No Room for RNAi in Roche's Operational Excellence Plans

Tucked inside Roche's months-awaited announcement today containing details on its restructuring program (and the loss of 4,800 jobs, mostly in the US and mostly in pharma) is a nugget that will make RNAi-watchers gulp. Three years on from its landmark deal with Alnylam in the field of RNA interference, Roche is shutting down all of the discovery for which it paid so dearly.

That deal with Alnylam included $331 million in up-front payments and -- in addition to non-exclusive rights to Alnylam's IP in four therapeutic areas -- bought Alnylam's European research site in Kulmbach, Germany. Roche now says it will shutter Kulmbach and all its other RNAi work:

Following a comprehensive portfolio review, Roche will discontinue certain activities in research and early development. These include RNA interference research in Kulmbach, Germany, and in Nutley, New Jersey, and Madison, Wisconsin, in the US. In addition, plans also include reorganising certain internal functions to free up resources for upcoming phase II studies of new molecular entities. Approximately 600 positions will be affected.

Adding to Roche's woes, the 5% stake it took in Alnylam in 2007 -- at $21.50 per share (a 40% premium at the time) -- was subject to a three-year lockup and is now way under water. If there's RNA interference activity in Roche's future, it's hard to divine where. Roche CEO Severin Schwan was clear on a call this morning with investors: "We plan to exit ... our siRNA efforts," he said. Nobody pressed him further during the Q&A. Case closed.

The news comes on the heels of Novartis' decision in late September to not exercise an option that would have given it Roche-like access to Alnylam's platform for the relatively low sum of $100 million. Novartis remains committed to RNAi drug development, the companies noted at the time, and is pursuing RNAi therapies against what it calls its "full and final" list of 31 targets. But the Novartis news prompted Alnylam's own restructuring. The RNAi pioneer said it was laying off 25-30% of its workforce.

So where do these Swiss stances leave Alnylam -- not to mention other RNAi hopefuls including Roche's other partner Tekmira? Alnylam was ready with a response, expressing disappointment and surprise at Roche's decision. At the very least, these moves suggest that signing new blockbuster deals will be difficult. But it has never been clearer that Alnylam will no longer live or die based on its ability to sign monster non-exclusive platform deals: it's now a drug developer. The real risk is that Roche's decision, and to some extent Novartis', reflect a broader belief in a bleak clinical future for RNAi therapeutics. With human proof-of-concept data not too far away, we won't necessarily have to wait long for a glimpse.

Meanwhile, Alnylam's market cap languishes below $500 million, and the company announced earlier this month that its still-impressive cash pile was $372 million. That's historically low value ascribed to the company's IP, dealmaking potential, future milestones and royalties, and clinical pipeline.

The field of RNAi needs a win, and badly. Merck, the other big pharma to take a big leap into the space with its $1.1 billion acquisition of Sirna back in 2006, says astonishingly little about its therapeutic progress there (and siRNAs are absent from its pipeline chart). Now and then a rumor that someone's going to pony up money to buy the UK's Silence Therapeutics bubbles to the surface, and just as surely recedes again. RXi is committed to delivering for its investors a deal by the end of 2010. Time is running out on that promise. The next generation RNAi play Dicerna has demonstrated that it can pull in investors, but it has yet to enter the clinic with its dicer-substrate molecules.

RNAi may not succeed as a therapeutic modality. More likely, it just needs time to mature, to solve its delivery problems, to gain traction in the clinic. Whether or not any Big Pharma or investors are willing to wait for that remains to be seen.

Genzyme: The Takeda Rare Disease Company ?!?

The Genzyme/Sanofi rumorville is awash yet again—but this time the rumors relate to the quality of sushi in Cambridge. The latest speculation Nov. 14 is that Genzyme had found a white knight bidder in Takeda, the largest Japanese pharma and a company with ambitions to be a bigger player on the world’s pharmaceutical stage.

It’s certainly true that Takeda, like Sanofi, is facing a pretty significant patent cliff as sales from Actos and Prevacid slide. It’s also true that its global ambitions mean Takeda might look to grow its U.S. presence via an acquisition. (As this IN VIVO feature from May spells out, Japanese pharma are one of the most promising buyers for US biotechs.)

And yes, we know the strength of the yen means Takeda can take advantage of the exchange rate, essentially paying a premium others might not be able to afford that still allows them to capture additional value even at an inflated price.

But taking a step back it’s hard to put a whole lot of faith in rumors that may, once again, be posturing. Oh, sure, the two drug makers probably talked. But talk is cheap. And since Genzyme began soliciting suitors several weeks ago, it’s entirely possible the biotech instigated the discussion. What IN VIVO blog wants to know is has a term sheet been submitted?

"I would be skeptical of one of the top Japanese pharmas emerging as a bidder," says George Montgomery, co-founder and managing director of the health care M&A advisory firm Marshall Healthcare Partners, who spoke to us before Takeda's name was officially linked to Genzyme’s in the blogosphere. “It would be their sole strategic initiative for the next few years, as opposed to being able to make multiple bets."

It’s important to remember this basic but highly relevant point: an acquisition the size of Genzyme – north of the $18.5 billion Sanofi has already offered – would be hard for any of the Japanese pharmas to swallow, even Takeda, which only has $9.7 billion in cash on-hand as of Sept. 30. Thus, Takeda would need to borrow significant cash to finance the deal, something its dividend-conscious shareholders may not support.

"Genzyme is a growth play at a time when Takeda is not, but the concern, of course, is that the ensuing weaker balance sheet would put Takeda's sizeable dividend at risk," said analyst Pelham Smithers of Pelham Smithers Associates said in a Nov. 15 research note. "The general thinking is that Takeda won't go for it, but it is an interesting opportunity nonetheless.

In addition, Takeda still needs to make good on its 2008 $8.8 billion purchase of Millennium Pharmaceuticals, for which the Japanese pharma paid a dear premium– 53 percent on the stock price and 16 times revenues.
"I just can't see how Takeda should be able to manage Genzyme and Millennium under the same umbrella," said Credit Suisse analyst Fumyoshi Sakai in an email exchange.

Genzyme's broad business portfolio, with an emphasis on drugs to treat rare diseases as well as a presence in areas like renal disease and biosurgery, seems afield of Takeda’s stated areas of focus: metabolic disease and oncology.

Sanofi has stated its intention to maintain Genzyme's business in Cambridge, MA as a center of excellence for rare diseases, even as it plans to consolidate other parts of the business and reduce SG&A expenses. It’s hard to see how Takeda could make the same decision, since its Millennium division already operates independently in Cambridge with the tagline, "The Takeda Oncology Company."

For such reasons, does "Genzyme: The Takeda Rare Disease Company" have the right ring?

by Jessica Merrill

Deals Of The Week Gets Exclusive

Commitment is such a weighty decision, isn’t it? Whether it’s high schoolers obsessed about going steady or 30-somethings who stay over three nights a week but refuse to stash their extra underwear in an available drawer, making the choice to be exclusive is hard. What if things don’t work out? Gulp.

In biopharma land, exclusivity is no less thorny a subject, especially when it relates to options-to-acquire. This week news comes that Novartis, which alongside Cephalon remains one of the most active in inking this specific flavor of option-based deals, is at it again. On November 11, Novartis said it had taken an option either to buy San Diego-based Aires Pharmaceuticals outright or license the biotech’s mid-stage treatment for pulmonary arterial hypertension called Aironite.

