Deals of the Week: For Astex Shareholders, Will 8 1/2 Do?

A month after Otsuka Pharmaceutical agreed to buy cancer drug developer Astex Pharmaceuticals for $886 million, a top shareholder is challenging the deal. Sarissa Capital Management issued an open letter Oct. 2 to announce its opposition, lamenting a price it found underwhelming, an auction process it found flawed, and an executive team whose motivations it believes to be suspect. A separate shareholder class action is already pending, alleging that the deal won’t deliver fair value as proposed.

Sarissa is a life science-focused hedge fund operated by Alex Denner and Richard Mulligan, onetime associates of activist investor Carl Icahn. The fund’s operators believe its 5% stake in Astex is worth more than the $8.50 per share Otsuka agreed to pay in the Sept. 4 deal, and the firm is not planning to tender its shares. Moreover, the firm expressed surprise at the deal’s timing, saying it was “inexplicable and disturbing” that Astex would sell before it reveals key Phase I/II clincal data from oncology candidate SGI110 in December, with more data to come in 2014. The drug has shown promise in acute myeloid leukemia and myelodysplastic syndromes.

The letter also alleged that Astex failed to engage all potential bidders, and favored terms that would keep existing structures intact while rewarding top executives with individual long-term compensation incentives. Sarissa’s co-founders called the executive-retention terms “extraordinarily upsetting,” said the executives’ intentions were compromised, and accused management of trying to “hide important issues about [their] motivations."

Astex fired back with its own open letter Oct. 2. The Dublin, Calif.-based company described a sale process in which 33 potential suitors were engaged and five showed serious interest, but only Otsuka submitted a final proposal. Astex says it negotiated the $8.50 price up from $7.75, and received interest from another buyer in the $6 to $7 range. (Shares hovered between $5 and $6 for most of July and August.) Astex claims it hasn’t received any competing buyout offers since the Otsuka deal was revealed last month, and denied that it had discussed specific employee retention arrangements with the Japanese buyer.

Most of Astex’s speculative value is tied up in pipeline drugs SGI110, a DNA hypomethylating agent that reactivates gene expression, suppressing tumor cell growth; and AT13387, an HSP90 inhibitor targeting multiple cancers. The company also reaps royalties on sales of Dacogen (decitabine) for myelodysplastic syndromes, sold by Eisai in North America and Janssen Cilag elsewhere.

Could a solution come in the form of a contingent value right that could add a further payout to a deal long after it’s consummated? Astex’s SGI110 data presentation at December’s American Society of Hematology conference represents a near-term milestone that could tempt both sides to settle for a contingency, but SGI110 and AT13387 still have a long way to go. The two sides would have to settle soon; Otsuka’s offer is set to expire Oct. 10. Stalling might work, too. If the current deal falls apart but the December data are encouraging, additional suitors could line up as potential buyers or partners. Astex could then command a much higher price, with a somewhat de-risked asset in its pipeline. And even in the short term, the suggestion that Astex could be worth more might compel more shareholders to get on board with Sarissa’s demands. - Paul Bonanos

Even if your life isn't just like a Fellini film, we hope you enjoy la dolce vita this weekend. And please enjoy...

Johnson & Johnson/Effimune/Merus/CureVac/DCPrime: J&J's London Innovation Center announced deals between the Big Pharma and four European biotech companies on Oct. 3, timed to coincide with a meeting between J&J researchers and UK political and research movers-and-shakers at the six-month-old center. The center is one of four ICs around the world, set up to invest or collaborate with academics, entrepreneurs and early-stage companies. All four deals were concluded with help from the IC. In the first, J&J's Janssen Biotech Inc. entered into a global option and license agreement with French company Effimune concerning a preclinical pegylated anti-CD28 antibody fragment, FR104, which has potential in immune-mediated disorders. If the option is exercised, Janssen will make milestone payments and pre-specified royalty payments on worldwide net sales of the product. In the second deal, Utrecht, Netherlands-based Merus has received an equity investment from J&J Development Corporation as part of a €31 million ($42 million) extension to a Series B financing round that now totals €47.6 million. Existing investors include two other corporate investors, the Novartis Venture Fund and Pfizer Venture Investments, as well as Bay City Capital, Life Science Partners and Aglaia Oncology Fund. Merus is building a pipeline of single cell-derived human bispecific antibodies for use in cancer therapy. In the third deal, Germany's CureVac will collaborate with Janssen Pharmaceutica Inc.'s Crucell Holland to develop an influenza vaccine based on CureVac's RNActive technology. And lastly, the Leiden, Netherlands-based DCPrime BV has entered into a research collaboration and optional license agreement with Janssen Pharmaceuticals Inc. on a potential dendritic cell-based vaccine; one candidate has completed a Phase I/IIa trial in acute myeloid leukemia. - John Davis

Tri-Institutional Therapeutics Discovery Institute: With a personnel contribution from Takeda Pharmaceutical, three New York-based academic research institutions will team up to create the Tri-Institutional Therapeutics Discovery Institute (Tri-I TDI), a non-profit organization that will seek to expedite advancement of basic biomedical research into innovative therapies and treatments across a broad spectrum of therapeutic areas, including cancer. Initial work will focus on small molecules, but eventually the institute plans to branch out into monoclonal antibodies and molecular imaging agents. Announced Oct. 1 in New York City, the collaboration will bring together under one roof researchers from Memorial Sloan-Kettering Cancer Center, Rockefeller University and Cornell University’s Weill Cornell Medical College. This is hardly the first time these three institutions have come together for a joint research initiative. In 2011, each was among seven New York research institutes electing to partner with Pfizer in an initiative to apply open innovation toward the development of biologic therapies across all therapeutic areas. In addition, each institution has pursued its own tech-transfer deals with private industry over the years. The institute begins its work with $20 million in philanthropic funding. It has received a $15 million grant from Lewis and Ali Sanders and $5 million from Howard and Abby Milstein. In addition, the three institutions will make equal contributions to an operating budget, while Takeda’s initial investment will be in the form of medicinal chemists based at the institute. Carl Nathan, chairman of Weill Cornell’s department of microbiology and immunology, said Takeda’s participation will be unusual, in that the personnel it lends to the effort will perform medicinal chemistry and take those processes much farther along than would be possible at the academic level, but without any guarantee of an economic benefit to the Japanese pharma. - Joseph Haas

Intrexon/Sun: Fresh off an August initial public offering that raised $184 million, synthetic biology specialist Intrexon created a  joint venture with India’s Sun Pharmaceutical to discover and develop new drugs for eye disorders. The companies plan to unite Intrexon’s technology platform, including the proprietary RheoSwitch Therapeutic System to control protein expression, with Sun’s global specialty pharma development and manufacturing expertise, and target chronic disorders such as “dry” age-related macular degeneration, glaucoma, and retinitis pigmentosa. Intrexon’s business model is built on partnerships, typically providing novel in vivo and ex vivo biological engineering techniques to another company with a specialized area of focus. (It struck a separate deal with Oragenics this week, concerning new therapies for oral, throat, sinus and esophagus disorders.) Led by billionaire Randal J. Kirk, Germantown, Md.-based Intrexon has struck at least eleven deals since its formation in 2007 as GT Life Sciences. Financial details weren’t released, and neither Intrexon nor Sun would comment beyond a statement. It’s not clear whether the two parties are equal owners, nor whether they invested equal amounts. Although they will share in the profits, it’s also unclear how decisions guiding the JV will be made. - P.B.

