Deals Of The Week: Kicking The Tires

Apparently, virtually by the time it became “news,” it transformed into “non-news.” News reports of Roche’s interest in acquiring ultra-rare disease focused Alexion Pharmaceuticals surfaced suddenly July 12 and just as rapidly evaporated the following week, as Wall Street analysts noted the prohibitive premium price and lack of cost-saving synergies.

That doesn’t mean that “tire-kicking” season is over in biopharma, if indeed it ever ends. During a steamy summer season highlighted by the running of the bulls in Spain, the jockeying for position of the bikers in France, and world-class tennis being followed quickly by world-class golf in the U.K., renewed speculation about the fate of cancer specialist Onyx Pharmaceuticals after it it put itself up for sale in in late June surfaced just as the Roche/Alexion story sputtered to an end.

Recall that Amgen got the ball rolling on Onyx speculation with a $120-per-share bid confirmed by Onyx on June 30. Onyx declined the offer but also put itself on the auction block, hoping to attract an even greater price tag. Now, perhaps four or more companies are interested in the oncology firm, possibly including its long-time partner Bayer and competitors in the multiple myeloma space such as Celgene and Takeda.

Media reports also cited Bristol-Myers Squibb and Gilead Sciences as possible suitors, while Pfizer was mentioned as a player, then backed off due reportedly to the price premium. Also not in the running, according to speculation, are Sanofi, GlaxoSmithKline, Novartisand Biogen Idec.

Roche’s reputed interest in Alexion, while understandable because of the Connecticut biotech’s all-out success with Soliris (eculizumab), the highest-priced drug in the world, also is puzzling because of questions about how the Swiss pharma would derive value from such a pricey acquisition. The company has only one commercial product – for a pair of ultra-orphan diseases – albeit a rapidly growing, billion-dollar product, bolstered by an up-and-coming robust pipeline. Reports – unconfirmed – had Roche looking over financing vehicles in order to make a purchase in the range of $25 billion for Alexion.

Deutsche Bank analyst Robyn Karnauskas wrote July 15 that while many European large pharma companies might be able to afford Alexion, they would balk at the price. Roche likely would be better off pursuing “a product/company with more strategic fit or transformational potential,” she said. Projecting Alexion total revenues of $1.7 billion in 2014 and $2.6 billion in 2015, the reported Roche bid would translate into multiples of 15x next year and 10x in 2015, she estimated.

An analyst at UBS Investment Research, Matthew Roden, who covers Alexion, wrote July 15 that the company is an attractive and likely take-out target but would offer few points of potential synergy with Roche. It would be more of a “bolt-on” transaction than a “fold-in” acquisition, he suggested.

“Since the Alexion business model requires a high degree of patient touch and very specialized sales force to reach idiosyncratic PNH (paroxysmal nocturnal hemoglobinuria) and aHUS (atypical hemolytic uremic syndrome) markets, we see limited capability for SG&A cost savings through a deal beyond regulatory structure,” Roden said.

His U.K.-based colleague Andrew Whitney, who covers Roche, noted July 15 that an offer of about $130-per-share for Alexion would represent 35 times the UBS projections for 2014 earnings by the biotech.
So, while Roche/Alexion apparently is not happening and Onyx could end up in the hands of a big pharma, a big biotech or some business model in between, DOTW can offer these transactions that reached the point of signatures along the dotted line …

Spectrum/Talon: Spectrum Pharmaceuticals acquired Talon Therapeutics in the hopes of expanding the indications for Marqibo. The liposomal form of vincristine received accelerated approval from FDA in August 2012 to treat third-line patients with Philadelphia chromosome-negative acute lymphoblastic leukemia (ALL). Spectrum hopes Phase III data to treat newly diagnosed, elderly non-Hodgkin’s lymphoma patients will pan out and lead to an approval in NHL, thereby significantly expanding the potential market for Marqibo. A Phase III trial of Marquibo in newly diagnosed ALL patients also is ongoing. This trial is intended to serve as a confirmatory trial for the accelerated approval. Disclosed on July 17, the deal was slated to close a day later. Spectrum paid $11.3 million in cash, in addition to 3 million of its shares. Spectrum shares closed at $8.77 on July 17. At that price, Spectrum paid $37.6 million in cash and stock, plus contingent value rights (CVRs) worth up to $195 million. CVRs are tied to Marqibo sales milestones and an approval for Menadione, a Phase II topical lotion for the treatment of the skin toxicity associated with epidermal growth factor receptor anti-cancer (anti-EGFR) agents. Spectrum plans to launch Marqibo before early December, with a price point similar to other improved formulations of oncology treatments, like Abraxane, a long-acting, nanotech formulation of paclitaxel, or Doxil, a liposome-encapsulated doxorubicin. Private equity firm Warburg Pincus and hedge fund Deerfield Management recapitalized Talon in 2010, buying at least $69 million in equity in the last three years. - Stacy Lawrence

Pfizer/Sequella: Anti-infective drug specialist Sequella has licensed a mid-stage tuberculosis antibiotic from Pfizer. The privately held Rockville, MD, company acquired worldwide rights to sutezolid, previously known as PNU-100480, for an undisclosed amount. Pfizer previously investigated the oxazolidinone antibiotic in both drug-sensitive and multi-drug resistant tuberculosis, conducting Phase II and pivotal trials in Africa and Russia respectively. Sutezolid complements the Phase II drug SQ109, Sequella’s lead program in Mycobacterium tuberculosis; the company plans to investigate pairing the two in a combination therapy. The 16-year-old company has another TB drug, SQ609, as well as programs in Helicobacter pylori, Clostridium difficile and M. avium paratuberculosis. Sequella traditionally has supported itself by raising capital from hedge funds and other private investors as well as government grants. It also completed a partnership with Maxwell Biotech Venture Fund in 2011, giving the Russian investor territorial rights to SQ109. Pfizer said it is shifting its anti-infective focus from treatment to prevention, and has been seeking to partner drug candidates such as sutezolid. The drug also could be studied in Gram-positive infections such as methicillin-resistant Staphylococcus aureus and vancomycin-resistant Enterococcus, as well as other forms of tuberculosis. – Paul Bonanos

Medtronic/Amgen: Medtronic reps who sell the firm’s interventional spine devices will need to expand their skill set to include drug sales beginning this month. Under a three-year strategic partnership with Amgen, announced July 15, Medtronic will start promoting the biotech's Prolia (denuosumab) to U.S. spine specialists by July 31. Prolia is an FDA-approved biologic for the treatment of postmenopausal women with osteoporosis at high risk for fracture. For Amgen, the deal offers access to Medtronic’s expansive customer base of spine physicians, “who are at the forefront of evaluating and treating women with fractures caused by [postmenopausal osteoporosis],” said Marion McCourt, a VP with Amgen, in a July 15 press release. “This partnership allows us to intervene shortly after an osteoporosis-related fracture has occurred, and encourage therapeutic interventional to help reduce the risk of a subsequent fracture.” The upshot for Medtronic is not as clear cut. Financial terms of the agreement were not disclosed. “This new agreement increases awareness and access to our current base of orthopedic and spine physicians already treating patients with osteoporotic vertebral compression fractures,” said Doug King, president of Medtronic Spine. “Identifying successful treatment options and access to care at the site of service for the growing number of women with osteoporosis at high risk for fracture is our primary objective.” - David Filmore

Royalty/Quest: Quest Diagnostics has divested its stake in the highly-anticipated cancer drug ibrutinib as it continues to refocus its business on information services and simplify its operations. Quest sold the single-digit royalty stream to Royalty Pharma for $485 million, the companies announced July 18. Ibrutinib, an oral Bruton’s tyrosine kinase inhibitor (BTK), is being developed by Pharmacyclics and Johnson & Johnson for the treatment of chronic lymphocytic leukemia, small lymphocytic lymphoma and mantle cell lymphoma. Pharmacyclics submitted an NDA for the drug to FDA on July 10. Earlier this year, the regulatory agency granted the drug its new breakthrough designation, a means of pushing highly-effective drugs through regulatory approval more quickly. The drug is expected to receive a fast track review and could be on the market by early next year. Analysts estimate worldwide peak sales between $2 billion and $3.5 billion. Royalty Pharma buys up royalty streams from other companies – the investment firm has stakes in several of the largest drugs on the market, including AbbVie’s blockbuster rheumatoid arthritis drug Humira (adalimumab), Pfizer’s fibromyalgia pill Lyrica (preagbalin), J&J’s RA drug Remicade (infliximab), Biogen Idec’s recently approved multiple sclerosis pill Tecfidera (dimethyl fumarate), and Merck’s diabetes blockbuster Januvia (sitagliptin). - Lisa LaMotta

Auxilium/Sobi: Auxilium Pharmaceuticals has found a new partner to take over commercialization of its treatment for Dupuytren’s contracture and Peyronie’s disease, Xiapex (collagenase clostridium histolyticum), in Europe after its prior partnership fell through due to slow sales of the drug. Swedish Orphan Biovitrum (Sobi) will take over where Pfizer left off, taking on commercialization of the drug in the 28 EU member countries, Switzerland, Norway, Iceland, 18 Central Eastern Europe/Commonwealth of Independent countries, including Russia and Turkey, and 22 Middle Eastern & North African countries. In exchange for the commercialization rights, Auxilium will receive tiered double-digit royalties on all sales and will be eligible for up to $40 million in milestone payments that are tied to undisclosed sales benchmarks. Pfizer originally signed on to commercialize Xiapex in Europe in 2009. At the time, Pfizer paid Auxilium $75 million upfront, and agreed to pay $150 million in regulatory milestones and $260 million based on undisclosed sales milestones. In addition, Auxilium was to receive increasing tiered royalties based on sales in Pfizer's territories. Pfizer to pull out of the partnership in November 2012, but did not stop promoting the product until the end of March. It will continue supplying the product to physicians until mid-October. - L.L.

