Deals of the Year Nominee: Pfizer/Ranbaxy

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

In some circles, the event had its own acronym: LLOE – Lipitor Loss of Exclusivity. Now it has a date: Nov. 30, 2011 -- the end of the primary care era for pharma. Think that’s a little extreme? Well, you don’t get to be a Deal of the Year Nominee by playing it safe.

Except in this case you do. While most of the DotYNs you’ve read about here are essentially bets by firms that big ideas will work out in one form or another, this was a tale of two companies not wanting to take a chance. As we explained in the Pink Sheet, the deal gives some certainty to both sides, but what it really offers is closure.

In an era when product expirations – either through the lifting of exclusivity or the weight of safety problems--seem more common than product launches, this deal is an example of how big pharma can try to take its primary care jumbo jets in for soft landings. Protonix’s fall to earth offered a number of lessons for generic and brand firms to learn, and Ranbaxy seems to have gotten some good practice deal-making when it worked out a settlement on Nexium with AstraZeneca.
With the lawsuit behind them, both Ranbaxy and Pfizer can focus on what’s next. For Ranbaxy, it’s resolving manufacturing problems and figuring out how to be a regional growth engine for a big pharma. (The Daiichi/Ranbaxy merger, which may have contributed to the Pfizer settlement, is also a DotYN – vote for them both!)

For Pfizer, the question is how to learn to love being a drug maker again. CEO Jeffery Kindler may not have all the answers to that one yet, but by acknowledging the end of the Lipitor relationship, he’s moving in the right direction. Failing to recognize the seriousness of the problem helped cost the previous management team its jobs, so the decision to sign the divorce papers with the firm’s biggest product perversely takes a weight off the company.

But while the Ranbaxy settlement is a great example of what a company like Pfizer can get when it has a former general counsel as its CEO, that talent for certainty may also be emblematic of what a firm might miss out on. Because while some other new big pharma CEOs have been out trying to gobble up innovative technology or swallow up successful partners, one of the principal development decisions Pfizer has made with Kindler at the helm has been to stop placing bets on cardiovascular research.

But at least the financial community now knows how to model PFE’s LLOE. And so we formally nominate Pfizer/Ranbaxy for achievement in the category of playing it safe.

image by flickr user maxymedia used under a creative commons license.

Deals of the Year Nominee: Daiichi/Ranbaxy

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

Your next IVBDOTY nominee is Daiichi's bid to buy a big old $4 billion stake in the Indian generic drugmaker Ranbaxy Laboratories. And what a bumpy ride it has been.

Lets start at the beginning. Ranbaxy announced in June the Japanese Pharma's bid for a controlling interest in the company, which it would buy in large part from the founding Singh family. The bid valued the company at about $8.5 billion based on currency values at the time.

The word on the street was that Daiichi's move, to be financed with cash and debt, was "bold and entirely out of character." But as we said then, it should not have been surprising that Daiichi was going to do something with its $6 billion cash reserves. To remain competitive with its Japanese brethren, particularly Takeda and Eisai which have been particularly acquisitive, the firm needed to ink a major transaction that would extend its reach beyond the stagnant home market, where annual government-mandated price-cuts on drugs and a slower regulatory approvals process make for a tough business climate. (For more on the pressures facing Japanese pharmas, check out this story from our January 2007 IN VIVO.)

And like Takeda and Eisai, which are facing patent exipirations on crucial drugs such as Prevacid, Actos, and Aricept, Daiichi has its own pipeline worries to think about: the company's website lists just three Phase III compounds, including the oft-discussed and risky prasugrel it has partnered with Eli Lilly (we later chimed in with some big news about when that drug might meet an FDA advisory committee). In May it acquired the German antibody developer U3 Pharma, presumably to increase its large molecule capabilities.

What is surprising about the Daiichi/Ranbaxy deal is that Daiichi chose to invest in a company focused primarily on generics and geographically situated in an emerging market. While India is undoubtedly an important arena, companies such as Takeda, Astellas, and Eisai have focused their efforts on building a US presence, especially in oncology.