Enteris/Nordic Bioscience: Enteris BioPharma inked its first-ever licensing deal, just three months after it was formed from the assets of defunct Unigene Laboratories. The Boonton, N.J.-based company licensed its proprietary oral formulation platform, Peptelligence, to Nordic Bioscience subsidiary KeyBioScience Sept. 30, in order to develop oral versions of peptide drugs targeting metabolic diseases. Terms weren’t released, although Enteris acknowledged that it will receive both fee-for-service payments and royalties on any products that result from the deal. Nordic previously formed a joint venture with Enteris’s predecessor in 2011, studying Unigene’s calcitonin analogs for type 2 diabetes, osteoarthritis and osteoporosis. Chicago hedge fund Victory Park Capital is the sole owner and funder of Enteris. The company was launched after Unigene, hobbled by debt and by negative regulatory decisions, was sold in pieces.  The company believed that Unigene had neglected technologies such as Peptelligence all along, and hopes potential partners will see its value in extending drug franchises with convenient formulations and renewed patent life. - Lisa LaMotta

Celgene/PharmAkea: Celgene is making a habit out of equity/option deals. The Summit, N.J. drugmaker’s latest arrangement gives it an opportunity to buy PharmAkea Therapeutics, a small-molecule discovery company created last year to develop drugs for fibroproliferative diseases. Celgene will invest $35 million over three years, take an equity stake in PharmAkea, and hold an exclusive option to acquire it.  The companies will explore three targets concerning connective tissue and the link between fibrotic disease and cancer. PharmAkea believes it can begin Phase I trials on two programs within three years; Celgene holds the option to extend the arrangement for 18 months or buy the company outright. The deal was announced simultaneously with PharmAkea’s $10 million Series A funding from Bay City Capital. It’s a now-familiar strategy for Celgene, a company that took a similar option to buy Quanticel Pharmaceuticals for $45 million after Versant Ventures incubated the company for several months in 2011. Celgene also paid $100 million for an exclusive option to acquire five-year-old epigenetics drug developer Acetylon Pharmaceuticals in July, after investing in the company’s Series B round previously. Celgene seeded PharmAkea last year, allowing it to recruit a management team that includes several executives from Amira Pharmaceuticals, sold to Bristol-Myers Squibb for $325 million upfront in 2011, and BrainCells Inc. - P.B.

Deals Of The Week Wonders: Who Will Buy Onyx?

When was the last time biotech had a really juicy, successful, high-stakes bidding war? Likely the $10.2 billion Pharmasset acquisition by Gilead Sciences announced in late 2011, which since has played out quite nicely for the latter. Not only did that deal help drive Gilead shares up by about 150% since the deal announcement, but it also tipped off the start of a very long bull-run for the sector.

If Onyx Pharmaceuticals attracts a bevy of bidders, garners a tidy premium for shareholders, and proves a strong asset for an acquirer, its activities could help bolster a flagging biotech stock market. Mostly in June, the NASDAQ Biotechnology Index has shed almost all of a tidy 9% it gained in the first few weeks of May.

If a competitive Onyx acquisition plays out, a deal could come in the fall. That would coincide perfectly with a roster of large-cap clinical and regulatory milestones – which together might breathe life back into a biotech rally that’s getting very long-in-the-tooth.

For now, Wall Street seems certain that the biotech will attract a flock of suitors, culminating in a deal. In fact, Onyx shares are trading well above Amgen’s $120 per share bid, which Onyx publicly confirmed on June 30 that it had rejected. It hired Centerview Partners to contact other potential acquirers, but said it already had interest from undisclosed third parties. Onyx shares closed at $133.52 on July 3, giving the biotech a $9.7 billion market cap.

Potential bidders could include a number of pharmas with existing oncology franchises that need to bolster their bottom lines, such as Pfizer and Merck & Co. Also in line could be established players in the multiple myeloma (MM) market including Celgene and Takeda, in addition to likely pharma players betting on MM monoclonal antibodies such as Bristol-Myers Squibb and Johnson & Johnson. J&J is partnered with Takeda on MM treatment Velcade (bortezomib).

Onyx investor Oliver Marti of Columbus Circle Investors expects to see more than a half-dozen potential suitors emerge, with an acquisition taking about three months to play out. He expects other companies ultimately will prove more aggressive than Amgen, although he does expect Amgen to raise its bid. Marti thinks $140 per share would be an acceptable price.

Amgen has done only a handful of billion-dollar deals. In 2001, Amgen acquired inflammation company Immunex for $17.9 billion in cash and stock. That’s its only deal for more than a couple billion dollars. Since then, it’s done four deals in the roughly $1 billion to $2 billion range including $2.2 billion for antibody play Abgenix  in 2005, $1.3 billion in a stock swap for gene expression regulation company Tularik  in 2004, up to $1 billion in cash and milestones for cancer vaccine company BioVex  in 2011 and $1 billion in cash for antibody company Micromet in 2012, according to Elsevier’s Strategic Transactions database.

“Pfizer and Bayer are natural candidates, Takeda could be a player as well,” added Dallas Webb of BB Biotech, also an Onyx investor. He anticipates the next round of bids will start at $130 and “depending on the number of bidders should go north of that.” He expects more clarity within the next month on the acquisition process.

Various analysts have pegged a likely Onyx per-share sale price in the roughly $135 to $148 range. On top of that, there could be a contingent value right, particularly for oral MM proteasome inhibitor oprozomib. Gene Mack of Brean Capital proposed a $135 buyout share price, with a CVR of about $30 tied to oprozomib approvals in relapsed/refractory and newly diagnosed MM patients, as well as sales milestones based on up to $2 billion.

Pfizer and Bayer are major Onyx partners. Kidney and liver cancer drug Nexavar (sorafenib) as well as colorectal cancer and gastrointestinal stromal tumor treatment Stivarga (regorafenib) both resulted from the Bayer partnership. Bayer evenly splits Nexavar profits globally with Onyx, excluding Japan, and pays Onyx a 20% net royalty on Stivarga global net sales. The partners recently submitted in the U.S. and EU for Nexavar to treat thyroid cancer.

Onyx co-promotes Stivarga under a fee-for-service arrangement, Bayer has the right to terminate the Stivarga co-promote under a change-of-control agreement. But the Nexavar and Stivarga royalties would survive a change-of-control. Onyx was savvy enough to add that to an October 2011 renegotiation of its Bayer partnership, likely in preparation for a clean acquisition down the road.