Along with the option announcement, Aires said it reeled in a $20 million Series B financing, enough money to finish Phase II trials of Aironite, a nitric oxide prodrug that causes vasodilation and has anti-inflammatory properties. Novartis didn’t officially take part in the financing, but it has ties nonetheless. That’s because the new investor, MPM Capital, made the investment out of its MPM Bio IV NVS Strategic Fund (try saying that three times fast), a side-car fund backed by—you guessed it—Novartis. Existing Aires backer ProQuest Investments also participated in the round.

Details surrounding the option are murky. We know that Novartis paid a separate fee for the right to acquire Aires after it successfully completes Phase II studies of Aironite and, all-in, the deal price could reach $250 million. But the price of the option remains undisclosed, as do values for the initial acquisition payment and the regulatory and sales milestones.

Since its formation in 2007, the MPM/Novartis fund has signed at least eight option deals, including the recent Aires transaction, according to Elsevier’s Strategic Transactions. The Aires deal hews closely to a familiar formula designed to give Novartis an advantage at the deal-making table. Except for the overall buy-out price, the Aires news is reminiscent of Novartis’ March 2009 option-to-acquire Proteon Therapeutics for up to $550 million. That deal, contingent on Proteon’s ability to demonstrate proof-of-concept with its Phase I/ II recombinant human elastase, was also announced concurrently with the first tranche of Proteon's $50 million Series B financing.

Given the cash constraints privately-held start-ups face, option-type deal making has become more common. Such deals might cap investor upside, but the additional non-dilutive cash and greater certainty of an exit mean it’s an offer investors have a hard time refusing.

But as anyone who's watched a Mafia flick can tell you, "hard to refuse" isn't the same as "popular." Some VCs and biotech executives worry that the Novartises of the world will try and wiggle out of the pre-agreed upon terms that trigger an alliance or acquisition. Indeed, there is recent precedent.

In 2007, Radius optioned its mid-stage osteoporosis medicine, BA058, to Novartis for $10 million. According to the terms of the deal, once Radius announces Phase II data for BA058, the big pharma has 90 days to evaluate the information before making a go/no-go decision. At the end of the option period, Novartis can say “no” and walk away, leaving Radius to shop the product to anyone they want, or “yes” and trigger the pre-negotiated deal. The thing is, Radius announced its Phase II data in August 2009, and there’s been no nay or yeah about the option in the intervening period. Math may not be this blogger’s strongest suit, but even a nine-year old can calculate that a decision from Novartis is a year overdue.

Indeed, there’s little clarity on whether any of the options associated with the MPM/Novartis fund have actually been exercised, even though a number of them have undoubtedly reached critical decision points. Does Novartis’ decision regarding BA058say anything about the long-term viability of the option model?

Maybe yes. Maybe no. (Depending on the daisy--er, asset-- it's a little bit like playing effeuiller la marguerite.)Given current uncertainties in the marketplace, it’s a fair bet option-style deal making isn’t going away. And for the cynics in the readership, there are happy endings: Purdue Pharma and Cephalon recently exercised prior options associated with their respective tie-ups with Infinity Pharmaceuticals and BioAssets Development Corp.

Ultimately commitment is a leap of faith—or at least a flying leap. Here at IN VIVO Blog we’ve got your exclusive line-up of deal making news. It’s time for another edition of…


Clovis Oncology/Clavis Pharma: News flash! IN VIVO Blog has learned that several other firms were also involved in this deal: Cleavis, which is working on DNA repair mechanisms; Clyvis, an under-the-radar Scottish start-up; and Clivus, with the latest advances in phrenology! Of course we jest. The real deal here is just between Clovis and Clavis, announced Nov. 11, and it expands upon the November 2009 tie-up that saw Clovis pay Clavis $15 million upfront for partial rights to CP-4126, a reformulated gemcitabine currently in Phase II for pancreatic cancer. The reformulation with Clavis's Lipid Vector Technology aims to promote gemcitabine uptake in patients with low levels of the nucleoside transporter protein hENT1, which normally allows gemcitabine into cancer cells. Several studies suggest a significant percentage of pancreatic cancer patients, perhaps up to 67%, have low levels of hENT1, and the partners are working on a companion diagnostic to sort low- from high-hENT1 patients. With the expanded deal, Clovis pays $10 million immediately for full global rights, plus $30 million in Asian milestones and up to $165 million in sales milestones. Clovis is still on the hook for the $365 million in milestones attached to the development and commercial rights it originally bought for North America, South America and Europe. -- Alex Lash

GlaxoSmithKline/Xenoport: The partners on the restless-leg syndrome (RLS) treatment Horizant said Nov. 8 they had amended their February 2007 agreement to give the San Francisco Bay Area biotech the right to pursue development of the drug for diabetic peripheral neuropathy (DPN) and additional indications in the US. All ex-US rights previously granted to GSK have reverted back to Xenoport, as well, and the firms have made undisclosed financial adjustments in milestones and royalty rates to reflect the new responsibilities. GSK remains responsible for US approval of Horizant – formerly known as Solzira and burdened with a track record of clinical and regulatory misses – for restless-legs syndrome and post-herpetic neuralgia. The drug failed a Phase II trial for DPN in 2009, then FDA rejected Horizant for RLS in February 2010, issuing a complete response letter and prompting investors to bail on Xenoport. But FDA has accepted GSK's response and has issued a new PDUFA date of April 6, 2011. Under the original deal, GSK paid Xenoport £40 million upfront, promised up to £298 million in milestones, and sales royalties. -- A.L.

Eli Lilly/Avid Radiopharmaceuticals: Lilly announced a deal this week, but not the blockbuster M&A investors have been hankering for. Even as ratings agencies downgrade the Indianapolis pharma, Lilly is sticking to its strategic guns, replenishing its pipeline with bite-sized transactions centered on late-stage assets. The company’s decision Nov. 8 to purchase Avid Radiopharmaceuticals, a privately-held diagnostics company that specializes in the detection of chronic diseases through brain imaging, is further evidence of Lilly’s mindset. It also shows that despite the risks of Alzheimer’s drug development (semagacestat, anyone?), Lilly still believes in this therapeutic arena. Lilly will pay $300 million upfront to acquire all outstanding shares of Avid and another $500 million tied to regulatory and commercial milestones to get its hands on the biotech’s molecular imaging agent, florbetapir F18, which is pending FDA approval. While such a large sum isn't unusual for a biotech with a late-stage asset in a valuable therapeutic area like oncology, it's almost unprecedented in the diagnostics arena, where M&A targets generally have marketed assets and are acquired not by drug companies but by fellow diagnostics specialists. Given the risks associated with Alzheimer's, technologies that help prevent costly late-stage failures like semagacestat are worth a premium. And Lilly, determined to push forward its remaining Phase III Alzheimer's drug, the antibody solanezumab, certainly can’t afford to repeat its semagacestat outcome. But those peculiarities mean the startling deal price for Avid is likely the exception rather than the rule. Meantime, Avid’s backers, which include Safeguard Scientifics, Alta Partners, Pfizer Strategic Investment Group, and Lilly's own corporate venture group, can celebrate a tidy exit. Based on the deal’s upfront alone, investors stand to realize an estimated 4x return on their venture, having put in just under $70 million since Avid’s 2004 founding. -- Lisa Lamotta and E.L.

