Deals of the Week Gets Disruptive

One needs to look no further than today’s pharma industry to prove that “necessity is the mother of invention.” Acute challenges swamping the sector are forcing previously insular players to abandon their silo thinking and engage customers, employees, payers, providers, and even suppliers and competitors to make strategic leaps.

That seemingly inevitable evolution was the theme at the 5th INSEAD Healthcare Alumni Summit held in late October in Zurich, Switzerland. Participants discussed these kinds of disruptive collaborations, examining how co-operation can help overcome insularity in health care, and what structural and cultural factors characterize successful collaborations.

A keynote interview session put two pharma CEOs on the spot: to sustain healthy businesses, what approaches and deal-making strategies were they considering today that were unavailable or unappealing to them only a decade ago?

Roberto Gradnik, CEO of Stallergenes SA, is attempting to launch his France-based company – which develops treatments for allergy-related respiratory diseases – out of its regional European orbit and take it global. The group currently devotes around 20% of its annual gross sales – which in 2012 totaled €240 million ($323 million) – to R&D, a large proportion for a company Stallergenes’ size.

Gradnik told the INSEAD conference that it’s crucial to change a small-to-mid-sized company’s mindset to be successful at expansion – a process that’s clearly disruptive and necessitates big change on the inside and often demands untried approaches. “Sure, if I don’t go down this path then I would avoid a cultural clash – but I would also not be able to build a successful company,” he told the conference. “At the same time, we need to find new commercial and development models, and be increasingly creative in our partnering ideas,” he added.

Riccardo Braglia heads his family’s Swiss drug and device business, Helsinn Group, which began life in his grandfather’s garage in the late 1940s but today operates in 90 countries with 63 partners using a core business model of what he terms “integrated in-licensing” of late-stage pharmaceutical compounds, medical devices and nutritional supplement products. He told the conference that Helsinn’s business model is based on three pillars: in-licensing, developing products and obtaining marketing authorization on international markets, and out-licensing products through a network of partners worldwide. Its main business areas are cancer supportive care, pain and inflammation, and gastroenterology.

Braglia, who has been at the helm of Helsinn for a decade, recounted a recent cultural challenge he faced when Helsinn took over U.S. biotech Sapphire Therapeutics in 2009, to expand the group’s pipeline in therapeutic areas, notably in cancer care, and give it a foothold in the U.S. But the takeover quickly presented problems that he hadn’t foreseen and which took him more than two years to put right.

“We figured, ‘well, they speak English there so what’s the problem?’ But oh boy, it was a nightmare to implement our culture, that of a family-business, our strategy, our products, and reconciling their biotech culture within the pharma industry. It was really tough, partly because I didn’t want to have any expats running the show there, because I always want to work with local people, because the culture of a country is very important. So what I did was spend half of every month in the United States to make it work – and it eventually did.”

Braglia said his integrated in-licensing business model means his company is essentially a virtual corporate entity with limited infrastructure. “It also means that half of my 500 employees are not in the office but rather in airplanes on business trips.” He said that in the last decade, Helsinn was focused increasingly on licensing alliances, manufacturing alliances, scientific alliances and commercial alliances. An example is an injectable manufacturing joint venture using a plant owned by Pierre Fabre Group of France but paid for by Helsinn.

Gradnik’s company has just secured a U.S. partner – Greer Laboratories Inc. – for its key grass allergy vaccine Oralair, which he hopes to launch there in early 2014, pending FDA approval. Under the deal, announced Oct. 31, Greer will lead the sales and marketing of Oralair, a grass pollen sublingual immunotherapy tablet that includes five grasses -- sweet vernal grass, orchard grass, perennial rye grass, timothy grass, and Kentucky bluegrass -- while Stallergenes will be responsible for manufacturing and supply. Stallergenes will receive regulatory and commercial milestone payments totaling up to $120 million, plus royalties. Oralair will be reviewed by FDA’s Allergenic Products Advisory Committee Dec. 11.

Both Braglia and Gradnik said CEOs of small to mid-sized biopharma companies need to be involved in such collaborations.

“I need to know that the other CEO shares the same philosophy and vision,” Helsinn’s Braglia said.

Gradnik said it should also be the chief executive’s role to know when collaboration has gone sour and take remedial action. “It’s best to cut your losses and end it. I have one like that currently going but will refrain from saying who that’s with,” Stallergenes’ CEO told the conference.

Perhaps a topic for a future “No Deal of the Week.” Until then, enjoy our takes on the not-yet-sour ...

Helsinn/Chugai: In its latest partnership, Helsinn has chosen Chugai Pharmaceutical Co.'s U.K.-based European marketing subsidiary to help sell its ghrelin receptor agonist anamorelin in Europe.
Under the deal announced on Nov. 12, Chugai will get rights in certain major European markets to commercialize the oral drug for anorexia-cachexia syndrome related to advanced non-small lung cancer. Financial details were not disclosed. The pact follows Helsinn's agreement in January with Mexican pharmaceuticals company Especificos Stendhal SA de CV for anamorelin's development in selected Latin American markets. Anamorelin is a first-in-class, once-daily drug previously studied in around 500 patients, including four completed Phase II trials. It is currently being tested in two Phase III studies, ROMANA 1 and ROMANA 2, for the treatment of anorexia-cachexia syndrome in patients with advanced NSCLC.
Chugai will distribute and commercialize the product in Germany, France, the U.K., Ireland, Belgium, the Netherlands and Luxembourg. Chugai's European subsidiary already has direct operations in the U.K., France and Germany, marketing products there from Chugai or Swiss parent Roche. Helsinn retains responsibility for all product development activities including clinical trials and regulatory affairs and will supply the drug to Chugai, which will carry out all work related to commercialization. Phase II results of the drug presented to this year's European Cancer Congress in Amsterdam showed a significant rise in body weight from baseline in patients receiving the medicine compared with placebo, and a favorable overall safety/tolerability profile. Cancer-associated anorexia-cachexia is a muscle wasting and weight loss condition that occurs in around a third to half of cancer sufferers. There are as yet no approved therapies for the condition. Ghrelin, also known as the "hunger hormone", is secreted by the stomach and is targeted by anamorelin to stimulate multiple pathways involved in regulating body weight, appetite and metabolism. -- Sten Stovall

Roche/immatics: People have begun to sit up and take notice of immatics biotechnologies GMBH after the company announced on Nov. 13 a cancer vaccine collaboration with Roche that could lead to the German immunotherapeutics biotech receiving research and milestone payments of up to $1 billion, in addition to a relatively modest up-front payment of $17 million. The high “biobucks” figure takes into account the multiple products and indications likely to be explored in the collaboration, the second announced by Roche in the immunotherapy field in the past two months. Immatics, a Tubingen-based firm with strong backing from local German entrepreneurs and VCs, has developed a technology, XPRESIDENT, to identify cancer antigens recognized by T lymphocytes, and has a tumor-associated peptide (TUMAP)-based cancer vaccine targeting renal cell carcinoma, IMA910, already in a Phase III study. Roche is keen to evaluate preclinical TUMAP vaccines alone and combined with checkpoint inhibitors and other modulators of the immune response, specifically in the areas of gastric, prostate and non-small cell lung cancer. Immatics' Phase I-ready gastric cancer vaccine candidate, IMA942, is the most advanced product covered by the agreement, and Roche will be responsible for clinical development and commercialization of this and other immunotherapies generated in the research collaboration.-- John Davis

Oncodesign/UCB: French drug discovery and pharmacology services firm Oncodesign SA is to collaborate with European mid-sized biopharma UCB SA on identifying selective kinase inhibitors with potential in the treatment of neurodegenerative diseases, in a deal announced Nov. 13. Oncodesign’s Nanocyclix technology generates potent and highly selective kinase inhibitors based on macrocyclization of small molecules, and the two companies will collaborate on identifying such inhibitors that cross the blood-brain barrier and interact with a UCB-selected kinase target. UCB will have an exclusive option to license the joint program, with worldwide development and commercialization rights, upon successfully reaching certain discovery milestones. Oncodesign will, in turn, get research funding, and upon exercise of the license option, research, regulatory and commercial milestones involving the development of molecules in two or more indications, and tiered royalties on net sales. Dijon-based Oncodesign was set up in 1995 and has previously forged collaborations with several other pharmaceutical companies including Sanofi and Ipsen to apply its drug discovery technology in various therapeutic areas, including tissue repair and Parkinson’s. -- John Davis