So: We've got Daiichi betting big on both a massive emerging market and generics. And not to go all Arlo Guthrie on you two weeks in a row, but one deal like this might be odd (and we're paraphrasing here) but three deals where large pharmas start putting bets down on generics players in emerging markets, well that might be considered a movement.

And guess what: Sanofi-Aventis did after all buy a stake in Zentiva this year and GSK acquired the South African generics play Aspen Pharmaceuticals. Maybe it's not a movement, but it's certainly a trend to watch.

Not that it has been easy for Daiichi in the months between its initial bid and closing the deal. First there is the small matter of a US Department of Justice probe into Ranbaxy related to "systemic fraudulent conduct" by the generics maker, plus complications from India's Securities and Exchange Board (as detailed here by our cousin publication PharmAsiaNews), and doubtful investors.

By mid-October Daiichi had secured about 20% of Ranbaxy and the deal was expected to close by the end of the year. So why vote for Daiichi/Ranbaxy? For the brand-generic yin and yang? For the emerging market strategy? For the drama and the intrigue? At Deals of the Year we've got a bit of everything.

While you were winning/losing some

This weekend saw two major sports upsets, though neither was as shocking as the deep six of the global financial markets just a week ago. At last, the US finally won back the Ryder Cup, ending nine years of European domination; meanwhile, NFL fans not rooted in the six New England states cheered as the Miami Dolphins absolutely obliterated the Patriots defense with an annoyingly-simple-yet-hard-to-beat "Wildcat play" that snapped the Patriots 21 straight regular season wins. (The last loss was Dec. 10, 2006, coincidentally against the Dolphins.)

No financial crisis will slow down the consolidation of the generics pharmaceutical companies, according to this report. Of course, we've been reporting on the rise of generics for some time. At the same time, we're seeing a slowdown of the overall M&A market for pharma companies. (Check out the extensive report here or in this month's Start-Up.) Nevertheless, the Royal Bank of Scotland recorded a level number of buyouts this year, valued at more than $25 billion, an 80 percent increase over last year. Teva Pharmaceuticals' $9 billion buyout of Barr Pharmaceuticals certainly helped drive up that number, and Teva's chief executive for North America, Bill Marth, says more deals may be following the Barr buy. "It doesn't leave us in a position where we won't do more acquisitions that are complementary, it will just change the focus of those acquisitions," Marth told reporters Friday.

Speaking of generics, Ranbaxy, Indian's largest drugmaker and a recipient of a smackdown by the FDA, has recruited one-time GOP presidential (and vice presidential?) candidate Rudy Guiliani to take on its fight. The former Hizzoner will push to lift the ban the FDA put on more than 30 Ranbaxy medicines after finding deficiencies in Ranbaxy's plants. The company says the FDA's concerns are baseless. The Economic Times says other Indian pharmaceutical companies aren't overly concerned about selling in the U.S.

It ain't Lehmans Brothers, but things aren't looking well for Atherogenics, according to Pharmagossip, which linked to an article from the Atlanta Business Chronicle. Noteholders in the company filed a petition to put the company into Chapter 7 bankrupty.

Happy Birthday to Bayer Corp. The U.S. subsidiary of Bayer AG marks its fiftieth year in the US, according to an article in the Pittsburgh Post-Gazette. The paper had a sit down with Gregory Babe, who is to become the first American-born executive to head the subsidiary.

Direct-to-Consumer advertising continues to draw fire. The Guardian reports that the British Medical Association and the Royal College of Physicians are among nine medical organization to opposed the introduction of direct-to-consumer medicine. The group's contend that the NHS's eleven billion pound annunal drug cost would skyrocket if pharma comapnies could pitch their product directly. Meanwhile, on this side of the Atlantic, the FDA heard from two physicians who want the FDA to expand its oversight of direct-to-consumer ads to include medical devices. The docs--an orthopedic surgeon and cardiologist--who say drugs and devices should stand on equal footing when it comes to DTC ads, therefore putting the devices under greater scrutiny.

Wacky World of Generics: Painful Historical Parallels Edition

New details about a pending Justice Department investigation of Ranbaxy recall some painful memories from veterans of the generic drug scandal in the US at the end of the 1980s.