Rexahn/University of Maryland, Baltimore: Rexahn Pharmaceuticals has in-licensed a novel drug delivery platform, Nano-Polymer-Drug Conjugate Systems (NPDCS), from the University of Maryland, Baltimore, the company announced July 17. The technology delivers chemotherapeutics directly into tumors, potentially increasing efficacy and reducing toxicity. Rexahn plans to use the technology to develop RX-21101, a preclinical-stage polymer conjugated form of docetaxel. By minimizing the circulating concentration of docetaxel in the blood and maximizing the concentration in the cancer tumor, RX-21101 may increase anti-tumor activity while lowering adverse events. The financials were not disclosed. Rexahn, based in Rockville, Md., has three oncology candidates in clinical development, the lead of which is Archexin, an akt1 inhibitor partnered with Teva Pharmaceutical Industries. - Jessica Merrill

Bausch & Lomb/Mimetogen: Eye-care company Bausch & Lomb has acquired the option to license a Phase II compound for dry eye syndrome from Mimetogen Pharmaceuticals. The compound, MIM-D3, stimulates the production of mucin, which is essential for lubrication of the eye. The drug was shown to be effective and safe in Phase II studies and a late-stage trial is expected to begin before the end of the year. B&L paid Mimetogen an undisclosed option fee and will have the opportunity to pursue development upon Phase III results. At that time, B&L will assume all development costs and will pay Mimetogen development and sales milestones, as well as royalties. Dry eye affects 25 million people in the U.S. alone and tends to affect more people as they age. The global market is currently worth $2.5 billion and is growing at a rate of 10% annually. - L.L.

Alexion/Ensemble: Bringing to a close a week highlighted by Roche’s apparent buyout interest, Alexion signed a drug-discovery collaboration July 18 with Ensemble Therapeutics. Financial terms were not disclosed, but Ensemble gets an upfront payment and research funding, along with potential for development and commercial milestones under the agreement. Ensemble, whose Ensemblin technology platform can produce novel small-molecule candidates to address targets normally addressed by biologic therapies, will screen more than 10 million macrocyles against undisclosed disease drug targets specified by Alexion. Alexion, which focuses on life-threatening, ultra-rare disorders, will have exclusive worldwide rights to develop and commercialize any candidates emerging from the collaboration. Recently hired Executive VP and Head of Global R&D Martin Mackay said this transaction is meant to expand Alexion’s product portfolio. “We seek to broaden the number of pathways toward developing potentially transformative first-in-class drug candidates for patients with selected severe and life-threatening ultra-rare disorders,” he said in a release. - Joseph Haas

Ocera/Tranzyme: Ocera Therapeutics has made its way to the public markets through a reverse merger with the publicly-traded biotech Tranzyme. The new company will focus on developing Ocera’s lead drug, an ammonia scavenger OCR-002 in development for hyperammonemia, the ammonia build-up in the blood when the liver is no longer able to remove toxic substances from the blood. That build-up can cause hepatic encephalopathy, marked by worsening brain function, which eventually can lead to brain swelling, coma and death. Ocera’s investors also committed $20 million in a private placement financing, cash that will see the company through most of a Phase IIb trial testing OCR-002. Becoming a publicly-traded company wasn’t the impetus for the transaction, however, CEO Linda Grais said. “The strategic rationale was really the strength of the combined management team, particularly bringing the clinical development team from Tranzyme together with the program from Ocera,” said Grais. “We realized that this was a team that would take us a long time to build from scratch.” Though Tranzyme’s research was focused in gastrointestinal disease, its Research Triangle Park, NC, team led by Chief Medical Officer Franck Rousseau has extensive experience in liver disease. Before joining Tranzyme, he worked at Gilead asTherapeutic Area Head, Hepatic Diseases and VP Clinical Development. Tranzyme ran into trouble in 2012 when a Phaes III trial in postoperative ileus on lead drug TZP102 failed to meet its primary and secondary endpoints. It began reviewing strategic options early this year. - J.M.

Photo credit: Wikimedia Commons

Deals Of The Week: CATT Fight

Well, the cat (er catt) is out of the bag – and, n,o we aren’t talking about Kate Middleton’s decision to wear a long-sleeved ivory confection with flower appliqué details when she tied the Windsor knot.

While fashionistas, pundits, and the British nation had their eyes trained on Westminister Abbey, the biopharma industry was focused on the release of data comparing the utility of the high priced Lucentis versus the much cheaper Avastin to treat wet age-related macular degeneration. And as everyone now knows, the data from the 1200-patients trial sponsored by NIH suggest that in this particular setting, there seems to be little reason—based on overall outcomes—to spend thousands of dollars on Lucentis when Avastin works just as well for a fraction of a cost.

Dr. Phillip Rosenfeld, an ophthalmologist at the University of Miami Miller School of Medicine, was particularly blunt in his assessment in a NEJM editorial that accompanied the data’s publication: "Healthcare providers and payers worldwide will now have to justify the cost of using ranibizumab [Lucentis]," he said.

That’s not to say Genentech and Novartis aren’t channeling their inner Churchill (or perhaps, more appropriately, their inner John Paul Jones). Already the companies are highlighting potential unanswered safety questions, including discrepancies in dosing and a slight increase in the incidence of non-specific serious adverse events, mostly hospitalizations. Expect the drug companies to play up whether the controlled conditions of the NIH trial can adequately be replicated in a real world setting too.

Given we are talking about people’s sight, those questions may provide a persuasive argument for docs and patients wary of not using the formulation that has FDA’s stamp of approval. Provided payers play along, of course.

And that's why Medicare’s decision is so critical. Avastin vs. Lucentis has become the poster child for the comparative effectiveness debate; thus, you can bet industry will be watching closely to see whether or not CMS initiates a coverage review that would limit Lucentis’ use. Such a decision would certainly give private payers more license to limit the medicine as a first-line treatment option.

The ripples of CATT will almost certainly be felt outside the walls of Novartis and Roche/Genentech as well. Ophthalmology – particular treating diseases that blind—has become an area of interest for big pharma because of the unmet medical need for new therapies. Because back of the eye diseases are treated by a highly trained and technically savvy group of specialists, the sector has long been a favorite of the venture community as well.

What does this mean for new AMD drugs coming down the pike like the complement inhibitors developed by Optherion or the anti-PDGF inhibitor developed by Opthotech? Given such medicines work by a different mechanism of action than the anti-VEGF inihibitors Lucentis and Avastin, their value proposition is still a little bit easier to explain. But whether potential partners will bite without superiority data is another question.

Certainly the CATT data seem to make life much tougher for Bayer and Regeneron, who now face some thorny questions about their VEGF Trap-Eye medicine, aflibercept. Phase III data released last fall showed the drug to be non-inferior to Lucentis, with fewer doses required. But with data from CATT suggesting drugs like Lucentis and Avastin can be given at less frequent intervals, a dosing advantage alone seems unlikely to be enough to ensure Regeneron and Bayer coverage and commercial uptake of their medicine – especially when data showing a much cheaper alternative can do the job.

Whether you think the CATT results are the cat’s meow or worth nothing more than a cat call, it’s time for another edition of deals of the week…

Johnson & Johnson/Synthes: The deal garnering the lion’s share of the PR this week is Johnson & Johnson’s $21.3 billion tie-up of orthopedic trauma device maker Synthes, announced April 27. Under the terms of the deal, J&J will pay $181.75 per share for Synthes in cash and stock, an 8.5% premium over Synthes’ stock price close on April 26 and a 21.7% premium over its close on April 14, when rumors about a possible tie-up first surfaced. It’s the largest deal in J&J’s history, coming half a decade after the diversified giant passed on upping its $25 billion bid for Guidant. Strategically the Synthes buy-out makes a lot of sense: it gives J&J the pole position in orthopedics boosting sector revenues from around $5.6 billion to more than $9 billion, and deepens its expertise in trauma fixation devices, an arena less prone to payer oversight and the vagaries of a slowing economy. (Fixing the damage arising from a major accident ain’t exactly elective.) At the time of the Guidant bidding war, analysts noted J&J’s interest in that company and the size of the deal said a lot about the health care company’s view on the relative merits of investing in med-tech versus pharma. Given the Synthes acquisition, the question of J&J’s dedication to Rx is sure to resurface, though the early approval of Zytiga may help the balance.

