Deals of the Week Gets Better Connected, Dips A Toe In Digital Health

Digital health is a bit of a catch-all. It encompasses everything from inexpensive exercise- and diet-recording gadgets to sophisticated multimillion dollar disease management systems, online pharmacies and website-based behavioral therapies. Truth be told, this DOTW correspondent, like many pharma execs, has always put the drugs first.

But there's no denying the clamor of expert opinion claiming digital health will be a powerful disrupter of health care markets in the future, potentially transforming pharma and device companies into service providers. "Digital health is going to happen, it may take time and will advance in fits and starts, but it will happen without the help of the establishment," Simon Cook, CEO of VC firm DFJ Esprit, told the London meeting of the Digital Health Forum, DHF13, earlier this month. "Nine out of 10 digital health businesses will fail, but a few will succeed and change the health care system." DFJ has investments in biopharma companies like Kiadis Pharma and Oxford Immunotec, as well as the internet nutritional company, Graze.

The transformation is coming faster now than two or three years ago, Cook said, because of the increasing pressure on individuals to take control of their own health, coupled with the increasing pervasiveness of smart phones and apps, making people comfortable with digital technology.

The investment community also is more engaged. Low-capital intensity business models are starting to emerge for digital health companies and are "incredibly compelling" for venture capitalists, said Alex van Someren, managing partner of seed funds at Amadeus Capital Partners. Amadeus, along with Archimedia Investments, put £1.6 million ($2.4 million) into the health care cloud platform, Qinec, in November 2012, and took part in May 2013 in a £2 million financing round for TrialReach, a company trying to improve patient awareness of clinical trials.

But small investment rounds, which characterize the digital health sector, often slip below the radar, or are not disclosed publicly, leading to a lack of comprehensive information about deal flows and valuations.

In the increasingly hot area of patient engagement and consumer health, much of the attention devoted to digital health has focused on continuous health monitoring followed by instant intervention via 24/7 connectivity. Innovators have focused on the concept for years, progressing slowly, but newcomers say they're at a turning point. U.K-start-up CellNovo, backed by investors and VCs to the tune of more than $40 million, is one of a slew of companies trying to address this challenge, and believes it is the most advanced in the diabetes sector.

Cellnovo has developed algorithms and software which allow physicians to monitor patients remotely in a sophisticated manner not seen with other company's systems. It anticipates a commercial launch of its digitally interconnected blood sugar monitor, insulin patch pump and exercise diary later this year, said Executive Chairman Eric Beard.

The theory that digital tools can improve the quality of care while saving money is exactly what the US and other countries are striving for as they work to reform their health care systems. In that sense, digital health tools are aligned with systemic priorities, and its benefits have not gone unnoticed by pharmaceutical companies as they and others try to grapple with harsh demands. Johnson & Johnson's business unit, Janssen Healthcare Innovation (JHI) is accelerating J&J's change from a product-centric to a health care solutions company. The company has noticed digital health start-ups often struggle to scale-up, and intends to offer master classes to European entrepreneurs in business development, to enhance the digital health ecosystem, in collaboration with partners.

But while we await the detonation of digital disruption, pharma and biotech have continued to forge deals and agreements, as we unveil ...

AstraZeneca/Roche: AstraZeneca and Roche are teaming up in a medicinal chemistry data-sharing collaboration with the aim of accelerating drug discovery. The deal announced June 26 is a sign big pharma may be more willing to work together in the pre-competitive space to improve the pace of drug development than in the past. Under the arrangement,  the two companies will use a technology called matched molecular pair analysis (MMPA) to identify chemical modifications that can be applied to each company's individual compounds to improve metabolism, pharmacokinetics or safety. The aim is to identify potential new drug candidates faster by using their combined databases of experimental results. Roche and AstraZeneca are committed to making the data generated by the program available to the broader research community, and are open to additional drug manufacturers joining the collaboration. The data-sharing will be managed by MedChemica, an expert in MMPA technology. - Jessica Merrill

MorphoSys/Celgene: Germany's MorphoSys has forged a potentially transformative alliance with Celgene, under which the latter receives worldwide rights to MorphoSys' CD38-targeting antibody, MOR202. The product, which is in Phase I/IIa trials in multiple myeloma, is believed to be Celgene's first clinical-stage antibody for the disease, a therapeutic area it dominates. In return for the rights, MorphoSys receives an upfront fee of $92 million, and Celgene will purchase $60 million worth of shares in MorphoSys at a premium of at least 15% to the biotech's closing share price of $37.06 on June 26. MorphoSys also will receive development, regulatory and sales milestones, plus double-digit royalties outside of a co-promotion territory in Europe, the companies announced June 27. The deal gives the partners the financial firepower to speed MOR202 to the market, while potentially broadening its indications beyond multiple myeloma. - John Davis

Aspen/Merck: South Africa's Aspen Pharmacare Holdings, the largest generics drug firm in Africa, continued its geographic, manufacturing and portfolio expansion efforts in a complex deal valued at more than $1 billion with Merck, roughly one week after revealing it hopes to acquire two mature thrombosis drugs and a manufacturing site from GlaxoSmithKline. For approximately $600 million, Aspen will buy a portfolio of 14 drugs from Merck and acquire active pharmaceutical ingredient manufacturing and related sales sites in the Netherlands and the U.S. In the deal, Aspen will get the Boxtel site in the Netherlands as well as part of two other API plants in that country, along with a manufacturing site in Iowa. Sales offices in the Netherlands and Illinois also will be included in the package. News surfaced June 18 that GSK is mulling an offer from Aspen to purchase Arixtra and Fraxiparine, which generated aggregate sales of $670 million in 2012, as well as a manufacturing site in France. - Joseph Haas

Cytokinetics/Astellas: Cytokinetics has signed a two-year research collaboration including rights to its skeletal muscle activator CK-2127107 with Astellas Pharma. The deal, announced June 25, is the second Cytokinetics has signed in two weeks, extending the company's cash runway and providing financial flexibility to carry on with the development of its lead drug tirasemtiv independently. Like '107, tirasemtiv is a skeletal troponin muscle activator, currently being tested in a Phase IIb clinical trial in patients with amyotrophic lateral sclerosis; data are expected by the end of the year. The license for '107 to Astellas is for non-neuromuscular disorders. The development plan encompasses potential indications like cachexia and sarcopenia. The deal does not exclude the potential to study other skeletal activator mechanisms that may emerge from the research in neuromuscular indications. Cytokinetics will receive $40 million initially from Astellas, including a $16 million upfront payment and $24 million in R&D reimbursement over the first two years of the collaboration. The biotech stands to receive as much as $450 million in development and commercial milestones, as well as royalties on any drugs emerging from the collaboration. Cytokinetics announced an expanded collaboration with Amgen June 12, under which it received $25 million upfront in exchange for giving Amgen rights to the heart failure candidate omecamtiv in Japan; the two already are partnered in other parts of the world - JM

Seattle Genetics/Bayer/Agensys: Antibody-drug conjugate specialist Seattle Genetics executed its seventh partnership since the start of 2009 around its auristatin-based ADC technology platform on June 25. This time, the Bothell, Wash., biotech will receive $20 million upfront from Bayer for a multi-target oncology collaboration. Seattle Genetics could earn up to $500 million in milestones under the Bayer agreement, as well as royalties on any products reaching the market. Targets were not disclosed. Bayer will be responsible for all R&D costs, plus manufacturing and commercialization. Seattle Genetics, which brought the first ADC to market for oncology with the 2011 U.S. approval of Adcetris (brentuximab vedotin), now has partnerships with five of the 12 big pharma companies, as well as three Japanese pharma and four biotech firms. In a release, VP of Corporate Development Natasha Hernday said Seattle Genetics has 15 ADCs in clinical development between proprietary and partnered programs, and is in line to earn up to $3.5 billion in milestones and royalties from its strategic partnerships. The biotech also announced June 27 it had taken an option under its 2007 collaboration with Astellas-affiliated Agensys. Seattle Genetics will fund 50% of the future development costs of ASG-15ME, a potential ADC therapy for bladder and lung cancer for which an IND has been submitted to FDA. - JAH

