Deals Of The Week: A Better Way To Investigate Clinical Trial Investigators?

In tandem with a 10-company effort launched in September to resolve clinical development hurdles, three pharmas are coming together to establish a databank that participants will be able to use to evaluate potential clinical trial sites and investigators. The Investigator Databank initially will be a joint effort of Johnson & Johnson, Merck & Co. and Eli Lilly, but other participants from the non-profit TransCelerate BioPharma initiative are expected to join in eventually.

Andreas Koester, head of clinical trial innovation/external alliances for J&J’s Janssen R&D, said the initiative’s primary goal will be to “avoid redundancy” in paperwork for selecting and approving trial sites and in training clinical trial investigators.

Koester, who will lead the effort, told Deals of the Week that the Investigator Databank should be ready to go by the end of this year. The initial three participating firms already have uploaded their information into the databank but it is behind firewalls for now so none of the companies can access another’s data until the initiative begins. Other companies participating in TransCelerate are expected to begin contributing information by the middle of 2013.

“The R&D team at Janssen came together last year to look at our clinical-trial process and see what could be improved upon and what could be streamlined,” Koester said. “There were some things that needed a common solution and would only work if we teamed up with our peers.”

The databank, which will not include any patient data, is intended to serve as a one-stop repository where key information about trial sites, such as what equipment a site does or doesn’t have and the Good Clinical Practice (GCP) training records of its personnel, can be accessed by any participating company. The expectation is that the jointly provided data will minimize redundacy in much of the site- and investigator-selection process, such as prequalification and CGP training. To aid the effort, each participating company will agree to acknowledge one another’s GCP protocols and work toward an industry standard, Koester noted.

J&J and Lilly were among the 10 pharma companies (Merck was not, however) that announced Sept. 18 the creation of TransCelerate and its five goals, one of which was the centralization of trial site prequalification and training. TransCelerate CEO Garry Neil said the databank’s work will be aligned with the non-profit’s focus on clinical study execution.

“Industry collaboration, including pre-competitive data-sharing, is critical to ensuring continued progress to improve industry-wide clinical trial practices,” Neil said.

Beyond the benefits of time conservation, the databank also is expected to benefit clinical trial quality by making it more feasible for investigators to participate in multiple trials. Koester said that many investigators don’t participate in more than one or two clinical trials because the paperwork tends to be too time-consuming and takes away from time spent with patients. Companies therefore churn through investigators and often have trouble finding more.

“Sharing our investigator databases will help optimize administrative activities by mutually recognizing training and other essential information that is required of our investigators, as well as allow us the ability to include key investigators around the world with whom we have not worked in the past,” said David Detoro, head of global trial management for Merck Research Laboratories. “All of this will help lead to more efficient clinical trial execution – a critical component of getting novel products to patients in a timely fashion.”

While biopharmaceutical companies are finding ways to work together to make clinical trials more efficient, they nonetheless continue competing in the business development world. For the latest examples, check out our latest summary of  …

Forest/Adamas: Adamas Pharmaceuticals and Forest Laboratories are counting on simplification and reduced frequency of dosing to carry Arimenda, a fixed-dose combination of two long-marketed drugs to treat dementia associated with Alzheimer’s disease. Privately held Adamas out-licensed the drug to Forest Nov. 14 in a deal that includes a $65 million upfront payment as well as potential milestone payments and sales royalties. The deal, under which Forest will assume all developmental and commercialization costs for the drug in the U.S. market, brings Adamas a $65 million upfront payment. In addition, Adamas could earn up to $95 million in development and regulatory milestones, as well as royalties on net sales beginning five years after U.S. launch of the memantine/donepezil combo product. Arimenda is a fixed-dose combination of extended-release memantine (Forest’s Namenda XR) and immediate-release donepezil (Eisai/Pfizer’s Aricept), which Adamas was developing using its own extended-release technology. However, Forest, which has been working to ameliorate a looming patent cliff as Namenda and antidepressant Lexapro (escitalopram) lose exclusivity, bought out U.S. rights to Arimenda with a plan to use its own proprietary extended-release memantine formulation in the product. That formulation, combined with several Adamas patents, will give the new product patent protection into 2029 and could help Forest extend the life of its franchise. It’s unclear if Forest intends to use the Arimenda brand name. – Joseph Haas