One interesting wrinkle is whether this big orthopedic deal could presage additional dealmaking in CV, since within J&J there’s historically been a school of thought linking opportunities in these two markets. As rumors about the possible J&J/Synthes tie-up coalesced, speculation ran the gamut. Thanks to the precipitous drop in market share of its drug-eluting stent biz, some predicted J&J would exit CV altogether, selling off its Cordis business; others said 'no,way,' opining this will spur J&J to re-up in CV, perhaps via acquiring percutaneous valve-leader Edwards Life Sciences.

Because J&J is paying for Synthes mostly in stock -- just 35% of the payment is cash -- the health care firm has plenty of ammunition for additional deal making. Given J&J's hefty balance sheet, its use of stock to ink the deal took some by surprise since it creates additional unwelcome earnings pressure. Even though the deal bolsters the struggling DePuy subsidiary, which like the consumer division, has seen major setbacks due to recalls, some claim J&J is simply putting a Band Aid (pun definitely intended) on its problems. Critics argue the company’s manufacturing problems are significant and that integrating Synthes will detract from the hard work required to fix a broken system. —The EBI Device team

Kadmon/Nano Terra: Sam Waksal’s Kadmon is at it again. After its deal-making bonanza last fall – recall the firm acquired Three Rivers and set up a strategic partnership with Valeant—Kadmon is teaming up with privately-held Nano Terra, a nanotech accelerator developing technologies with applications from biopharma to more industrial settings. Terms of the tie up weren’t disclosed but they do provide Kadmon with an exclusive license to three novel, clinical stage assets and access to Nano Terra’s proprietary Pharcomer Technology drug discovery platform. (FYI, the product candidates and the Pharcomer technology were originally developed by another private biotech, Surface Logix, and only recently acquired by Nano Terra, though no formal announcement about that deal appears to have been made.) Perhaps the most interesting asset for Kadmon is Slx-2119, a selective Rho-associated coiled-coiled kinase 2 (ROCK2) inhibitor that impacts cell shape and cell migration and may play a role in diseases as diverse as diabetes, cancer, and spinal cord injury. As part of the recent alliance, the assets and technology will be transferred to a new joint venture owned by Kadmon and Nano Terra called NT Life Sciences.—EFL

Sequella/Maxwell Biotech Venture Fund: Anti-infectives developer Sequella of Bethesda, Md., signed an unusual deal that gives Maxwell, a venture fund that specializes in Russian investments, rights to tuberculosis treatment SQ109 in Russia and the Commonwealth of Independent States, which includes Armenia, Kazakhstan, and Ukraine. Maxwell is taking an undisclosed equity stake in Sequella, but the parties do not consider the transaction a round of funding. Sequella could receive up to $50 million from Maxwell, the first tranche being an upfront payment and near-term milestones that the companies declined to disclose. Run by former Pfizer discovery executive and incubator chief Alex Polinsky, Maxwell has responsibility for development and approval of SQ109 in its licensed areas. Sequella has completed three Phase 1 studies of SQ109 in the U.S. and is currently running Phase 2 efficacy studies in TB patients in Africa. It is also testing the compound as a treatment for Helicobacter pylori infections and fungal infections. Sequella officials told the IN VIVO Blog that the company has not raised traditional rounds of venture capital, instead leaning on individual investors and hedge funds to supplement government grants. -- Alex Lash

Eli Lilly/Medtronic: While drug companies routinely team up with device makers to find better ways to deliver drugs, the April 26 deal between Eli Lilly and Medtronic, to research and develop a new treatment for Parkinson's disease is notable for two reasons. For starters, the collaboration involves two very early stage technologies. But the alliance also facilitates Lilly's move into a new area of CNS that heretofore hasn’t been a primary focus. If all goes according to plan, the alliance will result in a combination of Lilly's modified form of glial cell-derived neurotrophic factor (GDNF) and Medtronic's implantable drug infusion system. Because the large protein growth factor can't get past the blood brain barrier, and, on its own, isn't targeted, the Medtronic device would deliver it directly to the dopamine-producing neurons that degenerate as Parkinson’s disease advances. The companies aren't disclosing much about the terms of their alliance, except to note that it is a 50-50 split in both costs and revenues and spans clinical development, regulatory and ultimately commercial stages. The aim is to produce a combination product that can be submitted jointly for regulatory approval. The partners don't have a fixed time line for getting their therapy through development, but expect to move it into the clinical within five years, said Ros Smith, a senior research director of regenerative biology at Lilly.While the modified GDNF is most advanced, Lilly also has several compounds in pre-clinical development for Parkinson's disease. Medtronic, for its part, doesn't currently sell a device that delivers drugs directly to the brain, although it markets a deep brain neurostimulation technology for treating Parkinson's disease and sells implantable pumps and catheters for delivery to the spinal cord.--Wendy Diller

Image courtesy of flickrer privatenobby used with permission through a creative commons license.

Deals of the Week's Thanksgiving Day Massacre (In 4-Part Harmony, Of Course)

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why I called the post Deals of the Week.

Now it all started four Thanksgivings ago; it was four years ago on Thanksgiving, when Chris Morrison and I started writin' a blog about deals, but not every day, just once a week. And writin' about deals once a week, you know it's a lot of work. (Hint. Hint.)

And there's a lot of garbage you gotta sift through, but we decided it would be a friendly gesture on behalf of readers. So we trolled around the Internet with our shovels and rakes and other implements of destruction (a.k.a. EBI's Strategic Transactions database) looking for deals to analyze. But then a big bad editor (also known as Officer Roger) said why are you doin' that? We are closed on Thanksgiving.

And we had never heard of a blog closed on Thanksgiving before (we don't get out much) so with tears in our eyes we drove off into the sunset looking for another place to dump our garbage -- I mean our deals.

We didn't find one. So we wrote our post anyway, went back and had a Thanksgiving Day that couldn't be beat, went to sleep, and didn't get up until the next morning when we got a call from Officer Roger... And it's been a recurring feature here at IVB ever since.

But fortunately, not another case of American blind justice since we always arrive at the truth of the matter and it doesn't even require 27 eight-by-ten color glossy pictures with circles and arrows and a paragraph on the back of each one.

In honor of the day, we hope you consider joining the IN VIVO Blog Movement. All you've got to do is walk into the office wherever you are, just walk in and say ,"You can get anything you want at IN VIVO Blog." And walk out.

You know if one person, just one person does it, they might think he's really sick and they won't take him... And can you, can you imagine fifty people a day, I said fifty people a day (okay, we'd really like 1000) walking in, quoting a line from IN VIVO Blog and walking out?

And friends, they might think its a movement. And that's what it is, the IN VIVO Blog Movement.

Remember Deals of the Week? (This is a post about Deals of the Week.)

Without further ado, we bring you this week's installment. Feel free to sing along in four-part harmony. With feeling. Cuz'...

You can get anything you want at IN VIVO Blog.
You can get anything you want at IN VIVO Blog.
Log right in, it's a click away.
Just a finger tap. You don't have to pay.
You can get anything you want at IN VIVO Blog. (Excepting Roger.)

Convergence/Selcia: Barely more than a month after it was spun out of GlaxoSmithKline, CNS-focused Convergence Pharmaceutical bagged its first drug discovery collaboration, with Essex, UK-based CRO Selcia Ltd. No financials were disclosed, but Convergence isn’t short of cash, having raised $35.4 million on inception in one of Europe’s largest A rounds. Run by CEO Clive Dix, of PowderMed fame, Convergence already has two clinical-stage assets and six earlier-stage programs targeting ion-channels involved in chronic pain. In this deal, the partners will hunt further molecules for chronic pain, with Convergence applying the ion channel biology, medicinal chemistry and preclinical development expertise it inherited from GSK, and Selcia contributing synthetic chemistry and chemistry support services. The collaboration shows that Convergence, like its parent GSK (and indeed many other Big Pharma), is willing to embrace others’ drug discovery approaches, and to tap into drug discovery resources and technology on a flexible basis.--Melanie Senior

Medtronic/Ardian: Back in the summer of 2008, Ardian sought out corporate investors to participate in the company’s targeted $30 million Series C financing, thinking some corporate oomph and expertise would help drive clinical testing of its Symplicity Catheter System, used for treating hypertension and related conditions. The following spring Medtronic led a $47 million round, acquiring 11% of the company in what was – and still is - a rare up round. Now, Medtronic is going all in, announcing that it will acquire the rest of Ardian for $800 million up front, setting a record purchase price for a medical device company that doesn’t have an FDA-approved device. (Medtronic topped the mark it set in 2009 with the $700 million of CoreValve Inc., a percutaneous heart valve company.) Medtronic also agreed to pay commercial milestones equal to the annual revenue growth through the end of Medtronic’s fiscal year 2015. Ardian’s system allows doctors to deliver radiofrequency energy to the renal sympathetic nerves surrounding the renal arteries. Decreasing conduction of these nerves is seen as a way of triggering the body’s own regulation mechanisms to lower blood pressure. For the past six months, Ardian has been releasing positive results from its ongoing clinical trials with the most recent bit of good news at the American Heart Association meeting this month.--Tom Salemi

