Deals of the Week Watches The Stakes Rise

The wide-open IPO window has given private companies more liquidity options, so maybe it’s no wonder that pharmas are willing to pay more than usual for closely-held start-ups. Judging by some recent acquisitions, pharmas are digging deep to buy assets they believe will become blockbuster cancer drugs. The mid-June buyout of Aragon Pharmaceuticals by Johnson & Johnson for $650 million up front is among the cancer sector’s largest takeouts of a privately-held, clinical-stage company ever – and comes despite a lingering lawsuit and a prominent competitor.

Among purchase prices for pure-play oncology start-ups, J&J’s down payment for Aragon is nearly peerless. Daiichi Sankyo's buyout of Plexxikon in 2011 leads the pack at $805 million up front; if Plexxikon wasn’t technically a pure-play, virtually all of its value was tied up in a key cancer asset. Like the Aragon deal, the Plexxikon deal was heavily front-loaded: Just $130 million was tied to milestones, while J&J will be on the hook for $350 million more if Aragon hits all its marks. And compared to other cancer deals in recent memory, such as Amgen Inc.’s 2011 purchase of cancer immunotherapy developer BioVex Inc. ($425 million up front) and Gilead Sciences Inc.’s 2011 deal for Calistoga Pharmaceuticals Inc. ($375 million up front), it’s a giant step richer. 

Catherine of Aragon, via Wikimedia commons

Aragon CFO Paul Cleveland declined to discuss specifics of Aragon’s earn-out, but the deal centers on Phase II program ARN-509, an androgen receptor inhibitor for castration-resistant prostate cancer. For its hefty purchase price, J&J gets an asset that’s already withstood one court challenge from rival Medivation Inc., and could face another. Medivation’s Xtandi (enzalutamide) shares lineage with ARN-509; both were discovered based on the research of University of California, Los Angeles professor Charles Sawyers, and Medivation alleged that the school hid ARN-509’s existence while out-licensing Xtandi. A judge affirmed that Aragon owns ARN-509 in January, but Medivation is appealing the ruling; a resolution might not come until next year.

Apparently the uncertainty wasn’t enough to spook J&J, but it’s possible that a different uncertainty spurred it to buy: Aragon’s choice regarding whether to conduct an IPO. The queue for new biotech listings is a long one, and it might be as easy as ever to go public. Even bluebird bio Inc., a mid-clinical-stage company in the once-untouchable gene therapy field, priced above expectations in mid-June, signifying that appetites are high for new offerings – even ones that carry a lot of risk. Indeed, Cleveland told “The Pink Sheet” that Aragon had a “very feasible go-it-alone strategy” that included a partnership and/or an IPO. (The strategy has apparently been in place for awhile, as CEO Richard Heyman told us last year.) Rather than risk letting Aragon brave the public markets, J&J moved to buy now.

In the end, J&J gets a drug that could succeed its existing prostate cancer therapy Zytiga (abiraterone), whose key patents expire in 2016. In the process, it extends a franchise that will compete with Xtandi, a drug S&P Capital IQ equity analyst Herman Saftlas said could deliver $2.5 billion in annual sales by 2015. And Aragon’s investors? Well, they get liquidity at a handsome multiple, but as part of the arrangement, they’ll also roll over some of their cash returns into a new company, Seragon, into which Aragon will spin out its Phase I selective estrogen receptor degrader ARN-810. -- Paul Bonanos

We know you have choices of your own, so thanks for choosing….

