most early stage alliances, the deal is heavy on the back-end payments, with the German biotech due €5 million upfront and up to €254 million in milestones down the road. But should Evotec deliver the goods, it would prove a nifty return on the biotech's acquisition of DeveloGen, a deal completed less than three months ago for up to €14 million in cash and stock, plus potential earn-outs. It's DeveloGen's metabolic target discovery platform that MedImmune is tapping into, and it adds a third alliance to the subsidiary's portfolio. Meanwhile, MedImmune and parent AstraZeneca are looking to fill a hole in their pipeline. -- Alex Lash

Reckitt Benckiser/Para Pharmaceuticals: Reckitt Benckiser Group pushed further into the consumer health business and India on Dec. 14 when the household cleaning products maker announced its £460 million ($727.3 million) acquisition of India’s Para Pharmaceuticals from private equity group Actis and minority shareholders. The acquisition, which is 31 times Para’s EBITDA, gives Reckitt access to one of India’s most popula cold-and flu-remedies, D’Cold. Still that’s a steep price to pay to boost exposure in an emerging market, where Reckitt already sells Dettol, Durex and Disprin. (At that price, IN VIVO blog thinks Para should throw in at least two turtle doves.) The company’s consumer healthcare unit now accounts for one-quarter of sales and will become increasingly more important since its household cleaning division faces pressure from competition like Procter & Gamble.—Lisa LaMotta

GlaxoSmithKline/Maxinutrition: As part of its pre-Christmas shopping spree, Glaxo says no to French Hens, but yes to muscle shakes, acquiring U.K. sports nutrition firm Maxinutrition Group Holdings for £162 million. The deal diversifies Glaxo’s Nutritional Healthcare business, adding the smaller player’s line of protein-rich body building, weight management, and endurance products onto the big drug maker’s carbohydrate business Lucozade and Horlicks (also known internally as a @calcium micronutrients business"). GSK's Nutritional Healthcare sales were already on a tear climbing 12% to $408.6 million for the third quarter of 2010. But with this new triumvirate, the pharma sees a recipe for growth. It can leverage the selling power of Horlicks while tapping into the sports nutrition business, a sector still growing strong in established markets that, globally, could be worth nearly $5 billion. – Dan Schiff

Ramius/Cypress: It took four calling birds, but Cypress Bioscience finally got a buyout offer from Ramius that was music to its ears. On Dec. 15, the San Diego biotech announced it had accepted a $255 million takeover offer from Ramius. The deal values Cypress at $6.50 per share, 63% more than Ramius’ $4-per-share offer in July. When Ramius launched its pursuit, it ripped Cypress management in an open letter, blasting the company’s decision to license a schizophrenia drug from Israel’s BioLineRx and declaring its 2008 acquisition of diagnostics company Proprius a failure. Since then, Ramius has incrementally increased its offer, including a $6.00 per share deal that Cypress’s board rejected. The parties finally agreed on the $6.50-a-share price, and agreed to extend the tender offer in order to complete the deal. Cypress garners most of its revenue from fibromyalgia drug Savella (milnacipran), and completed small-money deals in August to acquire rights to an autism drug from Marina Biotech and a smoking cessation product from Alexza Pharmaceuticals.—Paul Bonanos

Sanofi-Aventis/Merck Serono: ON-CO-LO-GY! In the drug world, viable cancer drugs are definitely as valuable as five golden rings. But as the recent U.S. regulatory decision around Avastin in metastatic breast cancer shows, incremental efficacy against an unmet medical need ain’t enough any more. Some companies are trying to overcome wily tumor cells by combining targeted therapies that work via different mechanisms into a single agent. And as the Dec. 17 alliance between Sanofi-Aventis and Merck Serono shows, they are willing to forge ties with competitors (excuse me, external parties) if that’s what it takes. According to the deal’s terms, Sanofi contributes two novel small molecule kinase inhibitors (both incidentally inlicensed from Exelixis in 2009): a PI3 kinase/ mTOR inhibitor SAR245409, and a class I PI3K inhibitor, SAR245408. Merck Serono, meanwhile, supplies its MEK inhibitor, MSC1936369B. (All three molecules are currently being studied in independent Phase I trials.) Here’s how the sharing works: Sanofi will conduct trials combining Merck’s MEK with its PI3K/mTOR inhibitor, while Merck will study the other PI3K blocker in combination with its medicine, and both drug companies will fund their own studies. Beyond breathy prose about “personalizing and stratifying cancer care” and maximizing the portfolio, details about the collaboration were vague, meaning what happens after Phase I, and importantly how the financials will be sorted, remain mysteries. Structurally – and therapeutically – the deal is almost an exact duplicate of the 2009 tie-up between Merck & Co. Inc. and AstraZeneca. (No word if an overly long airport security queue also played a role in this most recent alliance, however.) -- EFL