It is amazing to think—at a time when generic drugs are the political golden child, everybody’s favorite starting point for reining in costs, and everybody’s hope for controlling spending on biologics—that it was just two decades ago that generic drugs were perceived as inherently suspect. Company after company was accused of fraud, and dozens of products were withdrawn from the market.

So no one in the generic sector wants to read that the government is alleging “systematic fraudulent conduct” on Ranbaxy’s part.

Ranbaxy, of course, wants to read that least of all—certainly not while a $4.6 billion merger with Daiichi Sankyo is pending. (PharmAsia News has all the details on what is known about the investigation, and the speculation that it might affect the pending merger of the two companies.)

The companies say the deal is not in jeopardy. The bottom line for proceeding: Ranbaxy says the scope of the investigation is fully understood by Daiichi and the risks to the business as a whole aren’t worth worrying too much about.

Daiichi better hope so.

The alternative is not pretty. The downside risk may best by captured by considering what happened to Fujisawa went it bought out Lyphomed in 1989. The transaction came after a Lyphomed faced a round of manufacturing compliance issues that had seemingly been resolved.

The deal was a disaster on every level for Fujisawa. It turned out that FDA wasn’t done with Lyphomed by a long shot, not as the full extent of issues related to fraud in the generic drug sector started to come to light.

How big a disaster? Well, Fujisawa paid about $1 billion to buy Lyphomed, and ended up writing off $575 million when it finally unloaded the business in 1998. (The buyer? APP, which is being acquired itself a decade later.) Fujisawa spent millions cleaning up the business along the way, including withdrawing many products it acquired because of questions about potential fraud in the applications. Worst of all, Fujisawa’s own products were held up as a result of FDA’s concerns, putting its relationship with Medco Research for Adenoscan in jeopardy.

And strategically, it certainly didn’t help Fujisawa achieve its primary goal of building in the US. Fujisawa has since merged with Yamanouchi, and the new company—Astellas—is still working on that goal.

Painting by Renee Dixon

Did Pfizer Get A Wedding Favor From Ranbaxy And Daiichi?

By now, you’ve probably heard that Ranbaxy and Daiichi have fallen in love—or at least entered a mutually binding financial agreement to that effect.

So where does this leave others who had a relationship with Ranbaxy—like Pfizer, for example? The brand and generic giants were never romantically linked (although there were rumors) but they did have an involvement that touched each to the core: Ranbaxy was the first-to-file challenger for Pfizer’s mega-blockbuster Lipitor, and they’ve been in court ever since.

But now the fight seems to be over: A week after Ranbaxy and Daiichi announced they were tying the knot, Ranbaxy and Pfizer said they were cutting a deal to end their legal entanglement.

It gives Pfizer closure on its love affair with the blockbuster statin, but what does it do for Ranbaxy? Well, it provides a fair bit of certainty in terms of revenue projection—and that may be what a company looking to settle down wants—but we wondered whether Ranbaxy could have gotten a better deal if it didn’t have to worry about what another corporation would think about it.

Did Daiichi’s heft make Pfizer take the risk of an “at risk” launch more seriously, or did Daiichi tell Ranbaxy that once they moved in together it couldn’t stay out carousing all night in strange legal jurisdictions?

In the discussions we’ve had on the matter, people tend to be divided. Those who look at the world through a merger lens think that Daiichi acted as a sensible ball and chain, helping to wrap up a potentially damaging distraction before it got out of hand. Those who spend their time thinking about selling products and suing people, though, think that Daiichi may have offered a nice dowry that Pfizer was afraid could become a war chest.

Tell us what you think!



--M. Nielsen Hobbs

(Photo courtesy of Flickr user Pardesi via a creative commons license.)

DotW: The Heat Is On

The temperature has been hot--and so has the deal-making. We counted at least 273 deals in the past five days. Not really. We actually stopped counting on Tuesday because there were already too many to keep track of. And that was before the week's biggest deals: the Ranbaxy/ Daiichi Sankyo and Invitrogen/ Applied Biosystems tie-ups (see below).