MedImmune/NGM: MedImmune, the biologics arm of AstraZeneca, signed on with privately held NGM Biopharmaceuticals June 17 to collaborate on the discovery and development of novel peptide or antibody therapeutics for type 2 diabetes and obesity. No financial terms were disclosed, but NGM will receive an up-front payment and research funding with the potential to earn development, regulatory and commercial milestones, as well as worldwide royalties on any products resulting from the partnership. The deal is the latest by MedImmune’s Innovative Medicines Unit for cardiovascular and metabolic diseases. Currently, bariatric surgery, which bypasses part of the patient’s intestines, is not reversible, and presents an array of gastrointestinal side effects, is reserved mainly for morbidly obese patients, who sometimes also suffer from out-of-control type 2 diabetes. “It’s not for every individual,” Christina Rondinone, chief of MedImmune’s cardiovascular and metabolic disease IMED said. “What we plan to do is develop a product that will mimic the benefits of surgery, avoid the side effects, and that every individual with diabetes can use. Our goal is not to treat the disease but reverse it with a drug.” Founded in 2008, South San Francisco, Calif.-based NGM now has signed three partnerships around its technology for understanding the roles that hormones play in certain diseases. In 2012, it partnered with Daiichi Sankyo to discover and develop drugs for type 1 and type 2 diabetes that modulate beta cell regeneration. Then, in January, NGM agreed to an exclusive collaboration with Janssen Pharmaceuticals Inc. to discover and develop novel therapeutics for type 2 diabetes. - Joseph Haas  

Teva/MicroDose: The Israeli firm Teva Pharmaceutical Industries Ltd. said June 17 it would acquire privately held MicroDose Therapeutx Inc. for $40 million up front and up to $125 million more in post-acquisition milestones. The New Jersey company’s two unpartnered clinical candidates are MDT-637, a treatment for respiratory syncytial virus, and a nerve agent antidote, both delivered via the company’s own inhalation technology platform. It acquired the anti-RSV candidate from ViroPharma Inc. in 2009. The firm has other delivery platforms, but Teva highlighted MicroDose’s respiratory technology and pipeline, saying the acquisition would strengthen its respiratory franchise. Underscoring Teva’s focus, the firm said it would also pay sales-based milestones and royalties upon commercialization of MDT-637 and an earlier stage asthma/COPD compound. Teva has expanded its generic empire as well as the branded side of its business through acquisition, although it has kept a fairly low profile since its $6.8 billion takeover of Cephalon Inc. in 2011. The firm has three branded respiratory products: QVAR for asthma, ProAir HFA for bronchospasm, and QNASL, a nasal spray for allergies. - Alex Lash  

Perrigo/Fera: Michigan-based Perrigo Co. said June 17 it would add to its smorgasbord of generic, over-the-counter, and animal health products by licensing a portfolio of nine generic ophthalmic offerings from specialty firm Fera Pharmaceuticals LLC of New York. Perrigo will pay $93 million, with $36 million more in contingent payments if more products are licensed. The portfolio includes sterile ointments and solutions and brought in more than $30 million in net revenue in 2012, according to Perrigo. Fera launched in 2009 with an ophthalmic portfolio that it acquired from Fougera Pharmaceuticals Inc., then the US arm of Nycomeduntil Takeda Pharmaceutical Co. Ltd. bought Nycomed in 2011. Fougera was owned by a private equity group until 2012, when Sandoz, the generics division of Novartis AG, bought it. Fera CEO Frank DellaFera and other top management were formerly with Sandoz. Perrigo claims to be the largest manufacturer of over-the-counter pharmaceuticals for the private label or “store brand” market. - A.L.  

Sanofi/Curie: A research collaboration between Sanofi and Institut Curie will revisit the basic biology that leads to ovarian cancer, according to the two entities’ joint statement issued June 19. Financial terms weren’t disclosed. The companies plan to identify targets that lead to cancer by revisiting a library of tumor samples that the Institute has preserved. Sanofi’s oncology division will work with Curie-Cancer, the Institute’s partnership organization, to address ovarian cancer using a translational approach. Sanofi plans to select targets based on tumor genome sequences, which are compared with healthy tissues to identify molecular alterations. It’s the second partnership Paris-based Curie-Cancer has formed with a major pharma this year. Roche and Curie-Cancer said in May that they would expand an existing four-year research deal reached in 2009, which had given Roche access to Curie’s pre-clinical research models. - P.B.  