Novartis/Immunogen: ImmunoGen Inc. announced on Nov. 11 that Novartis AG has taken its third license to use the biotech’s antibody-drug conjugate technology on an undisclosed cancer target. It is the fifth license around Immunogen’s ADC targeted antibody payload (TAP) technology this year by a major drug company.
The Novartis license dates back to a 2010 deal in which the Swiss Pharma licensed exclusive rights to use Immunogen’s TAP technology to develop antibodies against a predetermined number of oncology targets.
For each license, Immunogen receives an up-front payment and is entitled to receive milestone payments potentially totaling some $200 million plus royalties on the sales of any resulting products. Novartis is responsible for the development, manufacturing and marketing of any products resulting from the license. Immunogen’s pipeline consists of four wholly owned ADC programs and eight partnered ADCs in 10 different cancer indications. The best known partnered ADC is Roche’s Kadcyla (ado-trastuzumab emtansine), which was approved by FDA in February as a second-line option after Herceptin (trastuzumab) and a taxane, but labeling left a window for broader use in some first-line patients. A safety signal in a Phase II trial of the biotech’s lead asset, IMGN901 for NSCLC, was disclosed last April, followed by its discontinuation on Nov. 5 on the recommendation of the trial's independent Data Monitoring Committee. -- Mike Goodman

Merck KGaA/BeiGene: Big pharma is increasingly in-licensing compounds from Chinese companies, and the biopharma arm of Merck KGAA, Merck Serono SA, inked a second global licensing, co-development and commercialization deal with BeiGene (Beijing) Co. Ltd. for oncology compound BeiGene-290.
BeiGene-290 is in preclinical development and is expected to enter the clinic in 2014. Under terms of the agreement, announced Nov. 13, BeiGene will be responsible for developing and commercializing the poly (ADP-ribose) polymerase (PARP) inhibitor in China first and Merck will be responsible for the development and commercialization of the compound for the rest of the world. In return, BeiGene will receive an undisclosed up-front payment and is eligible to receive further payments of up to €170 million ($232 million) for clinical development milestones and potential commercial milestones in both China and globally, as well as royalties on net sales. Specific indications for the oncology compound were not disclosed. Both deals, while global, have been structured to ensure BeiGene leads development in China, which should enable the companies to take advantage of regulatory consultations with China FDA as part of the agency’s accelerated approval pathway. The new agreement signals a milestone for biotech innovation in China, said BeiGene Co-founder Xiaodong Wang during the signing ceremony in Beijing. Wang is also the director and architect of China’s National Institute of Biological Science. -- Brian Yang

Shire/ViroPharma: The big M&A news this week was London-listed Shire PLC’s agreed takeover of ViroPharma Inc. for an eye-watering price of $4.2 billion cash, which would give the Ireland-based specialty drug maker access to the U.S. target’s C1 esterase inhibitor Cinryze for treating Hereditary Angioedema, a genetic immune disorder. The proposed acquisition may attract anti-competition resistance from regulators, given Shire’s possession of HAE treatment Firazyr (icatibant injection), but the acquirer says it is confident that these two products are in two different marketplaces. If allowed to proceed, Shire expects the marriage to generate annual cost synergies of around $150 million by 2015, over and above the improved operating leverage already being driven by the ongoing One Shire reorganization.-- STS

Cell Therapeutics/Baxter International: Beleaguered oncology company Cell Therapeutics Inc. has inked a deal for its Phase III mylefibrosis asset pacritinib that it sees as a vote of confidence. CTI announced Nov. 15 that it has signed an agreement with Baxter International Inc. for full commercialization rights outside the U.S., as well as joint commercialization rights in the U.S. The $60 million up-front payment will include a $30 million equity investment in the Seattle-based biotech company, which may also receive clinical and regulatory milestones up to $112 million, including $40 million in clinical milestones that are expected in 2014 and another $27 million expected in 2015. Baxter will handle 75% of costs through submission. CTI acquired pacritinib, an oral tyrosine kinase inhibitor that acts on the JAK2 and FLT3 pathways, in April 2012 from Asia’s SBIO Pte. Ltd. CTI paid $30 million upfront and is on the hook for a total of $132 million in regulatory and sales milestones. Prior to CTI getting the rights to pacritinib, the drug was licensed to Onyx Pharmaceuticals Inc., which opted not to development it in 2011. Pacritinib is CTI’s latest hope after two late-stage pipeline failures – first FDA shot-down non-Hodgkin’s lymphoma treatment Pixuvri (pixantrone), followed by a clinical hold for the blood cancer drug tosedostat. -- Lisa LaMotta

What If Deals Of The Week Had A Party And Nobody Showed Up?

What if they had a week and no biopharma deals happened? We’re not quite at that point but it has been slow-going, to put it mildly, on the deal-watching front.

Did everybody go on vacation all at once? Well, your trusty correspondent got back from his time off about two weeks ago and Deals of the Week has a schedule to keep. Let’s see what activity we can find.

There have been a few deals the week of Aug. 19, although none of the blockbuster sort or even all that close (see below). In fact, deal rumors may have outnumbered actual signed deals this week – they certainly set more tongues wagging. The biggest news in business development and M&A likely was renewed speculation that rare disease specialist Shire might be a buyout target for big pharma. The rumor gained in plausibility coming on the heels of Perrigo’s $8.6 billion acquisition of Elan on July 29 for the primary purpose of benefiting from Irish tax laws.

Focused on over-the-counter products, nutritionals and generic drugs, Perrigo bought out Elan largely for its appealing tax structure, as well as the royalties it earns from multiple sclerosis blockbuster Tysabri (natalizumab). Because Perrigo is merging with Dublin-based Elan, rather than just moving to Ireland, the new combined company will be able to take advantage of that country’s tax rates, which are considerably lower than those in the U.S.

On Aug. 15, Perrigo held its first earnings call since the transaction, saying that its expectations for increased global business are expected to offset slowing U.S. revenues in its OTC business. The company reported overall record net income of $967 million for its fourth quarter, a 16% increase from the year-ago period, and income of $3.5 billion for its fiscal 2013, which ended on June 30, a 12% increase from 2012.

While sales for its consumer health care business, which includes OTC drugs and pet-care products, grew 16% to $562.4 million for the quarter, Perrigo executives said during the call that sales in some OTC categories are slowing, a trend that likely will continue. Perrigo’s nutritionals sales, comprising supplements and infant formula, reached $150 million, an 11% increase year-over-year, with all categories within the segment growing and new product sales reaching $7 million.

It’s unclear whether Bristol-Myers Squibb, said to be reprising its interest in acquiring Shire, would be looking for tax advantages – Shire is headquartered in Ireland, as well, but also maintains corporate offices in Philadelphia and Cambridge, Mass.

Industry analysts on Wall Street and in London have said the pharma’s main interest might be Shire’s business model of producing and selling high-priced drugs for small specialist populations that discourage generic competition because they are hard to make and extremely targeted. However, if Bristol bought Shire, Irish tax rates would apply to any existing Shire products sold by Bristol and it likely could use the Irish rate on future products of its own, resulting in a reduced, blended tax rate for its overall business.

Shire has pursued an interesting business development strategy, using small to mid-sized acquisitions, particularly of companies with late-stage or commercial assets, to transform itself. The centerpiece of this strategy was the 2005 buyout of Transkaryotic Therapies that led to the establishment of its growing Human Genetic Therapies division and became a primary competitor to Sanofi’s rare-disease subsidiary Genzyme.

In an effort to build a franchise around bio-engineered skin-substitute product Dermagraft, Shire bought out Advanced BioHealing for $750 million in 2011, but to date that deal has not succeeded greatly in growing the Regenerative Medicines unit. On July 25, Shire announced that sales of Dermagraft, the primary motive for the acquisition, declined 57% to just $22 million during the second quarter.

Overall, however, the company reported sales growth of 7% during the quarter and said it was on track for double-digit full-year sales growth as it had projected.