It's an odd week for heavy deal flow, coming so quickly on the heels of the ASCO and ADA meetings and in advance of next week's shin-dig in San Diego. But perhaps the soaring temperatures provided various biz dev teams no incentive to leave their nicely air-conditioned offices. And maybe this was a way for Invitrogen execs to ensure that the masses came to their tacos and beer party next week. (BIO Nebraska's Omaha steak fete and Positively Minnesota's raffle for a universal electronic charger offer stiff competition, after all.) Alternatively, it's possible staffers were simply jonesing to play BioRad's shoot-em-in gene transfer video game.

Other news hot off the computer screen? AstraZeneca is burning up the competition when it comes to market share in China, according to this Wall Street Journal article. And employees at Jazz Pharmaceuticals, Schering Plough, Mylan, GlaxoSmithKline, and Sanofi-Aventis are on the hot seat: all firms announced lay-offs this week. Perhaps the job cuts include the people responsible for the name of Sanofi-Aventis's new injectable insulin, Apidra. Doug Farrago, MD, a hilarious, disruptive physician, lambasts the company in this YouTube send-up.

Need to cool off? By all means, dive in to another edition of ...

Genentech/Symphogen: Danish polyclonal antibody play Symphogen said on Tuesday that it was collaborating with Genentech in the infectious disease space. The three-undisclosed-target deal has a total potential value of $330 million inclusive of an upfront payment, equity investment and milestones, and grants Genentech worldwide exclusive license to any candidates. This is the first external demonstration of Genentech’s stated commitment to developing large molecules against infectious diseases and Symphogen’s third deal, but by far the biggest validation of its Symplex and Sympress technologies.

Janssen/Astex: Johnson & Johnson’s Janssen Pharmaceutica is taking a license to Astex Therapeutics’ novel fibroblast growth factor receptor (FGFR) inhibitor program and is starting new discovery programs on two additional drug targets. The deal, announced Monday, sees Janssen paying $37 million in upfront, cash and equity payments and research funding to Astex as well as potential milestones and royalties. Janssen’s Ortho Biotech arm is responsible for all preclinical and clinical development on all three programs. Astex retains an option to co-commercialize any FGFR projects in the US. Astex CEO Harren Jhoti, PhD, told IN VIVO’s sister publication “The Pink Sheet” Daily that the lead FGFR program is only at the lead optimization stage but given the strong interest in the program—which, he says, is highly specific and should therefore avoid side effects that have hindered other firms’ efforts—“we were able to command pretty significant financials.”

Daiichi Sankyo/ Ranbaxy: On Wednesday, Daiichi announced it had agreed to buy a 34.8% stake in Ranbaxy from the Indian company's founders, the Singh family. The company will finance the acquisition--priced at a handsome 31% premium to Ranbaxy's closing price Tuesday--with a combination of cash and financing. Analysts reckon the combined company will be worth about $30 billion and called the transaction "bold and entirely out of character." Unlike Japanese brethren Takeda and Eisai, which have inked their own multi-billion dollar transactions in recent months to increase R&D capabilities and a US presence, Daiichi chose to invest in a company focused primarily on generics and geographically situated in a very important emerging market. The deal could also give Daiichi an important leg-up in its home generics business. According to an article published on in-Pharma technologist's website, Alan Thomas, IMS Japan's global account director, compared with the rest of the world, Japan has an extremely high proportion of brands that have come off patent - 41 per cent - but an extremely low generic penetration on the market - at only 3.4 per cent. And Japan's generics industry is expanding at an annual rate of nearly 9%. That may seem like small pills (er, potatoes), but it's currently the fastest growing segment of that country's drug business. Seems like there are now two clear schools of thought in pharma, those pursuing a focused approach (Bristol-Myers Squibb and Takeda have both made important moves in this direction) and those pursuing a diversified strategy – Novartis and now Daiichi. Perhaps Pfizer is interested in jumping on the diversified bandwagon? The Business Standard reported late Thursday that Pfizer may bid for the 65 per cent non-promoter stake in Ranbaxy.