Boehringer Ingelheim/f-star: Boehringer's R&D collaboration with f-star this week is yet more proof that the privately-held German drug maker is ramping up its large molecule capabilities. This is the fourth antibody deal Boehringer has done this year alone according to Elsevier's Strategic Transactions, building on collaborations with 4-Antibody, Micromet, and most recently MacroGenics. Financial terms of the latest transaction weren't disclosed, but f-star, a former Series A-list all-star that has pulled in more than $25 million in venture dollars, will receive an initial technology access fee, research-based funding, and of course the potential for downstream regulatory and commercial milestones. In return, f-star will use its modular antibody technology to develop novel therapeutics against up to seven targets nominated by Boehringer that span multiple therapeutic areas. Biobucks for each of the seven targets, to which BI of course holds worldwide rights, could total up to €180mm ($247mm), excluding royalties. (Prompting unintentionally hilarious headlines about the "$1.7 billion" deal.) f-star's technology allows it to introduce additional binding sites into antibodies or antibody fragments, engineering large molecules that can target multiple proteins in a single molecule. Note this isn't the first time BI has signed an alliance focused on antibody fragments (that honor goes to Ablynx back in 2007) or bi-specific antibodies (MacroGenics' DART technology competes with f-star). Such second-generation approaches are a means of circumventing established IP claims for successful traditional antibody therapeutics and may advantages over Mother Nature's molecules, as they are potentially easier to manufacture and can have greater tissue penetration.--EFL

GlaxoSmithKline/Dr. Reddy's: GlaxoSmithKline's deal with Dr. Reddy's for the big pharma's United States oral penicillin facility and product portfolio is an interesting spin on regional deal making. Under the terms of the agreement, GSK transfers ownership of its penicillin manufacturing site in Tennessee and U.S. rights to Augmentin and Amoxil brands to Dr. Reddy's for an undisclosed sum. That GSK would opt to sell out of the US penicillin market isn't too surprising. Back in 2008 the drug maker announced plans to lay off the 200+ workers employed at the 400,00-square-foot manufacturing site by fall 2009 in preparation for sale of the plant because of declining sales of Augmentin stateside as a result of generic competition. Thus, the deal makes everyone happy, allowing GSK to downsize in a market no longer deemed valuable, while still allowing the drug maker to preserve ownership RoW, where GSK sees the potential for growth via its branded generics strategy. Dr. Reddy's, meanwhile, has been angling to scale up its generics business in North America. Thus, this deal gives the India-based giant entree into the US penicillin-containing antibacterial segment and a physical footprint to boot.--EFL

Roche/Ligand: Around the same time Roche decided to close out its R&D work in RNA interference, the Swiss pharma also notified Ligand Pharmaceuticals that it was ending a partnership to develop RG7348 (formerly MB11362) for hepatitis C. This no-deal officially ends the circuitous relationship between La Jolla, Calif.-based Ligand and the Swiss pharma. The tie-up began in August 2008, when Roche paid $10 million upfront to initiate a two-year collaboration with Metabasis Therapeutics to apply the latter firm’s HepDirect platform to Roche’s lead nucleoside candidates for HCV. In June 2009, the two companies chose ‘7348, which had since advanced to Phase I, as their lead candidate, with Roche paying a $2 million milestone to the biotech. Fast-forward to October 2009, when Ligand bought out Metabasis, inheriting the HCV deal. Since Ligand/Metabasis, Roche has paid up another $6.5 million in milestones; for the bean counters in the audience, $2.7 million of that went to Metabasis shareholders who had received contingent value rights in the original sale. Ligand, which says it learned of Roche’s decision on Nov. 19, also completed a one-for-six reverse stock split that same day, reducing current outstanding shares of common stock from 117.7 million to 19.6 million. Despite the no-deal, Ligand still boasts partnerships a plenty, boasting of ongoing alliances with Pfizer, GlaxoSmithKline, Merck, and Bristol-Myers Squibb, among other.—Joseph Haas

HAPPY THANKSGIVING FROM IVB!

DotW: State of the Union

Okay, we at IVB know that Tuesday night's speech wasn't really a state of the union address. Call Obama's discourse a precursor, a practice run, a preliminary to the real thing coming in 11 months. Whatever you call it, there's no denying the officially unofficial address will likely go down in history as one of the most important events--after the budget, also released this week--of 44's first 100 days. Not necessarily because, as Ezra Klein at American Prospect notes, it was a particularly inspiring--or terrorizing--speech. But because "he didn’t wrap his agenda in a lot of rhetoric about America’s mettle or hide it behind stories and icons. He just sort of said it." Imagine.

In a week where the Dow plummeted to lows not seen since 1997 and news on rising unemployment and falling home sales only added to the gloom, it's perhaps natural to take stock of the biopharma state of the union. Sadly, as investors worried over the mind-boggling $3.6 trillion federal budget Obama submitted Thursday, the stock prices of pharma companies, med-tech outfits and insurers dropped, illustrating again that there is no such thing as a recession proof industry.

As the saying goes, you can't swing a dead cat without hitting a troubled biotech these days. Elan once again made the news with an announcement that it was shedding 230 jobs--half in Ireland and half in California--as it tries to control costs and marshall resources. (No word on the corporate jets.) Meantime, Vanda is the latest company to experience the full brunt of shareholder activism, while Intercytex shows regenerative medicine is still a tough area to grow a business.

And then there's Dynogen, this week's winner of IVB's little engine that couldn't prize. The company declared chapter 7 less than a year after trying to go public via the SPAC--or is it SCRAP?--route. Even as six law firms kvetched about their unpaid legal fees, Dynogen's venture backers, which include Oxford Bioscience Partners, SV Life Sciences, and Abingworth Management, took it on the chin despite sinking $67 million into the IBS developer.

In what is surely a sign of the times, this week Pfizer announced it was discontinuing work on two Phase III primary care products, PD 332,334 for generalized anxiety and esreboxetine for fibromyalgia, to redirect resources to drug candidates with more potential. The news shows that even Big Pharma face tough decisions these days about which programs to move forward and which to table. Could the news mark the beginning of the much vaunted Pfizer transformation CEO Kindler has talked about in the days since moving to acquire Wyeth? This blogger is reserving judgement until the New York pharma actually does some thing revolutionary, such as not just killing the programs but outlicensing them. (For another opinion on Pfizer's transormation potential be sure to check out this hilarous youtube video by a former Ann Arbor, MI-based employee.)

Meantime when it comes to dealmaking in the biopharma state, the big news this week was partnerships gone awry. Astellas made the decidely un-Japanese decision to go hostile in its quest for CV Therapeutics, despite the fact that the decision means Astellas violates a longstanding standstill agreement tied to the California biotech's Lexiscan imaging agent. The Roche/Genentech saga continues apace, with Roche marshalling its economic might by issuiing over $30 billion in bonds in the past two weeks, and Genentech preparing to woo investors at its annual R&D day in NYC on Monday. (Better be some good danish at that meeting...)





Synta’s shocking news that it was halting a Phase III trial of metastatic melanoma drug elesclomol due to excess mortality likely portends an end to its rich partnership with GlaxoSmithKline. Originally inked in 2007, the agreement has added just over $100 million to Synta’s coffers. And, as we wrote on Monday, Johnson & Johnson and Basilea seem poised to begin a very public fight over milestone payments tied to regulatory approval of the antibiotic ceftobiprole. Frustrated over European and US regulatory delays associated with the drug, Basilea announced it was seeking arbitration to obtain compensation from partner J&J for outstanding milestones and the value of the opportunity lost in not having ceftobiprole on the market.

Here at IVB, we know that not all deals are created equal. We, the bloggers, in order to form a more perfect industry, provide for the common defense and promote the general welfare, bring you another edition of Deals of the Week. (Domestic tranquility is not, however, guaranteed.)

Merck Serono/Ambrx: Merck Serono and Ambrx formed a more perfect union this week as they expanded their existing relationship to include the development and commercialization of a preclinical biological multiple sclerosis candidate, ARX424. According to the deal, announced Feb. 24, Darmstadt, Germany-based Merck Serono gains exclusive global development and commercial rights for the MS compound. In exchange, Merck Serono will pay an undisclosed sum to Ambrx, plus pick up an equity stake. Ambrx also stands to receive undisclosed clinical, regulatory and commercial milestone payments for drugs that make it to market, plus royalties on global sales, as part of the package. Furthermore, it has the option down the line of converting royalty rights in the US to a profit-and-loss sharing agreement. San Diego-based Ambrx is one of those increasingly rare beasts: a biotech with plenty of cash resources that's announcing staff increases rather than layoffs. In the last 20 months, Ambrx raked in $60 million thanks to the recent equity deal and milestone payments from its alliance partners, which also include Merck and Eli Lilly. Thanks to these resources, CEO Steve Kaldor says, conservatively speaking, his firm should be able to get through late 2011 or early 2012 with no need for new financing or equity deals. "We continue to sustain a multi-year runway while growing our biologics product portfolio and innovative platform" he said. Of course, it helps that Ambrx's RECODE (reconstituted chemically orthogonal directed engineering) technology allows the company to endow native proteins with new therapeutic propertis. And readers you know what that means. Even if the company is devoting much of its efforts to creating first-in-class molecules, there is the potential to use RECODE to create follow-on biologics, be they true generics or copy cat molecules with a twist. It's an area of intense interest to Big Pharma these days, especially given the Obama Administration's willingness to include FOB legislation in the most recent Congressional budget. (Teva and Merck dominate the Big Pharma FOB horse race currently thanks to their deal making in recent months, a topic highlighted in the February issue of IN VIVO.) As for the MS compound that was central to the Merck Serono/Ambrx deal, there are few details on the exact nature of the protein in question. "It may be a pioneering target or a follow-on biologic. We are not divulging what class it is," Kaldor told our sister publication "The Pink Sheet" DAILY. Whatever class it is, it's IVB's bet that Ambrx will not long remain an independent company. Merck Serono is our pick to buy it.

