Deals Of The Week Brings It All Back Home

As a great man once said, there’s no success like failure, and failure’s no success at all. For Infinity Pharmaceuticals, the failure of one drug means it will have to seek success with another lead candidate – and it’s planning to do that alone, rather than with a longtime partner.

Infinity announced July 18 that it had taken back global rights to a key cancer drug by restructuring an existing alliance with Purdue Pharma LP and its European affiliate Mundipharma International Ltd., which had previously obtained rights to all of Infinity’s early-stage oncology programs in a 2008 arrangement. The renewed focus on that drug comes a month after Infinity said it would suspend a Phase II trial on saridegib, a cancer drug that was apparently performing no better than placebo, according to interim data. Saridegib was also covered under the same partnership.

Infinity now takes full control of a phosphoinositide-3-kinase (PI3K) inhibitor known as IPI-145, which has been through a Phase I study and is slated to enter an expansion cohort, as well as mid-stage trials for asthma and rheumatoid arthritis. Also transferred were rights to a fatty acid amide hydrolase program and other early discovery projects. Initially, Purdue and Mundipharma had sought greater control over the oncology compounds, according to Infinity CEO Adelene Perkins. But Infinity was unwilling to part with additional rights, and instead took back worldwide rights to the programs.

Perkins said the company will attempt to build value on its own, using cash from the restructured deal, before it considers partnering the programs again. But now that it’s less encumbered by alliances, Infinity could become a takeout target too. (As we’ve noted before, a clean target can be especially ripe for picking. Speculation arose last fall that Amylin would soon be bought, shortly after it recovered full rights to exenatide from Lilly. Within months, Bristol-Myers Squibb and AstraZeneca paid $7 billion to acquire Amylin, valuing it far higher than its trading price before the partnership dissolved.)

Under the newly rearranged agreement, Purdue and Mundipharma will take a larger equity stake in Infinity. Purdue will buy 1.8 million shares of its common stock for $14.50 a share, or $27.5 million. Infinity also will issue another 3.5 million shares at the same per share price to Purdue to pay off the remainder of a $50 million line of credit that Purdue issued in 2009. The investment will give Purdue a 28% stake in the company, up from its previous 22.5% share. The original contract stipulates that Purdue cannot own more than 33.3% of the company. Infinity also will pay Mundipharma a royalty on sales of any future products that were once part of the agreement ranging from 1% to 4%.

Who's in the basement, mixing up the medicine? Why, it's...

Express Scripts/ Walgreens: Walgreens will rejoin Express Script's pharmacy networks beginning Sept. 15 under the terms of a “multi-year” contract announced July 19. Although the companies did not disclose contract specifics, the announcement states that Walgreens’ 7,900 stores will participate in the “broadest” Express Scripts retail pharmacy network available to new and existing clients. With Walgreens, that network includes more than 64,000 pharmacies nationwide. The resolution must be reassuring to drug companies concerned about broad access to their drugs, even though it is unlikely that they lost much in sales because of the dispute, since competitors were ready to fill Walgreen’s shoes.

Walgreens withdrew from Express Scripts’ retail pharmacy network in January. In financial presentations preceding Walgreens’ exit, Express Scripts and rival PBM CVS Caremark both predicted the development would lead to a greater acceptance of narrower pharmacy networks among payers. Payers have typically opted for broad pharmacy networks as a convenience to members even though they are more expensive. It remains to be seen whether payers will actively choose a more restrictive network in the interest of controlling costs once Walgreens has rejoined the Express Scripts mix. Addressing the question in an email, an Express Scripts spokesman said, “we wouldn’t speculate on any future transitions, but we have had strong interest from clients” in narrower networks.

For Walgreens, the financial impact of its dispute with Express Scripts has been significant. Express Scripts processed approximately 88 million prescriptions filled by Walgreens in fiscal 2011, representing approximately $5.3 billion of the drug chain’s net sales. In a financial report filed July 12, Walgreens estimated that since it left the Express Scripts network, it has retained, on an annualized basis, only 15% of the 2011 prescriptions processed by the PBM.Adding even more pressure on Walgreens to reach an agreement was the prospect of losing its network relationship with Medco Health Solutions, which Express Scripts acquired in April. A Walgreens spokesman said in an email “there are no changes in pharmacy access for Medco clients and members” under the new agreement with Express Scripts, and that “Medco retail networks that included Walgreens will continue to do so.” Walgreens pharmacies filled approximately 125 million Medco prescriptions in 2011, representing approximately $7.1 billion of the drug chain’s net sales.--Cathy Kelly