DARA Biosciences/T3D Therapeutics: As it aims to focus wholly on oncology support therapeutics, North Carolina-based DARA BioSciences Inc. has spun out the last of its unrelated assets. DARA announced June 18 that T3D Therapeutics has licensed the worldwide rights to DB959, an oral, dual nuclear receptor agonist whose primary target is peroxisome proliferator activated receptor delta (PPARd). DARA has already developed the drug through Phase I for diabetes and dyslipidemia. T3D, which was founded by DARA’s former Chief Scientific Officer John Didsbury, intends to refocus the molecule as a treatment for Alzheimer’s disease. T3D is paying $250,000 up front, another $250,000 before the end of the year, plus commercial and development milestone payments. DARA will now focus solely on the commercialization of products that help with the side effects of cancer treatment – the company currently has three marketed products that fit this category, including a cream for skin irritation caused by radiation treatments. The company is looking to in-license other commercial-ready products and to find a partner that will develop the cancer support product it has in its pipeline. - Lisa LaMotta  

Protalix/Fiocruz: Israel’s Protalix BioTherapeutics Inc. reached an agreement with Brazil’s Ministry of Health that will allow the Brazilian government to manufacture the Gaucher disease treatment Uplyso (alfataliglicerase). The June 19 supply and tech-transfer agreement between Protalix and Fundação Oswaldo Cruz, known as Fiocruz, calls for the Brazilian health group to purchase $280 million worth of Uplyso from Protalix. Fiocruz will construct a facility and receive a license to manufacture its own Uplyso after seven years, once the purchase agreement is fulfilled. Uplyso, known in the U.S. and Israel as Elelyso, is an enzyme replacement therapy for Gaucher disease, a lysosomal storage disorder. Pfizer Inc. had licensed the drug locally and received Brazilian marketing approval in March, but returned rights to Protalix in exchange for $12.5 million in annual payments. Fiocruz is obligated to buy $40 million worth of Uplyso during the first two years of the agreement, and $40 million each year subsequently until it reaches the full $280 million. The seven-year agreement may be amended to add an additional five-year term to fulfill the financial terms. - P.B.

Once You Start Up Financings of the Fortnight, It'll Never Stop

Your faithful FOTF correspondent is in San Diego this week for the CalBIO conference, specifically to wax journalistic on a panel trying to look into the future – 2030! -- and opine sagely upon what we see. Some call this prediction; others call this pulling objects out of one’s nether regions, which thankfully doesn't require the Jagger-like calisthenics seen at the start of this week's video flashback.

What we can predict with near certainty is that the upcoming issue of Start-Up, arriving soon in print or electronic edition according to your subscription preference, will be full of timely topics. We’ll go inside Third Rock Ventures, which has raised more than $1 billion since 2007 to invest solely in early stage biotech. And not just invest; Third Rock creates many of its own companies, then puts its own partners into temporary executive roles in those companies once they launch.

Is it working? Hard to say yes, definitively, until they start truly reaping what they’ve sown. (Only two exits so far.) But Third Rock has a 28% stake in one of the companies in the IPO queue, bluebird bio, and a 24% stake in Agios Pharmaceuticals, which filed its S-1 a few days ago. More might be coming this year. LPs have enthusiastically bought into the Third Rock promise, that's for sure. But that’s not to say the group hasn’t hit snags or that there aren't adjustments to make. (You'll have to read Start-Up to find out what those are.)

Third Rock’s not the only VC growing their own. Flagship Ventures has been at it twice as long, in fact, and about five years ago – right around the time Third Rock rolled into town – it decided to put a brand on its in-house start-up brewery: VentureLabs. They’ve been busy lately, with big – dare we say “Third Rock-like”? – Series A rounds to launch two high-concept start-ups, Moderna Therapeutics and Syros Pharmaceuticals. The new Start-Up will also look at the early days of Moderna, and how the Flagship/VentureLabs folks helped push what was at first an advancement in the induced pluripotency of stem cells toward a new therapeutic modality that, despite many question marks, almost immediately attracted a major Pharma partnership and nearly a quarter of a billion dollars guaranteed.