CSL/Xencor: Any doubts about interest in next generation technology that provides souped-up antibodies, look no further than news that Aussie biopharma company CSL signed an R&D alliance with Xencor to gain access to the privately-held biotech's Xmab technology, which allows the optimization of antibodies to create molecules with increased potency and longer half-lives. Details of the agreement--from its apparent breadth to the size of the upfront payment and downstream milestones--were lacking. It's the second such alliance Xencor has signed this month. Earlier in February, the biotech announced it was teaming up with Human Genome Sciences to use Xmab to create better versions of the Rockville, Maryland-based company's antibodies. Details of that transaction weren't disclosed, either. For the privately-held Xencor the two transactions--even if modest in size--likely provide much needed non-dilutive funding. The company, which has raised $130 million since its 1997 founding, last raised money in Oct. 2007 when it tacked an additional $15 million onto a 2006 $45 million Series E, which was led by MedImmune Ventures with additional backing by Novo Nordisk and HealthCare Ventures. (New investors in the Series E extension included Oxford Bioscience Partners and Merlin Nexus.) It's hard to tell how long Xencor's backers are willing to subsidize the company, but despite numerous partnerships--including deals with Centocor, Genentech, and Boehringer Ingelheim, no suitors have been sufficiently impressed with the technology to want to acquire the Monrovia, CA-based company despite pharma's 2007 land-grab for next generation antibody technologies. It could be that companies are still waiting for validation that the technology works as advertised: molecules in Xencor's internal pipeline are still at a very early stage. The biotech's lead product, an anti-CD30 for Hodgkin lymphoma and other T-cell lymphomas, is only in Phase I development.

Actelion/GeneraMedix: In a continuing bid to strengthen its position in the pulmonary arterial hypertension market, Switzerland's Actelion announced Monday that it would pay an undisclosed amount for worldwide development and commercialization rights to an IV formulation of epoprostenol from the injectable generics group GeneraMedix. Approved by FDA in June last year, this improved formulation of GlaxoSmithKline's (now generic) Flolan offers more convenient storage options than epoprostenol alternatives, including another generic from Teva approved last year. While not likely to be a large deal, the tie-up makes sense. It allows Actelion to leverage its existing infrastructure and expertise in this specialist field, where it already sells the lead drug Tracleer (bosentan). But there is no way epoprostenol will come anywhere close to replacing Tracleer, which sold CHF 1,294 million in 2008, and is under increasing pressure from contenders marketed by Gilead and United Therapeutics. (A generic version will also be available come 2015 for those keeping track.) According to analysts at Piper Jaffray, who estimate total worldwide sales of IV PAH therapies are worth about $200 million to $300 million, epoprostenol may add $30 million to $50 million in sales before 2014. To make up the revenue gap from potential lost Tracleer sales, look for Actelion, which has a sizeable war chest--approximately CHF 1.1 billion in cash at the end of 2008--to sign additional deals in the coming months.

Cephalon/Arana: Arana's mystery buyer has a name: Cephalon. On Feb. 26, Aussie biotech Arana announced that it was involved in take-over discussions. Trading on the Australian Stock Exchange was halted in anticipation of a buy-out. One day later Cephalon revealed that it intends to offer A$1.40-a-share for the biotech, a 69% premium to Arana's closing stock price on Feb. 25. If the offer goes through at the current price--and it does have the support of Arana's independent directors absent a superior proposal from another party--it will be worth approximately A$318 million ($207 million USD). In support of its bid, Cephalon took steps to secure nearly 20% of Arana's issued shares from the Aussie outfit's two largest shareholders, Start-Up Australia Ventures and Rockwell Securities Ltd., before launching the formal offer. The deal represents a slight shift in Cephalon's deal-making strategy in recent months in that it is not tied to any contingent value rights. Recall that Cephalon's recent $100 million tie-up with Ception was an option-based deal that gave the Frazer, PA-based company the right to buy the smaller biotech for an additional $250 million plus milestones and earn-outs if a Phase IIb/III trial of Ception's antibody reslizumab for eosinophilic asthma panned out. But the recent deal is certainly in-line with Cephalon's stated desire to build a larger presence in both biologics and inflammatory disease. Together with the ImmuPharma compounds Cephalon recently locked up and Ception's reslizumab, Arana's portfolio of tumor necrosis factor (TNF) alpha blockers, gives Cephalon a tidy pipeline of drugs aimed at diseases such as lupus, rheumatoid arthritis, and psoriasis. Indeed, Arana's Phase II novel anti-TNF domain antibody for psoriasis, ART621, was the primary driver of the deal. Of course, it helps that in addition to a novel pipeline of products, Arana also comes with a guaranteed revenue stream: thanks to strong IP in the anti-TNF space, the biotech receives royalties from Abbott Laboratories and Johnson & Johnson on Humira and Remicade.

Medtronic/CoreValve: As we wrote earlier this week, you know Medtronic's $1.03 billion buying spree is only the beginning, not the end, of the long-anticipated land grab around the percutaneous valve replacement field and its two major sub-markets--aortic and mitral valve devices. There has been a lag of several years since Edwards Lifesciences did the first major deal in the space, acquiring aortic player Percutaneous Valve Technology (PVT) in late 2003. But the promise of the market has continued to grow as investment remained active, technology improved, and the competition increaed. Give Medtronic credit for the executing the old "shock and awe" routine with perfection, by picking up a pair of percutaneous players in quick succession: CoreValve Inc. and Ventor Technologies Ltd. For Medtronic, these deals represent not just an investment in technology building. In CoreValve, the device behemoth gets a company that is already competing aggressively in the European aortic market, where CoreValve's smaller-sized system is running neck-and-neck with long-time leader Edwards. The deal could spark a torrent of additional partnering, especially as Edwards Lifesciences and St. Jude looked to build armamentariums competitive with Medtronic's.

Interested in future deals-of-the-week candidates? Check out the the January issue of Medtech Insight for the full story on percutaneous aortic valve players, and the technical and operational challenges facing the field.

(Photo courtesy of flickr user tsevis through a creative commons license.)

Milk..Check, Eggs...Check, Corevalve...Check

Let the bidding begin.

You just know Medtronic's $1.03 billion buying spree is only the beginning, not the end, of the long-anticipated land grab around the percutaneous valve replacement field with its two major sub-markets: aortic and mitral valve devices. There has been a lag of several years since Edwards Lifesciences did the first major deal in the space, acquiring aortic player Percutaneous Valve Technology (PVT) in late 2003. But the promise of the market has continued to grow as investment remained active, technology improved, and the competition increaed.

Give Medtronic credit for the executing the old "shock and awe" routine with perfection, by picking up a pair of percutaneous players in quick succession CoreValve Inc. and Ventor Technologies Ltd., but battles aren't won with the biggest strike, no matter how impressive.

Consider the opportunities in the aortic market alone. Industry data suggests the cases of aortic stenosis will hit 4.6 million in the year 2030, almost double the cases in 2000. But the real growth comes in treating the roughly one-third or one-half of patients who currently couldn't survive an open-heart procedure.

It's that potential that's pulling Edwards Lifesciences, St. Jude, and now, most vigorously, Medtronic into building armamentariums of devices to tackle both percutaneous valve replacement markets. This was fantastic news for CoreValve and Ventor investors as the folks at Dow Jones Venture Capital Dispatch can attest.

For Medtronic, these deals represent not just an investment in technology building because in CoreValve, it is getting a company that is already competing aggressively in the European aortic market, where CoreValve's smaller-sized system is running neck-and-neck with long-time leader, Edwards.

But just as we saw in the atrial fibrillation market recently, additional acquisitions are the sincerest form of flattery. (Medtronic, once again, aggressively snapped up two of the more promising business, CryoCath and Ablation Frontiers.)

So we turned to our colleagues at Medtech Insight for the goods on what percutaneous aortic valve companies might be the target of future acquisitions and topic of future headlines. For the full story on these aortic players, please check out the January issue of Medtech Insight for the technical and operational challenges facing the percutanous aortic valve replacement field. (And for those eager to understand the potential in the percutaneous MITRAL valve replacement industry, feel free to check out Medtech Insight's cover story in the current issue here.)


And here's the field of potential acquisition targets...