Par Pharmaceuticals/ TPG Capital: Generic drug maker Par Pharmaceuticals agreed to be acquired by private equity firm TPG Capital in a deal that is worth as much as $1.9 billion. Par, which had sales of roughly $900 million, announced July 16 that TPG will pay $50 per share to acquire the company. Based on the July 13 closing price of $36.58, the last trading day before the deal was announced, the offer represents a 37% premium. The generic pharmaceutical company’s stock jumped more than 36% to trade at $50 the day the deal was announced. Par has until Aug. 24 to seek a better offer, the company said, noting it will “actively solicit acquisition proposals.” Should no other offers materialize, the deal is expected to close this year. Consolidation activity in the generics market has been high over the last few years, but much of it involves U.S. companies looking for ex-U.S. properties and/ or differentiated subsectors such as injectables, and hard-to-manufacture formulations, so few suitors may be interested in Par’s largely U.S.-focused business. The deal with TPG comes shortly after Relational Investors LLC, which owns 9.9% of Par, urged the company to put itself up for sale citing the continued low valuation for the stock despite Par’s effort to make operational improvements. Par added Indian generics manufacturer Edict Pharmaceuticals for $20.5 million in cash, as well as repayment of $4.4 million in debt and up to $12 million in cash earn-outs. It also bought Anchen Pharmaceuticals, for $410 million in May 2011 and a portfolio of ANDA filings, from Teva, in the wake of the Israeli company’s acquisition of Cephalon. The purchase price is below what other generic pharmaceutical companies have been bought out for recently. -- Lisa LaMotta

Amicus Therapeutics/GlaxoSmithKline: GSK increased its equity stake in Amicus Therapeutics Inc. when the two companies expanded their collaboration regarding jointly developed migalastat HCl for Fabry disease. The July 19 collaboration gives Amicus all U.S. rights to Fabry programs developed under the agreement and GSK the commercialization rights to the rest of the world. The British pharma is increasing its stake in the Cranbury, N.J.-based company to 19.9%, with a $18.6 million investment of stock priced at $6.30 per share. Migalastat HCl is being developed as a monotherapy and currently is in Phase III; data are expected in the third quarter of 2012. The drug also is in Phase II as a combination with enzyme replacement therapy. Amicus and GSK, in collaboration with Japan-based JCR Pharmaceuticals Co. Ltd., are developing migalastat HCl as a co-formulation with a proprietary recombinant human alpha-Gal A enzyme (JR-051). The formulation is expected to enter the clinic in 2013. Amicus and GSK will continue to share research and development costs for all formulations of migalastat HCl, with Amicus funding 25% and GSK funding 75% of these costs for monotherapy and co-administration during the remainder of 2012. The companies have agreed to split costs 40%/60%, respectively, for the co-formulation and for all formulations in 2013 and beyond. -- L.L.

Accera/ Nestle Health Sciences: Accera has struck a deal with Nestle Health Science SA to gain clinical development and commercialization for its medical food Axona, which is meant to help manage metabolic processes associated with moderate Alzheimer’s disease. Terms of the July 18 deal were not disclosed. People with Alzheimer's and other neurodegenerative conditions typically suffer from a condition called neuronal hypometabolism, meaning neurons are unable to process glucose. Axona, formerly called Ketasyn (AC-1202), is an orally available form of caprilyc triglyceride that is metabolized by the liver into betahydroxybuterate, a ketone body, which then crosses the blood-brain barrier for use by neurons as fuel. Accera has completed clinical trials elderly volunteers and in patients with memory impairment or mild-to-moderate AD. Results showed that Axona helped improve cognition when compared with placebo.

Established in January 2011, Nestle Health Sciences was formed to gain a stronger foothold in diagnosis and treatment of gastrointestinal diseases, an area Nestlé knows well from its medical nutrition business. The new subsidiary has bigger ambitions, however, and is hoping to create a continuum of offerings for metabolic ailments and neurodegenerative diseases like Alzheimer’s; Axona would be a strong addition to that. The medical nutrition industry is small, dominated by three companies – Abbott Laboratories, Mead Johnson Nutrition, and Nestlé. Nestlé launched the Health Science subsidiary in January, building it out of the technology from Nestlé’s existing health care nutrition business, which posted sales of $1.9 billion in 2010. The subsidiary since has purchased three companies – Vitaflo Scandinavia, CM&D Pharma, and Prometheus Laboratories– in an effort to make it more substantive than its previous medical nutrition business. - L.L.