Xention/Provesica: Rather than divide its focus between two largely unrelated programs, UK-based Xention and its investors have elected to divide and conquer, spinning out the biotech's overactive bladder program into a new, separate company called Provesica. Two of Xention’s stakeholders, Forbion Capital Partners and Seroba Kernal, have supplied not six geese-a-laying but something much more important: cold hard cash to the tune of £4 million ($6.2 million). Beyond setting up an independent Provesica, the money will support Phase II trials of its lead compound, a vanilloid TRP (transient receptor potential) receptor antagonist, which affects the detrusor muscle in the bladder. Xention, which recently raised £8 million in Series D funding, will continue to advance its atrial fibrillation program, aimed at developing inhibitors to selectively block ion channels in the heart’s atria but not its ventricles. In conjunction with the spin-off, Xention has restructured, with holding company Xention Pharma Ltd. operating an R&D subsidiary.—PB

GlaxoSmithKline/Impax: GlaxoSmithKline, which now faces generic competition for its only Parkinson’s disease drug, Requip, swam back into that space Dec. 16, inking a co-development and commercialization deal with Impax Pharmaceuticals for the smaller firm’s lead program, IPX066. (Seven swans were apparently optional.) GSK will pay $11.5 million upfront along with up to $175 million in potential milestones and tiered, double-digit royalties on sales of IPX066, an extended-release combination of levodopa and carbidopa now in Phase III, in exchange for worldwide rights outside the U.S. and Taiwan. Impax, the CNS-focused, branded drugs division of generic player Impax Laboratories, will continue to make and supply the medicine to GSK. Impax completed a Phase III trial (APEX-PD) in early-stage Parkinson’s earlier this year with strong results and expects data from a second Phase III study (ADVANCE-PD) in patients with advanced Parkinson’s in the second quarter of next year. An NDA filing could come as soon as end of 2011.—Joseph Haas

Adimab/Lilly, Adimab/Genentech, Adimab/HGSI: On the eighth day of Christmas Adimab dispensed with the 8 maids-a-milking (and drug development too) and focused on the cream of the crop: its platform. At a time when most biotechs can’t monetize their platforms through discovery stage deals, privately-held, yeast-based antibody discovery biotech Adimab (alongside DOTY nominee Ablexis) remains the rare bird. Adimab watchers shouldn’t be surprised the company has inked more deals – three of them actually, with the likes of Lilly, Genentech and Human Genome Sciences. Nor do these recent deals stray far from the company’s previous single-target antibody discovery alliances, which emphasize non-exclusivity around a target and pay the biotech undisclosed financials that include an upfront, plus milestones and royalty payments. Why is Adimab the belle of the antibody discovery ball? “Our technology platform is not only faster than conventional antibody technology but it yields more relevant therapeutic leads with a higher probability of success,” CEO Tillman Gerngross, PhD, told us for a piece we did earlier this week in “The Pink Sheet” DAILY. The upshot of all Adimab’s dealmaking is that the cash-flow positive biotech (it announced two milestone payments to go along with the three deals this week) is restructuring to an LLC to return cash to shareholders in a tax-efficient way. – Chris Morrison