If bluebird or Agios goes public, it will be Third Rock’s first IPO, but Flagship’s been around the block many times. In the current window, it’s already notched two IPOs since the start of 2012 – Receptos and Tetraphase Pharmaceuticals – and it owns 16% of Agios. Others have ushered even more biotechs public in the same time frame: As we note in the next Start-Up, New Enterprise Associates and funds associated with Fidelity top the charts with five IPOs apiece.

But as our colleague Stacy Lawrence reports, there’s been no rush to exit: Among all major shareholders (those with 5% stakes or higher)  that went through IPOs in 2012, less than one third have reduced their holdings. Thirty of 43 have held tight or increased their shares, often in the IPO as part of an agreement to get the deal done.

Just published in "The Pink Sheet" DAILY, Stacy also talks to several VCs about what seems to be a reinvigorated IPO appetite for early-stage biotechs – a good sign indeed for the likes of Third Rock and Flagship. And what of the growing number of early-stage biotechs with corporate investors providing the backbone of support? Once quite rare, we’re now seeing new companies out of the gate mainly backed by corporates, such as Protagonist Therapeutics, whose JJDC-led Series B we describe below. Another, ArmaGen Technologies, caught our attention when it made Start-Up’s 2012 A-List for its intriguing receptor-mediated technology that draws therapeutics through the blood brain barrier, and for its unusual Series A syndicate: Four corporate investors splitting evenly a $17 million round. Our colleague Paul Bonanos was even more curious, and in the story he’s penned for -- you guessed it -- the new Start-Up, he noted this telling quote from one of ArmaGen’s backers: “When you take away the worry about losing your money, great opportunities arise.”

In essence, at least a couple of ArmaGen’s investors consider exposure to the company’s technology just as important, if not more, than their financial return. Outlooks like that among corporate investors should make for very interesting strategy discussions when it comes time to ready a company for sale or for a public debut. Then again, not all corporate VCs embrace strategic return more than financial return. (For a rather brusque counterpoint, see this story about Novartis Venture Funds and chief Reinhard Ambros' decision to drop its strategy-oriented option fund: "Strategic means you pay money for something intangible, and you waste money.")

If we don’t get to the blurbs soon, this column will go past the point of no return. So let’s sum up: If you like the topics of conversation here at FOTF, you should love Start-Up, perhaps even enough to subscribe. That ends our shameless plug; now back to our shameless prose, often referred to as...

Avaxia Biologics: The therapeutic antibody firm topped off its Series B round with an undisclosed amount of cash from the venture arm of AbbVie, bringing the round to $11.4 million. It’s a fascinating case for several reasons. First, Avaxia’s lead product, an oral TNF inhibitor currently in a Phase Ib study in irritable bowel syndrome patients, goes after the same target as AbbVie’s superblockbuster Humira (adilimumab). That might lead one to believe AbbVie wants a closer look at what could make a potential replacement for Humira. But that outcome would be a rare occurrence, indeed. According to our Strategic Transactions data, from 2006 to 2011 only two private companies backed by corporate venture funds were eventually bought by the funds’ parents: Avid Radiopharmaceuticals (bought by Eli Lilly) and Avidia (Amgen). AbbVie does not gain any rights to Avaxia’s lead, AVX-470, or other products, but it does take a board seat. Another reason this is one to watch is Avaxia’s antibodies. They’re not monoclonal, like Humira and so many other key biotech products. They’re polyclonal, essentially a gemisch of antibodies strained from cow’s milk, and therefore quite capable of surviving a trip into the gut. Avaxia comes along just as a few companies, led by Symphogen, are dipping a toe into the possibility of antibody combinations. But those combinations are made from monoclonals, not polyclonals. Other than serum products, it’s hard to find precedent to what Avaxia is aiming for. Just as notable is how far Avaxia has gotten with its platform, funded to this point by angel investors. Its A and B rounds, totaling nearly $10 million before the AbbVie add-on, were led by angel groups. – Lisa LaMotta and Alex Lash