Novavax/PATH: Novavax, a Rockville, MD-based vaccine specialist announced a collaboration on July 18^th with the international non-profit health organization PATH to develop its recombinant RSV fusion protein vaccine to protect infants in developing countries through maternal immunization. There is currently no approved RSV prophylactic vaccine available for the disease. RSV is the most common childhood respiratory infection, and has a global prevalence of 64 million cases, with 160,000 deaths annually. PATH will provide approximately $2 million toward Novavax’s Phase II dose-ranging trial planned for later this year. The partners may then progress the further development of Novavax’s vaccine with the goal of immunizing pregnant women such that high levels of maternal RSV antibodies will be transmitted to their offspring before birth. Thereafter, they can elect to continue the collaboration, with PATH potentially funding 50% of Novavax’s external clinical costs. Novavax would retain global rights to the product in the event it is approved, and has made a commitment to make the product affordable and available in low-resource countries. The RSV virus is also increasingly recognized as a significant pathogen in elderly populations. Novavax has stated that their goal is to collaborate with both private and public-sector partners “in all markets throughout the world,” says CEO Stanley Erck. Novavax puts the global commercial opportunity for a prophylactic RSV vaccine in excess of $5 billion. The biotech has partnerships with Cadila Pharmaceuticals (India), GE Healthcare, and LG Life Sciences (Korea), and was the recipient of a Department of Human Health BARDA grant  in March 2011. -- Michael Goodman

Life Technologies/ Navigenics: In what appears to be a straightforward buy-over-build decision, life sciences tools conglomerate Life Technologies is acquiring personal genomics firm Navigenics.  LifeTech calls the deal its “first step in executing a strategy to build out its molecular diagnostics business.”  It will employ Navigenics’ CLIA-certified lab to design and validate new assays, including both laboratory-developed tests and FDA approved diagnostics.  Navigenics’ CLIA lab will also support LifeTech’s partnering efforts with pharma for companion diagnostics.

Two years ago, LifeTech’s genomics’ efforts – it manufactures gene sequencers through its Applied Biosystems and Ion Torrent Systems divisions – were focused on the research and translational medicine markets, initiating programs like its collaboration with the Translational Genomics Research Institute, to find gene signatures that could better guide treatments and outcomes for triple negative breast cancer.  Since then, cancer genomics research has led to an increasing number of targeted gene tests – many that can be performed on next-generation sequencing platforms.  With diagnostics a much greater potential market opportunity for genomics than life sciences research, LifeTech, along with its major sequencing rival Illumina, has started to move downstream.  And its translational work appears to have sold the firm on the need for its own CLIA lab and on the opportunities that open up in cancer genomics by owning the clinical workflow, including data analysis and bioinformatics (which we wrote about recently here). The companies did not disclose the price of the acquisition, but it’s fair to assume that it was not much more than the bricks-and-mortar value of the lab, plus a dime or two for bioinformatics and the opportunity to hold onto some good people.

Navigenics’ founding model was challenged, as were those of other personal genomics start-ups, after the cautionary letters it and others received in June 2010 on the need for a premarket review of their products.  Nor did it appear to rejigger its model to create much know-how or IP since. That said, in announcing the deal, LifeTech also noted that it will be able to leverage Navigenics’ clinician and patient education and support capabilities as it builds a diagnostics business – particularly with community-based physicians.  One benefit of the personal genomics adventure has been recognition that when to comes to complex tests there’s a greater need for direct involvement with physicians, as opposed to a focus on marketing tests to labs.--Mark Ratner

Human Genome Sciences/GlaxoSmithKline: In a deal that was years in the making, GSK finally acquired its partner Human Genome Sciences for $3.6 billion, in a deal made up of cash and debt announced July 16. Now, GSK gets full ownership of darapladib, an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2) being investigated in acute coronary syndrome, and albiglutide, a once-weekly, injectable GLP-1 agonist for type 2 diabetes, as well as the already-marketed lupus drug Benlysta (belimumab) that the companies have been partnered on for more than a decade. The $14.25 per-share price represents a 99% premium over HGS’ closing price on April 18, the last trading day before GSK’s initial offer was disclosed publicly. That original bid was valued at about $2.6 billion, so HGS’ three months of delaying what many observers viewed as the inevitable brought its investors roughly another $400 million. Both companies’ boards have approved the transaction, in the form of a tender that will expire July 27. -- L.L.