Mitsubishi Tanabe/Anaphore: At least one lady (if not nine) is surely dancing on the news of Mitsubishi’s R&D tie-up with Anaphore, a San Diego-based biotech developing trimeric proteins called Atrimers. Anaphore’s CEO Katherine Bowdish tells sister publication “The Pink Sheet” DAILY, “this first partnership does a great job of validating our technology platform.” It’s certainly a nice first and Mitsubishi’s willingness to contribute research funding is a decided plus, but Anaphore isn’t going to win any DOTY nominations based on the deal terms – a $5 million upfront, $110 million in milestones, and tiered royalties on sales of any products resulting from the option-style collaboration, which could be expanded to up to three targets. Still the tie-up, focused in auto-immune disease, is a reminder that drug makers remain interested in accessing novel technologies, especially if said platforms can create medicines against intractable drug targets or are inaccessible because of preexisting IP. Anaphore is especially interested in creating novel proteins that bind receptors in the so-called TNF super-family. The biotech’s most advanced candidate, the still preclinical ATX3105, antagonizes the interleukin-23 receptor, which plays a role in autoimmune disorders. -- Shirley Haley & EFL

Galderma/Q-Med: Lords a leaping! Leading Swiss dermatology company Galderma’s $967 million bid for medical implant manufacturer Q-Med will roughly double the acquirer’s sales and substantially increase its presence in aesthetic dermatology, a sub-segment of dermatology that is growing worldwide. Galderma, a joint venture of Nestle and L’Oreal, sells prescription and non-prescription dermatology products worldwide and is the largest manufacturer of topical dermatology therapies in the U.S. Q-Med makes dermal fillers including Restylane, which competes against Allergan’s successful Botox. The deal is non-traditional in that it offers different terms for the majority shareholder, Lyftet, which owns 47.5% of Q-Med, and the remaining shareholders. Bengt Agerup, Lyftet’s CEO, has already agreed to accept an irrevocable offer of 58.94 SEK in upfront cash, with up to 16.02 SEK in additional payments if certain development and business milestones are met. The remaining Q-Med shareholders would receive a flat cash payment of 75 SEK per share. Q-Med investors will have between Jan. 4, 2011 and Jan. 25, 2011 to tender their shares.—Wendy Diller

Novartis/Alcon: On Dec. 15, Novartis AG finally acquired the remaining 23% of eye care company Alcon Inc. that the Swiss-pharma giant didn’t already own. Alas, the announcement, which requires Novartis to pay independent shareholders the same average share price it doled out to Nestle, came without much fanfare. (In what was surely an oversight given the months it took to finalize the transaction, there were no pipers piping or drummers drumming.) The deal, which is a stock swap, will cost Novartis another $12.9 billion, driving the total price of the Alcon acquisition to $51.6 billion. In dollar terms, that rivals the mega-mergers of Pfizer/ Wyeth, Merck/Schering and Roche/Genentech. Is an ophtho company worth that much? The beauty of a deal is always in the eye of its beholder, but this particular therapeutic sector is enjoying a renaissance. Ophthalmologists are a technically savvy bunch, so having a strong device presence will likely help Novartis leverage its existing ophthalmics medicine business, which along with consumer-focused CIBA Vision and Alcon will be folded into a new eye care unit run by Alcon CEO Kevin Buehler. – Lisa LaMotta & EFL

Financings of the Fortnight: Sunshine Breaking Through?

No one we know would say that biotech’s financing drought is ending. Hardly seems possible.

But conversations are taking on--dare we say it-- a slightly more optimistic tone. The Nasdaq biotech index, for one thing, continues its upwards trajectory. Most of that performance, we admit, stems from good news out of big-cap players like Elan, Amgen, Gilead and maybe a few others. It’s not a sustained small-cap phenomenon – yet.

Certainly no one’s predicting the imminent opening of an IPO window (closest thing we’ve seen to a pharma IPO filing is Vitamin Shoppe).

Indeed, there are plenty of what we’d probably call financings-under-duress, the kind of deals both investors and companies have to do to keep fighting. Oxigene, for example, followed the Alexza pattern in buying back, at a discount, its financing partnership with Symphony Capital – saddling Symphony with a lot more stock in Oxigene, and thus a lot more risk. More upside, too, of course – but that wasn’t what Symphony’s model was designed for.