ADC Therapeutics/VivaMab: Swiss-based ADC Therapeutics is adding to its preclinical pipeline of around 10 antibody-drug conjugates by licensing a novel internalizing antibody, VM101, from BioAtla LLC's therapeutic division, VivaMab LLC. The antibody conjugated with a cytotoxic warhead has already shown in vivo efficacy against models of intractable hematological cancers, the companies reported June 24. ADC Therapeutics plans to start pre-IND development of the antibody-drug conjugate immediately for the treatment of a hematological cancer, with San Diego-based VivaMab providing development support and receiving undisclosed milestones and royalties. The antibody binds to antigens on the surface of tumor cells, is internalized and then releases the cytotoxic pyrrolobenzodiazepine payload. The Swiss firm say it intends to move multiple drugs into the clinic over the next three years. Upon successful proof of concept, it will seek to license the antibody-drug conjugates to pharmaceutical companies. - JD

Immunocore/Genentech: Genentech has become the first major partner of the privately held UK biotech Immunocore, which is developing a new class of bispecific therapeutic proteins called ImmTACs. The companies have entered into a research collaboration and licensing agreement for the discovery and development of multiple novel cancer agents, with Immunocore receiving an initation fee of $10-20 million for each program, the companies announced June 27. Immunocore will also receive more than $300 million in development and commercial milestones for each target program, and tiered royalties. The company's lead product, IMCgp100, which is in a Phase I/II clinical trial in patients with late-stage melanoma, is  not part of the deal. ImmTACs consist of high-affinity T-cell receptors linked to an antibody fragment, anti-CD3, which activates the immune system. T-cell receptors can recognize intracellular changes tha occur during cancer or viral infections, and ImmTACs are expected to target and destroy cancer cells without affecting healthy cells. - JD

Tesaro/Myriad Genetics: Tesaro, a three-year-old company focusing on cancer and moving at lightning speed, will use Myriad Genetic's BRCA1 and BRCA2 mutation tests to screen patients for enrollment in Phase III trials for one of its lead drugs, niraparib. The drug, a PARP inhibitor, which Tesaro in-licensed from Merck in 2012, is geared to patients with BRCA1 & 2 mutations who have breast or ovarian cancers. Myriad is the only company offering an FDA-approved version of this test, so the alternative would be to go to laboratories offering home grown versions, but the latter may not be as robust, a downside for inclusion in pivotal trials. Both studies will be initiated in mid-to-late 2013. Tesaro told Robyn Karnauskas, an analyst with Deutsche Bank, that its PARP inhibitor program is its most de-risked development strategy, based on very specific input from EMA and FDA. Women with germline BRCA 1 or 2 mutations have increased risk of developing high-grade ovarian and breast cancers, which are particularly sensitive to PARP inhibitors. Management further believes that the drug may be effective in other indications. - Wendy Diller

Nicox SA/Immco Diagnostics: Nicox, a French ophthalmics company, has entered into an exclusive agreement with Buffalo, NY-based Immco Diagnostics to promote a proprietary laboratory test targeted at early detection and diagnosis of Sjoegren's syndrome, an autoimmune disease that destroys the ability to produce tears and saliva. Under the terms of the deal, Nicox will detail the test to ophthalmologists in North America, to whom patients with the syndrome often present because dry eye is a symptom. Immco will be responsible for processing the test and all regulatory activites and reimbursement. Nicox will receive a majority of revenues generated from the ophthalmologists and has a nine-month option to exercise ex-U.S. commercial rights to the test as well. The disease destroys the exocrine glands that produce saliva and tears. Current diagnostic techniques for Sjoegren's syndrome are only moderately effective and detect disease only at advanced stages. The new test aims to diagnose the disease at earlier stages, when it is more treatable. Dry eye is a primary symptom of the disease, which is chronic, and the test is aimed at helping early diagnosis and more efficient management of it; rheumatologists are also involved in treatment. The test was approved in the U.S. in 2013, with a commercial launch expected in the second half of the year - WD

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Deals Of The Week Wonders What Merck's Latest Biosimilars Move Really Means

Ever since Merck jumped into the biosimilar field in 2008 with a ferocious go get ’em attitude more fitting of an NFL tackle than a big pharma, we’ve been following their progress – and then lack of progress – closely. Back when most pharmaceutical manufacturers were still griping about defending their biologic brands, Merck’s early aggressive ambitions made an interesting case study in how a big pharma might strike offensively by positioning itself as a contender in the biosimilar space.

So the company’s announcement Feb. 20 that it has partnered with Korea’s Samsung Bioepsis to develop multiple undisclosed biosimilar candidates, while delivered quietly in a concise statement, struck us as a noteworthy change in strategy.

You didn’t have to read tea leaves to see that Merck’s original strategy wasn’t working out. In 2008, Merck established a business unit devoted to the field and pledged to invest $1.5 billion and launch six or more biosimilars between 2012 and 2017. But last year, as we reported here, the company closed Merck BioVentures, the unit it created devoted to biosimilars, and folded the research into biologics and vaccines at Merck Research Labs. And Mike Kamarck, the charismatic proponent of biosimilars who led Merck’s charge into the field, left the company.

Now, we can’t help but wonder what the latest announcement means for Merck’s biosimilar strategy.
Is it a reaffirmation of the company’s commitment to biosimilars, albeit through a more modest path, or is Merck effectively washing its hands of biosimilars while still holding out for some hope of an eventual commercial reward? Samsung will be responsible for preclinical and clinical development, manufacturing, clinical trials and registration of any candidates, while Merck will commercialize the products. It’s not clear how much Merck is putting behind the effort either, as the financials of the deal were not disclosed; Merck is paying Samsung an upfront and has agreed to milestones.

Merck declined to offer further insight on the move, but said the deal with Samsung will complement its internal effort. The only biosimilar Merck has in its internal pipeline that has been publicly disclosed, however, is a copy of Roche/Biogen Idec’s Rituxan, the one drug Samsung Bioepsis won’t be developing because the company – formed in 2011 out of joint venture between Samsung Biologics and Biogen – won’t make any biosimilar versions of Biogen products.

Given Merck’s inability to get new drugs to market of late, the decision to take a contract research approach to biosimilars may be the best way for Merck to hold onto the potential commercial upside of biosimilars without the investment internal development requires. Merck ran into the field at high speed, and we admired their optimism, but given the evolving regulatory and commercial dynamics, a cautious path may be the wiser one.

And let’s not forget why the decision to jump into biosimilars was easier for Merck to make than for some other big pharmas: Merck never had a history in biologics and hasn’t traditionally had treasured blockbuster biologic brands to protect. It gained some knowledge of the field and rights to Remicade in certain territories outside the U.S. through its mega-merger with Schering-Plough. But it’s hard to envision Merck’s inexperience as a competitive advantage in a notoriously difficult field like biologics. Development and manufacturing is just as hard for biosimilars, even when manufacturers have a reference molecule to use as a road map.

Three years after the U.S. government laid a regulatory framework for biosimilars, no applications have yet been filed through the new pathway with FDA. Today, while Merck has adopted a more subtle tone when it comes to biosimilars, Amgen – a biologics expert – is crowing about its grand ambitions for the field.