Recently, it was reported that Shire has hired Lazard as a financial investor to assist it if a hostile takeover bid emerges. Bristol reportedly was going to offer nearly $17 billion to purchase Shire this past May. Shire’s share price has been trending up lately, nosing over the $100 mark on July 11 and continuing to incline. The stock closed trading Aug. 21 at $114.02, undoubtedly helped by the new rumors of possible takeout interest.

While DOTW waits for that potential story to percolate, we point you to these actual transactions that occurred over the past week:

Shire/Santaris: Meanwhile, Shire transacted some actual business, announcing an extension Aug. 23 of its strategic alliance with Santaris Pharma to discover and develop RNA-targeted therapies for rare diseases. Specific financial terms were not disclosed. Under the original deal, signed in 2009, Santaris has been using its proprietary Locked Nucleic Acid (LNA) platform to discover and begin development of preclinical oligonucleotides against rare genetic disorder targets selected by Shire. Shire paid $6.5 million upfront for access to the technology along with research funding and $13.5 million for completion of early studies in the original deal, which specified five targets. Santaris also was eligible for up to $72 million in milestones for each program, plus sales royalties on any product reaching the market. The revised deal adds an undisclosed number of additional targets to the collaboration. Santaris gets upfront cash and research funding, and again can earn milestones and royalties if a product derived from the target research gets to market. As with the initial agreement, Shire holds worldwide development and commercialization rights to any resulting compounds.

Adimab/Celgene/Innovent: Less than a month after antibody-engineering firm Adimab signed a pair of non-exclusive R&D partnerships with GlaxoSmithKline and Biogen Idec, the New Hampshire biotech struck again, announcing a pair of deals Aug. 20. This time, Adimab has signed discovery partnerships with Celgene and Innovent, again to generate therapeutic antibody candidates against multiple targets. The July deals brought Adimab’s total to 19 partners, including a “who’s who” of big pharma and big biotech, and the company said it expects to sign at least three tech-transfer deals a year through 2015. However, the deals with GSK and Biogen transferred non-exclusive rights to Adimab’s antibody discovery and protein-engineering platform, giving them expanded use of the technology beyond prior tie-ups with the biotech. In the Celgene agreement, Adimab will use the platform to generate antibodies against multiple, undisclosed therapeutic targets. Adimab receives an undisclosed upfront payment, while Celgene will have the option to develop and commercialize all antibody candidates resulting from the collaboration. For any candidate that Celgene options, Adimab will receive a licensing fee and be eligible for clinical milestones and royalties on product sales. Meanwhile, Adimab and China-based Innovent will partner on a single program to discover, develop and commercialize an antibody-based therapeutic against an undisclosed target. Innovent will coordinate all initial product development, including manufacturing and clinical trials. Each company will retain the right to develop and commercialize any resulting drug candidate in its respective geographic territories. Innovent will hold those rights in China, while Adimab retains U.S., European and Japanese rights to the program. Innovent will compensate Adimab for discovery and optimization of therapeutic leads, while Adimab will reimburse Innovent for specific development costs.

Evotec/Jain Foundation: Germany’s Evotec AG, a drug-discovery alliance and development partnership company, and the Jain Foundation announced Aug. 21 that they have extended and expanded their research collaboration in skeletal muscular dystrophy diseases. No financial details were disclosed. Based in Bellevue, Wash., Jain is a privately funded foundation whose goal is to cure muscular dystrophies caused by deficiency of dysferlin protein. In a release, foundation CEO Plavi Mittal said the collaboration is moving toward the screening of compound libraries with Evotec. “This is an important step toward accomplishing our mission of finding a therapy for Limb-girdle muscular dystrophy type 2b/Miyoshi Myopathy,” he said. Earlier this year, Evotec partnered with Harvard University to identify and develop a new class of small-molecule inhibitors of bacterial cell wall synthesis. Evotec is applying its drug-discovery technologies and expertise toward developing anti-bacterial agents that target peptidoglycan biosynthesis, while the university brings assays, anti-bacterial chemical starting points and x-ray crystallography tools to the collaboration.

Mount Sinai Medical Center/Exosome Diagnostics: Mount Sinai Medical Center (NY)’s Icahn School of Medicine is collaborating with Exosome Diagnostics Inc. on research and development of real-time nucleic acid-based body-fluid diagnostics to advance personalized medicine in areas such as oncology and inflammation. From the work, Exosome anticipates pursuing commercial development of potential in vitro diagnostics. Under the five-year collaboration, Mount Sinai researchers will get early access to Exosome technology for use in targeted molecular research, the two New York-based organizations said Aug. 21. The Exosome technology enables real-time capture of genetic biomarkers that are responsible for disease directly from blood, urine and cerebrospinal fluid without need for a tissue biopsy. The medical center will retain rights to molecular biomarkers associated with disease progression and drug response under the agreement, while Exosome will get commercial development rights to any molecular in vitro diagnostic products that may result from the collaboration.

Photo credit: Wikimedia Commons

Deals of the Week: An Update On A Potential Pfizer Split-Up

Pfizer's Chairman and CEO Ian Read doesn’t make himself available for interviews readily, so a March 26^th note from Sanford Bernstein’s esteemed pharma analyst Tim Anderson caught our attention pronto. The note describes a teleconference call Anderson held with Pfizer’s top management team, including Read and R&D chief Mikael Dolsten. Also on the call were Geno Germano, president and general manager of specialty care and oncology; John Young, president and general manager of the primary care business unit; and Amy Shulman, EVP and general counsel and business unit leader for consumer health. 

Much of the call revolved around management’s perspectives on splitting up the company. The topic is by no means new, but the strategy continues to fascinate, particularly given the implications it has going forward for the bigger is better argument that dominated the industry for decades, and Pfizer’s leading role in embracing the pro-scale argument, not to mention its gargantuan 2009 acquisition of Wyeth. 

The shifting commercial landscape and concerns about the difficulties of managing massive global R&D units are two key factors underlying the motivation for a split, Read told Anderson. No news there, as Read has said this before, but Anderson’s conversation illuminates how management’s thinking is evolving and what its choice points are likely to be. Anderson believes Pfizer is very much still considering a split, although it has not yet made a firm decision. One possibly telling note about the timing: It has not hired consultants to help the process along. Such a move would seem a logical step, given the complexity of the undertaking. Moreover, it is closely following whether investors sustain their positive reaction to the Abbott Laboratories/AbbVie split.

To do so, Pfizer is taking several steps, including installing different management structures for its two core businesses: one for the innovative medicines and the other for the ‘value’ or established products businesses. These structures are largely in place already, although not yet in emerging markets, Pfizer management told Anderson.

Still, dividing up various aspects of Pfizer’s businesses would be complicated. Pfizer’s manufacturing plants serve multiple purposes, for example, separating them operationally “so they can be managed by two divisions would be a long and difficult process,” management told Anderson. Manufacturing also ties into how profits from individual products are taxed, he noted.

The company is also still considering a compromise as a draw for investors. Anderson calls it a ‘virtual split,’ in which Pfizer retains both businesses, but provides more transparency around each, including separating their P&Ls. This is likely to happen in 2013, Anderson speculates; management has not defined a deadline, but said it would likely take this step ‘soon’. A full break up, should that be the ultimate choice, could take three years to completebecause of SEC requirements for three years of audited financial data and the operational complexities. 

The pros and cons of a split are already well known to Pfizer followers. On the plus side, each business has very different growth drivers, with different cultures required, time lines for getting products to market, and regulatory and commercial strategies. The cons are: loss of scale for back office operations and added costs of two standalone companies, and the complexities of sorting out how to divide up manufacturing operations. 

The company has been evaluating a split for at least two years — almost as long as Read has been at the helm. It has already spun out or sold its animal health, drug formulation and delivery, and international pediatric nutritionals businesses, adding tens of billions of dollars to its coffers. It is now the most cash-rich company of a cash-rich industry, a position investors laud. (Statistically-minded investors might note that two of these deals took place in consecutive Aprils — 2011 for Capsugel, and 2012 for the $11.9 billion sale of the pediatric nutritionals business to Nestle. However, divesting consumer health, one of Pfizer’s growth drivers, is not on the table, management told Anderson and has previously told the Street. Wall Street seems favorably inclined toward current management, a sharp turnaround from the dissatisfaction that helped drive previous CEO Jeff Kindler from his post in December 2010 and paved the way for Read’s ascent. But, given the success of other pharma spin outs and divestitures, it’s itching for this split to occur.