We’d also note that pharma continues to provide not merely the only exits for biotech, but a fairly substantial percentage of its financing, too. Corporate VC remains at center stage – with the Avila financing from the Novartis Option Fund only the most recent example.

But a few bits of unexpectedly good news are at least quickening the industry’s pulse. Human Genome Sciences surprised the market by meeting the primary endpoint in the first of two Phase III trials on Benlysta, the first lupus drug in years to actually show real clinical results. HGS acted fast and raised more than $300 million – the industry’s biggest common-stock offering since Vertex raised $320 million back in February. Orexigen, too, raised a not-too-shabby $75 million after it announced that its obesity drug Contrave had met virtually all of its clinical goals in its Phase III programs.

And deals like Amgen’s with GlaxoSmithKline on denosumab likewise indicate why biotech does have an argument or two in its long-term favor. GSK paid a ton of money for a relatively limited set of rights – indeed, most surprisingly, agreeing to split indications on the drug with Amgen (you’ll remember that Amgen virtually destroyed the split-indication deal nearly a quarter of a century ago with its EPO deal with Johnson & Johnson).

And for those cock-eyed optimists in the group, there is some talk about IPOs. Quiet talk, perhaps. But at least a few people have speculated about Portola, which thanks to big deals with Novartis and Merck, doesn’t have to worry about financing expensive later-stage trials for the next several years and can instead focus on advancing its earlier-stage programs. And should either elinogrel (with Novartis) or betrixaban (with Merck) prove particularly interesting, well, there’s a nice little tinge of acquisition in the air to entice an IPO investor.

So, on that optimistic note, let’s get to some of the more interesting deals we’ve seen over the last fourteen days.




Avila Therapeutics: In a deal that combines equity financing with an option on an early-stage research program, Novartis Option Fund led a $30 million Series B financing on July 27 for Avila Therapeutics, which uses its proprietary Avilomics platform to design and develop covalent drugs in the areas of cancer, autoimmune disease and viral infection (you can see our write-up from The Pink Sheet” DAILY, here). NOF is a $200 million fund that seeds innovative companies through initial and follow-on investments – the initial investment is coupled with a program option to provide early validation of the company’s technology. Avila says it will use the proceeds to advance its first program into clinical development – its lead programs are a protease inhibitor for hepatitis C (AVL181) and a molecule targeting the Btk kinase (AVL291), an emerging target in oncology and autoimmune disease. The Waltham, Mass.-based company did not say which of those programs would advance to clinical development first, and neither company identified the therapeutic target of the program for which NOF has option rights. Avila says its drugs work through protein-silencing – the molecules’ covalent nature enables them to bond strongly, selectively and resiliently to disease-causing proteins, theoretically producing superior therapeutic outcomes. The drug candidates’ covalent bonding also makes them effective against mutations in disease targets, according to Avila. Participating with NOF in the Series B were Avila’s original investors – Abingworth, Advent Venture Partners, Atlas Venture and Polaris Venture Partners. The four VC firms staked Avila with $21.3 million in Series A funding in 2007, and also made a convertible debt purchase this past May that initially brought Avila $5 million and eventually could yield $15 million. – Joe Haas