Pfizer/Biovista: This week’s deal between Pfizer and Biovista illustrates yet again the thrifty mindset at work in the halls of the the biggest pharmas. To discover additional uses for existing compounds, Pfizer has inked a pilot research collaboration with privately-held Biovista that gives the big drug maker access to the service firm's proprietary datamining technology, which uncovers potential utility in various therapeutic areas, including oncology, ophthalmology, metabolic disease, and CNS disorders. Biovista will collaborate with Pfizer’s Indications Discovery Unit to identify up to three novel indications for each of the Pfizer candidates being evaluated. In return, Pfizer will pay Biovista an undisclosed upfront payment and success-based milestones. Biovista has inked numerous partnerships around its technology, including one earlier this year with the FDA to help regulators identify and understand the mechanisms resulting in adverse events. Biovista isn't content to remain a service play; in 2009, the firm started its own drug development program based on repositioned compounds in CNS diseases. Pfizer, meanwhile, continues to try to wring value from every compound in its research pipeline. This is the second repositioning deal the behemoth has inked in 2010 alone. In May, it announced it was teaming up with Washington University in a $22.5 million, five year collaboration designed to find new uses for a 500-compound Pfizer data set. -- E.L.

Image courtesy of flickrer dmixo6 under a creative commons license.

Is it Worth It?

The term that keeps coming up when you talk to Republican staffers in the House of Representatives about their 2011 agenda is: oversight.

“I think one of the lessons Republicans learned when they lost power in 2006 is they should have done more oversight of their own people,” says one Democrat on Capitol Hill who doesn’t think oversight of the Obama Administration would be such a bad idea.

If Republicans didn’t learn the lesson of conducting more oversight of their own, they sure are planning to teach a lesson to their colleagues on the other side of the aisle.

Unless you were living under a rock, you know that repealing health care reform was one of the top issues Republican candidates across the country ran on as they took over the majority in House and made major gains in the Senate.

The start of that process, according to many Republicans, is to haul up heads of key agencies in HHS—including the HHS Secretary Kathleen Sebelius—to start asking some hard questions about healthcare reform and its implementation going forward.
“Once he gets vaccinated, we look forward to seeing him” for oversight hearings, quips one Hill staffer of Acting CMS Administrator Don Berwick, who has yet to go before a House congressional committee but will testify before the Senate Finance Committee on November 17.

CMS is already a focal point of the soon-to-be incoming Congress with pending national coverage decisions for Dendreon’s prostate cancer cell-based immunotherapy Provenge, Amgen’s Aranesp and erythropoiesis-stimulating agents (ESAs), and the possibility of doing the same with Roche/Genentech’s Avastin for first-line treatment of breast cancer.

The House Oversight & Government Reform Committee, which will be chaired by Rep. Darrell Issa (R-Calif.) come January, has already sent a letter to FDA Commissioner Margaret Hamburg probing the agency’s oversight of pharmaceutical manufacturing plants in Puerto Rico. The letter promises more questions in the future, and we expect an in-person appearance before the committee will not be far off.
The question is: are Obama Administration officials ready and willing to face a hostile Congress for the two years?

There are already rumors in Washington that HHS Secretary Sebelius could be the next high-level official out the door. And FDA Commissioner Hamburg has a built-in successor in Deputy Joshua Sharfstein, who has previous Hill experience. And remember, Berwick is still only “acting” (he was a recess appointment) and has yet to be confirmed by the Senate.

Whether they stay or go may depend on their appetite for a good, long public fight. Do they think it’s worth it? We’ll know in the next 12 months.

A Leaderless European Medicines Agency: Does it Matter?

Will it matter if Europe’s top medicines regulator, the European Medicines Agency (EMA), is without an Executive Director for the next six months or so?

A headless EMA is on the cards because of a translation mistake in a European Commission recruitment advertisement – the use of “Physiker” in German, meaning physicist, rather than the German word for physician.

This meant that the recruitment process, which started earlier this year, had to be repeated, and will not be finalized before Thomas Lonngren, the current Exec Director, bows out at the end of December.

The EMA is really only a co-ordinating center for the 27 national regulatory agencies in the EU, and it’s these agencies, and their employees, that do most of the actual work.

So, it is a totally different beast to a more politicized regulator like the U.S. FDA, where the top position is a political appointee and the agency itself makes the regulatory decisions.

And let’s face it, the FDA has been without a Commissioner in the recent past, and has not gone completely awry, so it should be relatively easy for EMA to do the same. EMA’s recently appointed Acting Executive Director, Andreas Pott should have no problem keeping everything ticking over, anyway; he has been EMA’s head of administration for 10 years.

Maybe there's more required than ticking over, though. Europe has a new Health Commissioner, John Dali, who is keen to make his mark, and there is draft EU legislation rumbling around on counterfeit drugs, patient information, pharmacovigilance and the like. All of this needs EMA's input.

Furthermore, the agency is halfway through deciding its work priorities for the next five years via its “roadmap for 2015”. And what would happen if the region had to confront another public health crisis, like the swine flu epidemic?

On the plus side, when the new (non-physicist?) Executive Director does show up, he or she will (hopefully) be well placed to reinvigorate the agency.

Despite new websites and rebranding initiatives (the infamous pestle-and-mortar logo) and a new, shortened acronym (EMEA is so passé), the agency and its Executive Director are still largely invisible to Europe’s general public.

What EMA really needs is an individual who is comfortable with having a high public profile, someone who is not only a highly skilled regulatory bureaucrat but who communicates effectively to the public, and becomes a publicly recognized figure.

Yes, the agency is excellent at putting “regulatory affairs” documents on its website, but is this what the public wants, or needs? As I write, the communication heading the “What’s New” category on the EMA website is titled: “Guidance on centrally authorised products requiring a notification of a change for update of annexes”. Not something that is likely to grip the attention of many of the EU’s population of half a billion souls.

Perhaps there is an opportunity here to move beyond considering national regulators for the post, and to consider academics, or even individuals with a more political background.

But one major regulatory stakeholder, the pharmaceutical industry, is sure to remain quiet during the recruitment process. Any indication that the industry backs or favours a particular candidate is not likely to enhance that candidate’s prospects. Expect nothing from the industry until the decision is made.

Potential candidates should hurry, however. The closing date for submitting applications is Nov. 24.

-- John Davis

image from flickr user sebr used under a creative commons license

DotW Considers Restructuring

As part of its announced restructuring this week, Biogen Idec decided to terminate or divest 11 programs in areas such as cardiovascular and oncology and instead focus on its historic strength in neurology and autoimmune disease, as well as promising hemophilia assets.

The ripples of that decision are already being felt, most immediately by Cardiokine, a privately-held biotech based in Philadelphia that has raised $87 million in venture dollars since its 2004 founding. Back in 2007 the start-up ,which counts Health Care Ventures and Care Capital among its backers, partnered its sole asset, a selective vasopressin receptor antagonist for hyponatremia called lixivaptan, to Biogen for $50 million upfront.

Amber Salzman, president and CEO of Cardiokine, did her best to spin the divestment news in a positive direction. "I am pleased we have regained exclusive global rights to lixivaptan, a potentially important advance in the treatment of hyponatremia," she said in a statement. "We are nearing the completion of the Phase 3 program and look forward to study results and confirming our registration plans in the near future.”

Biogen nabbed lixivaptan as it was rebuilding its late stage pipeline in the wake of a previous restructuring that began in 2005. At that time Biogen execs admitted they had neglected their pipeline to concentrate on the launch of Tysabri (natalizumab), a next-generation MS therapy that promised much greater efficacy than the interferon-based treatments dominating the market at the time. So they ramped up dramatically in several areas, including CV, buying rights to the pulmonary arterial hypertension drug Aviptadil from mondoBiotech and Adentri, an A1-adenosine receptor antagonist for heart failure, from CV Therapeutics. (Biogen dropped work on Adentri earlier this year. )

As a result of Biogen's new restructuring, Cardiokine loses out on a potential $170 million in milestones. At this point, it's got to hope Big Pharmas in need of late stage products (Lilly? Sanofi-Aventis?) could be drawn into a more lucrative partnership, or even an acquisition.