Other nuggets from Anderson’s call: Pfizer’s goal for its newly launched anti-coagulant Eliquis is to reach equivalent formulary positioning to earlier entrants, Boehringer Ingelheim’s Pradaxa and Johnson & Johnson/Bayer AG’s Xarelto by year end. The company’s other new specialty drug, Xeljanz, an oral medication for rheumatoid arthritis, is ”getting consistent uptake in the post anti-TNF portion of the market.” Direct-to-consumer advertising is expected to begin in mid-2013.  Breast cancer pipeline drug palbociclib, a CDK 4/6 kinase inhibitor, is on investors’ radar following release of strong clinical data in December 2012.--Wendy Diller

Who's splitting up, buying, selling, licensing, or partnering? It's all in this week's installment of...

Lundbeck/Otsuka: Just weeks after partners Lundbeck and Otsuka launched their first joint product in the U.S. derived from a 2011 collaboration, they expanded their 2011 alliance for yet the second time in a month, focusing  on Lundbeck’s novel Phase II compound for Alzheimer’s disease, LuAE58054. In March 2013, the companies launched the once-monthly injectable anti-psychotic Abilify Maintena, a long-acting formulation of Otsuka’s blockbuster Abilify, which is set to lose patent protection in 2015. Just days after the launch, the partners expanded the original agreement to include co-promotion of all Abilify formulations (including tablets and oral solutions) in certain European countries. The companies are also jointly developing Otsuka’s brexpiprazole, now in Phase III for multiple psychiatric disorders. The latest expansion adds $150 million from Otsuka to Lundbeck’s coffers upfront, and could result in regulatory and sales milestone payments of up to $675 million. In exchange, Otsuka gets co-development and commercialization rights to Lu AE58054 in the U.S., Canada, East Asia (including Japan), major European countries, and Nordic countries. Phase II studies of the asset recently completed, and three Phase III trials are expected to begin later in 2013. The compound, a selective 5HT 6 receptor antagonist, is in development as an adjunct to donepezil for Alzheimer’s disease. The drug is expected to begin three Phase III trials later this year involving 2,500 patients. – Lisa LaMotta

Shire/SARcode: Shire's CEO-designate Flemming Ornskov hasn’t officially taken over the reins at the specialty pharma but he is already pulling the strings when it comes to business development. The company announced its second acquisition within two weeks in ophthalmology – a therapeutic area Ornskov knows well, but one that is new to the company. The Irish specialty pharma announced on March 25 that it acquired SARcode Bioscience Inc. and its lead asset lifitegrast for dry eye disease for $160 million upfront and undisclosed milestones. That announcement follows the March 12 acquisition of Premacure AB, the developer of a rare neonatal eye disease treatment, for an undisclosed amount. Ornskov called ophthalmology a 'very attractive' therapeutic area in an interview with “The Pink Sheet” DAILY. Prior to Bayer, Ornskov worked at the eye specialist Bausch & Lomb as global president of pharmaceuticals and OTC, and previously headed Novartis's ophthalmology business. For SARcode investors the deal is an attractive exit. The process was competitive, with multiple potential acquirers coming forward after the first Phase III trial read out last year, according to Sofinnova Ventures partner Garheng Kong, who also sits on SARcode’s board of directors. Sofinnova led SARcode’s $44 million Series B financing, completed in July 2011 to fund the Phase III program.–Jessica Merrill

Edison/Dainippon: Mountain View, Calif.-based biotech Edison Pharmaceuticals has scored a regional partnership with Japan’s Dainippon Sumitomo. On March 28. Edison announced that Dainippon is providing it with $15 million upfront, as well as $35 million in research funding for the Japanese development and commercialization rights to EPI-743 and EPI-589. The Japanese pharma will pay up to $35 million in development milestones for each indication, as well as another $460 million in commercialization milestones and royalties. Edison will use the funds from the deal to conduct late-stage development and commercialization of EPI-743, its lead product candidate, which it intends to commercialize itself in the U.S. and possibly Europe during the 2015 timeframe. Edison has been raising small sums of money since its inception in 2005, but had been considering the best possible way to transition from a pure development company to one with a commercial orientation as well. “We’ve been in private board discussions on how to capitalize Edison through commercialization,” said Edison CEO Guy Miller in an interview. “We had been considering different options including a regional deal or even an IPO.” – L.L.

AstraZeneca/Actavis: Actavis gained the right to launch its generic version of AstraZeneca PLC’s blockbuster Crestor on May 2, 2016 – 67 days before Crestor’s patent protection expires – in a deal announced March 25. In return, the generics maker agreed to pay a fee of 39% of its net sales during this early marketing period. The terms were part of a settlement agreement to resolve patent litigation. Actavis (formerly Watson Laboratories Inc.) will also be able to launch its zinc salt formulation of the cholesterol-lowering drug, which it developed under an NDA as a way to circumvent the Crestor patent, at the same time ([A#00130218011]). The companies noted in separate March 25 releases that the entry date may be earlier and the fee eliminated under certain circumstances, which they did not specify. In December 2012, the U.S. Court of Appeals for the Federal Circuit affirmed a district court decision that the substance patent covering Crestor is valid and enforceable. The patent expires following pediatric exclusivity on July 8, 2016. Crestor is AstraZeneca’s top-selling drug with 2012 revenue of $6.25 billion, of which $3.16 billion was in the U.S. The companies announced the settlement agreement on the same day the Supreme Court heard oral arguments in Federal Trade Commission v. Actavis, which addresses whether patent settlements in which the brand pays the generic to delay launching its product are anticompetitive. It is unclear whether the AstraZeneca-Actavis deal would spark opposition by the FTC as it did not involve a “reverse” payment from defendant to plaintiff. —Brenda Sandburg

Sanofi/Transgene: French biopharma companies Sanofi and Transgene will collaborate on the development of a new industrial platform for the production of clinical and commercial batches of Transgene’s immunotherapy products, including its modified vaccinia Ankara (MVA vaccine), a reengineered virus used as a vector for the production of recombinant proteins. Genzyme’s polyclonals facility in Lyon-Gerland will serve as the site for the platform, and is targeted for an investment of €10 million ($13 million), to be equally shared by Sanofi and Transgene. The platform will remain Sanofi’s exclusive property. Under the agreement, Sanofi will essentially serve as Transgene’s contract manufacturing organization, and Transgene will be a preferred customer for 15 years. The Genzyme site is already manufacturing polyclonal antibodies and has the necessary capabilities to support the registration of immunotherapy products for the EU and U.S. markets.  Construction will start in the third quarter of 2013, with completion scheduled for 2015. Transgene expects to file its first BLA in 2016. In 2010, Novartis AG licensed an exclusive option for global rights to Transgene’s TG4010 vaccine (MVA-MUC1-IL2) against MUC1-positive NSCLC and other types of cancer. The decision to option will be based on Phase IIB results, which should be available in the second half of 2013. The biotech is also advancing JX594, an oncolytic virus candidate licensed from Jennerex Biotherapeutics Inc. for hepatocellular carcinoma and other tumors; Phase II data will be presented in the first half of this year.—Michael Goodman

Novartis/Clinigen: British specialty pharma Clinigen Group is building a portfolio of hospital-only drugs it believes will thrive in its hands. In its latest deal, the Burton-on-Trent, U.K., company said March 26 it had acquired from Novartis rights to Cardioxane, a cardioprotective agent used to combat complications of anthracycline chemotherapy in advanced breast cancer patients. The Swiss pharma agreed to sell its rights to the drug for $33 million in cash, which Clinigen will pay in two installments. Novartis had owned rights to dexrazoxane since its 2006 acquisition of Chiron, but the drug has been approved since 1992.  It’s been marketed by several companies under a variety of names, but since 2011, its usage has been restricted to the breast cancer indication in the EU and U.S. Clinigen plans to market the drug with emphasis on certain European, Asian and Latin American markets where it believes it can stimulate sales. Last week, Clinigen licensed antiviral drug Vibativ (telavancin) from Theravance Inc. to treat nosocomial pneumonia infections stemming from methicillin-resistant staphylococcus aureus infections. The company licensed Foscavir (foscarnet sodium) from AstraZeneca PLC, an anti-bacterial drug combatting cytomegalovirus in bone marrow transplant patients, in 2010. Clinigen went public in September 2012.—Paul Bonanos