Wall Street is skeptical that Bayer would buy Onyx in its entirety, although it may seek to fully capture Nexavar and Stivarga rights. Analyst Tim Race of Deutsche Bank, who covers Bayer, noted in a June 28 call that Bayer long has maintained that buying its biotech partners usually is too expensive and that, given its full pipeline, it doesn't need a major new product at this time. He added that Bayer is very hard-nosed about price and likely to walk away from a high valuation. In addition, Bayer would need to raise debt, a move that would damage its credit rating – something Race sees Bayer as unlikely to do.

Onyx partner Pfizer may be a more likely bidder, as the big pharma has made building an oncology franchise a top priority. Onyx and Pfizer have a partnership dating back to 1995 for high-profile Phase III breast cancer candidate palbociclib (formerly PD-991), which recently received breakthrough therapy designation from FDA.

Onyx stands to earn an 8% royalty on palbociclib should the compound get to market. That revenue stream could amount to almost a half-billion in 2026, when analysts expect the drug could generate around $6 billion in sales. If Pfizer really believes in this product, it might be motivated to capture all the palbociclib upside and also add likely blockbuster multiple myeloma drug Kyprolis (carfilzomib).

Existing MM competitors also are likely Onyx acquirers. Celgene's revenue is underpinned largely by MM immunomodulator Revlimid (lenalidomide), which increasingly is being used and tested in combination with Onyx’s Kyprolis. Takeda and J&J market MM proteasome inhibitor Velcade (bortezomib), which Takeda gained when it bought Millennium Pharmaceuticals Ltd.. With the same mechanism of action as Kyprolis and a 2017 patent expiry, Takeda likely needs a replacement. For now, it’s focused on developing its own oral MM proteasome inhibitor, MLN9708.

BMS and J&J also have bets on MM monoclonal antibodies, which are expected to bear fruit in the next few years. AbbVie and Bristol are partnered on Phase III elotuzumab, while Genmab and Janssen Biotech, a unit of J&J, have Phase I/II daratumumab. Daratumumab has Fast Track and Breakthrough Designations for fourth-line MM. These are likely to be used sequentially or in combination with Kyprolis, making Onyx a potentially good fit.

Speculation already has started about which biotech with potential oncology blockbuster companies could be next for a potential take-out. Mark Schoenebaum of ISI Group suggested Ariad Pharmaceuticals, Seattle Genetics and Medivation.

A long Onyx sale saga is likely just at the beginning of unfolding. While DOTW waits for the next shoe to drop, take a look at some actual deals in this week's edition of …

Pfizer/Bioventus: Pfizer will license worldwide rights to its bone morphogenic protein (BMP) portfolio to orthopedic biologics specialist Bioventus. In return, Pfizer will receive an upfront payment, milestones and royalties. Financial terms were not disclosed. The products include a BMP in development and an rhBMP-2 in unspecified indications. The rh-BMP-2 product appears to have entered Pfizer’s portfolio with its acquisition of Wyeth; Wyeth’s pipeline as of May 2009 described a BMP-2 program with indications in fracture repair and hip osteoporosis. Pfizer has agreed to undertake certain early development work for the BMP asset in soft-tissue indications and will manufacture the rhBMP-2 for Bioventus. Bioventus was spun out of U.K. device firm Smith & Nephew with funding from Essex Woodlands in 2012. The company recently has retained the services of BMP experts John Wozney and Howard Seeherman. It plans to soon open a research laboratory in Boston to develop and commercialize the BMP assets. With this deal, Pfizer continues to cull and prioritize its portfolio. The BMP agreement follows a spate of out-licensing in the wake of the Wyeth acquisition, including the CTLA-4 monoclonal antibody tremelimumab to AstraZeneca PLC and the irreversible TKI neratinib to newly formed Puma Biotechnology, both in October 2011. -- Mike Goodman

Merck/Xencor: Xencor already has a string of big pharma partners, but the small California-based biotech is hoping to get the financial flexibility to bring its own internal programs forward. Its latest deal brings the company one step closer to its goals.Xencor announced on July 2 that it has granted Merck a license to a Xencor Fc engineering patent for a monoclonal antibody for use in an undisclosed product that Merck is already working on. The New Jersey pharma also has an option to license the same intellectual property for future products. Merck paid an undisclosed upfront and agreed to pay annual maintenance fees, as well as milestone payments and sales royalties on any products that result. “Merck found an antibody that they needed that we had already patented,” said Xencor CEO Bassil Dahiyat. “They needed it for a use that we hadn’t thought of until they called us,” he added. The companies did not disclose what product the patent applies to or how it would be used. -- Lisa LaMotta

Avanir/OptiNose: CNS-focused Avanir Pharmaceuticals is licensing a proprietary intranasal delivery system from OptiNose for use in developing and commercializing a fast-acting, dry-powder inhaled form of sumatriptan for acute migraine. In the deal announced July 2, Avanir is paying $20 million upfront to license OptiNose’s Breath Powered delivery system; Avanir said it should be ready to file an NDA by early 2014 for AVP-825, the resulting drug/device combination product. The two companies will share development costs and work together on putting together the NDA submission. Avanir will assume responsibility for regulatory, manufacturing, supply-chain and commercialization activities for the product. OptiNose could earn up to $90 million in clinical, regulatory and commercial milestones related to ‘825, as well as tiered royalties on North American sales. Avanir says ‘825, if approved, would the first and only fast-acting, dry-powder inhalable version of sumatriptan for migraine. In a Phase III clinical trial, the OptiNose device demonstrated rapid absorption and provided relief using approximately 80% less drug than is contained in the most commonly prescribed oral sumatriptan product, the company added. -- Joseph Haas

Deals Of The Week Wonders Whether Heated Competition To Buy Ache Laboratorios Will Muddy The Brazilian Waters

Could a bidding war for Brazil’s privately held Ache Laboratorios do for Latin America what Abbott Laboratories’ gargantuan purchase of part of India’s Piramal Healthcare did for biopharma M&A in India?

Call it the “Piramal effect,” if you will. Abbott reset expectations among India’s domestic pharma world with its $3.72 billion purchase in 2010 of Piramal’s branded generics business. Brazil hasn’t yet seen the kind of blockbuster deal that would raise prices across the board; the highest value deal in that market to date is Sanofi’s $662 million buyout of Brazilian generics firm Medley Pharmaceuticals in 2009.

Sanofi got in early – staking its claim before big pharma’s buying spree in emerging markets generated significant deal inflation – but the deal hardly lifted the value of Brazilian companies across the board. That transaction was followed by smaller deals, such as Takeda’s $251.5 million (BRL 500 million) buyout of Brazilian branded generics specialist Multilab Indústria e Comércio de Produtos Farma about one year ago, which also included potential for up to BRL 40 million in earn-outs.

But, now comes word that could blow all previous Brazilian deals out of the water – Abbott and two of its big pharma competitors, Pfizer and Novartis, are preparing a second round of bids to buy Ache, Brazil’s leader in the sale of prescription drugs. The rumored price tag for Ache, fourth overall domestically in drug sales when over-the-counter products are included, ranges between $4 billion and $5 billion, a matter complicated by talk that at least one of three ownership families does not wish to sell. Ache’s public stance is that it is not up for acquisition.