The safety-first mentality at FDA has resulted in a full-fledged flight away from anything that might be classified with a "C"and a "V," but lixivaptan has a few things going for it, not least that its in Phase III trials. Its use in hyponatremia, an electrolyte disorder characterized by an imbalance of sodium and water, is also a plus. There are currently no approved therapeutic treatments for the condition, which frequently goes undiagnosed. Thus, potential interested acquirers can check the "unmet medical need" box that is now de rigueur in any biopharma transaction. In all likelihood, no deal will emerge until potential acquirers have a gander at top-line data from the ongoing three pivotal trials, especially a 650-patient study in congestive heart failure.

Cardiokine wasn't the only entity to suffer the fall-out from revised priorities this week. The American people also decided to divest more than 60 Democrats from their Congressional pipeline, but for now we'll let others weigh in on the effects of the new portfolio, especially on health care reform. Meanwhile, it's time for this blogger to revisit her own priorities and call it a weekend...


McKesson/US Oncology: The big-ticket acquisition this week was health care services and IT player McKesson's $2.16 billion all-cash take-out of US Oncology, a physician practice management company for cancer physicians. McKesson will pay cash for the outstanding shares of privately-held US Oncology and assume its $1.6 billion in debt. The deal builds on McKesson's aspirations to expand in the oncology specialty services arena, helped out by its 2007 purchase of Oncology Therapeutics Network for $575 million. It also comes as demand for oncology products is on the rise, and drug makers both big and small are doing their best to develop differentiated medicines to tackle the disease, an event that will only increase the need for purveyors of oncology services. (That is until there is pushback from payors about the distribution of pricy cancer meds.) Bringing US Oncology in-house expands the number of oncologists to whom McKesson has access to 3000, according to executives on a November 1 investor call. Currently, The Woodlands, Tex.-based US Oncology supports about 1300 community-based physicians in 38 states. Analysts have reacted positively to the deal, which is expected to close by the end of 2010, because of the complementarity of the two businesses. In a note to investors, Tom Gallucci of Lazard Capital Markets says it gives McKesson “a meaningful land grab within the fast-growth oncology space, lending further scale to its distribution business.” -- Greg Twachtman & E.L.

Bristol-Myers Squibb/Simcere: Behold the rise of regional deal-making. As drug makers look to push into important emerging economies like China and India, they face important decisions related to the development and commercialization of products. Is it better to invest in costly infrastructure and distribution networks, building capacity from the ground up, or leverage the capabilities of an in-country firm that is more familiar with the "hows" and "whos" -- particularly the government regulators and KOLs -- of the local market? BMS chose the latter route in its tie-up with Simcere, a Chinese pharma with a diverse portfolio that includes branded generics and the proprietary medicine Endu, a recombinant human endostatin, for non-small lung cancer. Financial terms of the BMS/Simcere deal weren't disclosed, but as part of the agreement, Simcere receives exclusive rights in China to develop and commercialize BMS-817378, a preclinical MET/VEGFR2 inhibitor. BMS retains rights in all other markets, and the two firms will jointly determine development. Interestingly, it appears the early work will be carried out by Simcere, in what may be an attempt by BMS to leverage two critical advantages offered by China: 1) the still -- for now -- cheaper labor market keeps the R&D burn rate low; 2) with greater access to treatment naive patients, it can be much faster to run oncology trials in a place like China than the US or Europe, where competition for patients is greater. In 2009, Simcere inked a similar deal with OSI Pharmaceuticals for the development of OSI930, a small molecule oncologic in Phase I that targets multiple tyrosine kinases, including one of the same targets hit by BMS's drug, the VEGF2 receptor. -- E.L.

Gedeon Richter/Grunenthal: The European women’s health market is in significant flux with the third major deal in a month, and the second involving Budapest, Hungary-based Gedeon Richter. On November 3, Richter purchased Grunenthal’s oral contraceptive business for €236.5 million (about $331 million), roughly one month after Richter bought out Switzerland’s PregLem for CHF150 million ($156 million). Meanwhile on October 28 Teva purchased Merck Serono’s Théramex division for €265 million to deepen its geographic reach in women’s health and particularly in the contraceptive space. Like Teva/Théramex, Richter is eyeing both geographic expansion and growth of its oral contraceptive portfolio with the purchase of Germany’s Grunenthal. The small family-owned firm adds seven contraceptives including Belara to Richter’s portfolio, with sales largely based in Germany, Spain and Italy. The deal covers commercial rights in all markets where Grunenthal’s products are approved, except for Latin America. Richter said the transaction will provide a platform upon which it can establish a sales and marketing base in key Western European countries; currently, Richter’s primary commercial base is central eastern Europe and the Commonwealth of Independent States. -- Joseph Haas

Kadmon/Valeant: Just one week after Kadmon Pharmaceuticals, Sam Waksal's post-ImClone reprise, emerged from stealth mode with the acquisition of Three Rivers Pharmaceuticals, the biotech is back in the limelight. On November 1, the biotech announced a pair of strategic agreements with Valeant Pharmaceuticals that allows the start-up to hit the ground running with a mid-stage HCV candidate. In part one of the two-part alliance, New York-based Kadmon licensed worldwide development and commercialization rights (excluding Japan) to taribavirin, an analog of ribavirin that has completed Phase IIb studies for HCV, for $5 million upfront. Toronto-based Valeant, which said continuing development of taribavirin no longer fit its specialty pharma business model, stands to earn development milestones and sales royalties between 8% and 12% of future net sales related to taribavirin. That doesn't mean Valeant is getting out of selling hep C medicines altogether, however. The deal's second part calls for Valeant to pay Kadmon $7.5 million for rights to distribute in six Eastern European nations the start-up's Ribasphere and RibaPak, formulations of ribavirin that Kadmon acquired via the Three Rivers' deal. Kadmon will serve as the supplier of the two drugs. For Kadmon, a still stealthy company that has released little information about its financial backers, the complicated deal means the company nets $2.5 million and gains a mid-stage asset simultaneously. For Valeant, the outlicensing is consistent with its streamlining after the Biovail merger, as it looks to divest programs that require sizeable R&D dollars to get to market. -- J.H. & E.L.


Swedish Orphan Biovitrum/Amgen: Stockholm-based Swedish Orphan Biovitrum, which wants to be known as “Sobi” -- a decision IN VIVO Blog supports because it sounds like a tasty buckwheat noodle -- is selling back to Amgen its co-promotion rights in Nordic countries to hyperthyroidism compound Mimpara (cinacalcet). "Strategic business reasons" were a driving factor in the "mutual agreement," according to the press release announcing the split. Unfortunately, the two companies declined to say more about why the seven-year deal was ending, or how much Amgen will pay Sobi to wind down the deal. It can't be much. Sobi's revenues from Mimpara were a scant 26.2 million Swedish Krona ($3.9 millon) in 2009. Could this be the converse to the regional dealmaking brouhaha in India and China (see above)? Certainly it's well known that co-promotion deals limited to a handful of smaller markets are time-consuming and complex to manage, which may make the return for both parties de minimus. For its part, Sobi, which has developed its marketing capabilities throughout Europe, is to reallocate resources to its newer products, such as Yondelis, Multiferon and Ruconest. -- John Davis