Lilly/Galapagos: Eli Lilly has returned the rights to an osteoporosis program to Galapagos NV, the smaller company announced during an R&D update on March 27. The alliance was initiated in December 2007, when Lilly agreed to pay an upfront of €3 million ($4.32 million) in exchange for an option to take over worldwide development and commercialization for up to 12 proprietary osteoporosis targets and drug-discovery programs. The goal of the program was to develop oral, bone-building drugs that could serve as follow-ons to Lilly’s osteoporosis franchise, which includes Evista and Forteo. Under the original terms of the deal, Galapagos was tasked with developing the drug candidates through Phase IIa proof of concept in exchange for the upfront and €88 million ($126.6 million) in milestones. It was also eligible for €130 million ($187.1 million) in commercial milestones. Galapagos said in a statement that the “alliance did not yield the expected results within an acceptable timeframe, and therefore Galapagos decided to end the alliance.” The smaller company had received €11 million in milestones from Lilly as of the end of the collaboration.—L.L.

 

Financings of the Fortnight Examines The Peter Thiel Principle

Iconoclastic investor Peter Thiel has famously offered smart young people money not to go to college. (See video above.) Now his personal foundation, through a venture called Breakout Labs, wants to play a role usually left to the Federal government: providing seed money to life science companies too young to attract venture capital.

Foundations, charities, and angel investors have also picked up some of the slack to boost what some VCs refer to as “science projects,” but these days, if it doesn’t quack like a product, the duck isn’t likely to come down and give you $50 (or $500,000).

So into the breach, again, steps Thiel, the billionaire founder of online payments company PayPal and one of the first backers of Facebook. He later co-founded Founders Fund, a venture firm dedicated to backing only entrepreneurs with audacious goals. In February's START-UP we profiled the firm as it moves more aggressively into the life sciences and health care. Beyond social networking and digital media, Founders Fund is now aiming to cure diseases, use data to change the way medical care is understood, and take advantage of mobile and analytical technologies to solve what its partners see as enormous human problems, rather than just improve drugs or treatments incrementally.

Some of those audacious goals are also part of the Breakout Labs modus operandi, or so they say. Unveiled in the fall of 2011, Breakout is a revolving fund, not unlike an evergreen venture fund. Operated by the Thiel Foundation and seeded initially with $5 million, the philanthropic program accepts royalties and warrants for equity in the start-ups it supports, typically taking an option for a 1% stake in each start-up. Breakout will then funnel those returns back into itself to seed more companies, with grants between $50,000 and $350,000 apiece issued on a rolling basis.

Its first six grants are ticketed for six companies which have what the Labs calls “radical ideas” in the life sciences. (Some of Thiel’s stated personal aspirations are a bit radical, too – living forever, say, or colonizing the ocean on stateless floating platforms.) Although Breakout says it prefers ideas developed outside of traditional academic settings, science director Hemai Parthasarathy notes that some have connections to academia: 3Scan, which aims to map the connections within the brain in a three-dimensional digital reconstruction, is based on technology developed at Texas A&M, and Longevity Biotech, a developer of artificial proteins that it hopes to use in orally available versions of biotech drugs, uses technology spun out of the University of Wisconsin.

The other programs funded, which Parthasarathy says include a few garage-level projects recently incorporated as LLCs, have auspicious implications, if not necessarily truly radical science. Arigos Biomedical would preserve organs in a cooled storage bank over a long period of time for future transplants, using cryonics techniques Parthasarathy acknowledges do not have a “high academic consensus” of approval behind them. Immusoft is developing a novel way to turn immune cells into therapeutic compounds within the body, applying technology discovered in Nobel laureate and CalTech professor David Baltimore’s lab to re-engineer B-cells and infuse them back into a patient’s body. Inspirotec is creating hand-held devices that capture airborne toxins, potentially affecting both epidemiology and bioterrorism, while Positron Dynamics is conducting particle science with implications that include medical imaging. All are in the early stages of research and development, so it'll be many years before anyone knows how dramatic an impact their projects might have. 

Founders Fund has been able to shake up the status quo on the tech side, but life sciences and health care -- areas with bedeviling development timelines, complex regulations, and hugely entrenched status-quo interests -- will be an interesting test of the firm's, and of Breakout Labs', outsized ambitions. Until then, look to Thiel, both through his foundation and through Founders Fund, to be an important source of capital in this corner of the world.

Whether radical, incremental, or somewhere in between, any new source of early-stage biomedical funding these days is newsworthy. You bet your life you’ll read about it in…

Alcresta: The founders of Alnara Pharmaceuticals, Alexey Margolin and Robert Gallotto, have teamed up with their former investors to launch two new companies based on their enzyme stability expertise. Alcresta is the latest, with a $10 million Series A round unveiled April 17. Third Rock Ventures, Frazier Healthcare Ventures, and Bessemer Venture Partners are the same investment group that backed Alcresta’s sister company, Allena Pharmaceuticals, with a $15 million Series A announced in November. “Sister company” isn’t quite the right phrase. Alcresta and Allena are more like Siamese twins: The two companies will be run by the same staff of eight people while producing completely different products. Alcresta is developing a nutritional supplement with omega-3 and omega-6 fatty acids that are more easily digested and absorbable. The fatty acids are an important part of cardiovascular and brain health, and most nutritional drinks and infant formula include the triglyceride form of the two acids, but certain patients – including premature infants, some elderly, and cancer patients – lack the proper enzymes to digest the nutrients in the triglyceride form. That’s where the Alcresta supplement would come in. The product would be used at point of care, including hospitals and in the home, and will join one of the fastest growing segments of the nutrional supplement market. The company expects to launch a product sometime next year and is already in talks with potential acquirers, Frazier partner Jamie Topper told our “Pink Sheet” colleagues. Meanwhile, Allena, which raised $15 million in Series A financing in November from the same investment group, will develop drug therapies with oral protein therapeutics aimed at treating nephrologic and urologic conditions. The founders expect the two companies to diverge at some point, but see the dynamic business model as a means of keeping costs down while products are in early development and can capitalize on the shared resources. -- Lisa LaMotta

Alder Biopharmaceuticals: Already richly funded by private investors and a lucrative partnership, antibody developer Alder has tapped into a new $38 million Series D round of funding, led by Novo Ventures. Since its previous venture round, a $40 million Series C in 2007, the eight-year-old start-up has received an additional $100 million in non-dilutive capital from a partnership with Bristol-Myers Squibb. BMS licensed Alder’s ALD518, a Phase II antibody that binds to interleukin-6, in autoimmune indications for $85 million up-front in 2009, then issued a $15 million milestone payment at the beginning of a Phase IIb study in rheumatoid arthritis in June 2011. While the licensing deal enriched Alder’s coffers, the company will need more cash to support several initiatives. For one, Alder still retains rights to ALD518 in cancer and is conducting a pair of Phase II trials in oral mucositis and acute graft-versus-host disease. The company had previously investigated the drug’s efficacy in combating cancer-related fatigue, cachexia and anemia, but Alder CEO Randall Schatzman said the regulatory path for those indications would be long and costly, and Alder has halted those programs for now. The D round brings Alder’s total private funding to $105 million. Prior investors Delphi Ventures, TPG Biotech, H.I.G. BioVentures, Sevin Rosen, Ventures West, and WRF Capital all followed on in the new round, but Novo’s participation was a factor in raising more private money instead of attempting an IPO. Novo is an evergreen fund backed solely by the Novo Nordisk Foundation, which often affords it more patience with its portfolio companies. Besides, said, Schatzman, “The public market is still a rocky place to play, with lots of down rounds in the public sphere. Early stage companies haven’t been trading well, so liquidity to investors has not been that great.” -- Paul Bonanos