Ache reported net earnings of $270 million for the 12 months ending Sept. 30, 2012. Nonetheless, a source familiar with the company told Deals of the Week that Ache remains an appealing investment for big pharma due to higher gross margins than its domestic competition, high top-line growth and strong relationships with distributors. In an emerging-markets competition where it is difficult to acquire worthy assets without overpaying, the three pharmas are facing a reality that a price tag above $5 billion – about 20 times EBITDA (earnings before interest, taxes, depreciation and amortization) – may be required just to get a foot in the door.

One pharma executive who asked not to be named told DOTW that his company is so discouraged by prices for assets in the primary emerging markets that it already is looking to next-generation possibilities such as Nigeria and Colombia.

As an article in The Atlantic notes, for overall business climate, Brazil recently has been viewed as the shining jewel of the so-called BRICS nations (Brazil, Russia, India, China, South Africa), with an average real gross domestic product growth rate of 4% between 2004 and 2010, including an eye-opening 7.5% in 2010. Add in low unemployment and a fairly industry-friendly regulatory environment, and Brazil perhaps was positioned to join China as the top emerging market for biopharma.

An early 2013 Business Monitor International report states that total pharmaceutical expenditure in Brazil in 2011 was more than $28.7 billion, and that total was expected to grow by 7.6% in local currency terms in 2012 (while declining in U.S. dollar spending due to exchange-rate fluctuations.) However, the biopharma opportunity in Brazil is being diminished by drug rebates, which are increasing both in total numbers and in size.

Meanwhile, GDP declined 0.9% in Brazil last year, combining with a 6% inflation rate to tarnish the South American giant’s emergence. Outside investment hoping to tap Brazil’s huge population, highlighted by a rising consumer class, faces what is known as “the Brazil cost” – a combination of high tariffs, poor infrastructure and red tape that increase the cost of doing business, the Atlantic reported.

But industry interest in tapping the Brazilian market cannot be denied. A review of Elsevier Business Intelligence’s Strategic Transactions database reveals six major equity investments in Brazilian biopharma holdings this decade. Beside last May’s Takeda/Multilab transaction, these include:

• Valeant Pharmaceuticals paying $28 million in May 2010 for Instituto Terapeutico Delta, a private branded generics and OTC company focused largely on dermatology;
• Pfizer anteing $240 million plus performance-based earn-outs to acquire 40% of generics firm Laboratorio Teuto Brasileiro in October 2010;
• Amgen ponying up $215 million in cash for Bergamo, a hospital-focused company with an emphasis on oncology, in April 2011;
• Merck investing an undisclosed amount in February 2012 to create and own a 51% stake in a Brazilian joint venture with Supera Farma Laboratorios, Cristalia Produtos Quimicos Farmaceuticos and Eurofarma Laboratorios; and
• UCB Group paying an undisclosed sum with potential for performance-based earn-outs to acquire 51% of specialty pharma Meizler Biopharma. The May 2012 deal included an option for UCB to buy out the remainder of the company.

While we await the outcome of the multi-company pursuit of Ache – GlaxoSmithKline reportedly dropped out of the bidding a while back – other biopharma deal-making was completed in the past week as we tally up …

AstraZeneca/AlphaCore: Following through on CEO Pascal Soriot’s promise to rebuild the company’s cardiovascular pipeline, AstraZeneca announced its third cardiovascular deal in two weeks. In the latest tie up, announced April 3, AstraZeneca’s biologics unit MedImmune acquired private biotech AlphaCore Pharma for an undisclosed sum. The big pharma gains ACP-501, a recombinant human lecithin-cholesterol acyltransferase (LCAT) enzyme that is believed to play a major role in removing cholesterol from the body and also may increase levels of high-density lipoprotein (HDL) cholesterol, better known as “good cholesterol.” A Phase I trial testing the drug met its primary safety and tolerability endpoint and also showed that ACP-501 raised HDL cholesterol in patients taking it. The cholesterol space is a high-risk, high-reward area of drug development, given the growing regulatory and commercial hurdles. But Soriot vowed AstraZeneca would embrace risk as a key to unlocking success in the drug-development process during an overview March 21 in which he unveiled his turnaround plan for the company. Cardiovascular disease is one of three core therapeutic areas the company has committed to. In March, the company signed two deals in the field: an option agreement with messenger RNA developer Moderna Therapeutics for up to 40 programs in exchange for $240 million upfront and a research partnership with Sweden’s Karolinska Institute. - Jessica Merrill

Bind Therapeutics/Pfizer: Nanotech company Bind Therapeutics has inked its second deal with a major player this year, signing a collaboration with Pfizer on April 3. Pfizer will pay Bind to combine its Accurins technology with small molecules provided by the big pharma. Pfizer will pay $50 million in upfront and near-term development expenses per molecule and Bind is eligible for $160 million in regulatory and commercial milestones for each product that reaches the market. Bind did not retain any commercialization rights, but will receive tiered royalties on worldwide sales. The company would not reveal the number or kinds of molecules covered by the deal or the therapeutic area of focus, but did say the agreement covers more than one molecule. The Accurins technology has been explored in the areas of oncology, inflammatory diseases like arthritis and cardiovascular indications. In January, Bind announced a similarly sized agreement with Amgen to develop and commercialize kinase inhibitor nanomedicines to treat solid tumors. - Lisa LaMotta

Ra Pharma/Merck: Less than a year after exiting stealth mode, Ra Pharmaceuticals has landed its first partnership, aligning with Merck to help the pharma discover and develop drugs for difficult-to-hit protein targets. Under the agreement announced April 1, Ra will use its proprietary Extreme Diversity platform to find and develop cyclomimetic candidates that can address intracellular protein-protein reactions in multiple undisclosed therapeutic areas. Ra will receive an undisclosed upfront payment and research funding; discovery, development, regulatory and commercialization milestones could bring its full remuneration to $200 million. While the deal stemmed from early conversations between Ra executives and Reid Leonard, head of Merck Research Ventures Fund, it does not include an equity component for the pharma, Ra President and CEO Doug Treco said. It also includes no risk-sharing, such as a co-promotion option down the road. Ra is developing what it terms a new class of drugs, peptide-like molecules offering the diversity and specificity of antibodies along with the attributes of small molecules, such as oral bioavailability. Cyclomimetics, the cyclic polymer drug candidates produced with Ra’s technology, are characterized by their cyclic structure and backbone as well as side-chain modifications that can provide beneficial properties not offered by natural peptides, the company says. It claims that Ra’s platform produces molecules that are highly specific and stable, offering improved cell permeability and potential for increased bioavailability as well as longer half-lives. - Joseph Haas

Astellas/Ambrx: In its latest tie-up with a major pharmaceutical player, Ambrx announced April 5 that it will collaborate with Japanese pharma Astellas Pharma on a series of antibody-drug conjugates (ADCs) in the oncology setting. Astellas will pay the biotech $15 million upfront, as well as $285 million in potential development, regulatory and sales-based milestones to discover and develop an undisclosed number of molecules that use its site-specific ADC technology. Last June, Ambrx inked a deal with almost identical financials with Merck. While details of the targets the companies intended to focus on were not disclosed, it was revealed that they would focus on areas “beyond oncology.” Ambrx also has tie-ups with Eli Lilly and Bristol-Myers Squibb. Previously it had arrangements with Wyeth, Roche and Merck Serono. ADC technology, which allows drugs to be targeted to a specific site carrying a therapeutic payload, have become a hot space since Seattle Genetics got approval of its ADC lymphoma drug Adcetris (brentuximab vedotin) in August 2011. - L.L.