Johnson & Johnson/Arena: On November 5, J&J's Ortho-Macneil-Janssen Pharmaceuticals division officially called it quits on the development of ADP597, a GPR119 agonist for type 2 diabetes it in-licensed from Arena as part of a two-compound 2004 deal worth $17.5 million upfront. The news marks the end of the six-year collaboration between the two parties; in 2008, J&J discontinued work on another GPR119 called APD668 in order to devote more resources to ADP597, which was believed to be the more potent compound. As of December 28, 2010, all rights to ADP597 officially revert to Arena, which has a portfolio of internally discovered GPR119 agonists, including follow-on versions of APD597 that weren't part of the original J&J deal. It's not clear why Janssen returned rights to the drug, which had just finished Phase I and demonstrated no obvious safety signals, according to company reports. Preliminary data suggest the oral molecule may have utility both alone and in combination with DPP-IV inhibitors like Januvia or Onglyza. It's possible the competitive landscape was one reason the deal came to an end. An interesting new class of small molecule drugs for type 2 diabetes, GPR119 agonists are a hot target in the type 2 diabetes landscape, with players such as Boehringer Ingelheim and GlaxoSmithKline vying to be first to market. The drugs target a protein expressed on the surface of pancreatic beta cells and endocrine cells in the gastrointestinal tract. In preclinical and clinical studies, GPR119 activation has been show to stimulate the relase of GLP-1 and other incretins that play an important role in insulin regulation. All told, Arena netted $32 million from the six-year collaboration with J&J, according to Elsevier's Strategic Transactions database. The return of the asset is another piece of negative news for Arena, which in late October received a complete response letter for its obesity drug lorcaserin. -- E.L.

Image courtesy of flickrer jasoneppink.

Financings of the Fortnight Waits For the IPO Parade To Start

Will the recent IPOs of Pacific Biosciences, a cut-rate Aegerion Pharmaceuticals, and a reportedly massive debut by a Chinese drug maker with a huge distribution network unleash a parade of life-science debuts? We don't know the answer to that question, but we thought it would be interesting to check in with the folks at Zealand Pharma, which said Nov. 3 it plans to raise up to $146 million on the Copenhagen stock exchange (yes, Zealand is based in Denmark, not the southwest Pacific).

Let's step back a second. If you abide by the oft-chanted mantra that the IPO is no longer an exit but another round of financing, then the real test of an IPO is how it positions the company. Certainly the most startling post-IPO exit in recent history belongs to another European biotech, Movetis. It debuted on the Euronext in November 2009, raising about $140 million and winning our Exit/Financing of the Year nod; nine months later it was betrothed to Shire in a $565 million deal.

Now here comes Zealand, which tried five years ago to go public. If it meets its fundraising goal, Zealand's coming-out would make it the biggest in Europe since Movetis. Like its Belgian brother, Zealand has a late-stage asset with potential broad market appeal: the Phase III GLP-1 analog lixisenatide, partnered to Sanofi-Aventis. It plans to file for approval in the EU in 2011 and a year later in the US, according to Zealand CEO David Solomon.

Solomon also told our Pink Sheet colleagues that an IPO "isn't a requirement for us." (How nice to have that flexibility.) But it's hard to believe its investors, who've piled $145 million into the company, are blissfully ignorant of the parallels to Movetis. Of course, Zealand doesn't need to go public to be bought at a tasty premium, but once public, it's that much harder for Big Pharma to force a target's shareholders to accept earnouts.

One thing to keep in mind: Zealand's shareholders, which include Denmark's Sunstone Funds and LD Pension, France's CDC Innovation and Allianz Private Equity, and the Netherland's Life Science Partners, will be subject to a 360-day lock-up period following the IPO.

For sheer cash on the barrel head impressiveness, no one will outpace Pacific Biosciences, whose IPO we describe below. But we're leery about correlating enthusiasm for sequencing technology with drug lust, so to speak. So if you want to know which way the biopharma wind is blowing, Zealand is a better place to hoist your sails -- at least until next April, when once again this is the place to be. But don't stay out in the cold, especially since it's not even winter yet. Curl up next to our hot stove with the latest edition of...


Karyopharm Therapeutics: Karyopharm derives its name from karyophrerins, proteins that shuttle from the nucleus to the cytoplasm, and has attracted $20 million in Series A financing to further its work on selective inhibitors of nuclear export (SINE). The Series A came entirely from Cyprus-based Chione Ltd., the investment vehicle for an unnamed wealthy individual, according to Karyopharm director Michael Kauffman, MD, PhD. Newton, Mass.-based Karyopharm started last year with $1 million from angel investors. It's using computational chemistry technology invented by its CSO and acting president Sharon Shacham, PhD, who used to head up drug development at now-defunct Epix Pharmaceuticals. Epix licensed Dr. Shacham the technology before the company filed for bankruptcy in 2009. Both Shacham and Kauffman, the former Epix CEO, helped establish the start-up, which is interested in oncology, autoimmune disorders, inflammation, and viral diseases including HIV. It will soon nominate a lead candidate for cancer and focus on hematological malignancies. To destroy tumors and ensure healthy cells retain tumor suppressor proteins in their nuclei, Karyopharm is developing small molecules that prevent the nuclear export of multiple proteins from the diseased cell, allowing the drug candidates to modulate the activity of key cancer pathways. The company’s platform targets the main culprit: CRM1, the nuclear pore complex that facilitates the import and export of the tumor suppressor proteins between the nucleus and cytoplasm. The 3-D structure of CRM1, which was discovered by Yuh Min Chook, PhD , was published in Nature in 2009. -- Amanda Micklus

Pacific Biosciences: DNA sequencing instrumentation specialist PacBio got the gold in late October, netting $186 million from a 12.5 million share IPO priced at $16. This comes four months after closing a $109 million Series F financing, which included a $50 million investment from strategic partner Gen-Probe as part of the companies’ June 2010 R&D collaboration. With Gen-Probe, PacBio's long-term goal, not to mention that of its competitors, is the clinical diagnostics market as featured recently in IN VIVO. But as is typical for life science tools providers, the company will first target the smaller academic and applied research market. PacBio has received orders for eleven of its instruments including from several of the best-known large-scale sequencing centers in the US and from Monsanto for agricultural research, according to its IPO prospectus. PacBio is also looking beyond DNA sequencing to potential applications for its technology in the study of chemical and structural modifications of DNA and processing of RNA and proteins, and it believes it can provide these additional capabilities through enhancements to software and consumables without the need for modifications to its basic hardware. As the cost of taking sequencing measurements drops due to innovations from PacBio and others, commercial success will depend at least as much on the ability to provide extensive high-quality data analysis as on hardware. Indeed, as noted in our recent discussion of Merck’s intention to utilize the sequencing capabilities of BGI in China, the resources dedicated to sequencing have flipped from the front end to the back end -- from being measurement heavy to being computation and data analysis (bioinformatics) heavy. -- Mark Ratner

Omeros: A year after netting $63.4 million from its IPO, the first for a pure-play U.S. biotech after the market crashed in 2008, Omeros has sealed a $20 million PIPE deal with Microsoft cofounder Paul Allen's private investment firm Vulcan Capital and its affiliate, Cougar Investment Holdings. In tandem with the financing, Washington State’s Life Sciences Discovery Fund (LSDF) also provided a $5 million grant to Seattle-based Omeros. The biotech says it will use the money to advance its G protein-coupled receptor program, aiming to perform high-throughput screening of about 120 “orphan” GCPRs, or those without a ligand. The goal is to identify what it believes could be up to 65 new druggable targets for a broad range of indications. In exchange for their investment, Vulcan and LSDF are eligible to receive tiered net proceeds earned by Omeros from the GCPR program, including product sales and specified partnership arrangements such as milestone payments. Vulcan is better known for its media and technology investments but has a life science track record. A year ago IN VIVO estimated Vulcan made ten times its investment in BiPar Sciences -- it led the Series A and reupped twice -- when BiPar was bought by Sanofi-Aventis. For their Omeros bet, Vulcan and LSDF will receive a blended percentage in the mid-teens on the first $1.5 billion in proceeds from the GCPR program; beyond that threshold, the percentage decreases to 1% of net proceeds. Vulcan also received three sets of five-year warrants, each good for 133,333 shares in Omeros, at exercise prices of $20, $30 and $40. Omeros, which sold its IPO at $10 per share, closed at $8.02 on Nov. 3. -- Joseph Haas