Colby/MannKind: Small, privately held Colby Pharmaceutical has built a portfolio of clinical-stage assets, focused mainly in cancer, in the last year through in-licensing and acquisitions. The most recent of three transactions is a licensing deal with MannKind, announced Nov. 13. Colby acquired worldwide rights to develop and commercialize disease-specific antigen compounds and intra-lymph node delivery technologies from MannKind’s novel MKC1106 immunotherapy programs, currently being studied for the treatment of melanoma, prostate cancer and hematological disorders. In exchange, Colby agreed to pay $140 million in upfront and potential milestone payments to MannKind. The San Jose, Calif.-based company plans to further develop the MKC1106-MT regimen in a Phase II melanoma trial. It is the most advanced intra-lymph node injection regimen from the program, and also plans to study the technology with its lead compound, the cancer adjuvant JVRS-100, a cationic lipid-based immune activator, and eventually with other adjuvants that might be in development outside the company. The partnership with MannKind is one of three deals Colby has completed since September 2011. At that time, Colby acquired worldwide rights to the lipid-based immune activator JVRS-100 from Juvaris BioTherapeutics, along with the company’s broader technology platform, called cationic lipid-DNA complex. Colby also acquired Othera Pharmaceuticals in September, obtaining a portfolio of small-molecule compounds for Nrf-2 regulated diseases characterized by oxidative stress injury. – Jessica Merrill

Pernix/Cypress/Hawthorn: Houston-based specialty drug manufacturer Pernix Therapeutics Holdings announced a deal to acquire generic drug maker Cypress Pharmaceuticals and its subsidiary Hawthorn Pharmaceuticals, a branded business, on Nov. 14. Under the terms of the agreement, Pernix will pay $68.5 million upfront in cash along with $12.5 million in equity. A delayed payment of $10 million will be paid out in December 2013 and the final $10 million will be paid in milestone payments, the triggers of those milestones were not disclosed. Cypress and Hawthorn are privately held companies founded in 1993 and based in Madison, Miss. They are expected to report out revenues of about $50 million in 2012. More than half of the company’s sales come from generic products including cough and cold medications, nutritional supplements, analgesics, urinary tract remedies and women’s health treatments. The remaining 46% of revenues were brought in by the branded side of the business under the Hawthorn name, which includes pharmaceutical products for allergy, respiratory, iron deficiency, nephrology and pain management. The acquisition is expected bring Pernix’s 2013 revenues to a range of $135 million to $145 million. The deal also will have synergies with the last acquisition Pernix made – its $4.9 million acquisition of Houston-based contract manufacturer Great Southern Laboratories in July. – Lisa LaMotta

Foundation Medicine/AstraZeneca/Ariad: Cancer genomic analysis play Foundation Medicine announced a pair of partnerships Nov. 12-13, bringing its number of disclosed partnerships to seven this year. Financial details weren’t disclosed for either deal. The AstraZeneca collaboration is a multi-year tie-up in which the partners will work to identify alterations in cancer-related genes to help predict patient response or resistance to targeted therapies. AstraZeneca hopes to use the information to aid drug development. Foundation Medicine also was granted right-of-first-negotiation for developing diagnostics as part of the deal. The Ariad Pharmaceuticals partnership is focused on genomic profiling for a specific candidate, AP26113. The companies will develop genomic profiles of patients in an ongoing Phase I/II trial to treat non-small cell lung cancer and match them to clinical observations on the activity and selectivity of AP26113. The idea is to identify the best patient population for the dual-inhibitor of ALK and EGFR, which could speed development time. Foundation Medicine launched its first product in June, FoundationOne, which enables physicians to identify the molecular alterations involved in a particular patient’s cancer and match them with relevant approved therapies and clinical trials. The firm raised $42.5 million from 10 investors in a Series B financing that closed in September. – Stacy Lawrence