Roche/Chiasma: Roche and privately held Chiasma Inc inked a deal Feb. 18 to develop and commercialize the Israel-based biotech’s proprietary pill Octreolin, initially for acromegaly and, afterwards, for neuroendocrine tumors (NET). Their pact brings a new Phase III drug to Roche’s pipeline, targeting both an oncology (NET) and non-oncology indication (acromegaly). It gives Roche worldwide exclusive license to Octreolin, and Chiasma receives upfront payments of $65 million and future milestone payouts of up to $530 million, along with tiered, double-digit royalties on Octreolin net sales. Roche said it decided to partner with Chiasma and commercialize Octreolin in part because of the convenience and improved quality of life an oral therapy might offer patients. The pill may consequently command a higher price to injectables and there appears to be little oral competition on the horizon near-term. Delivering octreotide orally twice daily would be a major advantage for patients with acromegaly as they would avoid the painful monthly injections involved in current treatment options such as Novartis' Sandostatin LAR. - Sten Stovall

Chiesi/Cornerstone: Cornerstone Therapeutics’ majority shareholder is looking to buy out the company. North Carolina-based Cornerstone announced Feb. 20 that it received a letter from its majority shareholder – Italy’s Chiesi Farmaceutici – offering to buy the remaining outstanding shares of the company. Chiesi offered $6.40 to $6.70 per share for the 40% of the company it doesn’t already own – valuing the specialty pharma at $177 million. In a letter from Chiesi to the board of directors of Cornerstone, Chiesi’s CEO Ugo Di Francesco said the company “has adequate liquidity available and excellent relationships with our banks to effect an all cash bid.” Di Francesco added that Chiesi has “conducted an extensive review of Cornerstone based on publicly available information, our own deep experience in the pharmaceutical industry and consultations with our outside advisors.” The Italian drug maker plans “to move promptly” in regard to the bid “and is committed to working vigorously and expeditiously with [Cornerstone] to complete a transaction.” Cornerstone said in a statement that “no decisions have been made by the board of directors with respect to Chiesi’s proposal.” The two companies paired up in May 2009 when Chiesi granted Cornerstone an exclusive U.S. license to sell its porcine-derived lung surfactant Curosurf (poractant alfa) for a 10-year period. In return, Chiesi took an equity stake in the company that now accounts for a 60% share. - Lisa LaMotta

Janssen/Pharmacyclics/Abbott: Partners Janssen Biotech and Pharmacyclics will work with Abbott to develop a molecular diagnostic test to identify patients with a genetic sub-type of chronic lymphocytic leukemia (CLL). Abbott will develop the test using its proprietary FISH (fluorescence in situ hybridization) technology; the test will identify hard-to-treat CLL patients who have a deletion within chromosome 17p (del17p). These patients are likely to respond to ibrutinib, a small molecule inhibitor of Bruton tyrosine kinase (BTK). At the American Society of Hematology conference in December, the partners presented positive Phase Ib/II data in a subset of relapsed/refractory CLL patients with the 17p deletion. The partners have an ongoing Phase II trial for ibrutinib in CLL patients with the 17p deletion. The company expects enrollment in this trial will take about 12 months to complete. On Feb. 12, FDA granted breakthrough designation to ibrutinib to treat two B-cell malignancies: relapsed or refractory mantle cell lymphoma (MCL) and Waldenstrom’s macroglobulinemia (WM). This could mean an approval for ibrutinib as soon as early next year. Pharmacyclics’ share price has been on a white-hot streak since last May, climbing more than 200%. News of the breakthrough designation bumped shares up about 20%. Details of the Abbott partnership remain undisclosed. - Stacy Lawrence

Eisai/Valeant: Valeant Pharmaceuticals announced Feb. 21 that it has acquired U.S. rights from Eisai Inc., the U.S. subsidiary of Japan's Eisai Co. Ltd., for cutaneous T-cell lymphoma treatment Targretin (bexarotene). Eisai received $65 million up front and is eligible for additional payments tied to undisclosed milestones. In March 2011, Eisai granted exclusive rights to Minophagen Pharmaceutical to develop and commercialize Targretin in Japan, expanding that agreement in April 2012 to cover Asia, Oceania, the Middle East, Eastern Europe and other regions. And in a deal similar to the Valeant agreement, in December 2012, Eisai sold U.S. commercial rights to Gliadel Wafer (carmustine) for glioblastoma to Arbor Pharmaceuticals. Gliadel and Targretin are aging products. However, the company’s cancer pipeline – oncology is 70% of Eisai’s revenues – has shown recent signs of stumbling. Farletuzumab, which entered Eisai’s pipeline with its 2007 acquisition of Morphotek, demonstrated disappointing results last January in platinum-sensitive ovarian cancer, not meeting the primary PFS endpoint in its first Phase III attempt. And Halaven (eribulin), approved in the U.S. in 2010 for metastatic breast cancer, missed its primary endpoints last year in a head-to-head Phase III superiority study against Xeloda (capecitabine). Much of the excitement around eribulin at the time of its approval was the likelihood of extending its label, which is now drawn into question. Eisai said the deal with Valeant would maximize the product’s value in the U.S. It went on to add that the agreement would enable Eisai to “strategically reallocate resources to other mid-to-long-term business growth areas” but it didn’t elaborate. As for Valeant, this deal continues its strategy of acquiring what it considers to be undermanaged commercial assets. - Mike Goodman

UCB/ConfometRx: Belgium’s mid-sized pharma company, UCB, is to link up with the Santa Clara, Calif.-based G-protein coupled receptor (GPCR) structural biology firm, ConfometRx, to discover new drugs in UCB’s sweet spot, the neurosciences. As often stated, GPCRs are the target for 25%-30% of marketed products, but GPCR research is hampered by the difficulty in extracting active receptors from cell membranes for use in research and drug screens. ConfometRx is developing crystallization techniques for GPCRs to make the screening process easier for GPCR-targeted drugs and antibodies. The two-year, multi-target research collaboration between UCB and ConfometRx is intended to gain insights into modulating GPCR targets in order to design differentiated drugs, the companies said Feb. 21. ConfometRx will receive an upfront payment, research funding and milestones, but further details of the agreement were not disclosed. UCB is building “super-networks” of innovation, which include tie-ups with Harvard University and the University of Oxford’s medical sciences division over the past three years. ConfometRx already is collaborating on various GPCR-related research projects with Bristol-Myers Squibb, Novo Nordisk and Lundbeck, while other companies active in providing research insights in the GPCR space include Heptares Therapeutics of the U.K., France’s Domain Therapeutics and San Diego-based Receptos. - John Davis

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Financings of the Fortnight Navigates Sequester Seas, Mega Moguls and Mini VCs

With several IPO hopefuls now in registration and a very odd venture round raised by a San Diego biotech, there was plenty of financing news to chew on the past couple weeks. But we’re sailing in a different direction for this fortnight’s most interesting financing.

With the sequester on the horizon, a big question mark looms over National Institutes of Health and other basic science funding. The scientific research lobbying group Research!America (that’s their exclamation point, not ours) says the NIH budget will drop by $2.4 billion, part of $3.6 billion in science research cuts across several agencies, or 7.8% of their fiscal 2011 budgets.

The $2.4 billion in NIH cuts alone is $300 million shy of the 2011 external grant totals of the National Institute of Allergy and Infectious Disease, or nearly half the total budget of the National Cancer Institute. NIH director Francis Collins has quoted studies that equate the cuts to 2,300 grants that NIH would not be able to award.

In Boston, which year after year receives the most NIH funding of any American city, health care officials and politicians are warning about 1,700 jobs lost.

As we slouch toward another 11th hour (and 59th minute) Beltway showdown, let’s focus instead for a moment on a small – OK, tiny – counterexample. In San Francisco this week, former Genentech CEO Art Levinson and friends unveiled a new science award, the Life Sciences Breakthrough Prize, which will distribute $3 million to its winners. The inaugural group holds 11, but future years the winners’ pool will be limited to five.