Mind-NRG: Always curious about asset financing strategies, we took notice when Index Ventures on Oct. 27 pledged up to €10 million ($13.4 million) to Swiss start-up Mind-NRG. Index has made a habit of asset-centric financings, backing development of a single candidate, or a small handful of candidates with a single mechanism of action, typically housed within companies with ultra-lean overheads and minimal staff. There are few examples, industry-wide, of success, but Index can point with justification to Abbott Laboratories' 2009 purchase of PanGenetics -- effectively a single-asset acquisition -- as its good-news story in this field. Abbott paid a whopping $170 million up-front for a Phase I antibody targeting nerve growth factor. Mind's asset, NRG-101, is a pre-clinical peptidic neurotrophic factor that crosses the blood brain barrier and may therefore have disease-modifying potential in diseases such as Parkinson's or Alzheimer's. The molecule was sourced from German proteomics group ProteoSys for no cash, just a 38% stake in Mind. Index holds the rest. -- Melanie Senior

Photo courtesy of flickr user Zack Sheppard.

Notes from AASLD: Apples and Oranges and Null Responders

The liver disease community – if not the investment community – has largely moved on from the novelty of comparing Vertex Pharmaceuticals' telaprevir and Merck's boceprevir, the two direct-acting antivirals that together form the threshold to a new era in hepatitis treatments if the buzz at the American Association for the Study of Liver Diseases is any indication.

Instead, physicians are celebrating the fact that two therapies may soon be available that can help patients achieve success rates that handily best the current 50% success rate from the standard of care interferon and ribavirin therapy, which is described as 48 weeks of constant flu-like symptoms and PMS.

The sense of promise is palpable at AASLD, now under way in Boston, where many of the sessions are standing room only.

A lot of the excitement now is around the IL28b genetic marker and its implication for better cure rates, and the lure of a still-years-away all-oral therapeutic regimen.

But first, there will be protease inhibitors. Merck and Vertex, who are jockeying to be first-to-market with a direct-acting antiviral for hepatitis C, plan to complete FDA submissions by the end of the year, with approval possible in mid-2011.

Based on overall profile, the odds-on favorite for best-in-class in this initial class of two seems to be telaprevir, but boceprevir may find a top-rung niche in experienced patients.

However, comparisons can be tough. Vertex had no short-course option in the Phase III study of telaprevir in experienced patients, REALIZE. Final results in that study have not yet been reported, but top line data showed 65% of experienced patients treated with telaprevir achieved SVR compared to 17% in the control arm.

Meanwhile, Merck released data at AASLD showing their response-guided therapy plan, which shortens the treatment period for patients who respond early, can work in prior treatment failures.

Another question frequently asked of presenters this year at AASLD concerns the definition of null responder, that is, patients who have had the poorest results with standard of care.

The definition of null responder used by Merck in RESPOND-2 is those who achieved less than 1 log decrease in viral load after the four-week lead-in period with standard of care. According to the abstract on the trial presented at AASLD, 33% of null responders (15/46) in the response-guided arm achieved SVR, a statistically significant improvement over the control arm, in which none of 12 patients had a cure. Null responders in the 44-week triple therapy arm had a 34% cure rate (15/44), also statistically significant.

That null-responder definition, however, appears to be at odds with the FDA guidance. In the document, FDA describes that population as people with "less than a 2 log10 reduction in HCV RNA at week 12" of standard of care therapy, the point at which the therapy is typically dropped for futility.

A footnote in the draft indicates that "other definitions for null response have been proposed, such as less than 1 log decline in HCV RNA at week four of treatment. However, failure to achieve a greater than 2 log decline … at week 12 has typically been used as a treatment futility criterion," and use of the 1 log decline definition "causes a gap in classification for individuals with a viral load reduction" that falls between the two.

Vertex has used that definition in its REALIZE study in experienced patients. In an interview, Robert Kauffman, chief medical officer at Vertex, reasoned that using what he called the "standard definition" prospectively to identify patients at the time of enrollment, rather than "on treatment," ensured that all patients were in the appropriate group.

To test the difference in the two definitions, Vertex used a four-week induction arm in REALIZE, and looked at the correlations between less than a 1 log drop at week four of the delayed start and the standard definition, Kauffman explained.

The outcome of the analysis was "a clear difference," he said. The two groups had different responses to the triple therapy. In addition, he said, the trial showed that both groups can have a "very, very good response."

A subanalysis of REALIZE reported at AASLD showed that among combined partial responder and relapser patients in the lead-in arm, 18% (31/171) fit the less than 1 log reduction definition at the end of the lead-in with standard of care. Of those patients 58% (18/31) went on to achieve SVR compared to 31% (46/147) patients prospectively-defined as prior null responders using the "standard" definition.

– Shirley Haley

flickr image by e g g used under a creative commons license.

French Doctors' Deal Provokes Fuss, so It Must Be Working...

Funny what happens at Halloween. Yours truly was looking up the latest on the French doctors' pay-for-performance scheme, the CAPI (Contrat d'Amelioration des Pratiques Individuelles) and she comes across the Centre for Advanced Paranormal Investigation. Rather spookily Halloweenic.

In the real, mostly pumpkin-free world of biopharma, CAPI represents France's first step towards Anglo-Saxon capitalism: rewarding docs with good old cash when they hit their performance targets--targets aimed at lowering drug costs, boosting generics and improving outcomes. The scheme was introduced last year as part of a host of changes aimed at cutting the mega-deficit. (Read about other more recent measures here.)

As one has come to expect of our French neighbours, there was outrage when CAPI came along. Outrage from physicians' councils ("...contrary to ethical guidelines!"), and from the drug industry association ("...this will be a brake on innovation!").

A year on, however, the scheme is undoubtedly working. (In tough times, money speaks louder than principles.) After a strong start in mid-2009, it had pulled in almost 15,000 doctors by September 2010, according to Le Quotidien du Medecin.

And most of those are apparently doing what the scheme--which is voluntary, by the way--wants them to do: prescribe more generics, do more screenings and vaccinations. Two thirds of CAPI doctors have met their one-year objectives and received, on average, €3,101--or their "thirteenth month"'s salary, as the assurance maladie describes it.

But there's always a reason to complain, it seems. This time, the anger's with the one third of CAPI-affiliated docs (about 1700) that didn't get their money. It's a scam, say some. Others claim the measures on which docs are assessed are inappropriate and unreliable. And besides, they ask, how can the same body that sets the objectives for the scheme be the one to measure whether those objectives have been met?

We'll spare you most of the details (you can read about some of them, in French, here). One complaint that seems fair, though, is that the authorities, in setting the scheme's objectives (in terms of numbers of diabetics remaining compliant, number of mammograms carried out, for example) didn't control for the prevalence of these particular diseases in particular areas. So for some doctors it might be much easier to clock up the figures than for others.