H.I.G. Capital: One of Alder’s early backers, the investment firm H.I.G. Capital, announced the closing of its second life-sciences fund, H.I.G. BioVentures II, with $268 million committed. The firm says the fund, originally targeting $250 million target, was oversubscribed, and more than half the limited partners were not investors in the first BioVentures fund. Managing director Aaron Davidson told “The Pink Sheet” that the new fund will seek out companies with lead products that can be developed with $40 to $60 million. That ceiling likely precludes very early-stage technology or capital-intensive indications such as Alzheimer’s disease, although Davidson noted that breakthroughs can change the calculus within a specific field rather quickly. He cited the recent FDA approval of Eli Lilly’s Amyvid (florbetapir) imaging agent, which helps doctors and researchers map amyloid beta deposits in the brain and could help re-shape the risk of Alzheimer’s R&D. Notable investments from the first fund include Salmedix and Gemin X Pharmaceuticals, both of which were acquired by Cephalon, now part of Teva Pharmaceutical Industries; OncoGenex Pharmaceuticals, which went public in reverse merger with Sonus Pharmaceuticals; Novadaq Technologies, a Canadian device company that went public in 2005, and Tranzyme, a drug firm that went public in 2011. -- Michael Goodman


Supernus Pharmaceuticals: More than a year after first filing to go public, Supernus has dusted off its S-1 and decided to have another go at the public markets. A revised prospectus filed April 11 aims the company for an IPO of about $75 million, not including extra shares allotted to underwriters. It wants to sell 5.77 million shares in the range of $12 to $14 per share. The firm is based on formulation technology spun out of Shire in late 2005 and into the hands of a venture syndicate led by New Enterprise Associates (NEA). Its lead compounds are extended-release anti-epileptic drugs, reformulated with the Shire technology. SPN-538 (extended-release topiramate) is under review at FDA and has a PDUFA date in July. Epliga (extended-release oxcarbazepine) is also under review with a PDUFA date in October. Not only has Supernus built a pipeline from the Shire formulation technology, it has stretched its venture dollars by turning royalties attached to the technology into bulk cash payments. The technology has been used in several marketed products. The royalties for Sanctura XR (trospium chloride) and Oracea (doxycycline) were used to secure $75 million in debt raised in 2008. For Intuniv (guanfacine), an important product in Shire's portfolio, Supernus accepted in 2009 a one-time payment of $37 million to waive future royalty rights, as our START-UP colleagues explained when Supernus first filed to go public more than a  year ago. Heading into the IPO, NEA holds 45% of Supernus, followed by OrbiMed Advisors (18%), Abingworth (18%), and Shire (7%). CEO and founder Jack Khattar, a former Shire executive who founded Supernus, owns 11% of the company. The latest filing notes that certain large shareholders could buy shares at the IPO, but it did not indicate which ones or how much they might buy. -- Alex Lash

- Paul Bonanos wrote this week's introduction on Breakout Labs.

Deals Of The Week: Will Lightning Strike Twice At Shire?

The old adage is that “lightning doesn’t strike the same place twice,” but as April showers approach, Shire PLC appears to be gambling that the cliché does not ring true. On April 12, it made a move to bolster its burgeoning Regenerative Medicine division, buying out privately held Pervasis Therapeutics in a deal that reportedly could total $200 million if all milestones pay out.

Pervasis adds a Phase II cell-based therapy Vascugel, for improving hemodialysis access for end-stage renal disease patients, and its endothelial cell technology platform, to Shire’s portfolio.

And Shire executives did not bury the subtext of the transaction – the specialty pharma is hoping that with targeted acquisitions, it can become the “partner of choice” in regenerative medicine, just as its 2005 acquisition of Transkaryotic Therapies enabled Shire to become Genzyme’s main competitor in enzyme replacement therapies.

The $1.5 billion purchase of TKT was leveraged into Shire’s ever-growing Human Genetic Therapies unit. Now, by pairing tiny, two-employee Pervasis with last year’s $750 million takeout of Advanced BioHealing, which brought in the skin-substitute Dermagraft, the company is trying to tell a similar story in regenerative medicine.

“That’s definitely our intent,” Kevin Rakin, president of Regenerative Medicine at Shire, told “The Pink Sheet”. “We want to do the same thing in regenerative medicine and I think there’s a template here: [acquire a] venture capital-backed company, get some technology into man and prove the applicability, and then ideally we can be ideally the partner of choice … for regenerative medicine product development and commercialization.”

ABH took a floundering product, Dermagraft, off the hands of a large medical devices company and built it into a successful franchise. The acquisition has brought Shire development, manufacturing and commercial expertise in regenerative medicines. The acquisition of Pervasis and the renal disease product candidate Vascugel offers a number of synergies, said Jeff Jonas, Shire’s head of R&D for regenerative medicine, in an interview with “The Pink Sheet” during EBI’s Pharmaceutical Strategic Outlook conference in New York on April 12.

“We know the renal space very well from our work with Fosrenol (lanthanum carbonate, Shire’s phosphate binder for a number of chronic kidney disease indications),” he said. “We are familiar with the dialysis suite. We are familiar with cell therapies as well. It is a marriage of a number of synergies that exist in the company.”

This deal should be seen as a harbinger of things to come from Shire, Jonas added, and not as simply an incremental transaction. In regenerative medicine in particular, the specialty pharma is seeking early- to mid-stage assets with upside that it can de-risk early in the development cycle. While HGT now comprises about one third of Shire’s total business, a fraction that is growing, Jonas would not put a number on regenerative medicine’s potential other than to predict that it represents an “area of real potential growth in the next 20 years.”

And now, get out your umbrellas, it's time for the latest roundup of:

Takeda/URL: In a bolt-on acquisition, Takeda’s U.S. division will pay $800 million upfront with the potential for sales-based earn-outs beginning in 2015 to take out privately held URL Pharma. With the buyout, announced April 11, Takeda acquires the gout treatment Colcrys (colchicine).  Takeda hopes that the addition of Colcrys to its existing Uloric (febuxostat) could position the company as the provider of choice for gout therapy in the U.S. Takeda executives were not specific about how URL will be absorbed into Takeda Pharmaceuticals North America, but said the acquisition is expected to be accretive to earnings beginning in 2013. Venture capital-backed URL, headquartered in Philadelphia, markets Colcrys via a 350-person contract sales force. The firm markets three other products in addition: Qualaquin (quinine) for malaria, Fibricor (fenofibrate) for triglyceride management and the antibiotic Bactrim (trimethoprim and sulfamethoxazole). URL’s sales were roughly $600 million in 2011, led by Colcrys, an alkaloid indicated for prophylaxis and treatment of gout flares as well as familial Mediterranean fever in patients four and older, which generated $430 million in revenue. Uloric, which launched in 2009, is hardly on a blockbuster track. The drug posted net sales of $117 million in 2011. But Takeda executives said the two drugs should complement one another well, since Uloric is indicated to treat chronic gout, while Colcrys treats acute cases.--Joseph Haas

Amgen/KAI Pharmaceuticals: Amgen announced April 10 that it plans to acquire KAI Pharmaceuticals. The big biotech paid $315 million in cash for the South San Francisco, Calif., biotech with plans to move its lead compound into late-stage testing as soon as possible. KAI currently is developing KAI-4169, a peptide agonist of the calcium-sensing receptor being developed for treatment of secondary hyperparathyroidism (SHPT) in patients with chronic kidney disease (CKD) who are on dialysis. The company presented positive Phase IIa data last year that showed ‘4169 raised the levels of parathyroid hormone. A Phase IIb trial is currently ongoing and results are expected in “the near term,” Amgen said. Phase III planning is underway already and Amgen will provide the company with a loan in advance of the deal closing to support planning. Amgen will have full worldwide rights except in Japan. KAI licensed the Japanese rights to the drug to Ono Pharmaceutical in September 2011, nabbing a $13 million upfront. The drug is currently being tested in an intravenous formulation, and KAI has looked into a transdermal formulation as well. But, Amgen’s head of nephrology, Reshma Kewalramani said the company is specifically focused on the IV formulation for the moment. “The appeal of this molecule is that it can be administered in concurrence with dialysis,” she said.–-Lisa LaMotta