Sanofi/Brigham & Women’s: For the next step on its continuing quest to establish itself as an end-to-end diabetes treatment provider, Sanofi has partnered with Brigham & Women’s Hospital to search for an immunological therapy for type 1 diabetes. Researchers from both organizations will unite to conduct “proof-of-concept, safety and functional studies” with a goal of finding an immunomodulatory drug target for the disorder, according to a July 18 statement. The parties did not release financial details of the arrangement, but said that Sanofi will receive an option to acquire an exclusive license to intellectual property generated by the partnership. Sanofi has marketed Lantus (insulin glargine) for more than a decade, and sells a variety of oral and injectable medications for both type 1 and type 2 diabetes; the company is currently waiting on regulatory approval for Lyxumia (lixisenatide), a glucagon-like peptide-1 antagonist. BWH researcher and Harvard professor Dr. Vijay Kuchroo specializes in immunology, and has studied the genetic basis of type 1 diabetes. – P.B.

Lisa LaMotta reported on the Infinity/Purdue deal. And thanks to flickr user mtarvainen for sharing under Creative Commons.

Deals of the Year Nominee: Infinity & Purdue/Mundipharma

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

Absent irrationally exuberant markets or dilution-friendly capital structures like the R&D Limited Partnerships and SWORDS of the 1980s, it’s virtually impossible to build a self-sustaining biotech without a Big Brother, contends Infinity CEO Steve Holtzman.

There’s thus a certain satisfying continuity in the fact that just a few months after Roche decided to end the most successful Big Brother relationship in pharmaceutical history by bidding to buy out Genentech, Infinity signed the latest incarnation of that legendary idea: a tie-up with the two Sackler-family owned private companies, US-focused Purdue Pharma and European-focused Mundipharma (see the transaction record here and our “Pink Sheet Daily” write-up here).

In return for what could be nearly 38% of its stock and the vast majority – ex-US – of its pipeline, Infinity bought probably five years of freedom from worrying about Wall Street -- enough money for both its discovery and clinical programs -- while retaining, like Genentech, the entire US market in which to create a commercial presence.

The most advanced compound in this enterprise: Infinity’s Phase I hedgehog cell-signaling pathway inhibitor, originally developed in a deal with MedImmune, then returned following MedImmune’s acquisition by AstraZeneca, which was developing a competing hedgehog program. (A few weeks after it signed the Purdue/Mundipharma deal, Infinity improved its position even more by bringing back from AZ its latest stage program, the Phase III injectable HSP-90 inhibitor IPI-504, as well as that drug’s younger brother, a Phase I oral compound, IPI-493 – drugs to which Infinity now owns all rights.)

But we don’t expect this deal to be much copied. The spec-pharmas Purdue and Mundipharma have no discovery programs to protect and Mundipharma has only a single cancer product in its portfolio: there should be no significant jealousies from internal R&D; no desire to interfere. Indeed, the deal is specifically not a collaboration, Infinity CSO Julian Adams points out: as Genentech has been with Roche, Infinity will remain a completely separate operation from its new affiliate.

That’s a rare situation for most companies that can afford a deal of this size (up to $75 million in equity by early 2009; another $200-400 million in R&D support; and a potential $72.5 - $100 million in warranty conversions). Indeed, one reason Roche is buying out Genentech is because it feels it can now do pretty much what Genentech can do – so why pay the royalties and other costs of maintaining an independent R&D and commercial infrastructure? Moreover, the Sacklers have no need to show investors regular profit growth – at Purdue and Mundipharma, they’re the only investors that matter, and they’d prefer the tax breaks from the R&D expense to a nicely upward sloping EPS line.

That’s because the Sacklers know Purdue is living on borrowed time. It was granted an almost magical but limited-term respite from generic attack after first losing exclusivity on its most important product, Oxycontin, and then regaining it in an utterly unexpected judicial reversal of the original ruling (See an in-depth “Pink Sheet” review here). But the drug will go generic again – no later, and possibly earlier, than 2013, just in time for the first of its Infinity products to hit the market.