But all this misses the more important point that CAPI is working. It's making doctors prescribe more generics (generic prescription targets are set at 90% for antibiotics, at least 80% for PPIs and 70% for statins) and it's making them more aware of long-term outcomes. So assuming that happy doctors with a bonus continue to outweigh unhappy ones without (and encourage the unhappy ones to try harder rather than to have a tantrum and pack it all in), CAPI--the non-paranormal version--may yet prove an important component of France's ongoing attempts to rein in the deficit. Spooky.

image from flickr user ...antonio... used under a creative commons license.

Deals of the Week Gets Its Exercise On

It's always nice to see option buyers out there Sweatin to the Oldies. Last week's exercisers Cephalon and Purdue followed through on their deals with BioAssets Development Corp. and Infinity, respectively. We salute your exertions.

Ablexis/ Pharma 5: This week next-generation antibody company Ablexis, which can also be thought of as Abgenix 2.0, announced the formation of a five-member consortium that includes Pfizer and four other top global drug companies. The alliance gives the pharmas non-exclusive access to Ablexis’s proprietary AlivaMab mouse technology, a next-generation platform for the discovery of antibodies. Financial details of the alliance were not explicitly revealed. However, as part of the transaction, each consortium member paid an undisclosed and non-refundable seven-figure fee to Ablexis as a down payment on the souped-up mice strains in development. Upon delivery of the AlivaMab mice, the drugmakers will each pay an additional eight-figure sum. While the consortium is officially closed to new drug makers, Ablexis is interested in additional partnerships related to its transgenic mouse platform, according to Ablexis CEO Larry Green, who says the nonrefundable upfront payments provide the biotech with “a comfortable runway for building out the technology.” Although the existence of the consortium was only announced October 26, the deal has been in the works for many months; its possibility was one of the primary attractions allowing the San Francisco-based biotech to pull in a $12 million Series A in June from a syndicate that includes Third Rock Ventures and (interestingly) Pfizer Venture Investments. Forming a consortium in order to get a bolus of non-dilutive money near term is one way to solve what has become a chicken and egg problem for platform start-ups. With the IPO market still challenging, and the value of platform alliances dropping significantly in recent years, it’s hard for investors to recoup their outlay in such biotechs in rapid fashion. But Green said in an interview “the back-end obligatory payments by licensees provide a very attractive return for our investors.” According to Green, Ablexis, which is a structurally a limited liability company as opposed to a “C company”, will not require any additional venture money. The start-up will return cash to its investors based on their relative ownership stakes. That’s one reason the LLC structure for Ablexis is so critical. Had the biotech been a standard corporation, the cash distributions would have been taxed heavily. Because of the non-exclusivity, it's clear that various consortium members are free to go after the same target(s) if they desire. What's not clear is how the intellectual property related to the mice are divvied up. If for instance, Pfizer's researchers tweak the mice to improve antibody production, does the consortium own the knowledge? Pfizer? Ablexis? IN VIVO Blog asked Green for clarification but learned only that "those elements of the collaboration will remain confidential."--Ellen Licking

Kadmon/Three Rivers: Former ImClone Systems Chief Executive Sam Waksal’s new biotech Kadmon Pharmaceuticals has officially emerged from stealth mode, purchasing privately-held Three Rivers Pharmaceuticals in a mostly cash deal that is rumored to be worth more than $100 million. Three Rivers will serve as the commercial and operational cornerstone of Kadmon, which is focused on oncology, infectious disease, and immunology. The new biotech has raised over $200 million in debt and equity from investors in Japan and China. Three Rivers will contribute a portfolio of three marketed hepatitis C treatments including Infergen, Ribasphere, and RibaPak, as well as the fungal treatment Amphotec. Kadmon is expected to keep the Three Rivers headquarters in Warrendale, Pa. and its manufacturing plant. Waksal hopes to follow up on the success of ImClone, which was acquired by Eli Lilly in 2008 for $6.5 billion. While Waksal is famous for his contributions to ImClone; he is infamous for his stint in jail after an insider trading scandal involving homemaking guru Martha Stewart erupted in 2002.--Lisa LaMotta

Hikma/Baxter: In an apparent bargain, Hikma’s US subsidiary West-Ward Pharmaceuticals has snapped up the generic injectables business of Baxter Healthcare for $112 million in cash. Multi-Source Injectables, as the group was called, sold roughly 40 different drugs in a variety of dosages and presentations and is on track to book revenue of $180 million in 2010, according to the companies. The deal elevates Hikma to the number two spot behind Hospira in the interesting US generic injectables space and boosts the group’s market share from 1% to 16% by adding Baxter’s suite of chronic pain, anti-infective and anti-emetic products. Hikma and West-Ward executives pointed to the solid strategic fit between the two groups, noting the company was one of the few logical homes for Baxter’s many DEA-scheduled controlled substances products – an area Hikma’s small injectable generics business was already familiar with. Nevertheless, Jason Grenfell-Gardner, sales and marketing VP at West-Ward told “The Pink Sheet”, there is very little overlap between the two companies’ portfolios. Hikma wants to expand the market for Baxter’s products in other territories, and plans to reintroduce heparin to the company’s line up. Beyond portfolio, Hikma adds Baxter’s 20-strong sales force to its current group of 8, as well as Baxter’s Cherry Hill, NJ manufacturing facility and a warehouse/distribution center in Memphis, TN – all told shifting 750 employees from Baxter to Hikma. The deal also shifts the center of balance for Hikma, a multinational with historic strengths in the Middle East and North Africa.--CM

Teva/Merck KGAA's Théramex: Israeli generics maker Teva has been quietly building up its biz dev activities, particularly in the oncology and respiratory arenas. This week, via its acquisition of Merck Serono’s Théramex division for €265 million, comes proof of its desire to deepen its geographic reach in women’s health, especially the contraceptive space. Teva has agreed to acquire 100% of Monaco-based Théramex’s operations, gaining a solid European presence, especially in France and Italy, a diversified portfolio of branded products, and perhaps most importantly, a seasoned sales force. In addition to the upfront payment, Merck Serono stands to receive undisclosed performance-based milestones. The deal’s upfront price is roughly 2.5x Théramex’s 2009 sales; major products of interest include Colopotrophine (promestriene), Lutenyl (nomegestrol acetate), and a combined estrogen/progestin contraceptive currently under development and in partnership with Merck & Co.For Merck Serono, the divestiture should not be viewed as evidence of the company’s lack of interest in women’s health. The company is retaining its valuable fertility franchise, after all. However, it does provide sizeable cash with which to build its oncology and neurology franchises. In September, the maker of Rebif (interferon beta) suffered an unexpected blow when its oral multiple sclerosis medicine cladribine was rejected by European regulators; a decision by US regulators is expected in the fourth quarter of 2010. For Teva, the Théramex transaction is also critically important as its builds out capabilities in Europe, following its acquisition earlier this year of ratiopharm. Group. That deal solified Teva’s number one position in the European generics industry, especially in Germany, where it had heretofore been only a minor player.--EL

Sanofi/BMP Sunstone: Sanofi-Aventis, which is already feeling the revenue impact of generic competition to its Lovenox (enoxaparin) franchise, continues to send a signal to the marketplace that it isn’t idly waiting around for Genzyme to realize the wisdom of its $69-a-share offer. The French drug maker’s hostile offer is stalled in “he said, he said” mode, as Genzyme’s CEO Henri Termeer tries to persuade investors to hold out for a significantly higher offer. In the meantime, Sanofi’s bid to acquire BMP Sunstone for $520.6 million, helps the drugmaker reach its goal of doubling over-the-counter sales– a plan Viehbacher announced in early 2009, when annual nonprescription revenues were $1.4 billion. With BMP Sunstone, which reported $146.9 million in sales in 2009, Sanofi gains a leadership position in China's OTC cough/cold market, thanks to popular brands such as the pediatric cough/cold medicine Hao Wawa (Good Baby) and Kang Fu Te (Confort) for women’s health. Sanofi estimates China’s consumer health space is worth about $16.55 billion. Perhaps more importantly, the BMP Sunstone tie-up gives Sanofi an in-country base of operations from which it can distribute Western OTCs. Certainly, the acquisition builds on Sanofi’s ongoing dealmaking in the region. In October, Sanofi established Hangzhou Sanofi Minsheng Consumer Healthcare Co. – the result of a joint venture with vitamin and supplement company Minsheng Pharmaceutical Group announced in early 2010.--Dan Schiff & EL