Alnylam/Tekmira: In our “Revised Deal of the Week,” Alnylam Pharmaceuticals has settled a trade-secrets suit brought by partner Tekmira Pharmaceuticals and inked a new licensing agreement that restructures their relationship. The twin actions free Alnylam from a thorny legal problem and enable it to manufacture its own drug candidates. Under the new agreement, Alnylam will make a one-time payment of $30 million to Tekmira to buy out manufacturing obligations so that Alnylam can independently manufacture lipid nanoparticle (LNP) technology for RNA interference (RNAi) therapeutics. In addition, Alnylam said it will make a one-time payment of $35 million related to the termination of prior license agreements and a “significant reduction in milestone and royalty payments” for its lead RNAi programs, ALN-VSP, ALN-PCS and ALN-TTR02. In a Nov. 13 conference call, Alnylam CEO John Maraganore said that over the past year the company has developed internal capabilities and proprietary processes for manufacturing LNP-based products. He noted that Alnylam would be able to manufacture its lead compound ALN-TTRO2, being developed for treatment of transthyretin-mediated amyloidosis, for the start of Phase III trials and expects to supply the drug at least through the early stages of commercialization. Phase II trial data on ALN-TTRO2 are expected in mid-2013 and the pivotal study is to begin by the end of 2013. Tekmira also is eligible to receive an additional $10 million in near-term milestones – a $5 million payment when ALN-TTR02 enters a pivotal trial and a $5 million payment when clinical trials for ALN-VSP begin in China. Tekmira also will receive five additional non-exclusive licenses to develop and commercialize RNAi therapeutics based on Alnylam’s siRNA payload technologies and will pay Alnylam milestones and royalties for these products. – Brenda Sandburg

TG Therapeutics/Ildong Pharmaceutical: Korea’s Ildong Pharmaceutical signed a licensing agreement with TG Therapeutics on Nov. 15 to co-develop and commercialize the latter’s anti-CD20 antibody ublituximab (TGTX-1101) in South Korea and Southeast Asia. MedCI LLC served as licensing advisor and provided assistance to TG Therapeutics, a clinical-stage biopharmaceutical company focused on the acquisition, development and commercialization of treatments for cancer and other underserved therapeutic needs. Under the terms of the agreement, TG Therapeutics is receiving an upfront payment of $2 million in addition to sales-based milestone and royalty payments in exchange for exclusive rights to develop and commercialize Ublituximab for all therapeutic indications in the territory, which also includes Taiwan, Singapore, Indonesia, Thailand, Philippines, Myanmar and Vietnam. TG Therapeutics is developing ublituximab for hematologic malignancies and other B-cell lymphoproliferative disorders. Currently, it is being evaluated in a North American Phase I/II clinical trial in patients with relapsed or refractory non-Hodgkin's lymphoma. – Peter Chang

But those weren't the only deals made during the past business week. Here is a roundup of other business development transactions occurring in the biopharmaceutical arena in the past seven days:

• MedImmune and biOasis Technologies entered an R&D agreement Nov. 14 to investigate the latter's Transcend technology for delivery of compounds to the brain;
• Reckitt Benckiser made a $1.4 billion offer Nov. 15 to buy out Schiff Nutritional, topping an earlier offer from Bayer AG;
• GlaxoSmithKline and Aptuit announced a multi-year expansion of their drug-development partnership in Verona, Italy, on Nov. 13;
• Boehringer Ingelheim and BaroFold signed a non-exclusive license on Nov. 13 to use BaroFold's PreEMT (Pressure Enabled Manufacturing Technology) platform for protein refolding work in BI's drug production; and
• Synthetic Biologics acquired clinical-stage beta-lactamase assets for prevention of Clostridium difficile infections Nov. 12 from Prev AbR LLC.

Photo credit: Wikimedia Commons

Red Rover, Red Rover, Let Financings of the Fortnight Cross Over

The Pacific Ocean has the Marianas Trench, the deepest place on Earth, more than six miles down. But Financings of the Fortnight has Crossover Canyon. And this fortnight, it went from zero to 210 million.

The zero was the number of dollars Radius Health raised trying to go public, and 210 million was the blockbuster financing for Intarcia Therapeutics. How fortuitous. As we noted in our previous column, our colleague Stacy Lawrence is working on a Start-Up feature about the return of crossover investors to biotech, and as if to punctuate her weeks of reporting that you’ll be able to enjoy just after Thanksgiving, Intarcia announced Nov. 15 a $210 million Series C, one of the industry's biggest rounds of private financing in memory, and it did so mainly by tapping crossover investors: the hedge fund Baupost Group, the diversified fund Farallon Capital Management, the multinational giant Fidelity Investments, and two other unnamed institutional investors. Existing venture backers New Enterprise Associates, New Leaf Venture Partners and Venrock also joined. The funding consists of $160 million in equity and $50 million in debt, and it’s all in one shot, Intarcia CEO Kurt Graves told our "Pink Sheet" DAILY colleagues. In other words, they don’t need no stinkin’ tranches.