Like we said, tiny. And the prizes are achievement awards, not grants for future projects, so it’s by no means a replacement for NIH’s role. But as fret about the future sources of scientific funding, what caught our eye was the presence of two non-life-science people on the new foundation’s board: Facebook chief Mark Zuckerberg and super-investor Yuri Milner. In 2011, this column made an open plea for Milner to throw some of his vast sums into the life science arena.

Since then, his investment firm Digital Sky Technologies has dipped a toe, joining syndicates for cancer diagnostics firm Foundation Medicine and consumer genome analysts 23andMe. No pure biopharma or device investments yet for Yuri, as far as we can tell, and so far he's following the same late-stage pattern as his highest profile tech investments (both Foundation and 23andMe have marketed products). Still, we’re encouraged by his involvement with a group that is rewarding research-stage biomedical breakthroughs.

High-tech giants are increasingly turning their profits into venture funds, and some of those funds are trickling into health care and the life sciences. Last year, we profiled the nascent health-care ambitions of San Francisco’s Founders Fund -- which came to life in part from Facebook and PayPal investor Peter Thiel’s fortune -- and now we’re starting to see Google Ventures make a health-care splash, too. (In fact, it’s a co-investor with Milner in Foundation Medicine.) Its latest investment is cancer-data analytics firm Flatiron Health, and the new issue of START-UP has a report.

Whether they're high-tech moguls or faces in the crowd at the other end of the spectrum, new sources of life-sciences capital will always be a front-and-center topic for us and our readers. This column has followed a couple crowdfunding efforts, and now our colleagues at IN VIVO have just published a long look not just at crowdfunding but also other ways the biopharma business is tapping into more open or distributed resources. It’s a highly recommended read, as of course are all the latest articles in START-UP and IN VIVO.

Which brings us to that odd round of venture we mentioned up top: San Diego biotech Elcelyx Therapeutics just raised a $20 million Series C round, but the management formed its own fund to lead the syndicate. The entity, GSM Fund LLC, is a “friends and family” group of Elcelyx executives and others from the San Diego biotech community, CFO Martin Brown told FOTF. In planning the round, Brown also spoke with conventional VCs but had this idea in the back of his mind, particularly because Rick Barry, the founder and managing director of now-defunct Eastbourne Capital Management, had wanted to invest in Elcelyx for some time. Under the C round, Barry will join the Elcelyx board of directors. The GSM Fund members have all committed to reserves that, if called, could end up doubling their investment.

What started as a backup plan became the reality, said Brown. “I was keeping a book and pretty soon we had more than enough,” he said. “It just happened that the LLC got a first-mover advantage. The timetable was really important to us because getting the financing locked in allowed us to commit to some pivotal studies. If the financing had taken a lot longer, we would have had to put some of our plans on hold.”

There were really no secondary benefits to the LLC model for Elcelyx itself, Brown added, although it was a different story for the individual investors. “There are advantages for the investors in the way we structured this,” he said. “It’s not a typical VC fund where there are management fees and carry. Every dollar that was invested by the members of the LLC purchased shares in Elcelyx.”

Jeffrey Sohl, director of the University of New Hampshire Center for Venture Research, told FOTF that it’s rare but not unprecedented for angels to create a one-time limited partnership structure to invest in a company as sort of a mini VC.

We have more details on the Elcelyx deal in the roundup below. All you have to do is scroll down. From friends and family to Facebook fortunes, from mega-moguls to mini-VCs, we cover it all here in… 

Elcelyx Therapeutics: For its new $20 million Series C round, privately held Elcelyx led a syndicate by forming its own venture fund, GSM Fund LLC, which takes its name from Elcelyx’s proprietary Gut Sensory Modulation technology. The round includes previous backers Morgenthaler Ventures, Kleiner Perkins Caufield & Byers and Technology Partners. Those three VCs had financed a two-tranche, $21 million Series B during 2011 and 2012. The LLC is structured so that its members can be called upon to double their investment if necessary. The roster includes four area biotech CEOs, four or five local MDs, about a dozen PhDs and a host of biotech executives and lawyers. New board member Rick Barry, one of the GSM Fund contributors, owned 19.9% of Amylin Pharmaceuticals and was a major investor in Telik and Sarepta Therapeutics when he ran the now-defunct Eastbourne Capital Management. Elcelyx is working to bring both a delayed-release version of metformin (NewMet), currently in Phase II, and an over-the-counter weight-loss supplement (Lovidia) to market. “The timetable was really important to us because getting the financing locked in allowed us to commit to some pivotal studies” CFO Martin Brown told FOTF. “If the financing had taken a lot longer, we would have had to put some of our plans on hold.” – Joseph Haas

Jounce Therapeutics: Jounce is the latest project incubated by Third Rock Ventures to see the light of day. The firm emerged from stealth mode Feb. 14 to reveal a $47 million Series A round, in which Third Rock was the sole investor. Jounce will attempt to develop cancer immunotherapies using a proprietary development platform, which company executives say will be a broader approach than that taken by some others in the field. Although it hasn’t yet named any specific targets, Cambridge, Mass.-based Jounce has already identified antibodies it plans to develop. A group of three Third Rock partners will serve as Jounce’s interim management team, including Cary Pfeffer as CEO, Robert Tepper as chief scientific officer and Robert Kamen as chief business officer. In an interview with our “Pink Sheet” colleagues, Pfeffer said the 2011 approval of Bristol-Myers Squibb’s cancer immunotherapeutic Yervoy (ipilimumab) for metastatic melanoma spurred Third Rock’s increased interest in the field. After establishing the company quietly later that year, Jounce’s management has built an advisory board that includes key research specialists from the University of Texas MD Anderson Cancer Center, Johns Hopkins University, the University of Chicago and the Georgetown Lombardi Comprehensive Cancer Center. – Lisa LaMotta and Paul Bonanos

Retrophin: The pediatric orphan disease firm, whose shares trade over the counter, raised $10 million in a private placement to help complete what could be a pivotal Phase II trial for its lead candidate. RE-021 is being tested to treat focal segmental glomerulosclerosis (FSGS). With an eye toward the favored status insurers and regulators are granting orphan drugs these days, Retrophin in-licensed the small molecule a year ago from Ligand Pharmaceuticals for $1 million upfront. Ligand had tested the compound to treat hypertension, but in its new indication Retrophin hopes to gain accelerated approval from FDA. The biotech  was founded in 2011 by then-hedge fund manager Martin Shkreli, who has since shuttered his MSMB Capital Management to devote himself to running the company. In December 2012, Retrophin completed a reverse merger with an OTC-traded shell company. Shkreli told FOTF that Retrophin will likely do either another reverse merger with a company on a major exchange or de-list and conduct an IPO.  In the placement, Retrophin sold 3.3 million shares at $3 each, a 6% discount to its close on Feb. 12, the day before the financing was announced. The deal included 1.5 million warrants, each with an exercise price of $3.60. On Feb. 20, Retrophin shares closed at $4.20, giving it a market cap of $35 million. MSMB led a $4 million Series A round in May 2012. – Stacy Lawrence

e-Therapeutics: The UK network pharmacology company said February 11 it would seek to raise £40 million in a follow-on offering, upon approval of its shareholders. The cash would help finish Phase I studies of its lead cancer therapy ETS2101 then move it through Phase II testing in brain cancer and Phase Ib/II testing for several other cancers. The company hopes the clinical activity will lead to licensing in 2017. Part of the new fundraising will come from existing investor Invesco Asset Management, which will boost its stake in e-Therapeutics from 45.9% to 49.9%, the company said. New shares will be priced at 32 pence each, a 4% premium to the closing price February 10. E-Therapeutics is one of a handful of companies to use modeling of disease pathways (sometimes called network biology or systems biology) to identify the critical points to attack and match them with drug candidates. Another publicly traded network-based company with products in the clinic is Merrimack Pharmaceuticals, which debuted on the Nasdaq one year ago. Merrimack has used its network biology platform to build an antibody combination product, which we describe in a feature in the new START-UP magazine. – Alex Lash