Agios/Foundation Medicine: Agios Pharmaceuticals and Foundation Medicine signed a pact April 4 to use the latter’s clinical assay, FoundationOne, to create diagnostics which could identify ideal patients for Agios’ compounds aimed at cancer metabolism. No financial terms were disclosed. The diagnostic-discovery collaboration will focus on Agios candidates intended to inhibit tumors that carry mutations in the IDH1 and IDH2 metabolic enzymes. The work will seek to identify tumor genomic alterations that would be most likely to respond to Agios’ candidates, and to potentially develop and commercialize companion diagnostics for Agios compounds. Foundation, which developed the FoundationOne genome analysis profiling system for personalized cancer treatment decision-making, raised a $42.5 million Series B financing in 2012 with a syndicate of venture capital and corporate venture outfits. The round was topped off with an additional $13.5 million this past January from individual investors including Bill Gates, Yuri Millner and new board member Evan Jones. Agios, partnered since 2010 with Celgene on cancer metabolism R&D efforts, raised a $78 million Series C round in 2011 and announced plans to branch out therapeutically into rare genetic disorders. - J.A.H.

Novartis/ImmunoGen: ImmunoGen on April 4 updated the status of its 2010 licensing agreement with Novartis to apply the biotech’s Targeted Antibody Payload (TAP) technology platform to create cancer-fighting antibodies for undisclosed targets chosen by the multinational pharma. Under an amendment to the agreement, Novartis has exclusively licensed one compound against a still-undisclosed target, while taking a non-exclusive license to a second compound which can be converted later to an exclusive license. ImmunoGen will receive $4.5 million upfront under the amendment and could earn between $200 million and $238 million in milestones pegged to the two compounds, plus potential sales royalties. Of the upfront money, $1 million is an option exercise fee, while the remaining $3.5 million, which could be credited against future milestone payments, will be paid if Novartis terminates development of one or both compounds. In a same-day note, Cowen & Company analyst Simos Simeonidis called the developments “an incremental positive for ImmunoGen” that helps to validate the TAP platform. In October 2010, Novartis paid $45 million upfront for the license, intended to help it create antibody-drug conjugate (ADC) therapeutics for cancer. The deal offered the potential for up to $200.5 million in milestones for each target leading to development of an ADC, as well as sales royalties on any products reaching market. - J.A.H.

ArQule/Daiichi Sankyo: In our “No-Deal” of the week, collaborators ArQule and Daiichi Sankyo have decided to terminate an early-stage collaboration around Phase I oncology compound ARQ-092. The news comes just months after a Phase III setback of the companies’ later-stage oncology compound tivantinib, which the two companies will continue developing together. Daiichi opted to license ARQ-092 in November 2011 and paid $10 million upfront at the time, as well as Phase I development expenses. ArQule stood to gain $255 million in milestone payments and the deal included development of multiple compounds; the program now has been returned to the Woburn, Mass.-based company. Meanwhile, tivantinib failed to show overall survival in a late-stage trial in non-small cell lung cancer. The drug’s development focus now has been shifted to liver cancer. The partners signed their initial agreement for tivantinib (known then as ARQ-197) in November 2008. Daiichi agreed to pay $60 million upfront, as well as $560 million in milestones to license the c-Met receptor tyrosine kinase inhibitor. - L.L.

Photo Credit: Muddy Amazonia

Deals of the Week Wants Cash on the Barrelhead

 

For pharmas making all but the largest acquisitions, cash is king. From speculative buyouts of preclinical start-ups all the way through bolt-on deals worth a few billion dollars, pharmas typically spend cash rather than swap stock to make their acquisitions. Except in the cases of mega-mergers, a pharma’s purchasing power lies on its balance sheet, not in its share price.

So when Moody’s Investor Service issued a March 18 study of the U.S. companies whose cash coffers were the richest, Deals of the Week couldn’t help but turn an eye to the seven health care companies named in the report. None of them has disclosed a pharma acquisition yet in 2013, but rumors are swirling that one will strike soon.

Pfizer was the wealthiest in the bunch, with $46.9 billion in the till at the end of 2012. That’s enough to place it fourth across all industries, behind only Apple, Microsoft and Google. And although Pfizer had the world’s best-selling drug for several years running until Lipitor (atorvastatin) lost patent protection in 2011, not all of its bounty came from product sales. It did, after all, pare off its nutrition business in an $11.85 billion sale to Nestle SA last year, not to mention its Capsugel unit to private equity firm Kohlberg Kravis Roberts in 2011. Pfizer hasn’t done a pharma acquisition since its (all-cash) takeout of NextWave Pharmaceuticals Inc. in November.

Ninth-place Amgen made four large cash buys in 2012, including deals for Micromet Inc., deCODE genetics EHF, KAI Pharmaceuticals Inc., and Mustafa Nevzat Pharmaceuticals that totaled more than $2.5 billion. But those made a small dent on Amgen’s balance sheet; Moody’s said the big biotech had $24.1 billion at year’s end. The report also noted that 78% of Amgen’s liquidity is located overseas; two of its four large 2012 deals were for non-U.S. companies.

Beyond Amgen, Johnson & Johnson wasn’t far behind at 13th place with $21.1 billion, while Merck was 15th with $16.1 billion. (J&J-owned Cordis made one device acquisition this month, buying Flexible Stenting Solutions Inc. for an undisclosed sum.)

Moody’s reported that Abbott had $15.2 billion in cash on Dec. 31, enough for 17th on the overall list, but a day later, the company split in two. Its pharma descendant, AbbVie, had $7.98 billion upon launch, according to a March 15 regulatory filing. Rounding out the top pharmas were Lilly at 23rd with $12 billion and Bristol-Myers Squibb at 40th with $6.4 billion.

More broadly, the pharma industry holds about 14% of the $1.45 trillion corporate cash pile, a share which has remained roughly the same for several years. It’s the second largest sector behind technology, which gained share to 38%, while energy is among the industries losing share.

If Big Pharma isn't yet striking, some companies are still buying, licensing, and partnering. You won't get thirty days in the jailhouse, but you won't be abreast of this week's dealmaking news without...