The money will help push Intarcia’s lead product ITCA-650 in a set of Phase III trials. Intarcia has developed a formulation of the diabetes drug exenatide that can be implanted under the skin up to a year in a matchstick-sized delivery device. Exenatide, an analog of glucagon-like peptide-1, is marketed by Bristol-Myers Squibb and partner AstraZeneca as both Byetta and Bydureon, in twice-daily and once-weekly formulations respectively. The partners paid $7 billion to acquire Amylin, which previously owned the drugs, in June.

Meanwhile, Intarcia was once a whisker away from partnering ITCA-650 but backed off to keep full control. That helps explain the enthusiasm of the crossover investors, who have piled into to some of the year’s largest venture rounds, though none of course as large as the Intarcia deal. Crossovers want to take companies public; M&A is not their preferred exit. In fact, one factor in their resurgence is frustration as they’ve watched strategic buyers pick off the best biotechs before they, the public investors, can get a piece of the action. It’s worth mentioning that these days, those buyouts often happen in wildly favorable circumstances for the buyers – in structured deals with earnouts that only pay shareholders if the acquired company’s products hit milestones, as we explained in the March issue of Start-Up.

So when you see hedge and mutual funds featured in a biotech venture round, it’s a good bet that company will do its damndest to go public. With all that cash riding into Phase III, and a product that could address one of the world’s most burdensome diseases, don’t expect Intarcia and its new shareholders to jump quickly into a buyer’s arms.

The crossover road can be rough, too. Radius Health, with crossovers BB Biotech AG and Brookside Capital in the mix, raised $91 million in 2011 – also with a debt component – merged with a public shell, and pointed itself toward the public markets through a process known as Form 10, which lets a company list over the counter without the hullaballoo of a big IPO. It then opted to try for a big IPO, after all, and filed an S-1 in February. Those dreams were put on hold this week; the company said it would withdraw its S-1 because of general market conditions, and the stock is still not trading anywhere, even on the low-profile, low-volume exchanges.

Somewhere in between Intarcia’s $210 million and Radius’s zero is Ziarco, a new company that said Nov. 5 it received the first $6 million tranche of a potential $27 million Series A round. Consider it a small bite of Pfizer’s old Sandwich. Ziarco licensed four drug candidates that were developed at Pfizer’s now-shuttered Sandwich, UK labs, and part of the venture cash comes from Pfizer’s venture arm. But the lead financier is a very unlikely source: the hedge fund Biotechnology Value Fund, which typically invests in small- and micro-cap biotechs like this one. The crossover move is its first in five years, and it doesn’t seem inclined to make a habit of it. BVF partner Mark Lampert called the Ziarco deal opportunistic. Ziarco has four anti-inflammatory and anti-allergy drugs, on which Pfizer spent more than $100 million on R&D, said BVF’s Lampert. The most advanced is a histamine H4 receptor antagonist that has completed Phase I. CEO Mike Yeadon, who was VP and CSO of the allergy and respiration research team in Sandwich, told our “Pink Sheet” DAILY colleagues it could be a once daily low dose oral treatment for asthma, allergic rhinitis, pain, and inflammatory skin conditions. Pfizer Ventures’ stake is undisclosed, and it will receive milestone payments and royalties as the drugs progress.

Speaking of progress, we're almost to the blurbs. A quick programming note: This week we've added a new twist to FOTF. After the four blurbs, you'll find a lightning-round paragraph that takes you through the rest of the fortnight's financings. We hope you find it useful. Now on the count of three, let's all get a running start and jump headlong into...

Visterra: If the Cambridge, Mass. biotech has its way, Tamiflu will have competition. Visterra said Nov. 9 it closed a $26 million Series A round with $13 million from the Bill & Melinda Gates Foundation, Omega Funds, and its existing investors. The cash will help Visterra push its monoclonal antibody VIS410 into the clinic for seasonal and pandemic influenza. It’s a therapeutic, much like Tamiflu (oseltamivir), which is famously stockpiled whenever a new flu strain emerges amid whispers of “pandemic.” Visterra also sees it used as a prophylactic for first responders and others at near-term risk of flu infection. The infusion of cash from the Gates Foundation was undisclosed, but it’s significant nonetheless. Visterra is the third biotech in roughly a month, and fourth since March 2011, to sell equity to the Gates Foundation. In our previous edition we discussed the Gates investment in vaccine firm Genocea Biosciences. New head of global health Trevor Mundel said this summer the foundation would be more aggressive with its new investment strategy, and so far he’s right. (The upcoming issue of Start-Up takes a deeper look at the Gates biotech investment initiative.) So far, the foundation is targeting platforms, such as Visterra’s antibody discovery technology, so it can help point applications of the technology in directions beneficial to global human health. For example, roughly half of Gates’s Visterra investment is earmarked for a program in infectious disease (but not the flu). The other lead investor in the $13 million tranche, Omega Funds, usually buys shares of venture firms no longer able to hold positions in portfolio companies. But the Visterra investment is primary, not secondary, said Visterra CEO Steve Brugger. – Alex Lash