Clovis Oncology: Clovis took advantage of a strong clinical data release with a public offering that brought in $240 million, the third largest secondary offering of the year behind Onyx Pharmaceuticals and Ariad Pharmaceuticals. The firm is the best performer from the biotech IPO class of 2011, with a 445% gain as of June 13, thanks in large part to a mighty ASCO bump – that is, data it presented at the recent American Society of Clinical Oncology conference that took Clovis’ share price from $36.56 to $74.59 in one weekend. The company reported Phase I/II efficacy data for its non-small cell lung cancer drug CO-1686 in patients with the T790M mutation, which confers resistance to current treatments. Clovis has done well with its strategy of in-licensing candidates and companion diagnostics; it brought in CO-1686 from Avila Therapeutics in 2010, then partnered with Roche to develop a test for the T790M mutation a year later.  Clovis’ recent run-up also benefited from positive initial data at ASCO for its drug rucaparib in ovarian cancer. Rucaparib is an oral poly (ADP-ribose) polymerase (PARP) inhibitor that Clovis licensed from Pfizer in 2011, and subsequently partnered with Foundation Medicine to create a companion test to find patients most likely to respond to the compound. -- A.L.

Protagonist Therapeutics: The peptide development firm said June 4 it has raised a $14 million Series B round, led by Johnson & Johnson Development Corp. JJDC joined Series A investors Lilly Ventures and Australian firm Starfish Ventures. Protagonist spun out of the University of Queensland’s Institute of Molecular Biosciences and, while headquartered in the San Francisco suburb of Menlo Park, Calif., it maintains discovery operations in the Queensland capital of Brisbane. It’s the latest example of early-stage biotechs drawing most or all of their venture funding from corporate-affiliated funds, which are helping fill the gap left by traditional venture moving their limited resources toward the later stages. Protagonist says it has developed a platform to identify disulfide rich peptides, a more stable version of a molecule that has limited therapeutic availability. Also called constrained or stapled peptides, the area is looking to Aileron Therapeutics, which recently completed the first clinical trial of a stapled peptide and answered some questions about the compound’s ability to remain stable in vivo and avoid safety concerns. The preclinical Protagonist has signed deals with Zealand Pharma and Ironwood Pharmaceuticals; one of the firm’s pursuits is the development of orally-active therapeutics for inflammatory bowel diseases. -- A.L.

Dermira: The firm developing treatments for acne and other skin disorders said June 11 it has raised a $35 million Series B financing to move into a Phase I/II trial its lead program, lemuteprofin, a photodynamic acne therapy, and two preclinical programs. Dermira’s Series A investors Canaan Partners, New Enterprise Associates and Bay City Capital all re-upped and were joined in the round by Maruho, a 100-year-old Japanese firm that specializes in dermatology and typically keeps a low deal profile. Dermira has now raised more than $70 million in venture funding; its $42 million A round helped it purchase Valocor Therapeutics, at the time the owner of lemuteprofin after its spinout from failed Canadian biotech QLT. -- A.L.