Valeant/Obagi: Canada’s Valeant Pharmaceuticals is again strengthening its dermatology business through acquisition, this time by buying Obagi Medical Products, the maker of several proprietary aesthetic and prescription skin-care lines sold through physician offices. The companies announced Valeant’s plans to acquire the Long Beach, Calif., company March 20 for $19.75 per share in cash, or about $360 million. Valeant’s offer represents a 42% premium to Obagi’s closing share price March 14, the last trading day prior to the disclosure of its fourth quarter and full-year 2012 earnings. The company generated sales of $120.7 million in 2012. Obagi’s portfolio includes a range of skin-care lines, including Obagi Nu-Derm, Obagi-C Rx, Obagi Condition & Enhance and ObagiCLENZIderm M.D. acne therapeutic system. Valeant has built itself into one of the world’s leading dermatology players through acquisitions. Last year, Valeant announced plans to buy Medicis Pharmaceutical for $2.6 billion, positioning it as the largest dermatology player in the U.S. and second in the world behind only Galderma. - Jessica Merrill

AstraZeneca/Moderna: Along with its new R&D strategy and organizational restructuring, AstraZeneca unveiled a massive bet on an early-stage biotech platform March 21 that suggests the big pharma has taken to heart its new CEO’s directive to be more willing to embrace risk. The deal, an option agreement for up to 40 programs across several therapeutic areas with privately held Moderna Therapeutics, carries an eye-catching price tag: $240 million up front, plus potential earn-outs. All told, Moderna, which aims to use messenger RNA (mRNA) as therapeutics, could earn more than $1 billion under the deal with AstraZeneca, announced March 21. That same day, AstraZeneca also unveiled a research partnership in cardiovascular, metabolic and regenerative disease with Sweden’s Karolinska Institute, one of several collaborations between those two groups in recent years. Beyond the $240 million upfront payment – the largest this year in a biotech/pharma collaboration and one of the biggest ever for a deal built around preclinical assets – Moderna also can earn up to $180 million in “technical milestones,” an arrangement Moderna CEO Stephane Bancel described as almost a secondary, contingent upfront payment. Moderna also could bring home development, regulatory and commercial milestones for each drug candidate licensed by AstraZeneca, as well as sales royalties ranging from the high single digits to low double digits. - Joseph Haas

Merck/Cerecor: Well-funded Baltimore start-up Cerecor has licensed a portfolio of neurology drugs from Merck that have shown potential in treating Parkinson’s disease. The program includes more than 2,000 molecules that inhibit catechol-O-methyltransferase, or COMT, a compound that breaks down dopamine in the brain and is linked to improving brain functions such as cognition, motivation and emotion. In a March 20 statement announcing the deal, Cerecor said Merck’s research has improved toxicity issues related to other COMT inhibitors. Marketed drugs in the class include Novartis’s Comtan (entacapone) and Valeant’s Tasmar (tolcapone), which typically are prescribed with levodopa, a synthetic form of the natural dopamine-producing chemical L-dopa. Terms of the Merck-Cerecor arrangement weren’t released, although Cerecor said it will pay milestones and royalties “consistent with other preclinical licenses in neuroscience.” The start-up has a Phase I anti-tussive drug, as well as a group of preclinical D-amino acid oxidase inhibitors obtained from Johns Hopkins University’s Brain Science Institute, in its pipeline. Last April, Cerecor raised $22 million in a Series A round using placement agent Maxim Group; the specific investors weren’t named. Former Celgene CEO Sol Barer is Cerecor’s chairman. - Paul Bonanos

Celgene/bluebird bio: Speaking of Celgene, the Summit, N.J., gene- and protein-regulation specialist has teamed up with 2012 Deals of the Year nominee bluebird bio in a gene-therapy deal (pdf) that will target oncology. Specifically, the two companies will collaborate to develop therapies that modify a patient’s own chimeric antigen receptor T-cells, then re-introduce them to target cancer cells. Although bluebird bio will foot the bill for Phase I trials on clinical products, Celgene will have the option to obtain a global license for each for an unspecified fee; bluebird bio retains the right to share U.S. rights in exchange for reduced milestone payments. Celgene’s upfront payment wasn’t revealed, but total fees including milestones for each product could total $225 million plus royalties. Celgene also agreed to collaborate on CAR T-cell research with scientists at the Center for Cell and Gene Therapy at Baylor College of Medicine, Texas Children’s Hospital and The Methodist Hospital, Houston. The team at bluebird bio also will have access to the scientists, led by Baylor professor Malcolm Brenner. - P.B.

NPS/Takeda: Two assets came full-circle March 19 as NPS Pharmaceuticals re-acquired ex-U.S. rights to a pair of rare disease drugs in a deal that will increase the equity position of Japanese pharma Takeda Pharmaceutical. NPS previously out-licensed the rights to teduglutide and PTH 1-84 in separate deals with Nycomed Pharma, which then was acquired by Takeda. In an unusual deal structure, NPS, which is marketing teduglutide in the U.S. as Gattex and hopes to file PTH 1-84 under the brand name Natpara later this year as a biologic therapy for hypoparathyroidism, brought the ex-U.S. rights to those two compounds in-house in exchange for $50 million in common stock. Down the road, Takeda can earn an additional $30 million, which will be either cash or additional equity at NPS’ discretion, when the two drugs achieve combined worldwide, single-year net sales of $750 million. Takeda holds an equity position of about 7% following this deal, NPS President and CEO Francois Nader said. Both the licensing fee and the sales-based milestone were structured as equity (although the milestone can be paid out as cash if NPS opts) partly to preserve cash, Nader said. An ex-U.S. license to both drugs is just the start of what NPS gains under the deal. The transaction also transfers an inventory of active pharmaceutical ingredients for both drugs to NPS, a less-expensive method for making teduglutide, a glucagon-like peptide 2 (GLP-2) analog, and a pen delivery system that could be used with PTH 1-84. - J.A.H.

CRT/Janssen: Cancer Research Technology, the technology transfer arm of world’s largest charity Cancer Research UK, and Janssen Biotech have joined in the search to find potential new multiple myeloma drugs. The duo hope they can identify molecules and develop potential medicines that block a key protein on a cell-signaling route called the unfolded protein response (UPR) pathway. Teams at The Institute of Cancer Research (ICR), led by Ian Collins in the Cancer Research UK Cancer Therapeutics Unit and Faith Davies in the Division of Molecular Pathology, will work alongside a team at Janssen. Together, Cancer Research UK and Janssen will fund up to 25 scientists, with Janssen providing some of the funding to support the research at the ICR in London. Janssen also will pay future milestones and royalties and take the lead on the clinical development of any potential drugs. The two sides announced their deal on March 21 but gave no financial details. CRT long ago moved beyond simply commercializing and managing the intellectual property generated by the £500 million in research funding provided by Cancer Research UK to five core research institutes across the U.K., as well as to researchers at dozens of other universities and organizations. The breadth of CRT’s academic network – it has sourced and managed IP from more than a dozen global charities and institutes, as well as that of Cancer Research UK-funded research and drug discovery – positions it as an important gateway to cancer-focused research in the U.K. It has a strong in-house drug-discovery capability and access to clinical development capabilities in conjunction with Cancer Research UK’s drug development office. Janssen Biotech is part of the Janssen Pharmaceutical Companies of Johnson & Johnson. J&J earlier this month opened an innovation center in London but a spokesperson for the U.S. drug company said Janssen’s alliance with CRT was not the result of that center’s establishment. - Sten Stovall