Abbvie: With a split from its parent company Abbott Laboratories imminent, the pharmaceutical unit AbbVie issued $14.7 billion in debt securities that will help it pay back cash to Abbott, as well as fund dividend payments to future shareholders. The debt issuance -- which included three-year fixed-rate, three-year floating-rate, five-year, six-year, 10-year and 30-year notes – was the largest dollar-denominated offering by a company in more than three years, and a sign that throughout market turmoil, health care reform, and other disturbances, Big Pharma has no problem convincing bond buyers of its seaworthiness. However, AbbVie did receive a slightly lower rating, Baa1, from Moody’s because of its untested independence and its overreliance on sales of rheumatoid arthritis drug Humira (adalimumab). Before AbbVie, the largest dollar-denominated debt offering was from Roche in February 2009 to help pay for its acquisition of Genentech. The company issued $13.5 billion in long-term debt, as well as $3 billion in commercial paper, a form of short-term debt. That same year Pfizer issued $13.5 billion in debt in conjunction with its acquisition of Wyeth. Amgen has also issued more than $10 billion in debt over several years to fund share repurchases. AbbVie issued $3.5 billion of 1.20% senior notes due 2015, $4 billion of 1.75% senior notes due 2017, $1 billion of 2.00% senior notes due 2018, $3.1 billion of 2.90% senior notes due 2022, $2.6 billion of 4.40% senior notes due 2042, and $500 million of floating rate senior notes due 2015. – Lisa LaMotta

Pearl Therapeutics: The Redwood City, Calif. company said Nov. 13 it has closed a $65 million Series D round to help move its combination chronic obstructive pulmonary disease drug, PT003, into Phase III testing by mid-2013. With four years of Phase II testing under its belt, Pearl Therapeutics wants to move into two pivotal trials and, it hopes, attract a partner for PT003. The Series D included the company’s four existing investors: 5AM Ventures, Clarus Ventures, New Leaf Venture Partners, and round leader Vatera Healthcare Partners. The company has raised a total of $167.5 million since 2007, including its $69 million Series C in 2010, which included the same four investors. Pearl expects to file for approval of its combo product, as well as each of the components in three separate New Drug Applications, by the first half of 2015. PT003 is a fixed-dose combination of glycopyrrolate, a long-acting muscarinic antagonist (LAMA), and formoterol, a long-acting beta-2-agonist (LABA). It uses a meter-dose inhaler (MDI) as a delivery device, and since MDI technology is already used with other medications, the company will not have to seek regulatory approval for the device, nor will it have to spend resources educating doctors and patients about the use of the device. – L.L.
 
Auspex Pharmaceuticals: Amid all our talk about public investors crossing over into the mezzanine rounds of private companies, we noticed that Auspex is having a different conversation. The San Diego-area company that makes deuterium-modified compounds has raised a $25 million Series D round that it hopes will fund its lead drug, an analogue of tetrabenazine, a treatment for chorea (involuntary spastic movements) associated with Huntington’s disease (HD). The original version, Xenazine, is marketed by Valeant Pharmaceuticals International through Lundbeck in the U.S. for the same indication. New investor Panorama Capital led the Series D round, with participation from existing investors Thomas, McNerney & Partners, CMEA Capital, and Sloan Biotech Fund. Gaurav Aggarwal of Panorama joins the board with the financing. Auspex has raised a total of $60 million since its 2007 inception. “We like the near-term nature of the product and the uniqueness of it,” Aggarwal told our friends at "The Pink Sheet". He was confident that Auspex could go public even if the syndicate can’t sell the company. Another deuterium modification company, Concert Pharmaceuticals, has advanced its lead candidate for diabetic neuropathy nephropathy into Phase II. Deuterium is an isotope of hydrogen, and substituting it for hydrogen bonds makes a molecule more able to withstand enzymatic breakdown and thus stay in the body longer. It also creates new chemical entities, their developers say. The patent office agrees: on Nov. 15 it granted a composition-of-matter patent to Auspex for its deuterium-substitute version of Pfizer’s JAK kinase inhibitor tofacitinib, which the FDA approved on Nov. 6. – A.L. 