GlaxoSmithKline/Amicus Therapeutics: GSK unveiled a standalone rare-disease unit in February and has been aggressively filling its portfolio. On Friday, Oct. 29 it added its nearest-term commercial prospect yet. GSK will pay Amicus Therapeutics $60 million upfront for rights to the Phase III Fabry disease treatment Amigal (migalastat HCl). Half the upfront is an equity purchase of 6.9 million shares of Amicus stock, or 19.9% of the company. GSK is also paying an undisclosed portion of Amigal's development, and the cash infusion will be enough to see Amicus through U.S. approval of Amigal, said the biotech’s CEO John Crowley. The deal could also pay Amicus up to $170 million in milestones, some of which could come in 2011, Crowley said. Genzyme’s manufacturing flubs in its rare-disease business further emboldened Big Pharma competitors to push into orphan and rare diseases, but they were already moving in that direction as industry economics have forced them to look beyond blockbuster primary-care indications. GSK's other rare-disease deals include a March partnership with Isis Pharmaceuticals to use that firm's antisense drug discovery platform to develop new drugs against five targets including infectious disease and conditions causing blindness; an October 2009 agreement with Prosensa to develop four RNA-based compounds for the treatment of Duchenne muscular dystrophy; and the purchase of a nearly 17% stake in Japan's JCR Pharmaceuticals, which makes recombinant biologicals for orphan diseases.--Alex Lash

Celtic Therapeutics/Resolvyx Pharmaceuticals: Private equity investor Celtic Therapeutics Holdings has bought an option to the rights to Resolvyx's RX-10045, a treatment for dry eye syndrome that is slated for Phase III trials in 2011. Financials details were not disclosed, but Celtic has an option to acquire and license rights to RX-10045, which is administered as a topical eye drop, in all ophthalmic indications. It also has an option to license a second Resolvyx compound. As part of the transaction, Celtic also bought a note convertible to Resolvyx equity. Resolvyx is one of several companies in the past several years to benefit from a flurry of venture interest in ophthalmology, a therapeutic area where small, privately backed companies have a possibility of commercializing a product if an attractive alliance or acquisition doesn’t materialize. Resolvyx’s most recently announced round of funding, a $25 million Series B, came in 2008 and was led by QVT Financial LP. The round included new investors Radius Ventures and Biogen Idec New Ventures, as well as existing investors. It's the fourth deal Celtic Therapeutics has made in its new incarnation after founders of Celtic Pharma, which aimed originally to invest $1 billion mainly in assets, not companies, went their separate ways, drastically paring back their ambitions as the model for project financing struggled during the recession.--AL

Boehringer Ingelheim/MacroGenics & Boehringer Ingelheim/ Pfizer: Antibody drug discovery startup MacroGenics Inc. struck two new platform deals that will help compensate for the Phase III failure of type 1 diabetes treatment teplizumab, which it had been developing in conjunction with Eli Lilly & Co. Inc. The broader agreement of the two is with Boehringer Ingelheim GmbH, and represents one of the first signs that the privately-owned German drug maker is serious about deepening its pipeline of biologics offerings. Under the terms of the deal, Boehringer committed an initial $60 million over three years to discover drugs around ten combinations molecular targets using MacroGenics’ trademarked DART platform, which creates compounds that react with two different antigens simultaneously. If any of the molecules becomes a marketable drug, MacroGenics would receive milestone payments worth up to $210 million for each. The partnership will first address immunological disorders, but could extend into oncology, respiratory, cardiometabolic and inflammatory diseases. MacroGenics’ alliance with Pfizer is narrower in scope, covering two dual-action antibodies engineered to redirect the body’s own effector T-cells against tumor cells. Financials of the Pfizer alliance—including the upfront payment—remain undisclosed. MacroGenics, which is privately-held, has raised more than $135 million over a decade from a syndicate of investors that includes Alta Partners, InterWest Partners, and TPG Ventures. Both alliances provide the biotech with important non-dilutive funding as a time when exit options for all venture-backed start-ups are constrained and builds on the $41 million MacroGenics received when Lilly licensed teplizumab.--Paul Bonanos

Endologix/Nellix: Can we call this a venture exit financing? Or a private investment in a public equity that’s buying one of our companies. (PIPETBOOOC)? Well, the branding of this deal clearly needs work. But Essex Woodlands Health Ventures rightfully earned some creativity points from other venture investors for its crafting of an exit/PIPE investment in the form of the announced acquisition of its portfolio company Nellix by publicly traded Endologix Inc. Nellix, which is developing a device to treat abdominal aortic aneurysms, will be acquired by Endologix for $15 million in stock. (Final payout could reach $39 million, all in stock.) At the close of the deal, Essex Woodlands – Nellix’ largest shareholder – will buy $15 million in Endologix stock to fund the continued development and the planned 2012 European launch of Nellix’ device. Essex Woodlands also will take a seat on Endologix’ board. At a time when it’s difficult for venture capitalists to exit companies with development stage products, the transaction gives Essex Woodlands and Nellix investors a somewhat clearer exit route now that it holds public instead of private stock. The returns aren’t great, based on the initial terms, since Nellix raised $30 million from venture investors. Of course, Essex Woodlands says it doesn’t intend to sell any time soon even after the one-year lock up expires. Instead, it and other Nellix investors hope to see the value of their holdings – now in Endologix stock – increase as the publicly traded company uses its existing and future sales teams to push Nellix’ endograft system in an increasingly competitive AAA market.--Tom Salemi

Valeant/Acadia & Valeant/Santhera: One of the inevitable consequences of M&A is the unwinding of certain alliances that aren’t central to the buying company’s strategy. This week’s news that Valeant Pharmaceuticals International has terminated a pair of partnerships and returned the drugs—both Phase III assets to treat Parkinson’s disease—to their originators is further proof of the phenomenon. The moves come four months after Valeant agreed to merge with Canadian biotech Biovail Laboratories Inc., which originated the high risk, high reward collaborations in its efforts to transform itself into a CNS powerhouse. Thus the “no deals” are consistent with Valeant’s desire to pursue a traditional specialty pharma model - i.e. one that doesn’t emphasize in-house research - with a strong focus on emerging markets. As part of a post-merger review following the $3.3 billion union with Biovail, Valeant will return the compound pimavanserin, being evaluated as a treatment for psychosis related to Parkinson’s, to Acadia Pharmaceuticals. As a balm, Acadia will also receive an $8.75 million payment to wrap up the transaction. In May 2009, Biovail agreed to pay $30 million upfront, plus milestone payments, to license the drug in the U.S. and Canada. Separately, Valeant returned fipamezole, a late-stage candidate to treat dyskinesia in Parkinson’s patients, to Swiss drug developer Santhera, after paying the first $12 million of a development and licensing deal covering U.S. and Canadian development rights. An ongoing licensing agreement with Ipsen for fipamezole will continue.--PB & EL