All of the Rest: Bind Biosciences, which is selectively targeting disease sites with its Accurin platform, raised an $8.7 million tranche out of a potential $20.25 million from foreign investors… To support its human plasma gelsolin for inflammation, BioAegis Therapeutics closed on a $3 million round… Reports here and here state that Aerial Biopharma has completed the second tranche of its $12 million Series A financing… Ophthalmic implant maker PolyActiva completed a $A9.2 million Series B… Longbow Capital led a £1.5 million financing for UK drug discovery company Domainex… Helmedix, which is developing autoimmune peptides derived from helminthic worms, raised $A1.25mm in funding… Burrill & Co. was the sole investor in Strand Life Sciences’ Series B… To back its work on injectable drug delivery devices, Unilife completed a $12 million registered direct offering… Regenerative medicine company Cytomedix could realize up to $27.5 million in a combination loan and equity financing…  Developer of oncolytic viruses Oncolytics Biotech publicly raised $32 million… In a FOPO, Medgenics, which is delivering therapeutic proteins using the patient’s own tissue, grossed $29.4 million… Imprimis Pharma completed a $9.7 million public sale in support of its drug reformulations using the Accudel system… Cancer therapeutics and diagnostics company Novelos closed on a $5.5 million FOPO… Stem Cell Therapeutics announced a units offering… TetraPhase Pharma filed for an IPO to advance work on antibiotics against multi-drug resistant infections… Ambit Biosciences re-filed for its IPO after withdrawing its offering in June 2011… Deerfield Management loaned Discovery Labs $30 million to support development of its candidates for RDS in premature infants… With commitments of $245 million, Lux Capital closed its third fund focused on energy, technology, and health care. -- Amanda Micklus

Photo courtesy of flickr member potat0man.

Deals Of The Week Sings Of An Icelandic Saga And The Path Forward

Our knee-jerk reaction to Monday’s announcement that Amgen is buying deCODE Genetics for $415 million in cash was “Say what?” It’s hard to get past the unlikely mix of cultures between Amgen, the most button-down of biotechs, and deCODE, whose irascible founder and CEO, Kari Stefansson, is anything but.

On second thought, though, the combination makes sense.  For Amgen, it’s a buy-versus-build way to install a broad-based, genetics-oriented discovery and target validation engine.  For deCODE’s investors Polaris Ventures and ARCH Venture Partners, it’s a timely and profitable exit: they put down roughly $14 million to bring the Icelandic genomics specialist out of bankruptcy in November 2009 and have been carrying it since.  And for deCODE’s scientists, it’s an opportunity to continue discovery research using population genetics and armed with blood samples from Icelanders and the country’s conserved genealogical and health care records.

As Polaris’ Terry McGuire blogged the day the deal broke: “Almost all of the other companies that started in this space gave up and moved to safer ground – developing drugs.  Kari Stefansson never lost sight of what was truly important, which is pioneering the genome.”

Equally true is that Stefansson’s broad vision caused his reach to exceed his grasp. As we wrote three years ago, the fundamental issue was one of business strategy – an overly optimistic view of the rate at which discoveries made with its genomics platform could convert into tangible drug and diagnostic assets, including IP, and justify the infrastructure investments the company had made.

deCODE's troubles stemmed from a combination of factors including a fragmented set of operations ranging across gene-based drug and diagnostics discovery and development as well as a foray into consumer genomics. As an Iceland-based company, it also had been especially sensitive to the impact of the global financial downturn in the latter half of the 2000s, which hit that country's banking industry very hard. Plus, an arrangement with Lehman Brothers to manage its money had left deCODE with essentially worthless paper.

Stefansson’s unwavering faith in deCODE’s expansive – and expensive – approach to discovery finally has paid off. “This was a 16-year saga,” says McGuire. "But true to the saga, Kari’s has been one of finding the path forward.” Polaris and ARCH together (via the aptly named Saga Investments, organized for the deCODE recapitalization) owned about 65%, roughly one-third each, of deCODE.  They’d put in around $50 million all told (plus some noncash obligations to turn the firm around), netting what appears to be more than a 5x return.

The business model for the recapitalized deCODE focused on establishing corporate partnerships, which is where Amgen came in.  The companies were discussing ideas for partnerships when, as sometimes happens, “there was a moment where they could see the breadth of this engine,” says McGuire.  Some of deCODE’s insights will directly relate to Amgen’s therapeutic areas of interest, he says, but as important will be deCODE’s long-term contribution to R&D.

Becoming part of Amgen presumably puts an end to deCODE’s aspirations as a developer of clinical diagnostics, an area very much in its sights when the firm relaunched.  In that respect, the deal speaks to the relative value of genomics in drug discovery versus clinical diagnostics development. – Mark Ratner

Teva/Xenon – In an effort to streamline its business, Teva Pharmaceuticals has decided to take a more focused approach to R&D, with an emphasis on respiratory diseases and central nervous system disorders (including pain and neurodegenerative disorders). A deal announced with Xenon Pharmaceuticals on Dec. 11 will fit snugly into the Israeli company’s new strategy. In exchange for the global rights to Xenon’s pain drug XEN 402, Teva will pay the Vancouver-based company $41 million upfront, as well as development, regulatory and sales milestones of up to $335 million. Xenon also will be entitled to royalty payments and have the chance to participate in U.S. commercialization, although details of the commercialization split were not disclosed. XEN 402, a Nav1.7 inhibitor, blocks sodium channels that are found in abundance at nerve endings and contribute to chronic pain conditions. Xenon has taken it through the start of Phase II for both inflammatory and neuropathic pain and in topical and oral formulations. Teva, which now has rights to both versions of the drug, plans to begin a full Phase IIb development program immediately. Xenon hasn’t been the only company working on Nav 1.7 inhibitors – a space that has drawn interest because its potential to be an alternative to opioid-based pain drugs. – Lisa Lamotta

Biogen Idec/Isis – Biogen Idec continues to demonstrate faith in antisense technology, announcing a third deal with Isis Pharmaceuticals Dec. 10. Much like the two previous deals between the companies, the recent tie-up focuses on neuromuscular targets. In exchange for access to three early-stage targets, Biogen will pay Isis $30 million upfront. The work is currently in the discovery phase. Once Phase II has begun, Biogen will have the right to option each of the three programs and continue development and commercialization activities. Isis is eligible to receive $200 million in total milestones per program, as well as double-digit royalties should any products be commercialized. In January, Biogen signed its first deal with Isis, agreeing to pay $29 million upfront as well as $45 million in potential milestones for the option to license Isis' Phase I spinal muscular atrophy compound. In late June, Biogen agreed to pay $12 million upfront for the right to a treatment for myotonic dystrophy type (DM1). Early-stage milestone payments could total $59 million. At the end of Phase II, Biogen has the option to license the drug; subsequent payments for meeting certain regulatory milestones could add up to $200 million. – L.L.