The Best of the Rest: Shanghai Jingfeng Pharma’s venture round brought in $30 million led by Vivo Ventures…an OrbiMed-led Series B for Cardioxyl Pharma totaled $28 million…Roche Ventures and MedImmune Ventures participated in Ambit Biosciences’ $25 million Series E supporting quizartinib clinical trials… fellow diagnostics companies Metamark Genetics, Epic Biosciences, and Advanced Cell Diagnostics each raised Series B financings…STAR antibody platform play Alethia Biotherapeutics closed a $4.7 million Series B…Avexxin raised an undisclosed amount in Series B financing for chronic inflammatory disease development…Vivo Ventures and New Leaf Partners joined as new shareholders through MEI Pharma’s $27.5 million PIPE…Tavistock Life Sciences led a $Cdn26.1mm private placement for MethylGene…vaccine adjuvants developer Isconova raised SEK50mm through a rights issue…Idera Pharma completed a $7mm converted preferred stock and warrants sale…small-molecule cancer drug developer Array BioPharma’s FOPO grossed $65.7 million…in the only completed IPO of the fortnight, breast cancer testing company Atossa Genetics raised $6.5mm without taking a haircut…Enanta filed to go public, hoping to advance its anti-infectives…Cardiovascular diagnostics company Singulex postponed its IPO … AstraZeneca completed a $2 billion two-tranche bond issue… insurance provider Aetna raised $2 billion from the sale of senior notes to fund its acquisition of Coventry Health Care.

Photo courtesy of flickr user bumeister1 via a Creative Commons license.

Viagra, The Strange Duck

Sildenafil, the active ingredient of Pfizer’s blockbuster erectile dysfunction drug Viagra, lost exclusivity in the U.S. on Nov. 6 – but don’t expect to see generic Viagra here anytime soon. 

The LOE affects only the drug’s use in pulmonary arterial hypertension (PAH), for which Pfizer sells it under the brand name Revatio.Viagra, on the other hand, continues to be protected by a use patent through April 2020, as "The Pink Sheet"’s Brenda Sandburg noted in an article on Nov. 12. It is available in 25 mg, 50 mg and 100 mg tablets; Revatio on the other hand only comes in a 20 mg strength, which is recommended to be taken three times daily. The recommended dosing for Viagra is 50 mg as needed, but not more than once daily, although depending on effectiveness and tolerance, a higher or lower dose can be taken. 

The AWP for both brands, likewise, is somewhat similar. A 90-tablet bottle (one month supply if used according to the label) of Revatio lists for  $2,107.04, with a 25% mark up on the wholesale acquisition cost, or direct price. Viagra’s AWP is calculated at 100 50 mg tablets for $2,783.49, with a 25% mark up, according to Elsevier’s The Gold Standard (roughly a three months or longer supply).

Four generic competitors have FDA-approved ANDAs for sildenafil, including Pfizer’s Greenstone subsidiary, which is selling the authorized generic. Despite the competition, the list price (AWP) for the generic appears to be only slightly discounted—but of course, the launch is only in its earliest days and AWPs don’t capture the true value of a drug, especially a generic, after rebating. 

So what’s to stop cost-conscious consumers from asking docs for generic Revatio and taking multiple tablets instead of one Viagra?

Plenty, say experts. Companies aren’t likely to promote the generic’s off label use in ED because of the threat of huge government fines for off-label promotion. Moreover, the drugs are prescribed by different kinds of doctors, who aren’t likely to try to game the system when they have nothing at stake. Pulmonary or cardiology specialists prescribe Revatio, while general practitioners primarily write scripts for Viagra, so a massive educational effort would seem to be in order, but generic companies generally do not engage in such activities on a grand scale.

Payers would be another obstacle:  private insurers aren’t likely to cover off label use of a generic when an on-label brand is available; furthermore, many require prior authorization before covering Revatio. Medicare doesn’t cover Viagra anyway, so many patients will just keep doing what they’re already doing: paying out of pocket.