All The Rest: To fund work on Phase II AKB6548 for anemia associated with CKD, Akebia Therapeutics raised $41M in Series C financing…ResearchGate, which is developing a platform to share and search for scientific data online, closed a $35M Series C…Edge Therapeutics collected $18M in Series C funds to support Phase II of EG1962 in preventing delayed cerebral ischemia…Prism Pharma, which has a lead compound for fibrosis, completed a $15M Series C…GSK spin-off Autifony Therapeutics topped up its Series A with an additional £5.5M from Pfizer Venture Investments and International Biotechnology Trust…in addition to adding Janssen as a new partner, Second Genome completed a second tranche on its Series A, which now totals $11.5M…concurrent with a $2.3M grant from the Norwegian Research Council's BIA-Program, Targovax raised $1.4M in equity…Arcturus Therapeutics, focusing on RNAi for rare diseases, closed a $1.3M seed round…Baxter Ventures came in as a new backer for Ocular Therapeutix…ARCA biopharma publicly sold $20M in Series A convertible preferred shares…StemCells received the right to sell Lincoln Park Capital Fund up to $30M in common shares…Oncothyreon raised $10M in an RDO to fund up-front payment in Array BioPharma co-promote…an undisclosed health care fund bought $9.8M in Celsion’s common stock…BioTime grossed $9.1M through a PIPE…epigenetics company Epizyme grossed $77M in its IPO…PeptiDream floated on the Tokyo Stock Exchange, raising $52M…Israeli firm Kamada completed a $52M IPO in the US…Kadimastem, which commercializes pluripotent stem cell-derived products, raised $5.5M in an IPO on TASE…Heat Biologics, PTC Therapeutics, bluebird bio, and Esperion all set terms for their IPOs…stem cell producer Cellular Dynamics International and Agios Pharmaceuticals, which is targeting inborn errors of metabolism, filed for their IPOs…Array BioPharma offered $115M in convertible senior notes…and Anacor Pharmaceuticals received a $45M three-tranche loan facility from Hercules Technology. -- Amanda Micklus

Deals Of The Week Tracks Obamacare

The pharmaceutical community, like much of the country remains divided about the Affordable Care Act and  its impact on healthcare and the industry, perhaps even more so than when the original law passed in 2010. The industry, of course, supported the initial legislation, and many people continue to believe it made the right decision. 

But as deadlines approach for the all-important next phase of the law, execution realities and uncertainty raise questions, many of which can’t be answered in the near term. Nonetheless, they have implications overall for the healthcare system and patients, and, more narrowly, for pharma commercial and business development strategy. This year, in particular, is important for the market access phase of the legislation, as the country prepares to get new health insurance exchanges running by the Jan. 1, 2014 deadline, and states decide whether and how to expand their Medicaid offerings to broader populations. As of Jan. 1, Americans must have individual insurance coverage or pay a penalty (modest at first); they can buy the coverage through insurance plans listed on health insurance exchanges which begin operations on that date. 

Overall, pharma industry support, officially, at least, seems high, even as executives worry whether their companies will ever make up for the tradeoffs they agreed to three years ago in the form of bigger rebates (for Medicaid and other government programs) and taxes through numbers of newly covered lives. They are concerned about less high-profile provisions of the act, such as its dramatic expansion of the 340b program to new categories of hospitals, and a provision that limits reimbursement companies can get for minor improvements to their product, as well as the federal and state governments’ ability to execute their plans on time. 

Many states are just now announcing which insurance companies are participating in the exchanges and those plans are identifying their basic options, but the industry in general does not yet have a good perception of what drug coverage will look like, how the new exchange plans or Medicaid expansion will be populated, or how the mandatory individual insurance provisions will be enforced. 

Because no one really has the answers, many in the industry expect companies to monitor the ACA’s progress closely but continue to operate status quo. They are not so much keeping their heads in the sand as monitoring cautiously,” says an executive at a firm that advises companies on market access issues. “From a tactical perspective, no one knows what will happen, so they are taking the path of least resistance. Top execs are asking me to come up with projections, and I don’t know them, so they are proceeding as though there is no effect.”

The uncertainty hasn’t stopped Wall Street from predicting winners and losers in the healthcare sector in general, or entrepreneurs form seizing opportunity in the midst of change. At the Jefferies investment bank conference on June 4, a panel of experts opined about investor beneficiaries, and all agreed that whatever else, managed care –perhaps by another name—will be the name of the game going forward. Past efforts to move populations into managed care failed, but what’s different now is the government support for such programs, as well as massive databases that able to monitor how the system is performing.