Celgene/AnaptysBio: Celgene and AnaptysBio announced an antibody-discovery partnership on April 9. No financial terms were disclosed. AnaptysBio will generate antibodies to oncology and inflammation targets using its proprietary SHM-XEL platform. Celgene will receive worldwide rights to develop and commercialize antibodies discovered by AnaptysBio under the terms of partnership. Privately held AnaptysBio is a leader in harnessing somatic hypermutation (SHM), the body’s natural process for generating antibodies, for antibody discovery and optimization. SHM-XEL is an in vitro platform that couples SHM with mammalian cell display to generate antibodies with desired binding and specificity properties. AnaptysBio will receive an upfront payment, potential preclinical and clinical milestone payments, and potential royalties on sales of each product derived from the partnership. The alliance is similar in structure to a pair of deals that the antibody specialist struck in January 2012: one with Novartis and another with an undisclosed company. It was Novartis’ second collaboration with AnaptysBio, the prior one having successfully delivered antibody candidates into the big pharma’s pipeline. AnaptysBio additionally has struck antibody discovery deals with Roche and Merck. This most recent partnership appears to be Celgene’s first foray into antibody therapeutics. The cancer biotech has focused its pipeline primarily on various flavors of small molecules – e.g., epigenetic, multi-mechanism IMiDs and kinases, and cytotoxic chemotherapeutics – and also on cellular therapies. As such, the deal represents a significant broadening of its early-stage portfolio.–-Mike Goodman

Arrowhead/Alvos Therapeutics: RNAi company Arrowhead Research Corp. announced April 11 that it acquired privately held Alvos Therapeutics, a developer of proprietary human-derived homing peptides, in an effort to gain delivery technology for its short interfering RNA (siRNA) compounds. Alvos shareholders will get an upfront payment of 315,467 shares in Arrowhead (about $2.13 million) and will be eligible to receive additional stock valued at up to $23.5 million if certain clinical and regulatory milestones are achieved. Alvos stockholders could receive additional stock if the first three drugs using the Alvos technology reach certain sales milestones. Targeted delivery of RNA interference candidates has been the field's premiere challenge. The Alvos technology platform, which originated at MD Anderson Cancer Center, is designed specifically to generate peptides that bind to and enter tumor cells, potentially solving the delivery problem for Arrowhead, which acquired Roche’s RNAi assets in October. Alvos, previously known as Mercator Therapeutics, will be integrated into the Arrowhead facility in Madison, Wis. Arrowhead CEO Christopher Anzalone said in a statement that the acquisition benefits the company by allowing “for the creation of new peptide-drug conjugates against cancer and other indications, thereby expanding our business and capabilities in a cost effective way." –-L.L.

Photo credit: Wikimedia Commons

Financings of the Fortnight Wraps Up The Year With Rare Gifts

We here at FOTF holiday headquarters (not pictured above) can't think of a better Hannukwanzamas present than a treatment for a rare disease whose patients previously had few or no options to help them. One of the big stories this year in our neck of the woods is that many in the biopharma industry are thinking the same thing, too. Of course, motivations for some are fueled in part by premium pricing and favorable regulatory pathways, terms that don't exactly invoke the holiday spirit. But if remedies come to market, we won't quibble. Capitalism is the worst of all pharmaco-economic systems except for all the others.

We've already noted several fundings, including the new companies Ultragenyx and Orphazyme, in this column this year; in the upcoming issue of START-UP, the Capital Matters team will examine a new NIH program, dubbed Therapeutics for Rare and Neglected Diseases, or TRND, that helps both academics and biotechs bring rare-disease programs across the valley of death. TRND has already helped push treatments for sickle-cell anemia and relapsed chronic lymphocytic leukemia into the clinic, with hopes for two more clinical programs in 2012. (TRND's full roster of programs is here.)

Now Atlas Venture and the specialty pharma firm Shire, which has aggressively built a rare-disease business to complement its ADHD franchise, are teaming to vet rare-disease programs and, if considered worthy, house them in entities co-financed by the two partners. 

The arrangement is a spin on an idea Atlas has already implemented and that other VCs are working on, as well: Since acquisitions these days are practically the only way to exit an investment, bring the potential buyer in early, preferably as a funding partner. For every project Atlas and Shire fund upfront, Shire gets an option to purchase down the road within a pre-negotiated time frame. Shire already has had notable success in the rare diseases arena, as its human genetic therapies unit continues to lead its sales and revenue growth. In 2010, the HGT unit generated 64% sales growth over the prior year, thanks to strong sellers such as Elaprase (idursulfase), Vpriv (velaglucerase alfa) and Replagal (agalsidase). 

Atlas has its Atlas Venture Development Corp. (AVDC), a group that's looking to in-license compounds, develop them quickly through proof of concept, and if possible sell them back to the original licensee. Its first deal was for an Eli Lilly & Co. migraine drug, now housed in an LLC called Arteaus Therapeutics. 

Versant Ventures also likes the find-the-buyer-early approach. It recently launched a cancer genomic analysis firm Quanticel Pharmaceuticals with $45 million from Celgene, which gets exclusive use of Quanticel's technology and exclusive rights to buy Quanticel, including any pipeline candidates Quanticel develops on its own, within three and a half years. 

With Shire, Atlas might find rare-disease programs that lend themselves to an asset-financing, virtual-development approach, but it could take a "platform approach" and perhaps build a more substantial stand-alone operation, as Atlas principal Ankit Mahadevia told our colleagues at "The Pink Sheet".

If you haven't noticed, both Atlas (for Arteaus) and Versant (for Quanticel) are nominees for our Deal of the Year in the exit/financing category, and voting just started. Cast your vote, please; it's all we want for Christmas, other than a little less unmet medical need in the world. Have safe, peaceful holidays, and we'll see you in 2012 with the next edition of...

Ember Therapeutics: Third Rock Ventures launched Ember Therapeutics Dec. 15 with a $34 million Series A round. As Ember’s lone investor right now, Third Rock will seek another backer that can offer the right expertise in the relatively new field of targeting brown fat augmentation to fight obesity, as well as insulin sensitivity, an approach to diabetes that has been plagued by safety problems. Ember's programs are currently in the preclinical stage. Louis Tartaglia, a Third Rock partner and interim CEO of Ember, told The Pink Sheet that a new investor could be a traditional VC or a venture arm of a pharmaceutical company "with which we do a large R&D alliance." If the latter, the corporate venture investor would likely be brought into the A round, Tartaglia said. Ember will be Third Rock’s third entry into the metabolic health arena, following Zafgen, which is working on methionine aminopeptidase 2 (MetAP2) inhibition to treat severe obesity, and Rhythm Pharmaceuticals, which is focused on MC5 agonists to treat obesity and type 2 diabetes. Ember is Third Rock's fifth publicly disclosed Series A investment in 2011. -- Joseph Haas

 

Aviir: The Irvine, CA company and Stanford University spinout disclosed it has raised $10 million of a planned $30 million Series B round to push its TruRisk cardiac risk diagnostic test to market. The round was led by Merck Global Innovation Fund, the fund's first disclosed investment as parent company Merck looks to put venture cash to use both directly and indirectly. (The January IN VIVO has a Q&A with Merck's new top dealmaker, Roger Pomerantz, which you can read here.) Previous Aviir investors New Leaf Venture Partners, Aberdare Ventures, and Bay City Capital joined Merck in the B round. Those three also contributed more than $11 million to a planned $25 million round disclosed in regulatory filings in 2007, but it's unclear how much more Aviir raised in that round -- which documents also classified as a Series B -- or how much venture funding total the firm has brought in. A company spokesman did not return requests for clarification. TruRisk measures a patient's blood level of seven proteins associated with arterial plaque at risk of breaking off and causing heart attack. -- Alex Lash