AstraZeneca/Isis – Antisense drug-discovery company Isis Pharmaceuticals also landed a second partnership on Dec. 11, an oncology deal with AstraZeneca that will address five targets including one program upon which clinical trials are already underway. For $25 million upfront, plus a $6 million near-term payment due in the second quarter of 2013 if research is ongoing, AstraZeneca gets rights to the Phase I/II clinical compound ISIS-STAT3Rx, as well as one preclinical program and options on other programs. AstraZeneca will fund ongoing research on the programs covered under the partnership, save for a small Phase II trial Isis is still conducting on ISIS-STAT3Rx for lymphoma. Isis also is eligible for $75 million in milestone payments over the next two years, including a $50 million payment if the ongoing study is completed; Isis would receive additional clinical and approval-related milestone payments, licensing fees and royalties on marketed drugs, but the companies didn’t provide further financial information. The partnership covers drugs that use Isis’ proprietary antisense technology, which destroys RNA that creates disease-causing proteins, as well as its Generation 2.5 technology that strengthens the potency of drugs. – Paul Bonanos

Bristol-Myers Squibb/The Medicines Company – In an example of a big pharma out-licensing deal, The Medicines Company has agreed to pay $115 million upfront to Bristol-Myers Squibb for the global rights to Bristol’s already-marketed topical recombinant thrombin product, Recothrom, which is used to stop non-arterial bleeding during surgical procedures. Approved in the U.S. in January 2008, Recothrom brought in $65 million in revenues in 2011. The Medicines Company plans to drive growth by seeking  approval of the drug in other countries. Bristol, which will be responsible for manufacturing, will receive royalties on the product during the two-year collaboration period. After that time, The Medicines Company will have the option to acquire Recothrom. Bristol said its decision to outlicense the drug is part of its effort to streamline operations and improve efficiency. For The Medicines Company, the deal bolsters its offerings in the hospital settings. The company also announced the same day that it has agreed to pay $115 million to acquire Incline Therapeutics, the maker of a needleless, patient-controlled analgesia device used in the hospital setting. – L.L.

Gilead/YM Biosciences – Gilead furthered its diversification strategy with expansion into oncology with the acquisition of Canadian cancer company YM BioSciences, announced  Dec. 12. Gilead will buy YM for $2.95 per share in cash, or about $510 million, with the transaction expected to close in the first quarter. YM had cash and equivalents of $125.5 million as of Sept. 30. The acquisition will give Gilead its sixth clinical-stage oncology compound, a Janus kinase (JAK) inhibitor, CYT387, which has shown promise in treating myelofibrosis. Gilead plans to initiate a Phase III study in the setting in the second half of 2013. The deal represents a solid exit for YM, which gained CYT387 when it merged with Australia’s Cytopia Ltd. in 2010 in a stock transaction that valued Cytopia at around $11 million. YM released results of a 166-patient Phase I/II clinical trial of the drug, its lead product, at the American Society of Hematology meeting Dec. 9, showing that treatment with CYT387, improved transfusion independence rates and spleen response in patients with myelofibrosis. But CYT387 will have to compete with a JAK1/JAK2 inhibitor already on the market for myelofibrosis. Incyte’s Jakafi (ruxolitinib) was approved by FDA for myelofibrosis in November 2011, and was the first JAK inhibitor approved for any indication. CYT387’s second-in-class status could dampen investor enthusiasm for the acquisition, but the fact the drug has been shown to increase hemoglobin and reduce the need for blood transfusions means it could offer a competitive advantage as the preferred treatment for the roughly 30% of myelofibrosis patients who have anemia. – Jessica Merrill

Somaxon/Pernix – Somaxon’s search for strategic alternatives has come to an end, but not exactly a lucrative one. Specialty pharma Pernix will acquire the sleep disorder company for $25 million in stock. That’s a small fraction of the at least $224 million that’s been invested in Somaxon since its 2003 inception. On Dec. 10, the day before the deal announcement, Somaxon’s market cap was a mere $10.5 million. It was trading just above its cash of $8.2 million at Sept. 30. During the third quarter, Deerfield Management initiated a position of 4.5 million shares in the company; that’s almost two-thirds of its shares outstanding. Somaxon shareholders still have to sign off on the deal. It’s been a steady slide for Somaxon. In September 2011, Procter & Gamble, the U.S. marketing partner for Somaxon insomnia drug Silenor (doxepin), terminated an August 2010 deal due to insufficient sales to support marketing expenses. Then in January, Somaxon said it was looking at strategic alternatives after a disappointing Silenor launch. The selling point for Silenor was supposed to be its approval for sleep maintenance, staying asleep into the seventh and eighth hours of sleep. But it’s proven difficult to gain a foothold in an insomnia market awash with generics, particularly of Ambien (zolpidem). Somaxon reported net product sales of $7.8 million in the first nine months of 2012. For its part, Pernix is adding a product to its ranks of generic, branded and OTC products. Until recently, the company has focused on pediatrics. But last month, it bought Cypress Pharmaceuticals for $101 million in cash and stock, thereby diversifying its product offerings. – Stacy Lawrence

Nuron/Pfizer – In another deal that has a big pharma unloading a non-priority asset, Pfizer sold its Meningitec vaccine to Exton, Pa.-based specialty biologic and immunotherapy developer Nuron Biotech. The vaccine is aimed at preventing bacterial diseases such as meningitis, sepsis and pneumonia caused by Neisseria meningitides serogroup C. The product is currently registered in 23 countries, and Nuron plans to expand its availability to markets with unvaccinated and under-vaccinated populations, the company said. N.meningitidis is estimated to cause 500,000 cases of disease annually worldwide with a 10%-20% fatality rate. The company previously acquired the HibTiter Haemophilus influenza Type b conjugate vaccine from Pfizer in April 2011 and is looking to relaunch the product, marketed in the 1990s by Wyeth, in the U.S. following discussions with FDA. Nuron has several vaccines and biologics in development. Terms of the deal were not disclosed. – J.M.

Deals Of The Week: Tolero Introduces Itself In "Double-Jointed" Deal With MannKind

In a deal structure that perhaps could best be described as “double-jointed,” new company Tolero Pharmaceuticals has licensed exclusive worldwide rights to MannKind Corp.’s preclinical Bruton’s tyrosine kinase (BTK) inhibitor program, which Tolero believes could yield novel therapies for hematological cancers and inflammatory diseases.

MannKind, of course, is focused almost exclusively on its perennially troubled effort to develop a recombinant inhaled insulin product, Afrezza. The deal with Tolero puts development of the BTK compounds in the hands of the privately held, Utah-based biotech, but allows MannKind the ability to opt back in after Phase I if it likes what Tolero has uncovered. In the case that MannKind opts back, “bio-bucks” slated to go to MannKind under the deal would flow instead to Tolero.

“It’s a different model that we proposed and one that I think MannKind really liked,” Tolero Chairman and CEO Dallin Anderson said in an interview. “It aligned incentives and made our negotiation progress very smooth. I think us proposing a structure that de-risked the opportunity for MannKind and gave them a chance to still be involved down the road helped us with not only terms but also to get to an agreement that makes sense for both parties.”

Tolero will pay an upfront amount with the potential for development, approval and commercialization milestones going to MannKind, along with tiered royalties on any product sales. The parties did not disclose precise deal terms, but Tolero said the upfront and milestones could total $130 million. However, MannKind also retains the right to re-acquire the BTK assets at pre-specified terms up to 60 days after the conclusion of Tolero’s first Phase I study. If MannKind elects this option, it would assume all development and commercialization responsibilities and costs, with Tolero entitled to the potential earn-outs specified in the April 30 deal.

“BTK currently represents one of the most exciting therapeutic targets in oncology, and we feel that our collaborative approach to targeting BTK may uncover some novel utilities not yet fully realized,” Anderson said. Pressed for details on what those additional “utilities” might be, however, the CEO remained mum.

Much about Tolero remains unknown – founded in 2011 and based in Salt Lake City, the firm is not backed by venture capital or institutional investors. Anderson, who noted his background as having co-founded Montigen Pharmaceuticals in 2003 and then selling to SuperGen in 2006 at a significant multiple, would say only that his company is funded by a number of private investors. Its own programs, including two compounds – TP-0413 for cancer-related anemia and TP-0829 for B-cell malignancies – are slated to enter clinical development in the next year and derive from a discovery approach based upon single genetic alterations that drive cellular signaling pathway abnormalities.