That said, there’s little precedent for a drug going off patent in one indication while remaining exclusive in another; most dual brands lose exclusivity at the same time. The few examples that come to mind are old and harken back to days when the competitive landscape was quite different (Prozac and Sarafem, suggested one consultant).   

Sildenafil is an outlier because Pfizer has a use patent protecting exclusivity for ED, at least in the U.S. -- a protection that a U.S. district court reinforced last year in a ruling against Teva (Teva is appealing). However, Pfizer lost a court case over the patent in Canada on Nov. 8, so Viagra will face generic competition there shortly. 

Given the similarities, and the availability of a generic active ingredient, the question comes to mind as to whether this means much of anything for the Viagra blockbuster franchise. The question’s important to Pfizer in particular because Viagra is by far the bigger seller; its sales for the nine months ended Sept 30 were $1.5B, while Revatio sales were $414M.  

The bet is that Viagra won’t get hit too hard. In any event, Pfizer will surely be watching closely for competitors’ missteps, particularly regarding off label promotion. In the words of one consultant: “This really is a strange duck.”

Source for image: www.visualphotos.com

DOTW: Early Stage Investing Pays Off

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

DOTW Ponders Quality In The Wake Of Compounding Pharmacies, Hurricane Sandy,And A Deal

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Lots of news this week either directly or indirectly highlighted concerns about the quality of everything related to infrastructure, products, and services. Starting front and center with Hurricane Sandy, right down to our own neck of the woods, biopharma deal making, quality has become a high-profile and challenging priority for the industry.

It is hard to avoid discussion of Sandy when reflecting on the week’s events, especially as this columnist resides in Manhattan, where after the storm, a stark contrast emerged between electricity haves and have nots. The haves, while inconvenienced, were largely able to access the normal comforts of the modern world and every day stresses that go with it, while the most fortunate have-nots struggled through the mess, and the less fortunate continue to suffer greatly.

Hurricane Sandy tested the emergency response planning in the Northeastern U.S., where, like, elsewhere, dense populations inhabit a complex world combining state-of-the-art technology and decades, even centuries-old infrastructure. New Jersey, which has been a manufacturing, R&D, and management headquarters for the biopharma industry over many decades, was hit particularly hard by the storm. While the industry has diversified geographically over the years, the state remains an important center of biopharma activity. No one is even broaching the cost of overall business damages, and the storm may not have significantly disrupted the biopharma industry’s supply chain.

But the quality of that supply chain is under strain regardless, as witnessed in a high-profile article which appeared in The New York Times detailing the agency’s decision that a 300-milligram dose of bupropion manufactured by Impax Laboratories was not bioequivalent to the anti-depressant Wellbutrin XL. As a result, the agency said it would be more careful about monitoring the way generic drug makers make extended release drugs. “The Pink Sheet” has been tracking the issue for industry, but The Times article brought it to the mainstream public's attention. According to the Times, which obtained its information from IMS Health, 120 extended-release drugs were sold in the U.S. in 2011.

And that article came on top of rising concern about compounding pharmacies in the wake of a nationwide outbreak of meningitis due to fungal contamination of preservative-free methylprednisolone acetate produced and distributed by The New England Compounding Center. Compounding pharmacies play an important role in distribution of many medicines.

Of course, for investors, problems and shifts in trends are business opportunities. And Patheon Inc.’s announcement on Oct. 29 that it planned to acquire the N.C.-based contract manufacturer Banner Pharmacaps for $255 million is one indication that pursuit of high quality manufacturing is a business opportunity.  Patheon provides contract manufacturing and development expertise to the biopharma and generics industries.

A private equity firm, JLL Partners, owns 55% of the company, which is listed on the Toronto Stock Exchange. Patheon’s stock is trading near its 52-week high of $3.90 a share, but clearly, its owners have it on an ambitious track. More than a year ago, its board brought in James Mullen, who led Biogen-Idec Inc. for seven years, to undertake a strategic revamp, and he, in turn, has hired a group of high-level senior pharma executives to become part of his management team. As Patheon sees it, there’s an opportunity to do roll ups in what is currently a highly fragmented industry with about $12 billion in sales and a vulnerability to manufacturing gafus as the global supply chain gets more complex and buckles under to cost pressures.

In addition to manufacturing capacity for solid oral dosage formulations, Banner brings to Patheon a pipeline of technologies for developing higher-margin, value-added proprietary products and a strong presence in Latin America, particularly Mexico, where it sells OTC and prescription drugs under its own brand. This will enable Patheon to pursue more and larger customers, fitting with an industry trend towards forming strategy partnerships with CMOs to outsource capital-intensive manufacturing.