Meanwhile, the industry’s relentless search for innovation continues – if for no other reason than because without it, there’s not much of an industry – witness the struggles of specialty pharma companies such as Elan PLC, Endo Health Solutions, and Forest Laboratories, all laboring to move beyond the enormous success of an innovative drug but finding it hard to come up with a repeat act.--Wendy Diller

MorphoSys/GSK: MorphoSys has struck a development and commercialization deal with GlaxoSmithKline for its mid-stage rheumatoid arthritis antibody, MOR103, which targets the GM-CSF pathway that stimulates production of immune cells such as macrophages. The deal, announced June 3, gives MorphoSys near-term cash in the form of a €22.5 million ($29.5 million) upfront, plus development, regulatory and commercialization milestones that could add up to €425 million. GSK also will pay a double-digit royalty on all sales of the product. MOR103 has completed a Phase I study in healthy individuals, as well as a Phase Ib/IIa trial in 96 patients with mild to moderate rheumatoid arthritis. Patients in the drug arm of the study showed a significant effect compared to placebo at just four weeks. GSK will take over all development, but did not specify when it will begin Phase II studies. MOR103 has also been tested in patients with multiple sclerosis.

MorphoSys has been shifting gears for the last few months as it tries to move away from the partnership model that has made it profitable to concentrate more on its wholly-owned pipeline. MorphoSys has two drugs in its proprietary pipeline: MOR208, a Phase I asset which targets CD19 for B-cell malignancies, and MOR202, a HuCAL antibody against CD38 for multiple myeloma. – Lisa LaMotta

Pfizer/CytomX Therapeutics: After obtaining preclinical proof-of-concept last year for its approach to tumor-specific delivery of specially engineered antibodies, CytomX has struck its first alliance with a big pharma. Under an agreement announced June 6, the company will collaborate with Pfizer to discover and develop a variation on antibody-drug conjugates (ADCs) for cancer. Pfizer will pay the South San Francisco, Calif.-based biotech $25 million in combined upfront cash and milestones pegged to research and preclinical achievements. In addition, privately held CytomX could earn up to $610 million in regulatory and sales milestones, as well as tiered royalties into double digits on sales of any product reaching market. Because of the selectivity of candidates generated via its Probody Platform, CytomX says it can target broadly expressed tissues that are difficult to reach with other therapeutic approaches because of worries about off-target toxicity. CytomX uses its technology to generate ADCs that it calls Probody Drug Conjugates (PDCs), specially engineered antibodies or other approaches to drug delivery for cancer, inflammation and other unmet medical needs. PDCs will be safer and differentiated from other ADCs, CEO Sean McCarthy said, because they are engineered to combine cytotoxic payloads with Probodies that are masked to become activated only in the tumor’s micro-environment. Pfizer and CytomX are not disclosing the indications or specific targets on which they will work together, nor any timelines for the work, other than that it is an exclusive, multi-target alliance focused on oncology. – Joseph Haas

Janssen Biotech/Second Genome: Janssen Biotech and Second Genome Inc. announced a landmark research alliance on May 5th in which the latter will apply its microbiome discovery platform to characterize the role of human bacterial populations in ulcerative colitis. The goal is to translate the knowledge into therapeutic programs. The deal marks big pharma’s first commercial collaboration in microbiome R&D and may stimulate further deals and investment in the space. Interest in the therapeutic potential of the microbiome has been building over the past three years with the founding of several venture-backed companies focused on microbiome biology. Second Genome gets an upfront payment and milestones, both undisclosed. The upfront does not include equity. Janssen will fund the collaborative research through its Johnson & Johnson Innovation Center and the immunology therapeutic area within Janssen R&D LLC. Second Genome has preclinical programs in inflammatory bowel disease and type 2 diabetes, each about a year and a half from IND. It also has several discovery programs. On the same day, the start-up announced a $6.5 million third tranche to its series A financing, bringing the total raised to $11.5 million.—Michael Goodman