UCB/ Otsuka Pharmaceuticals: Daiichi wasn't the only Japanese pharma gunning for a deal this week. The smaller company Otsuka Pharmaceuticals teamed up with UCB to co-promote the Belgian firm's anti-epileptic drug Keppra and the anti-TNF alpha drug, Cimzia for the treatment of Crohn's Disease. UCB and Otsuka will also co-develop and co-promote both medicines in other indications, while UCB will join Otsuka in co-promoting the anti-platelet agent Pletaal to selected accounts for a limited period. Deal terms were definitely on the small side: UCB receives up-front and milestone payments of up to €113 million, as well as funding for clinical development. Contrast that with Takeda's February deal with Amgen, where the deep-pocketed pharma paid out $300 million up-front, or the company's early April deal with Cell Genesys worth $50 million up-front and likely a great deal more for a Phase III immunotherapy product.

Invitrogen/ Applied Biosystems: Invitrogen offered to acquire Applera Corp.'s Applied Biosystems Group for $6.7 billion, in a move that would unite major players in the life-sciences tools field to create an end-to-end outfit that can tap into the very hot personalized medicine market. Applied Biosystems produces advanced instrumentation, while Invitrogen makes chemical kits that help analyze DNA samples. The companies hope that combining their specialties will better serve their overlapping customer base. Invitrogen CEO Greg Lucier said the complementary product lines would create a company "unrivaled in the world" for the breadth and depth of its life-sciences capabilities, but investors didn't buy the heady language, sending Invitrogen shares down $4.62, or 11%, to $38.73 Thursday. The WSJ reports that Alastair Mackay, of Garp Research & Securities Co. in Baltimore, said it isn't clear how well the merged entity will fend off competition from rivals such as Roche's Molecular Diagnostics division and Illumina. It's an interesting twist in what has been a long and storied history for Applera, which also owns Celera, once hoped to be a premiere pharmaceutical player that has retrenched to focus on diagnostics. The merger of Invitrogen and Applied Bio is consistent with a trend we've been watching for some time--the migration of tools companies into the testing market. (For more, read here.) Still, the new entity won't be competitive with Celera in the short run. Invitrogen/ Applied Bio signed a non-compete agreement with Celera in the specific areas where Celera is on or near market with products. Still executives claimed on the conference call announcing the news that this “won’t constrain the company” in terms of its diagnostic ambitions.

(Photo courtesy of Flikr user Roger Smith via a creative commons license.)

Daiichi/Ranbaxy: Eating Big Pharma's Lunch

Could Japanese pharmas be the Godzillas of the drug industry? With the money these outfits have been throwing around, they are certainly putting pressure on Big Pharma to up their deal ante. Consider that in the last six months there have been three multi-billion dollar buy-outs by mid-sized Japanese companies: Eisai bought MGI Pharma for $3.3 billion in cash in December; Takeda purchased Millennium for nearly $9 billion; and now comes news that Daiichi Sankyo is taking a controlling interest in the Indian drug giant Ranbaxy for $4.6 billion.

On Wednesday, Daiichi announced it had agreed to buy a 34.8% stake in Ranbaxy from the Indian company's founders, the Singh family. The company will finance the acquisition--priced at a handsome 31% premium to Ranbaxy's closing price Tuesday--with a combination of cash and financing. Analysts reckon the combined company will be worth about $30 billion and called the transaction "bold and entirely out of character."

It should not come as a surprise that Daiichi, a company with a cash war chest of $6 billion, is doing a big deal. Last year the company reported consolidated net sales of ¥880.1 billion, a year-on-year decline of 5.3%. To remain competitive with its Japanese brethren, particularly Takeda and Eisai, the firm needed to ink a major transaction that would extend its reach beyond the stagnant home market, where annual government-mandated price-cuts on drugs and a slower regulatory approvals process make for a tough business climate. (For more on the pressures facing Japanese pharmas, check out this story from our January 2007 IN VIVO.)

And like Takeda and Eisai, which are facing patent exipirations on crucial drugs such as Prevacid, Actos, and Aricept, Daiichi has its own pipeline worries to think about: the company's website lists just three Phase III compounds, including the oft-discussed and risky prasugrel it has partnered with Eli Lilly. In May it acquired the German antibody developer U3 Pharma, presumably to increase its large molecule capabilities.

What is surprising about the Daiichi/Ranbaxy deal is that Daiichi chose to invest in a company focused primarily on generics and geographically situated in an emerging market. While India is undoubtedly an important arena, companies such as Takeda, Astellas, and Eisai have focused their efforts on building a US presence, especially in oncology.