Direct Flow Medical Inc. Direct Flow Medical's Aortic Valve Prosthesis expects to initiate first-in-human trials by May of this year and obtain a CE Mark by the end of this year, enabling it to possibly have a device on the market by 2010. The Aortic Valve Prosthesis consists of a trileaflet bovin pericardium valve encased in a tapered, conformable polyester fabric cuff. It contains no metal, making it unique among the offerings.
CAPITAL RAISED: $35 million
EXTREMELY HAPPY INVESTORS (EHIs): Foundation Medical Partners, EDF Venturers, New Leaf Venture Partners, Spray Venture Partners, Vantage Point Partners and ePlanet Ventures. Oh, and a little company called Johnson & Johnson Development Corp.

Sadra Medical Inc. Sadra recently completed first-in-human studies in Europe on its Lotus valve system., a repositionable, retrievable, self-expanding transcatheter aortic valve. The company expects to begin a European feasibility study in the second half of this year.
RAISED: $20 million since 2003.
EHIs: Oakwood Medical, Onset Ventures, Pequot Ventures, SV Life Sciences. Boston Scientific invested in 2006.

JenaValve Technology Gmbh JenaValve hopes to have a CE Mark for its foldable porcine valve by the end of this year.
RAISED: $20 million since the start of 2006.
EHIs: Atlas Venture, Edmond de Rothschild Investment Partners and NeoMed.

That's just a sampling, but keep an eye out for AorTech International, Heart Leaflet Technologies Inc., Cormove, and Advanced Bio Prosthetic Surfaces Ltd.

Image courtesy of flickr user lonelysandwich through a creative commons license.

DotW: (Dis)contented

Now is the winter of our discontent. Apologies to both Shakespeare and Steinbeck, but it does seem as though we've all morphed into either Richard the Third or Ethan Allen Hawley. Moreoever, if the market reaction to Obama's housing plan is any guide, he's unlikely to prove the son of York destined to bring us a glorious summer.

As the Dow slid more than 100 points again Friday--down 6% for the week--to 7365.67, the tweets, twitters, and chirps tracking our economic outlook grow more downbeat. According to BNET, pharma cos have only begun to experiment with the new medium--hey, we can't really crow; we just started cheeping--or is that cawing?--yesterday.

News this week suggests at-risk companies in our sector now include Curagen, Vanda, and--here's a surprise--La Jolla Pharmaceuticals, all of which are looking at strategic options.

Even as Genentech continues to fight off Roche's hostile offer, the biotech was forced to acknowledge additional cases of PML associated with Raptiva. The news is unlikely to dampen Roche's desire for Genentech, and Raptiva has never been the central focus for institutional investors. Avastin anyone? But the news does bolster Roche's argument that $112-a-share for the storied South San Francisco outfit might be a wee bit generous. (Meanwhile the Swiss Pharma announced the sale of $16 billion in bonds, indicating it is lining up its financing to proceed with the deal.)

And Astellas can't be feeling too good. Remember how CV Therapeutics told the company to "hit the road jack", then thought better of it, and decided to look at the Japanese pharma's nearly $1 billion acquisition offer? On Feb 20, the Palo Alto, CA-based CVT came back with an official "don't you come back no more". As Astellas mulls its next move, here's one option not on the table: appeaing to CVT's shareholders directly. A standstill agreement included in the licensing agreement Astellas's predecessor Fujisawa inked with CVT means the pharma' can't take such aggressive action.

Traditional venture capital groups continue to wring their hands over "the denominator problem", capital calls, and the need for a plan B. Meantime corporate venture continues to shine, getting in on such deals as this week's Opsana Therapeutics and Genocea Biosciences financings.

If your feeling disgruntled or simply want an excuse to bone up on random literary and pop culture allusions, IVB is here with another edition of...

Medtronic/Ventor: With economic pressures creeping into the medical device market, stalwart competitors with suitable cash reserves are looking to turn economic woes into opportunity, seeking out potential acquisitions in areas that offer the best bang for the buck. Among the handful of segments that fall into this category, transcatheter heart valve replacement and repair, although at a relatively early stage in its evolution, is one that has garnered a great deal of interest. All of the big names in cardiovascular devices—including Edwards Lifesciences, Medtronic , Boston Scientific, Cordis/Johnson & Johnson, and St. Jude Medical--are either participating in this market or have expressed an interest in doing so, either via internal development work or partnering/acquisition. For the two dozen or so privately held emerging competitors working in this arena, the hope is that this interest will eventually translate into an M&A offer with a hefty price tag. For the Israeli company, Ventor Technologies, those hopes may soon become reality. According to recent media reports, Medtronic is close to completing a deal to acquire that privately held start-up for $325 million. Ventor, which is developing a transcatheter aortic valve replacement technology, launched a first-in-human (FIH) trial of its first-generation Embracer device in 2008 and expects to begin a pivotal, multicenter study later this year. Results of the initial FIH study were presented at the 2008 Transcatheter Cardiovascular Therapeutics (TCT) meeting, held last October in Washington DC. Medtronic and Ventor are well known to one another. As one of the firm’s investors, Medtronic reportedly contributed $7.5 million to Ventor’s latest funding round, a private placement completed last May. Since its founding in 2004, Ventor has raised a total of about $20 million, so a $300+ million exit would be an extremely successful outcome by any measure. For Medtronic, the acquisition will serve to help beef up the company’s cardiovascular pipeline and focus the firm more solidly on future high-growth market opportunities. Medtronic’s cardiovascular business has lately been facing competitive pressures in several of its key product lines. The company’s Endeavor cardiac drug-eluting stent (DES) is facing an uphill battle now that it must compete with Abbott Laboratories’ well-regarded Xience V DES (also sold under a private label as Promus by Boston Scientific), which quickly catapulted to a market leading position in the US after its launch last July. Moreover, Medtronic’s implantable cardioverter defibrillator (ICD) business has lost market share in recent quarters (although the firm now says the situation has stabilized), due in large part to lingering effects from the company’s Sprint Fidelis lead recall last year, which gave a boost to ICD competitors Boston Scientific and St. Jude Medical.--Mary Thompson

GPC Biotech/Agennix: This week GPC Biotech—on its knees since prostate cancer candidate satraplatin got knocked down at FDA in late 2007--announced plans to merge with a cash-strapped US counterpart, Agennix. GPC brings money, some people, clinical development experience and a public listing; Agennix brings a Phase III cancer compound, talactoferrin. Dievini Hopp BioTech holding, the investment company of German billionnaire Dietmar Hopp (co-founder of the multinational business software company SAP AG), provides the newco with a crucial cash infusion of €15 million. Thanks to the satraplatin debacle, it's long been expected that GPC would ink some kind of deal. But as we wrote in this blog post, IVB doubts this tie-up is the kind of sale GPC Biotech's CEO Seizinger had in mind. It’s essentially a reverse merger: GPC Biotech will be tipped into a new—as yet unnamed—company, which will also hold all of Agennix’s shares, plus the €15 million cash contribution. GPC’s shareholders will own 39.3% of the new group, Agennix’s 48%, with the Hopp cash representing 12.7%. As one of GPC's largest shareholders--the protagonist of GPC’s February 2006 fundraising, among others--Hopp is calling the shots. That's one reason the newco will be listed on the Frankfurt Stock Exchange not the Nasdaq; GPC is de-listing from that exchange as part of the merger. Top priority for the newco? Development of Agennix's talactoferrin, a recombinant version of human lactoferrin that is delivered orally. Phase II studies of the drug showed compelling results in NSCLC, according to Agennix. By bolting talactoferrin onto GPC's own products, which include a Phase I kinase inhibitor and satraplatin (which still hasn't quite drawn its last breath), the aim is to create a viable pipeline that can be advanced by GPC's biz dev team. Thankfully, the newco has enough cash, courtesy of the Hopps, to last until mid-2010.

Romark/Chugai: Details were decidely lacking when it came to this week's tie-up between privately held Romark Laboratories and Chugai for the Japan-centered development and commercialization of Romark's Phase II hepatitis C compound, nitazoxanide. As part of the deal, Romarks gets an undisclosed upfront payment from Chugai, and stands to receive additional (undisclosed) monies based on certain clinical and regulatory milestones. According to a press release anouncing the news, Romark will also receive (you guessed it, undisclosed) profits from product sales in Japan through a supply agreement, as well as royalties. "Chugai is an excellent partner for us in Japan. They bring substantial expertise in the development and marketing of treatments for chronic hepatitis C exemplified by their experience with Pegasys and Copegus," said Jean-Francois Rossignol, Chairman and CSO of Romark (Whew. I'm glad he disclosed that.) Japan, is of course, a notoriously difficult market to break into. Current wisdom is that effective commercialization of drugs in that country is often best left to Japanese pharmas who better understand the unique regulatory and sales hurdles of the home market. (It's one of the reasons for Affymax's 2006 deal with Takeda for Hematide or Amgen's 2008 monster deal--also with Takeda--involving 13 products.) Moreover, such deals provide US or European based companies with important non-dilutive funding, while doing little to dimish the partnering potential deal for a product in the rest of the world. Back in 2004, Vertex licensed Mitsubishi Japan-only rights to telapravir, receiving $33 million for that particular Phase I product. Could Chugai, part of Roche's hub and spoke model, be paying as dearly for nitazoxanide? It's hard to say (I know, that's never stopped us before.) On the one hand, the drug, which belongs to a new class of broad spectrum antiviral drugs known as thiazolides, has largely been derisked in terms of its side-effects, a sticking point that's buried many a promising hepatitis C drug in the past. Romark already markets the compound as an anti-diarrheal called Alinia. But it's also true that nitazoxanide has a storied past. Romark first licensed the compound to UniMed Pharma back in 1995 in a deal worth about $1 million. Three years later, it repurchased rights to the product after UniMed abandoned development citing changed strategic interests. In addition to hepatitis C, the drug is also being studied as a possible therapy to treat rotavirus and Crohn's disease.