Merck Serono/Nordic Bioscience and Merck KGaA/BMS: Merck Serono, a unit of Merck KGaA, said on March 18 it formed a strategic alliance with Denmark-based Nordic Bioscience AS around the German drug maker’s investigational therapy sprifermin, or recombinant human FGF-18, in osteoarthritis of the knee. Under the terms of the agreement, Nordic Bioscience will provide Merck with clinical development services on a shared-risk basis in exchange for a payment structure that includes service fees and potential milestone and royalty payments on the program. Financial terms of the collaboration were not disclosed; however. Merck retains full responsibility for the development and commercialization of the investigational drug. According to the World Health Organization, more than 5% of adults over 40 in developed countries, or more than 30 million people, suffer from osteoarthritis of the knee. A multi-national Phase IIb trial, dubbed the FORWARD study, is expected to begin enrolment in the second half of 2013 to evaluate further sprifermin for inhibition of the progression of structural damage, reduction in pain and improvement of physical function in patients with osteoarthritis of the knee. Sprifermin is a protein thought to induce chondrocyte stimulation leading to matrix synthesis and chondrocyte renewal. It is delivered by intra-articular injection. Two phase I trials in moderate/severe osteoarthritis of the knee previously were completed; a Phase II trial to evaluate the efficacy and safety in patients with cartilage injury of the knee is ongoing. The program was originally was in-licensed in 2004 from ZymoGenetics, a Bristol-Myers subsidiary. The next day, on March 19, Merck KGaA said it inked a deal with Bristol to promote type 2 diabetes drug Glucophage (metformin hydrochloride) under different formulations in China. Under terms of the agreement, Merck Serono and Bristol will co-promote Glucophage in China through a profit-sharing arrangement. Glucophage has been marketed by Bristol-Myers Squibb-SASS in China since 1999. The two companies will tap existing resources and complementary strengths, with Bristol-Myers Squibb-SASS continuing to manufacture Glucophage’s IR (immediate release) formulation. The collaboration will seek to expand the geographic distribution of Glucophage and provide diabetes-related health and medical information including education for health professionals. In addition, the co-promotion will significantly increase outreach to hospitals. Other terms of the agreement were not disclosed. -- S.S.

Thanks to YouTube user cweiandnd for uploading the Louvin Brothers clip. Keep clicking, there's more where that came from.

DOTW: Early Stage Investing Pays Off

Preclinical protein platform play Envoy Therapeutics got taken out by Takeda this week for up to $140 million. That magical “up to” typically hides a multitude of sins, but here that may not be the case.

The milestones are all preclinical and achievable within a year and a half, Envoy investor John Diekman of 5AM Ventures tells In Vivo Blog. VCs invested a mere $8 million in Envoy, which was founded in 2009. That puts an exit at 17.5x, if all the milestones are hit. That means 5AM's investment of about $4 million could be parlayed into around $70 million.

Although that’s an amazing multiple, with such a small investment it doesn’t quite provide the home run that VCs often rely on to create venture returns. It will return almost half of the $150 million fund the firm raised in 2006. 5AM subsequently raised a $200 million fund in 2009.

Diekman said the board originally bargained hard to get paid entirely upfront but, once they realized Takeda had solely preclinical milestones in mind, they were happy to relent. Comps for the deal are hard to find; there haven’t been any disclosed acquisitions of preclinical companies this year that paid cash and had the potential to be worth over $100 million, according to our deals database.

He noted 5AM Ventures planned to put $20 million total into Envoy and said, “If there’s anything we don’t like, it’s that we didn’t get enough money into the company."

But Diekman said the next inflection point likely would have been Phase II data, when the company could again be a promising acquisition candidate. So when the investors started evaluating options, they took into account the amount of money and the time that would be necessary to take the company to that next stage.

Envoy has bacTRAP technology, which combines genetic engineering with molecular biology techniques to label and extract protein-making components of specific types of cells. “This is one of the nicest platform companies I’ve seen in my life. They have the ability to bind new targets in such as way that you can start screening them in CNS and other areas,” said Diekman.

The central nervous system application is the attraction for Takeda, which has moved aggressively into the field in recent years. 

Takeda and Envoy have history. Takeda Ventures participated in the 2009 Series A round for Envoy, so it already held 12.5% of shares ahead of the acquisition. Another strategic investor, Roche Venture Fund, also participated in that financing. In 2010, Takeda and Envoy did a deal to discover schizophrenia drugs that offer greater efficacy and safety than approved treatments. Envoy received $3 million upfront and an additional $2.25 million per year for three years. 

“Takeda was an investor from the beginning and saw the technology. They did a deal with us, discovering a number of compounds. They watched the technology and saw how good it was and where it was going. And they wanted more,” said Diekman.

While Envoy secured a Takeda partnership and then an acquisition, this week a couple other biotechs went in the opposite direction and lost partners. We’ll give you all the details in this week’s edition of. . .

Sun Pharmaceutical/Dusa Pharmaceuticals: India’s largest drug maker by market cap, Sun Pharmaceutical, acquired U.S.-based specialty dermatology company Dusa Pharmaceuticals, a step it said will help build a global specialty dermatology business. The deal valued Dusa at $230 million, which translates to about 4x sales and 36x annualized after-tax profits based on 1H12 figures. Sun marked the deal as a departure from the company’s usual strategy, which is to acquire distressed assets. Also, Sun struck a conservative agreement that gives it market depth compared to a jump in its top-line. In an earlier interview, Sun Pharma Managing Director Dilip Shanghvi tempered expectations of any large deals. Dusa drew most of its $45 million revenues last year from Levulan, a single drug-device combination therapy for treatment of non-hyperkeratotic actinic keratosis, or AKs, of the face or scalp. Actinic keratosis is a common precancerous skin condition caused by excessive exposure to ultraviolet light and made up of rough, dry, tan- or pink-colored blemishes that often appear on facial skin or other skin exposed to sunlight. Founded in 1991, Dusa had a long gestation and only turned profitable in 2010. In addition to Levulan, it sells Blu-U, a blue light device used to treat moderate inflammatory acne vulgaris and general dermatological conditions. With the acquisition, Sun said it expects to provide about five million treatments per year in the U.S. Shanghvi pegged the market at well over $1 billion, adding that the cost of treatment is a factor for the number of treatments received.-- Vikas Dandekar