Tolero also is not disclosing the specific source of its technology, although Anderson alluded to some research relationships with the academic community in Utah, specifically the University of Utah and Brigham Young University. The company’s website says it “seeks to target diseases from a pathway-centric approach by identifying and developing pathway-specific inhibitors and then identifying specific diseases (i.e., cancer subtype) and genetic backgrounds where these pathway inhibitors exhibit enhanced efficacy.”

TP-0413, which targets signaling involved in the regulation of serum iron levels, a pathway implicated in rheumatoid arthritis as well as cancer, is in advanced preclinical and IND-enabling studies, with a goal of beginning clinical development in the second half of this year. Tolero also hopes TP-0829 will move into the clinic early next year, with potential activity in non-Hodgkin lymphoma, chronic lymphocytic leukemia and multiple myeloma.

Elsewhere, it was a typically busy week on the biopharma deal-making front – let’s get caught up with the latest round-up of:

Sandoz/Fougera: Novartis' generics unit, Sandoz, announced May 2 that it will be acquiring Melville, N.Y.-based Fougera Pharmaceuticals in an all-cash transaction worth $1.53 billion that is expected to close some time in the second half of 2012. Fougera, which produced sales of about $430 million in 2011 and has about 700 employees, will make Sandoz the largest manufacturer of generic dermatology products in the world. For Sandoz, the acquisition was “a strategic bolt-on with synergy potential,” said Jeff George, global group head, in an interview. According to Sandoz, once the acquisition is complete, the generic dermatology unit will take in about $620 million in sales globally, with most of that coming from the U.S. On the worldwide market, the company will compete with the likes of Watson Pharmaceuticals, Mylan, Sanofi and Teva Pharmaceutical Industries. Fougera, previously Nycomed US Inc., was the dermatology business of Swiss-based Nycomed Pharma AS before it was acquired by Takeda Pharmaceutical for $13.6 billion in 2011. Takeda decided to pass on the U.S.-based part of the business because it lacked expertise in dermatology and was uninterested in building out the assets. Since the Takeda takeover, Fougera has remained the asset of private investors – Nordic Capital, DLJ Merchant Banking (a Credit Suisse Group affiliate) and Avista Capital Partners. The acquisition by Sandoz gives those investors a good return with a multiple of about 8.8 times the company’s 2011 earnings before interest, taxes, depreciation and amortization (EBITDA) of $173 million. – Lisa LaMotta

Abbott/Action Pharma/Zealand: Abbott Laboratories boosted the renal pipeline of its soon-to-be-separate pharma division AbbVie by acquiring worldwide rights to Action Pharma’s AP214, a Phase IIb drug designed to treat acute kidney injury that can occur during cardiac surgery. Unlike most licensing deals for pipeline assets, Abbott obtained rights to the drug for a single payment, a $110 million cash transaction that won’t be followed by milestone or royalty payments. (Abbott has made this type of bet at least once before, paying PanGenetics $170 million upfront for a Phase II anti-NGF asset in 2009. Yet there’s one complicating factor: Denmark-based Action had developed the drug using structural peptide technology licensed from Zealand Pharma, another Danish company. In the new arrangement, Action rather than Abbott will pay Zealand DKK 62 million ($11 million), and Zealand is due a royalty in the low single digits if Abbott commercializes the drug. The old agreement between Action and Zealand has been terminated. Abbott will begin a second Phase IIb study on the drug this fall. No treatment has yet been approved for acute kidney injury in patients who have undergone cardiac surgery. Abbott already holds ex-U.S. rights to Phase III chronic kidney disease candidate bardoxolone, licensed in September 2010 from Reata Pharmaceuticals, as well as atrasentan, an internally developed Phase II endothelin-receptor antagonist in diabetic kidney disease. – Paul Bonanos


AstraZeneca/Axerion: AstraZeneca’s new virtual neuroscience drug discovery and development unit reached its first partnership agreement May 1, with a licensing and co-development pact centered on preclinical antibodies for Alzheimer’s disease discovered by Axerion Therapeutics. No financial terms were revealed, but Axerion will receive an upfront payment and research and development funding and be eligible to earn milestones and sales royalties if any compound reaches market. The New Haven, Conn., biotech will work with MedImmune, the biologics subsidiary of AstraZeneca, to optimize and develop antibodies that block the binding of amyloid-beta oligomer to cellular prion protein (PrP-C) in the brain. MedImmune has bought into Axerion’s program, in-licensed from Yale, in the hope that this approach could yield a disease-modifying therapy for one of the most challenging indications currently targeted in drug development. The Axerion partnership is AstraZeneca’s first since it announced plans during a quarterly earnings call Feb. 2 to streamline much of its R&D function, including going to a virtual model in neuroscience. At the time, R&D President Martin Mackay said the pharma’s goal was a “leaner, simpler, more innovative organization with a lower and more flexible cost base.” – Joseph Haas

Merck/Trevena: Pennsylvania-based Trevena announced May 2 that Merck & Co. will be the latest company to utilize its G-protein coupled receptor (GPCR) biased ligand platform. The company hopes to identify ligands that turn on only some biological responses, instead of a whole variety of biological responses, by using what it terms "biased ligands.” The company said that Merck, through a subsidiary, has signed on to use the technology to research biased ligands against an undisclosed receptor. Financial details of the transaction were not disclosed. Trevena, which raised a $35 million Series B round in 2010, has other research under way, including its mid-stage lead compound, a drug meant to treat acute heart failure called TRV120027. GPCRs are protein structures that wind across the cell wall, crossing the cell membrane seven times, and common drug targets. When a ligand binds to a GPCR's extracellular part, it triggers a response inside the cell. – LL

Gilead/AnaptysBio: On the heels of inking a partnership with Celgene in April, AnaptysBio has signed a fifth major pharma partner for its antibody discovery platform. This time, it is Gilead Sciences that wants access to AnaptysBio’s SHM-XEL platform for antibody discovery. The companies announced a partnership to develop novel antibody therapeutics May 1. Gilead will pay an undisclosed upfront fee and pay development milestones and royalties on sales of any drugs that emerge from the partnership. AnaptysBio’s technology platform uses the natural biological process by which antibodies are generated, somatic hypermutation (SHM); the company claims its technology can create antibodies with different antigen-binding regions and better binding affinities. Its other pharma partners include Merck, Roche and Novartis. – Jessica Merrill

Hologic/Gen-Probe: Women’s health-focused Hologic, a developer and supplier of diagnostics, imaging and surgical products, is buying molecular diagnostics provider Gen-Probe for $3.7 billion in cash, to be paid for largely by taking on debt. Adding Gen-Probe’s automated instrument platforms gives Hologic critical mass in the molecular diagnostics market. Hologic already owns a molecular diagnostics platform: the Invader technology it acquired when it bought Third Wave Technologies for $580 million in 2008. That gave Hologic an entrée into the molecular testing space, including its own HPV test – a broadening of Hologic’s core focus in women’s health, which includes mammography and, via its merger with Cytyc Corp. in 2007, cervical and breast cancer diagnostics. Gen-Probe gives the company the automation and menu to grow the diagnostics market more quickly – by implication, something that the Third Wave acquisition failed to do. A buyout of Gen-Probe has been in the air since April 2011, when the company reportedly retained Morgan Stanley seeking a buyer. What’s unclear is why Hologic made its move now. There’s speculation that the deal foreshadows a weakness in Hologic’s business. “Based on their forward-looking diligence [statements], that does not appear to be the case,” says Piper Jaffray analyst Bill Quirk. Clinical adoption of new Hologic’s tomosynthesis breast-imaging platform appears to be keeping pace with expectations. It brought on the Gen-Probe business as “one of the elements in building diagnostics so that it performs like [the] breast health [business], not so that it makes up for [it],” Hologic CEO Robert Cascella told investors. Post-acquisition, 50% of Hologic’s revenues will be in diagnostics, 38% in women’s imaging and 12% in surgical. – Mark Ratner

Royalty Pharma/Fumapharm – Royalty Pharma announced May 2 that it acquired an interest in the earn-outs payable to former shareholders of Fumapharm, which includes an interest in Biogen Idec’s multiple sclerosis candidate BG-12, for $761 million in cash. Based in New York, Royalty Pharma says it is the industry leader in acquiring royalty interests in approved and late-stage pharmaceuticals, including interests in Abbott’s Humira (adalimumab), Pfizer’s Lyrica (pregabalin) and Genentech’s Rituxan (rituximab). Biogen bought out Fumapharm in 2006 for $215.5 million and with it the German company’s lead product, psoriasis drug Fumaderm (fumaric acid esters) as well as BG-12. In April, Biogen announced positive data from the Phase III CONFIRM trial, its second pivotal study in relapsing-remitting MS. The compound was filed for approval in RRMS at FDA in February and with the European Medicines Agency in March. – JAH

Image courtesy of Wikimedia Commons

Supremes' Prometheus Ruling Has Dire Consequences for Personalized Medicine

by Michael Boss

It is astonishing when nine very smart people get it so wrong. I refer to the US Supreme Court decision in Mayo v. Prometheus.