Lilly/NeuroSearch: We aren't sure if NeuroSearch qualifies as the little engine that could or the little engine that can't--recall that earlier this month the Danish firm stopped work on its experimental medicine ABT-894 after a Phase II trial blow-up. Either way, the Danish company keeps doing deals. Who knows? One of these days they'll score. It not clear whether the most recent deal--a collaboration with Eli Lilly on new CNS therapeutics announced Feb. 17--will be the one that scores the big payola. The company's expanded collaboration with GSK announced late January is also in the running for that honor. And like the GSK deal, the tie-up with Lilly is one where NeuroSearch's rewards are primarily all on the come. The three-year drug discovery and development deal calls for NeuroSearch to investigate a defined number of ion channel modulators as potential CNS treatments--specific details concerning the targets were, of course, undisclosed. But IVB does know that NeuroSearch is gaining $5 million up-front for its efforts, plus up to $8 million more in funding and research fees. Lilly has also agreed to take a $17 million equity stake in the company. The deal is structured so that NeuroSearch bears the brunt of the responsibility and cost for the early work, with Lilly having "various options to exercise license rights to individual compounds". Should it exercise the option to a compound, Lilly is responsible for the remaining development and commercialization costs associated with the molecule and will pay NeuroSearch milestone payments per product of up to $320 million plus royalties. covered by the agreement and related intellectual property. For Lilly, the deal is yet another example of how the company hopes to access innovation via external collaborations through its FIPNet strategy, which the company's been discussing now for a few years as a possible means to solving its pipeline gap.

Shire/UCB: Shire is to acquire worldwide rights (ex-US, Canada, and Barbados -- hey, it's a critical market; think how manic your vacation might be otherwise) from UCB to Equasym IR and Equasym XL for treating Attention Deficit Hyperactivity Disorder. The deal hasn’t exactly made a dent in the $1.2 billion cash that Shire generated last year—it will pay just €55 million in cash, which is just over three times the products’ 2008 net sales, plus undisclosed milestones if it meets certain pre-defined sales targets. So it’s a tiny deal, but also a tidy one: UCB divests drugs (and 20 sales personnel) in markets that aren’t core, furthering its focus on "bringing new innovative medicines to people living with severe neurological conditions,” according to Troy Cox, President CNS operations for UCB. (And indeed, the Equasym drugs –which are immediate release and extended release methylphenidate hydrochloride—aren’t innovative, and ADHD doesn’t really classify as a severe neurological condition. That said, UCB’s hanging on to the US market, where the drug is sold as Metadate CD and competes with Ritalin.) But for Shire, the products fit right in. The group is already a leader in the US ADHD market, with sales of almost $1.5 billion last year. Equasym not only fills out the armamentarium, but provides a bridge into Europe, where Shire doesn’t currently sell any ADHD drugs, helping prepare for the European launch, planned for 2011, of long-acting Vyvanse. (Vyvanse, recently approved in the US, is where Shire hopes to transfer most of its Adderall XR patients ahead of generics in April.) And although most of Equasym sales are currently in Europe, buying worldwide ex-US rights provides Shire with a cheap, established treatment that may be more suited to some developing markets. That helps, albeit in a small way, further another of Shire’s goals: to quadruple the share of sales it generates from RoW to 25% by 2015--Melanie Senior.

Image courtesy of flickr user HOBO through a creative commons license.

DotW: J.P. Morgan Redux--UPDATED

It's common wisdom that the J.P. Morgan conference is the sole reason many in our industry get their flu shots. (We point you to the CDC website for other, far more important stats on why that annual vaccine is important.) Not too surprisingly, deal-making flurry continued apace, as companies small and large sought to garner valuable positive press to balance out the increasingly negative economic news.

Even as Cephalon, BMS, and Wyeth announced new deals (see below), another theme this week was shareholder activism.

On Jan. 14, Deerfield Capital continued to press its case that NitroMed investors stand to lose out if the troubled specialty pharma merges with privately-held aptamer-focused Archemix. In an effort to woo investors, the firm sweetened its black-knight offer from $0.65-a-share to $0.75-a-share in a deal roughly valued at $34 million. The New York-based private equity firm objected to the reverse merger in December because existing NitroMed stockholders would be apportioned only 30 percent of the new entity despite contributing between $35 million and $40 million to a company with no late-stage clinical programs.

Meanwhile, the tussle between Avigen and its largest stockholder, Biotechnology Value Fund, continues to play out on the public stage. On Jan. 15, BVF offered to buy all of Avigen's outstanding stock for $1-a-share, a 35% premium over the biotech's closing price on Jan. 8, the day before BVF announced a plan to replace Avigen’s board with four “stockholder-focused nominees.” BVF, which has nearly a 30% stake in Avigen, wants the biotech to accept a merger offer from MediciNova, while Avigen management has said it plans to seek a new direction in 2009 after its stock price crashed following the failure last year of its lead candidate in multiple sclerosis spasticity.

The economic crisis is sure to force a number of biotechs to make the hard decisions execs at NitroMed, Archemix, and Avigen now face. That realization was an obvious undercurrent in the meeting halls and evening soirees this week, with many adopting a mantle of "been here before" bravado tempered with gallows humor. Being able to actually walk through the lobby of the Westin St. Francis with arms akimbo on Tuesday afternoon only added to the feeling that this year our industry is in a very different place than it was just 12 months ago.

Suffering from post J.P. Morgan letdown? (It's a real syndrome, though unlikely to make it into the 2012 edition of the DSM-V. Please resist the temptation to utter the phrase "let me give you my card" to your spouse. He or she won't appreciate it.) Instead, we're here to continue to pound the industry drum with another packed edition of ...


Wyeth/Santaris: Established as one of Big Pharma’s strongest players in biologics, Wyeth has lagged behind its competitors in the RNAi space. A strategic alliance announced Jan. 12 with Denmark’s Santaris Pharma brings Wyeth the opportunity to develop and commercialize microRNA and mRNA therapies in up to 10 targets. And Wyeth gets the opportunity at what looks like an economical price - $7 million up-front plus a $10 million equity investment to access Santaris's technology platform. Wyeth will also fund the research collaboration for three years – annual amounts haven’t yet been set according to Santaris CEO Soren Tulstrop– and will pay milestones up to $83 million apiece for each target, plus worldwide royalties on any products that reach the market. While not talking specifically about this deal during his JPM presentation Jan. 14, Geno Germano, president of Wyeth's U.S. and Pharmaceutical Business Units, noted that more than 60% of the company’s 2008 revenues derived from “non-traditional pharma sources,” such as biologics and vaccines. Such revenue is expected to increase to 75% of the Big Pharma's business by 2012, he said. One critical product: Xyntha, a Factor VIII plasma product approved for hemophilia A in the U.S. last February. Combined with the pharma’s existing hemophilia drugs, ReFacto and BeneFIX, Germano said the three products represent Wyeth’s next blockbuster franchise--Joseph Haas.

Novartis/HHS: At JPM, Germano also talked up Wyeth’s success with Prevnar, a conjugated pneumococcal vaccine and the industry’s first blockbuster vaccine, which brought in about $2.7 billion last year. While Wyeth is looking to broaden its vaccine franchise with a planned purchase of Crucell, giving it entrée to hepatitis A, hepatitis B and typhoid fever competition, it also has to keep an eye on Novartis, which flexed its muscles in the vaccine world this week. The Swiss pharma announced it had been awarded a $486 million grant from HHS to help fund a new pandemic flu vaccine manufacturing facility on Jan. 15. While acquisition of the Dutch Crucell, the sixth biggest vaccine company in the world, would make Wyeth more competitive in pursuing vaccine contracts with other countries, Novartis is already there and HHS’ help in funding the Holly Springs, N.C., facility should only add to its advantage. HHS will provide the money over eight years to support design, construction, validation and licensing of the facility, which will make cell-based vaccines. Under the agreement, Novartis will provide a pre-pandemic supply of vaccine and ensure capacity to manufacture 150 million doses within six months of the declaration of a wide-spread outbreak. HHS also gets the option to purchase additional flu vaccine over 17 years--Joseph Haas.