Merck/ Regenstrief Institute: Merck & Co. signed a five-year agreement with The Regenstrief Institute to collaborate on a range of projects that will use clinical data “to inform personalized delivery of health care,” Merck said in a statement. Regenstrief, a non-profit medical research organization affiliated with the Indiana University School of Medicine, has access to a large data repository that includes de-identified clinical data on over 13 million individuals, according to Sanchin Jain, Merck’s chief medical information and innovation officer.  The foundation for the database is the Indiana Network For Patient Care, a healthcare information exchange that goes back to 1994 and captures a range of clinical and claims data from providers and payers across the state. The companies will use the data to explore novel methods for studying diseases and treatments for chronic conditions. The collaboration began in April, but Merck announced it on Nov. 8, so scientists from both organizations are in the midst of completing nine projects in 2012 and plan another 10 for 2013, focusing in total on osteoporosis, diabetes, hypertension, hyperlipidemia and insomnia. Financial details were not disclosed, but the collaboration aims to advance the science of bioinformatics and to “have a practical effect on Merck’s approach to bringing new products to patients,” Jain said. Study results could provide insights into medication adherence and patient outcomes, as well as improved methodologies for conducting observational research, he added. Results of collaboration studies will be published in peer-reviewed journals. Jain said that Merck selected Regenstrief, which is more than 40 years old, because of its expertise in biomedical informatics, health services research, and its world-class health information system. For Regenstrief, an alliance with Merck offers an opportunity to globalize some of its ongoing research and work with a leading pharmaceutical company.-- Wendy Diller

Pfizer/Alliance For Lupus Research: Pfizer’s Centers for Therapeutic Innovation (CTI) announced a partnership on November 7^th with the Alliance for Lupus Research (ALR) to co-fund the translation of promising lupus treatments into Phase I trials. In a reminder of how the R&D ecosystem is rapidly evolving away from the only-within-our-walls mindset, the collaboration is the first in which a Big Pharma joins with academic investigators and a non-profit research foundation to accelerate emerging science. Tony Coyle, VP and CSO of Pfizer’s CTI, says the program’s presence in each of the major U.S. life science hubs enables it to assemble highly customized teams with specific perspectives and skillsets. Pfizer and ALR will split the funding of academic investigators in Pfizer’s CTI network during the three-year collaboration. The partners have agreed to start off with four projects, but Coyle expects that, driven by success, the collaboration may run additional ones. He envisions funding in the $1 million-$2 million range depending on the particular needs of the project and how rapidly it can progress from bench to clinic. Coyle believes the team model – pharma, disease research foundation, and academia – can be replicated to other diseases and locales. Lupus, which is poorly served by drug therapy, is a natural test case since it’s a multi-organ disease that has recently seen dramatic advances in the understanding of its underlying mechanisms. It’s also genetically heterogeneous, and will require multiple drugs to treat all symptoms and subtypes. Pfizer, with two early-stage lupus candidates in its clinical pipeline, already has a head start.-- Michael Goodman

Arena/Ildong Pharmaceutical: San Diego biotech Arena Pharmaceuticals secured a second marketing partner for obesity drug Belviq (lorcaserin), as Ildong agreed to market the compound in South Korea. In a deal announced Nov. 6, Arena receives an upfront of $5 million and an additional payment of $3 million upon the drug’s approval by the Korea Food and Drug Administration (KFDA). Arena will manufacture Belviq and sell it to Ildong for 35% of annual net sales. That price will increase on a tiered basis up to 45%, not to exceed $15 million. Eisai has rights to Belviq in the U.S., Canada, Mexico and Brazil. That deal has a similar structure in which Eisai purchases Belviq from Arena in exchange for a percentage of annual net sales. In its Q3 earnings call on the same day as the Ildong announcement, Arena said Eisai would start to market Belviq in the U.S. in early 2013, subject to the U.S. Drug Enforcement Administration's final scheduling designation. Arena expects a decision by EMA on Belviq in 1H13. Investors don’t seem particularly convinced of the strength of a Belviq launch: shares are off almost 10% since approval on June 27. Still, competitor Vivus is off by much more – almost 60% since its Qsymia approval on July 18 – on a rejection by EMA for European brand name Qsiva (phentermine/topiramate) and a weak early Qsymia launch.-- S.L.

Chiromics/GlaxoSmithKline/Bristol-Myers Squibb: New Jersey-based Chiromics announced a pair of tie-ups on Nov. 9 under which Bristol and GSK will get non-exclusive licenses to the biotech’s chemical compound library. Bristol also will receive an exclusive license to a collection of proprietary chemical compounds discovered by Chiromics. Central to each deal is a screening collaboration to discover and optimize novel small-molecule candidates against multiple undisclosed therapeutic targets using Chiromics’ “cascade catalysis” technology. No financial terms were disclosed for either transaction. Based on technology discovered at Princeton University, this platform enables “accessible complexity,” the discovery of diverse molecules, including novel classes of drugs, that are differentiated from existing small-molecule therapeutics while offering drug-like properties, the ability to develop structure-activity relationships and ease of re-synthesis, Chiromics said. The biotech’s proprietary hit recognition algorithm, Chalis, also will be used in the discovery process with both pharmas.-- Joseph Haas

Pfizer/Auxilium Pharmaceuticals: The parties mutually agreed to end a 2009 partnership for the development, commercialization and supply of Auxilium's Xiapex (clostridial collagenase for injection) for Dupuytren's contracture and Peyronie's disease in the EU and 19 other European and Eurasian countries. The deal ends as of April 24, 2013. Xiapex (the EU trade name) is approved to treat Dupuytren's contracture in the U.S. and E.U. and an sBLA has been submitted for Peyronie's disease. Asahi Kasei has development and commercialization rights for Xiaflex in Japan, while Actelion has them in Canada, Australia and Mexico. The treatment is in Phase IIa testing for Frozen Shoulder syndrome (adhesive capsulitis) and in Phase Ib testing to treat cellulite. Auxilium recognized $15.7 million in Xiaflex/Xiapex revenues in Q3, including $13.2 million in U.S. revenues. As a result of the Pfizer deal ending, Auxilium will recognize $94 million of deferred revenue and $9 million of deferred costs in Q4. Auxilium president and CEO Adrian Adams said on the Nov. 7 Q3 earnings call that both parties were “disappointed” in the deal and that he’s in the midst of weighing options for these regions. -- Stacy Lawrence

GlaxoSmithKline/Xenoport: When is a parting of the ways not really a goodbye? In another “No Deal” this week, GSK and Xenoport ended a sales partnership, but the multinational pharma still agreed to buy an equity stake in the smaller firm at a premium price. GSK terminated a five-year marketing partnership for Xenoport’s Horizant (gabapentin), under which the it commercialized the restless leg syndrome drug worldwide except for six Asian countries, including Japan, for which Astellas held marketing rights. GSK said it is exiting the partnership due to an increased focus on core products. It paid $75 million upfront in 2007 for commercial rights to gabapentin, with up to $565 million in milestones potentially going to its California-based partner. To date, Xenoport has collected at least $130 million in milestone payments under the deal. While departing, GSK also is buying a 4.3% share in Xenoport, spending $20 million to buy 1.8 million shares at $10.86 per unit, a 30% premium over the stock’s 10-day average prior to the deal’s disclosure. Xenoport, which gets back all rights to gabapentin that were held by GSK, also is able under the deal terms to require the pharma to buy up to another $20 million in equity over the next six months.-- J.A.H.

Photo courtesy of flickr user 401(K) 2012 via Creative Commons license.