Indeed, this recent tie-up has a very different flavor from the Eisai/MGI Pharma and Takeda/Millennium tie-ups. For the billions Eisai ponied up for MGI, it got several marketed oncology products, including Aloxi and Dacogen, as well commercial infrastructure and an increased presence in the US. Takeda, meanwhile, eschewed a specialty pharmaceutical play, preferring a company with its own internal R&D efforts, an interesting but early stage pipeline and a potenial blockbuster in Velcade, a first-in-class proteasome inhibitor approved to treat multiple myeloma and mantle cell lymphoma.

But instead of bulking up on R&D capabilities or marketed products, Ranbaxy swung the other way, spending a large chunk of its available cash to obtain access to what Takashi Shoda, president and CEO of Daiichi Sankyo called "a strong presence in the fast-growing business of non-proprietary pharmaceuticals."

While many analysts seem surprised by the deal, Kenji Masuzoe, of Deutsche Bank, thinks it's welcome news. "A pure, 100%-pharma based business is a tough model," he says. Still, despite the challenges, most pharmaceutical companies have not embraced such a diversified business model. (BMS anyone?) Indeed, only two of the top 20 drug companies have major generics businesses: Novartis with its Sandoz unit and Teva (which let's face it is mostly a generics company anyway).

The acquisition raises a critical question: How will a proprietary company effectively run a generics business with its vastly different culture and vastly different economics?

It's worth noting that this isn't the first non-pharma type acquisition Daiichi has done. Back in 2006 the company purchased Astellas's OTC business unit, Zepharma Inc., for about $200 million. Last year Daiichi reported that net sales of its healthcare products, which include the skin blemish product Transino and the pain-reliever, Felbinac, increased 4.9% to ¥50.3 billion in year-on-year terms for the period ending March 2008.

Perhaps purchasing a big generics play at a time when the Japanese government is extremely anxious about the cost of healthcare and looking for ways to boost generic sales has a modicum of sense?

Indeed, there's also a certain logic to having a major stakehold in what should prove to be an important market, India. Hirohisa Shimura, an analyst with BS pharmaceuticals, told The Times that Daiichi may have accepted that its future growth lies with the fast-growing middle classes of Asia's emerging markets. "Emerging markets are absolutely the sort of expansion that the Japanese pharmaceutical companies will be thinking about now that their international competitors are doing the same," he says.

(Photo courtesy of Flickr user tumatigre via a creative commons license.)

Deals of the Week: Not Quite Exits, But OK Given the Circumstances

It’s hardly news that most biotechs can’t buy an investor. So it’s nice to see a few signs of progress.

Take pharma-ignored cell therapy. The stem cell world got a boost as two smart guys from biotech – Paul Grayson from Sanderling and John Mendlein, most recently CEO at biological-platform play Adnexus (sold for $500 million to Bristol-Myers Squibb) -- joined a bunch of scientists at Fate Therapeutics.

Elsewhere in the cell-therapy world: we’ve been wondering (in this post, for example) why big biotech deals so often cause biotech shares to drop. But not at Cell Genesys, whose Takeda deal started the company’s stock up a satisfyingly steep incline, virtually doubling as investors absorbed the news that somebody in Pharma, finally, had seen the value of cell therapy (albeit a pretty pharmaceuticalized version). Now it’s done the smart thing – raising $30 million from shares and warrants in a one-investor PIPE. It probably still feels the financing came at a pretty dilutive rate (something like $330 million pre-money) but hardly the dismal barely-above-cash-value price it was trading at a few months ago.

Now with that ringing endorsement we bring you ...

Intercell/Iomai: And as for exits – or quasi-exits: from the outside, things looked pretty bleak for vaccine-play Iomai, which had less than a year of cash when the Austrian Intercell said on Tuesday that it was buying the patch-tastic drug and vaccine delivery company for $6.60 per share, valuing the company at $189 million. Intercell gets a few mid-to-late-stage patch-vaccine programs from Iomai, including one for travelers’ diarrhea that may enter pivotal trials as soon as the first half of next year, as well as a second deal with Merck & Co. around Iomai’s patch with an undisclosed vaccine. Deal doesn’t do much immediately for the major investors, presumably the VCs like New Enterprise Associates and Essex Woodlands who have been stuck in the stock since taking it public in 2006 at $7/share at about an $85 million pre-money. They’ve got to take Intercell shares for their stake (which are at least far more liquid than Iomai’s were). We noted the predicament of these VCs and others who have found themselves ‘marooned in the public markets’ only last month in START-UP.