So who else -- absent a Big Pharma's sudden and shocking conversion -- could do deals like this? Other private companies (or companies who act like them) – in particular mid-sized European firms and maybe even a Japanese company or two. They’d certainly accept the regional aspects of this deal and – unlike the Big Pharmas – wouldn’t necessarily feel the urge to tell Little Sib how to do its job.

Big Brother, Little Sister by Flickr user Onion and used under a creative commons license.

Shocker! Infinity Regains HSP90 From AZ

How a pocketful of cash can change a biotech's negotiating fortunes.

According to a report in today's Pink Sheet Daily, Infinity Pharmaceuticals is announcing that it’s re-acquired from AstraZeneca the rights to its lead clinical program. Infinity will pay nothing upfront to get back full control of its Phase III injectable heat shock-90 inhibitor, IPI-504, as well as its Phase I oral compound, IPI-493.

As part of the break-up, AZ will fund its development obligations for another six months and, if Infinity manages to launch a product, will pay AZ a single-digit royalty.

Although we were not able to speak with AstraZeneca before press time, there’s no indication that it gave back the program because it's in trouble.

Certainly Infinity doesn't think so. A Phase III program in refractory gastro-intestinal stromal tumors trial is ongoing. Meantime, Infinity is expanding its Phase II two-arm lung-cancer trial, and just initiated a Phase I combination trial with Taxotere in an undisclosed indication. The company plans more trials to start in 2009.

Instead, the split appears to be a case of evolutionary incompatibility, marking the definitive end of a deal Infinity had originally signed in August 2006 with MedImmune, then an independent company.

The two companies had been nicely matched – MedImmune had no small-molecule capabilities and a single failed oncology program; Infinity had little money to prosecute its aggressive development program. In a deal for both of Infinity's lead programs -- its then-preclinical hedgehog cell-signaling pathway inhibitor and its then Phase I HSP-90 program (see the deal's evolution in our Strategic Transactions database), the companies agreed to a 50/50 expense-and-profit sharing partnership.

MedImmune paid $70 million upfront, with the potential for another $430 million in late-stage clinical development and sales milestones. (For more analysis of that transaction and other similar early-stage deals, see “The $100 Million IND".)

The deal worked well enough: although MedImmune had the rights and responsibilities for late-stage development, it stepped aside to allow Infinity, which had greater expertise in oncology, to run the Phase III GIST trial (Infinity CSO Julian Adams had invented and done significant clinical work on Millennium’s Velcade).

But the deal began to come apart once AstraZeneca acquired MedImmune. (Start here for our exhaustive coverage of that April 2007 transaction).

AZ probably didn’t feel it needed Infinity’s expertise. It knew little about large molecules--the reason it wanted to buy MedImmune--but plenty about small molecules. And it had a world-leading oncology franchise. It also had a competing hedgehog program – because of which, according to change-of-control terms in the original MedImmune/Infinity deal contract, AZ had to return hedgehog rights to Infinity.

AZ also probably didn’t like the terms it had inherited with the Infinity deal – in particular, the 50/50 profit split MedImmune accepted because it lacked small-molecule and oncology expertise.

With Infinity’s cash position worsening through 2008, it’s reasonable to assume that the two companies discussed a deal to reduce both Infinity’s 50% expense obligations as well as its 50% potential profit share – renegotiations now common in the industry (in September, for example, Zymogenetics renegotiated its atacicept agreement with Merck Serono so the struggling biotech could unload most of its funding obligations).

But if such a renegotiation was on the table, it undoubtedly fell off on November 20, when Infinity announced a huge deal with the privately owned, independent but affiliated spec pharmas Purdue and Mundipharma (click here for our Pink Sheet Daily story, our IN VIVO Blog report here and our Strategic Transactions report here). In return for ex-US rights to most of its pipeline--HSP-90 explicitly excluded-–the two companies and their owners provided Infinity virtually all of its R&D funding through at least 2013, along with the potential for more, and bought $45 million worth of equity (at a 100% premium).

In effect, Infinity solved its funding problem for the next five years or so – and at the same time created the possibility for a US-based commercial operation of its own.

It could thus afford to re-acquire HSP-90, gaining full rights to a relatively late-stage program – as well as the flexibility of raising extra cash by out-licensing ex-US rights. Meanwhile, AZ is able to advertise its willingness to help even a former partner – according to Infinity, AZ rushed ahead the negotiations to allow an early termination to the deal on good terms.

Bridegroom's Friend by Flickr user Andrei Shevelov used under a creative commons license.