The court’s decision was that Prometheus’ patents are not valid since they are attempting to cover a law of nature. The analogy to E=mc2 is made. All of biology follows the laws of nature!

Prometheus developed an assay to help identify the correct dose of thiopurine drugs in the treatment of autoimmune disease. If the drug is metabolized too fast the level will be too low and so not effective. Too slow a metabolism and the drug can be toxic.

Potentially lost in the supreme circus around arguments addressing the constitutionality of the Affordable Care Act, the court is going to announce today whether it will grant or deny the ACLU’s cert petition asking it to review its suit against Myriad and determine if genes are patentable. Lawyers anticipate the court will grant the petition, vacate the Federal Circuit’s decision in favor of Myriad and remand the case back to the Federal Circuit for reconsideration in light of its ruling in Prometheus.

While the specific circumstances of the Prometheus case revolve around analyte measurements, by simple analogy it seems to me that the argument can be extended to genes and any gene products. So the identification of genetic variants that, say, cause disease or resistance to treatment by a drug or potential toxic response to a drug would all fall under this Supreme Court ruling.

This is a devastating ruling at the dawn of the personalized medicine era. The Court has wiped out any incentive to figure out why certain individuals might do better on drug A rather than drug B and how much of drug B should be given. And what about all the technologies under development to define the optimal treatment of cancer? Again by analogy, finding out which drug kills the tumor cells to select the correct drug for the patient would seem remarkably similar to the Prometheus situation.

The patent laws were developed to foster innovation and development of commercial enterprises. This decision has set back a key field by as long as it takes to get the ruling reversed.

image of Jacob Jordaen's painting, Prometheus having his liver eaten by an eagle (in our version the eagle is apparently the Supreme Court), via wikimedia commons.

Michael Boss, a biotech executive with companies including Antisoma, Xanthus, Elan and Athena, is currently an independent consultant. He is also an inventor on a seminal biotech patent.

PSA Update: Dealing with Diagnostics

Last week, we added Mike Pellini, CEO of the cancer genomics start-up Foundation Medicine, to our Pharmaceutical Strategic Alliances Conference panel that will be discussing strategies for sharing risk in relationships between pharma companies and diagnostics developers. Mike was president and COO of Clarient Labs until its sale to GE Healthcare last year – one of several notable M&A transactions involving CLIA lab-oriented assets.

We recruited Mike after Iain Miller, head of theranostics strategy and business development at BioMerieux, told us he was taking a new position as global head of personalized medicine at GE Healthcare, where he started this week. Iain will still be at PSA to talk about Biomerieux’s deals with Ipsen and GSK around predictive cancer biomarkers and now, also a bit about his new role at GE, which includes the challenge of leveraging the value of Clarient and bringing additional assets in around it. With Iain’s move and Mike’s addition, we maintain a balance on the panel between larger and smaller company perspectives. Rounding out the session are Nic Dracopoli of J&J and Risa Stack of Kleiner Perkins Caufield & Byers, an early and frequent investor in companies developing complex, high-value diagnostics, the vast majority of which are performed in the CLIA setting.

The potential value a CLIA lab brings to pharma as well as other players like GE is a subject we’ve discussed in several IN VIVO features this year, including in the current (Sept.) issue, where we ask the question “Is Diagnostics the New Biotech…and Will Pharma Embrace It?”

The two fields share obvious historical parallels including common starting points, first with the use of antibodies as targeting agents and probes, and later with genomics. In both cases, the same core assumptions existed around using those tools to unlock the power of the biological perspective. And there was a need for physicians, potential development partners, and regulators to get their arms on a unique and innovative set of promising technologies.

Pharma’s interest in the new wave of complex diagnostics is two-fold. It clearly needs to be able to ensure the development and distribution of companion diagnostics for its targeted therapies – why some argue risk sharing is inevitable, if not yet in evidence. For some, diagnostics also appears to have regained its appeal as a way to diversify: think Novartis with Genoptix or Eli Lilly with Avid Radiopharmaceuticals.

Unlike big box diagnostics companies, which are primarily interested in running as many tests as possible on their platforms, the developers of complex diagnostics tend to be vertically oriented. They feature the kind of narrow and deep focus on a specific disease state that is required for adoption and payment of high-value offerings. Those capabilities fit well with – and some would argue are essential to – the biomarker discovery efforts now woven into virtually all of new drug development. On the commercial side, they also offer the potential to leverage the value of a specialized sales force.

Pharma has danced with diagnostics but also maintained its distance, much as it did with biotech in its early days, keeping in touch via alliances until the emergence of product franchises it could acquire. But unlike biotech, where products and franchises are basically additive to a portfolio, there’s a co-dependency with diagnostics, at minimum in the area of companion diagnostics and potentially more broadly, as an increasing number of diagnostics and related services emerge that help direct the choice and management of therapy over all.

The question is: What business models best address this evolution. Is collaboration and risk-sharing the way to go? Are diagnostics franchises now becoming investible assets for pharma such that they will be swallowed lock, stock, and barrel (and if so, which underlying tools and technologies will be most sought after)? Let’s see what the experts at PSA have to say.

Join us September 23.

What DOTW Didn't Say about Veridex/MGH

A widely read initial report from the Associated Press on Monday January 3, 2011 mischaracterized the new arrangement between Veridex and Mass General around the development of a third generation system for capturing and analyzing circulating tumor cells. (Here’s one link to that report, since amended by AP.)

The news service originally presented the deal as being around an existing second-generation “herringbone” pattern CTC chip technology, originally described in a Proceedings of the National Academy of Sciences paper in October 2010. AP even ran a photo of that chip lifted from the paper.

But the technology of interest to J&J is broader based and earlier in development; hence the five-year time horizon for this collaboration. (See our coverage in the January 7 Deals of the Week for more.) The third-gen system uses antibodies tagged with magnetic beads that can be mixed in with the blood sample.

In earlier versions, antibodies were affixed to a post on the surface of the chip (or on a V-shaped herringbone surface, which creates more active contact at the surface) to capture the tumor cells as the blood sample poured over it. Having antibodies in solution instead will make the system more versatile and greatly simplify chip manufacturing.

It also should improve specificity by allowing a purer collection of the CTCs, with reduced background noise from the capture of normal hematopoietic cells. Both the prior post and herringbone systems are 10-100x more sensitive than the current Veridex CellSearch system, says CTC chip inventor Mehmet Toner of MGH. He expects the third-gen system will be even better.

In the meantime, MGH is continuing development of the herringbone chip, through NIH grants and other sponsorship including support from Stand Up 2 Cancer, a research funding group organized by Hollywood celebrities. Toner and Dan Haber of MGH lead one of SU2C’s five scientific “Dream Teams.”