Antisoma/Xanthus: Similar issue for backers of Xanthus. Antisoma, the UK cancer-focused biotech, is acquiring the Boston-based start-up for ₤26.8 million in stock. Antisoma seems to have gotten a great deal. On a total of about $90 million invested from its VCs, Xanthus has managed to create a real pipeline, largely through in-licensing. It’s put four drugs into clinicals, with two leading the way: Xanafide is starting a Phase III trial in secondary acute myeloid leukemia under an SPA; and FDA has accepted Xanthus’ filing for oral oral fludarabine, to which its got US rights (the product is marketed in Europe and elsewhere). Most of Xanthus’ pipeline was spun out of Schering AG in a series of deals as that firm was integrating into Bayer, a deal we chronicled here in 2006. (Interestingly, before that, Xanthus had managed to grab another, earlier stage asset (P2045), a peptide coupled to a radioisotope which had originally come from biotech Diatide—which had been run by Xanthus CEO Richard Dean, PhD, and VP of development John Lister-James, PhD.) Xanthus’ backers won’t get free of Xanthus immediately: they’re putting about a third of the $42 million or so in new money Antisoma is raising simultaneously with the deal.

Merck/Ranbaxy: Now for something completely different. On Monday, Merck announced a partnership with Indian drug giant Ranbaxy in the anti-infective space. For an undisclosed up-front fee and milestones potentially totaling more than $100 million, Ranbaxy will search for anti-bacterial and anti-fungal compounds, taking compounds through Phase IIa before handing them back to Merck for additional human studies and commercialization. Merck won’t release details but Mervyn Turner, PhD, SVP for world-wide licensing and external research at Merck assures IN VIVO Blog that the proper incentives to keep both sides motivated have been built in. Still, it’s anybody’s guess what happens if Ranbaxy’s compounds don’t pan out. Does Ranbaxy get them back? Is the company still eligible for monetary compensation? “It’s all covered under the agreement,” says Turner.

This most recent deal comes on the heels of two other similarly structured deals Merck has inked in India: a November 2007 agreement with NPIL Research and Development (formerly part of Nicholas Piramal) in the oncology space and a 2006 partnership with Advinus Therapeutics in the metabolic disease arena. For Merck, the deals are all about expanding pipeline and pipeline capacity. Merck doesn’t have to fund much development, so doesn’t take a big P&L hit, but still has the right to step back in if something interesting results. We’re likely to see more such deals in the future. Increasingly Big Pharma is thinking virtual: companies once proud of their FIPCO status are openly discussing their desire to transform themselves into FIPNets (fully integrated pharmaceutical networks). Lilly, in particular, is a big proponent, and we have more on their strategy in a story in the May IN VIVO along with another piece in the same issue on Pfizer’s ideas for externalizing its pipeline.

BMS/KAI: We’ve already noted here the tie-up between Bristol-Myers Squibb and Kai Pharmaceuticals on an acute-care IV-delivery heart attack drug, KAI-9803. KAI had reformulated the compound from the original intra-coronary version it had licensed and gotten back from Sankyo, following that company’s merger with Daiichi, but the deal is also the second in Bristol’s so-called string-of-pearls strategy (after its Adnexus acquisition in 2007). No longer as big a Cahuna in the drug world as it once was, Bristol has been transforming itself into a specialist player, looking to layer in externally sourced next-generation R&D programs. If they’re good, they’ll come at a Big Cahuna cost, however -- pretty much just as Plavix is losing patent protection and with it a huge chunk of Bristol’s current operating cash flow. That’s why the company is trying to raise money now to fund its strategy, selling off Convatec ($4.1 billion) to a couple of private equity groups and IPO’ing Mead Johnson, keeping 10-20% and reaping maybe $900 million - $1.7 billion (with the possibility of selling off more over time).