Covidien: Diversified life-science firm Covidien said Dec. 15 it would spin out its pharmaceutical business into a standalone publicly traded company and keep its medical devices and supplies, which currently contribute 83% of sales to the US-Irish firm. (Covidien was formerly TycoHealthcare.) The pharma unit, which consists of generic and branded drugs, active pharmaceutical ingredients and imaging agents, posted a compound annual growth rate of zero between 2007 and 2011. It accounts for about $2 billion in annual sales of products such as bulk acetaminophen, generic methadone for opioid addiction, and the painkiller Exalgo (hydromorphone). There were no immediate estimates of the amount Covidien could raise in the spin-out of the unit. Executives say they've been planning the move for years. The pharma unit has been without a president for about a year, but executives said recently that they have hired someone to run the unit before the spin-out. The hire will come on board in early 2012, and the pharma unit will be prepared for a sale in September, Covidien CEO Jose Almeida said last week. Abbott Laboratories is another diversified firm that plans to divest pharma holdings, but unlike Covidien, Abbott will keep its generic drug products under the same roof as devices and diagnostics.  -- David Filmore

Ariad Pharmaceuticals: Cancer drug developer Ariad said Tuesday, Dec. 20 it had finalized its $243 million secondary offering, selling 24.7 million shares at $10.42 each, as it prepares for life as a commercial company. A marketing application for its mTOR inhibitor ridaforolimus has been submitted to authorities in the US and Europe by its partner Merck & Co., with an FDA decision expected in mid-2012. Ariad plans to co-promote the sarcoma treatment in the US. Next year, the firm could submit pan-BCR-ABL inhibitor ponatinib for leukemia. It is currently in a pivotal Phase II trial, with interim results released earlier this month. The perils of first-time launches for biotechs are legion as they shift resources away from R&D and into sales and marketing, all while investors typically shun the company's stock in a habit known as "shorting the launch." Those that manage to stay independent for the long haul tend to outperform their peers, although giving up some of their marketing rights can cloud the picture, as this analysis in July's IN VIVO shows. Meanwhile, Ariad's stock price is trading above the offering price. Shares closed Wednesday, Dec. 21 at $11.60 a piece. Underwriters bought their full extra allotment of 3.2 million in the deal. J.P. Morgan, Cowen and Co., and Jefferies & Co. were the lead underwriters. -- A.L.

Thanks to Joe Haas for his contribution to this week's intro. 

Photo courtesy of flickr user Howard Dickins.  

Deals of the Week Takes a Backseat to Non-Deal Newsiness

Not quite a goose-egg

Deals, Schmeals. What about Geron's stem-cell about-face? Denner's departure from Icahn's shop? And how about an IPO that wasn't underwater? Don't even get us started on MLB re-alignment or seeing Papelbon in a Phillies uniform. The news this week came thick and fast; it just didn't come for the most part in the form of alliances and M&A.

It has definitely been a big week for financings: Clovis Oncology took the prize when it took the rest of its Series A to the public markets, raising $130 million to fund its ambitions in tough-to-treat cancers. Staying private (for now) was Agios Pharmaceuticals, which raised a whopping $78 million in Series C funds to move beyond cancer metabolism (courtesy its existing venture backers and corporate partner Celgene, but also some shiny new-but-unidentified crossover types). And we haven't even mentioned molecular diagnosticians Biocartis' $100 million venture round, but at this point we'd better move on before FOTF smacks us over the back of the head with a shelf financing.

It's also been a big week for regulatory action: today's unsurprising surprise announcement from FDA Commissioner Hamburg revoking Avastin's metastatic breast cancer approval will not draw an appeal from Genentech even as it draws supporters' ire. But a couple nifty approvals for some niftily named new orphan drugs (Incyte's Jakafi and Erwinaze from EUSA Pharma) should dampen the enthusiasm of FDA-bashers. And of course there was the news that FDA may soon have some new approval mechanisms at its disposal, Progressive Approval and Exceptional Approval, as detailed in this piece from Monday's "The Pink Sheet".

Deals of the Week will take a break next week -- don't worry, you'll get your Alice's Restaurant -- as we gear up for our fourth annual Deals of the Year competition. But of course we've got a few nuggets to tide you over until December. Take a gander at...

Sanofi Pasteur/Curevac: The option-deal signed Nov. 15 between the private German biotech CureVac and Sanofi's vaccine division provides some measure of validation for the former's RNA-vaccine technology. It also gives the French drug maker rights to certain infectious disease programs, with R&D partially underwritten by Uncle Sam. On the same day Sanofi and CureVac said they were teaming up, the two companies also announced a $33.1 million, four-year R&D collaboration with further partners In-Cell-Art, a French nanotech company, and the US Department of Defense's Defense Advanced Research Projects Agency (DARPA). Because it has an option on the programs that in essence are being funded by the four-way collaboration (mainly by DARPA), Sanofi gets to kick the tires on CureVac's platform before committing significant cash. Its option rights -- based on pre-agreed license terms around vaccine programs against 'between five and ten' pre-defined pathogens -- are linked to the fulfillment of certain criteria within the DARPA-funded validation program. Pulling the trigger could cost Sanofi up to €101.5 million per pathogen in upfront and milestone payments for global marketing rights. That figure jumps to €150.5 million in the case where a prophylactic and therapeutic vaccine are developed. -- Melanie Senior

Shire/Shionogi: Shire has landed a Japanese market partner for undisclosed elements of its flagship ADHD franchise. The company said Nov. 18 it would team up with Shionogi & Co. to co-develop and co-commercialize ADHD meds in Japan, in exchange for an up-front fee and sharing future costs, though specific terms weren't released. Deal-wise, Shionogi has been more active in ex-Japanese markets this year (acquisitions in China and the US, for example) than at home, where it said earlier this year it would open a new R&D center. Compatriots like Daiichi and Ono Pharmaceuticals, which in recent months has licensed in Japanese rights to products from BMS, Merck-Serono, Servier, and KAI, have been more actively seeking out assets to sell in Japan. Shionogi has some experience in ADHD through its 2008 acquisition of Sciele Pharma, which sells Methylin for the condition. Hey, is that a goose in the back seat of an old Beamer?-- Chris Morrison

Genzyme/CFF: Genzyme (a Sanofi company) and the Cystic Fibrosis Foundation said Nov. 16 they would together work to identify "corrector" compounds that could fix malfunctioning CFTR proteins in patients with the disease's most common mutation, Delta F508. The collaboration will benefit from Genzyme's and Sanofi's extensive compound libraries, the companies said in a statement, and build not only upon past collaborations between the biotech and the CFF but also Genzyme's ongoing efforts in CF R&D. The company holds an option for global rights rights in all territories outside the US and Canada -- in all indications (except Duchenne/Becker muscular dystrophy) to PTC Therapeutics' ataluren (formerly PTC124), including CF, where the compound is in Phase III. The development of ataluren, which is being developed for a variety of genetic disorders involving nonsense mutations, was also partially funded by CFF grants. -- C.M. [Ed Note: the original version of the post misstated the territories/indications for which Genzyme has an option on PTC's ataluren. We regret the error.]

Medicis/Graceway: Medicis is buying the U.S. and Canadian pharmaceutical assets of bankrupt Graceway Pharmaceuticals for $455 million, subject to approval by Graceway’s board of directors. Graceway was founded in 2006 by private equity firm GTRC Golder Rauner and Jefferson Gregory, a co-founder and former chairman of King Pharmaceuticals. It filed for bankruptcy in September 2011. Details about the bankruptcy and other aspects of Graceway’s business are sketchy but the deal gives Medicis, a specialty pharma with projected 2011 sales of more than $730 million, a commercial portfolio with six key drugs with combined revenues of more than $125 million. The Graceway products complement Medicis’ focus on dermatology and aesthetics; they include Aldara (imiquimod) cream for basal cell carcinoma, Atopiclair for dermatoses, Maxair Autohaler (pirbuterol acetate inhalation aerosol) for bronchospasm, and Estrasorb (estradiol topical emulsion) for menopause. The deal also gives Medicis a small R&D program, including an undisclosed Phase II dermatology compound and a women’s health compound in Phase II. At the time it formed Graceway, GTRC said it would put up to $200 million into the company. Later, Graceway acquired the branded pharmaceutical business of 3M for $875 million, and rolled in with it another GTRC portfolio company focused on dermatology drugs, Chester Valley Pharmaceuticals. GTRC had formed that company in 2004 with an investment of $75 million. -- Wendy Diller


image by flickr user smohundro used under creative commons license.