Limerick Biopharma: South San Francisco, Calif.-based Limerick recently raised $15 million in a Series C round with its existing investors to begin advancing its Cellular Transport Pump Activators into clinical development. Giving the company some additional credibility, Corey Goodman, co-founder of Exelixis and Renovis and more recently the head of Pfizer’s Biotherapeutics and Bioinnovation Center, took on the chairman’s job (he’s served on Limerick’s board since 2007). Limerick’s CTPAs offer promise both as chaperone therapies and in monotherapy for cholesterol disorders. Primarily, CTPAs are intended for adjunctive use with existing or experimental drugs to improve their side-effect profiles and efficacy by activating cellular transport pumps to redistribute drugs away from areas where they have adverse effects. In theory, this will minimize toxic side effects without reducing a drug’s intended activity. While testing its candidates in the areas of immunosuppression and pain, however, Limerick also discovered that CTPAs remove cholesterol from peripheral and pancreatic beta cells, lowering serum cholesterol and glucose. The company’s secondary goal, therefore, is to develop CTPAs as therapies for hypercholesterolemia and hyperglycemia. Founded by Wendye Robbins, a Stanford professor and former president of NeurogesX, Limerick has raised $35.5 million total since 2006. The July 15 Series C was led by OVP Venture Partners, which previously was known only for leading seed and Series A rounds. In addition to OVP, Limerick’s other returning investors include Altitude funds, Arch Venture Partners and Sevin Rosen Funds. The firm hopes the current round can provide funding through proof-of-concept of one of its lead programs – one is set to begin Phase I study in immunosuppression this year, while another that could enter the clinic in 2010 will be targeted at metabolic disease. – Joe Haas

Cognition Therapeutics: There are a few drugs on the market that treat symptoms of Alzheimer’s disease, but the goal is to actually stop disease progression. Along with the actual scientific challenge of figuring out how to treat the disease, there’s also the problem in testing candidates: trials for such drugs are expensive and long. Plenty of costly failures litter the way (like Myriad Genetics’s Flurizan in Phase III—closely following Lundbeck’s lost $100 million up-front payment in their deal for the candidate). But the medical need and economic opportunity for solving the Alzheimer’s problem keep producing big new deals. For proof, just see Pfizer’s deal for dimebon and J&J’s recent investment in Elan’s Alzheimer’s immunotherapy program including bapineuzumab. Financing for biotechs breaking into the disease-modifying arena is picking up too (see Satori Pharmaceuticals), and now Cognition Therapeutics has pulled down a $1.2 million Series A financing—through the sale of equity and conversion of notes--from investors led by Ogden CAP. Founded in 2007, the company is developing small-molecule inhibitors of toxic beta amyloid oligomers, which are associated with memory loss and neurodegeneration. The start-up’s drug libraries were licensed from California State University Channel Islands where they were designed by former Amgen medicinal chemist Gilbert Rishton, PhD, who is now Cognition’s chief scientific advisor. Rishton’s chemical conditioning method takes extracts from terrestrial and ocean plants and adds chemical reagents to produce the low molecular-weight candidates, which are eventually screened in cellular assays that monitor the toxic oligomer’s effects on biological functions in mature primary hippocampal neurons. Cognition was seeded in 2007 with $200,000 in funding from Pittsburgh Life Sciences Greenhouse, which also participated in the current round.—Amanda Micklus

OxiGene: On July 21 OxiGene announced two financing events that will keep it alive for another year -- through the third quarter of 2010. The company, which works on vascular disrupting agents, closed a registered direct offering that grossed $10 million. It sold 6.25 million shares at $1.60, a 20% discount based on the ten-day pre-announcement average, as well as short- and long-term warrants to purchase up to 5.6 million in common shares. It also managed to grab another $12 million by buying back Symphony Vida Holdings, an off-balance sheet entity created with private equity firm Symphony Capital Partners. In October 2008 Symphony provided Vida with $15 million in cash to support development of OxiGene’s Oxi4503 (combretastatin A1 diphosphate), which is in Phase I for solid tumors, and Zybrestat (fosbretabulin) in ophthalmology. At the time, Symphony granted OxiGene a four-year option to acquire Vida for twice the amount that Symphony invested in the entity. But Sympony would only make that money if OxiGene lasted that long. So OxiGene is issuing Symphony $12.5 million in stock to pay for Vida ($2.5 million less than Symphony actually put into the financing vehicle) to get the $12 million cash still in the vehicle -- with Symphony now into OxiGene a lot more deeply than it ever planned to be (it owns 44% of the biotech). More or less the same thing happened with Symphony’s original deal with Alexza – which likewise bought back the Symphony vehicle for a big slug of stock, giving Symphony a 23% stake.—Amanda Micklus


Image from Flickr user Magh and used under a creative commons license.