Cephalon/Ception: In what is emerging as an ever more common method of getting assets cheaper--if not on the cheap--Cephalon announced this week its $100 million down-payment for privately-held Ception, which was founded by a group of former GSK execs in 2004. The payment gives Cephalon the option to purchase all outstanding stock in Ception for $250 million should the start-up's Phase IIb/III anti-interleukin-5 antibody, reslizumab, make good in the clinic. Reslizumab is targeted as therapy for pediatric eosiniphilic esophagitis, a rare inflammatory disease that has seen a ten-fold increase in diagnoses over the past decade. The deal also gives Cephalon a potential biologics platform that it can bolt onto its existing infrastructure. This increased capability is one reason the down-payment for Ception is so generous. Large molecule platforms have been commanding far higher price tags, and with this deal, Cephalon has signaled its interest and capped the ultimate expense it might owe down the road. This is the second option-type arrangement Cephalon has entered into in recent months. Last November, Cephalon did its first option deal, paying UK biotech Immupharma $15 million for license rights to Lupuzor, a CD4 T-cell modulator in Phase IIb for lupus--Shirley Haley.

The Medicines Company/Targanta: Facing the strong possibility that its franchise antibiotic Angiomax will lose patent protection in 2010, The Medicines Company hewed to its strategy of acquiring late-stage assets – this time through the acquisition of Targanta Therapeutics for $42 million. It's the second major acquisition for MDCO in recent months. In December, the company announced a riskier move: the buy-out of Germany’s Curacyte Discovery, whose lead program is Phase I serine protease inhibitor CU-2010, a candidate to fill the antifibronolytic gap created when Bayer had to pull Trasylol from the market. For its $2-per-share offer, MDCO will get the IV antibiotic oritavancin, stalled in Phase III for complicated skin and skin structure infections after receiving a “complete response” letter from FDA requiring additional trials in early December. Cambridge, Mass.-based Targanta netted $53.5 million in an IPO in late 2007, and has more than $40 million in cash on its balance sheet. Still there's no denying the oritavancin delay--and the cost of an additional pivotal trial--was a significant blow for the biotech. Phase II trials reportedly cost Targanta $40,000 per patient, and a larger Phase III study to better demonstrate the drug’s efficacy in patients with MRSA would be even more costly. Noting the growing U.S. market for gram positive infection therapies, estimated at $1.1 billion in 2007, MDOC stepped in, offering shareholders potential regulatory and commercial milestones payments, which could reach roughly $4.55 per share, in addition to its up-front offer. Cowen and Company’s Ian Sanderson called MDCO's move “a savvy deal” in a Jan. 14 note. In addition to Targanta's cash, MDCO also picks up an experienced antibiotic development team.--Joseph Haas.

Bristol-Myers Squibb/ZymoGenetics: With disappointing sales from its surgical bleeding drug Recothrom (topical recombinant thrombin) - just $1.8 million during third-quarter 2008 – and November’s change at the top, as then-President Douglas Williams succeeded retiring CEO Bruce Carter, ZymoGenetics appears fortunate to have gotten $85 million up-front for its Phase Ib Peg-interferon lambda candidate in hepatitis C from Bristol. At the JPM conference, Bristol Chief Scientific Officer Elliott Sigal said the deal fits with that pharma's strategic focus on antivirals and offers the potential of adding a “special type of interferon” with improved tolerability and targeting to the current standard of care in HCV. Adding a little spice to the transaction, which Williams says should bring ZymoGenetics $200 million total this year, including a $20 million license fee, is that the two companies were engaged in a two-year patent-infringement lawsuit related to Bristol’s rheumatoid arthritis drug Orencia that only was resolved last October. Bristol paid ZymoGenetics $21 million to settle the dispute over two patents held by the latter firm. This latest tie-up greatly strengthens ZymoGenetics' cash position and continues Bristol’s “string of pearls” strategy as the pharma attempts to transform into a next-generation biopharma--Joseph Haas.

Novartis/Peptimmune: Novartis and privately-held Peptimmune agreed on a pair of technically separate deals Jan. 15, with the pharma optioning exclusive rights to PI-2301, a peptide copolymer in Phase Ib for multiple sclerosis, while the venture capital fund Novartis formed with MPM Capital made an undisclosed equity investment in Peptimmune. Back in 2007, the Novartis/MPM fund took a $10 million equity stake in Radius Health, while a separate deal optioned Radius’ Phase II osteoporosis drug, BA058, in what was the first sign of corporate venture's ability to do biz dev. Few terms of the Peptimmune deal have been disclosed, although the biotech says it could realize more than $500 million in development, regulatory and commercial milestones if Novartis options ‘2301. If Novartis does elect its option, it will take over global clinical development, manufacturing and marketing of the drug. Meanwhile, the in-house venture capital model looks to be thriving. Thanks to their big pocketed Pharma sugar daddies, these groups can afford to be a little more generous in the terms they set than traditional VC firms, many of whom are drip-feeding companies as they go out on the fund-raising circuit--Joseph Haas.

Medtronic/Ablation Frontiers: If you’re actually wondering whatever possessed Medtronic to pay $225 million for Ablation Frontiers we’d like to introduce the company’s CEO Keegan Harper, with an excerpt taken from our November profile on the atrial fibrillation company. "Today, more than ever, that is a formula for success in medtech because by shortening procedure times or simplifying a surgical procedure, you enable doctors to treat more patients and that is generally a winning combination." Bingo. Medtronic CEO Bill Hawkins said it himself during his company’s presentation at the J.P. Morgan conference this week: Ablation Frontiers' “very unique set of anatomically correct catheters” will “democratize the atrial fibrillation procedure” by shaving considerable time off of a procedure that takes six hours or more at other companies. The purchase, if approved, would complement Medtronic’s earlier acquisition of CryoCath Inc., giving Medtronic a broader offering of atrial fibrillation products in its battle with Boston Scientific Corp. and Johnson & Johnson Corp. for the hearts and minds of electrophysiologists everywhere. It’s this pursuit that’s turned atrial fibrillation—a one-time black hole for device investors—into one of the sector’s brightest lights--Tom Salemi.

Merrion/Novo Nordisk: Irish oral delivery specialist Merrion Pharmaceuticals has inked another deal with Danish diabetes powerhouse Novo Nordisk to work on an oral formulation of a Novo GLP-1 receptor agonist. A deal to develop oral insulin analogues was signed back in November 2008. The Friday Jan. 16 deal is worth up to $58 million in up-front and milestone payments associated with a theoretical first-product approval and sales hurdles, plus an undisclosed royalty. Novo will also buy 300k Merrion shares at €3 apiece. Though there’s not a lot of granularity in the deal terms it’s worth noting that they’re very similar to the November insulin deal. Also remarkably similar and to us, more amusing: Merrion CEO John Lynch’s photo accompanying the release. Today’s picture of Lynch involves a photographer apparently lying on the floor in order to take a photo of the CEO upwards through a pill-strewn glass table. November’s picture is the same, except the pills are strewn in a slightly different pattern, and Lynch is accompanied by Ireland’s Minister for Enterprise, Trade, and Employment, Mary Coughlan. Now before you all write in to point out that Lynch is wearing the same suit/tie combo and therefore the photos were probably taken on the same day, answer us this: where’s Coughlan? Why is the photo on the second release dated today? Why the different pill formation? Are the photos Photoshopped? Are they a metaphor for the state of Irish biotechnology—nay, for biotechnology the world over? Or is the photo-through-the-glass-table all the rage now? We’re no conspiracy theorists, but something is afoot on the Emerald Isle (and/or rotten in Denmark, we’re not sure where the photos were taken …)--Chris Morrison.

Abbott Laboratories/AMO: The ophthalmic industry has traditionally been in its own club, with specialty device and pharmaceutical companies exclusively selling products marketed to ophthalmologists. So the announcement on Jan. 12 that diversified giant Abbott Laboratories would acquire Advanced Medical Optics for nearly $3 billion in cash was as astonishing as the hefty premium Abbott ponied up. According to the terms of the deal, Abbott will pay $22 per share or a 149% premium to the ophthalmology company’s Jan. 9 closing price of $8.85. Despite the hefty price tag, Abbott is getting a business that many predict will continue to grow by double digits because of aging demographics and improved markgins on products like intraocular lenses. The predicted increased incidence of cataracts, age-related macular degeneration, presbyopia, and glaucoma mean this market could expand from $700 million globally today to $1 billion by 2020. Currently AMO holds the number one spot in refractive surgery, through its LASIK franchise, which accounts for one third of AMO’s overall business. It’s also the second player in cataract surgery, a recession-proof sector that treats the leading cause of blindness in the growing elderly population, and the number three player in eye care with a number of popular consumer brands. Indeed, it is this troublesome environment that caused AMO’s valuation to be depressed enough to make it a prime takeout target. At the November 2008 meeting of the American Academy of Ophthalmology in Atlanta, the talk was all about the deteriorating state of the refractive surgery market as consumers pulled-back on discretionary spending, especially high cost, elective surgical procedures like LASIK. As the S&P 500 fell, so did laser vision correction procedures. With a high debt load in a hard-hit market, AMO’s stock price had fallen from $24 in June 2008 to $10 by the end of December. But with the backing of Abbott, AMO will have the financial resources it needs to make sure it’s in a good position when the financial storm abates--Mary Stuart.