The Medicines Co./ ProFibrix: The hospital marketer The Medicines Co. is expanding into the hemostasis market, and has negotiated an option deal with ProFibrix BV that could improve its position there. The company announced June 4 it has agreed to pay $10 million upfront for an option to acquire ProFibrix later this year after Phase III clinical trial results read out on the company’s lead biologic, Fibrocaps. The dry powder topical formulation of fibrinogen and thrombin is being developed to stop bleeding during surgery. If the results of the single Phase III trial testing Fibrocaps are positive, The Medicines Company would pay $90 million to acquire ProFibrix outright. It also would be on the hook to pay $140 million in regulatory and sales milestones. ProFibrix’s ongoing Phase III trial, FINISH-3, has completed enrollment of 719 surgical patients with mild to moderate surgical bleeding, and the results are expected in the third quarter. The Medicines Company already markets the recombinant thrombin Recothrom, to which it recently gained rights through an earlier option arrangement with Bristol-Myers Squibb Co. The Medicines Company plans to combine the 60-person hemostasis group it gained from Bristol with the ProFibrix team. Both are based in Seattle, although ProFibrix’s leadership and headquarters are in The Netherlands. Plans call for CEO Jan Öhrström to stay on with The Medicines Company and head the company’s efforts in the hemostasis market. – Jessica Merrill

Novavax/Isconova: Eager to add adjuvant technology to its clinical and preclinical recombinant vaccine candidates, Novavax is making a $29.2 million bid to buy Swedish firm Isconova. Spun out of the Swedish University of Agricultural Science, Isconova produces saponin-based, immune-modulating adjuvants. In October 2012, Rockville, Md.-based Novavax, which has vaccines in clinical development for seasonal influenza, pandemic influenza, respiratory syncytial virus and rabies, reported successful Phase I data testing its pandemic flu vaccine boosted with a third-party saponin-based adjuvant. In a release, Novavax said based on those data plus Isconova’s own data, it believes the Swedish biotech’s technology can complement and strengthen its vaccine programs. Novavax announced a public offer June 4 under which it would issue 15.45 million new shares of common stock and swap 1.2388 shares of its stock for each Isconova share. The deal would represent a 26.7% premium over Isconova’s share price at the close of trading June 3 and would result in Novavax shareholders owning 91.1% of the new combined company. Isconova shareholders would control the remaining 8.9%. Novavax said if the deal goes through, it will offer Isconova management “positions subject to their commitment to the combined company,” and it does not plan to seek changes regarding the Swedish firm’s headcount, employment terms or business location.--JAH

Arno/Veridex: Cancer-focused Arno Therapeutics signed an agreement June 3 with Veridex, a subsidiary of Johnson & Johnson, to develop a diagnostic test for seeking optimal patients for its oncology candidates. Based in Flemington, N.J., Arno is developing cancer therapeutics that target the PI3 kinase/Akt pathway, as well as HDAC inhibitors and camptothecins. The two firms will team up to use Veridex’s proprietary CELLSEARCH platform to develop a diagnostic to detect the presence of activated progesterone receptors as a biomarker of anti-progestin activity in circulating tumor cells, those that have detached from a solid tumor and are found in the bloodstream. Arno is developing onapristone, an oral, anti-progestin type 1 progestin receptor antagonist. Now in preclinical development, onapristone is slated to begin clinical study during the second half of 2013.--JAH

AstraZeneca/ Rigel: AstraZeneca pulled out of its three-year partnership with Rigel Pharmaceuticals on June 4 after the companies announced lackluster results of the Phase III program for rheumatoid arthritis drug fostamatinib, an oral spleen tyrosine kinase (SYK) inhibitor. The drug did not show the levels of efficacy that many other drugs in the category have in clinical trials, prompting AZ to pull the plug. Rigel intends to evaluate the data from the Phase III program, which AZ conducted, and make a decision by end of the summer regarding its next steps. Rigel executives believe that fostamatinib could still find a place in the crowded RA market, even if the indication is just for a small subset of patients. Rigel potentially will seek approval of the drug on its own, but said it will not commercialize the drug without a partner. 

The failed program is just the most recent in a string of failures for the British pharma, which has ended programs in cardiovascular and oncology as well. It has also faced a slew of setbacks with its diabetes program, partnered with Bristol.--LL