Patheon may not be focused on the industry’s bread and butter, innovative R&D, but it has ambitions to bring more modest technological innovation to the industry, namely in formulations and manufacturing.  In January, it partnered with a Columbian maker of soft-gel capsules, ProCaps SA, giving it rights to ProCaps’ proprietary soft-gel technology and manufacturing capabilities in Europe, the U.S. and Asia.

Although the industry has far too much manufacturing capacity in general, for both small molecules and biologics, it also faces a shortage of certain kinds of facilities, for things like state-of-the art sterile fill finish, points out Michael Lytton, Patheon’s EVP, corporate development and strategy, who previously was EVP, corporate and business development at Biogen. Patheon, by dint of its focus, has greater operational efficiencies, and can better manage complexity than larger companies focusing on new drug development, particularly for problem areas like sterile injectables, said Lytton. Because its processes are state of the art and highly automated, Patheon can provide high quality without great additional cost, Geoffrey Glass, EVP, global sales and marketing said.

Whether it’s easier for investors to win on the services side of the pharma industry than on the bread-and-butter of betting on R&D innovation remains to be seen. Meanwhile the search for innovation goes on.

GlaxoSmithKline/Vertex and Janssen Pharmaceuticals/Vertex: Vertex announced on Nov. 1 separate agreements pairing its nucleoside VX-135 with GKS's NS5A inhibitor and Medivir AB/ Janssen Pharmaceuticals’s protease inhibitor for Phase II trials. The deals end speculation about when the Cambridge, Mass., biotech would enter the intra-industry mix-and-match in search of an interferon-free combination regimen to treat hepatitis C. Both collaborations are non-exclusive, with an even split of expenses to support Phase II proof-of-concept trials to begin early in 2013. The deals did not provide for up-fronts or milestones, and the agreements cover only the trials.

Glaxo has not had a high-profile in the hepatitis C space, and Bristol Myers Squibb was thought the more likely candidate along with Janssen parent Johnson & Johnson for a Vertex clinical partnership. In fact, the clinical deal may be the first significant step into hepatitis C for Glaxo, an otherwise established player in the antiviral space.

The announcement solves the mystery of when and with which big pharma candidate(s) Vertex would test one of the few clinically viable nucleoside polymerase inhibitor candidates remaining in the industry. Attrition has been high for that antiviral class, exemplified by Bristol’s announcement in August that it would cease development its nuc BMS-986-094 following a Phase II cardiac toxicity incident.

The latest casualty is BioCryst Pharmaceuticals Inc.’s BCX5191, developed in house by the Research Triangle Park, N.C., biotech.

AstraZeneca/U.K. Academia: AstraZeneca  said Oct. 31 that it is expanding its dealings with academia in its latest experiment with new R&D models involving increased interaction with external partners. In late 2011, Britain’s second-largest drug maker made 22 compounds available to U.K-based scientists at no charge to see if they can develop new medicines from them. Academics submitted more than 100 proposals, from which the Medical Research Council on behalf of AstraZeneca selected 15 to further investigate for a range of potential new drugs covering Alzheimer's, cancer, and lung disease. Winners include a University of Bristol project investigating whether a compound originally evaluated for the treatment of prostate cancer could delay, or even reverse, the progression of Alzheimer’s disease; a team at the University of Manchester conducting a small clinical trial of a new treatment for chronic cough using a compound developed to treat heartburn; and scientists at the Royal Veterinary College, University of London hoping to re-purpose a lung disease drug to treat muscular dystrophies.

The 15 projects will be financed using £7 million ($11 million) provided by the MRC. Under the arrangement, AstraZeneca will retain its existing rights relating to the compounds and any new research findings by the academic institution will be owned by the academic institution.

The open innovation project is unique to Britain. It has already created a number of partnerships between researchers from academia and industry and should lead to future collaborations across the sector.--Sten Stovall

Astex/Cancer Research Technology/Newcastle University: Open innovation and knowledge sharing were major themes in Britain this week, during which U.S.-based Astex Pharmaceuticals TK inked a strategic cancer drug discovery alliance with Cancer Research Technology Ltd. and Newcastle University in northern England. Astex said that over the course of the partners’ five-year alliance it will provide £1 million ($1.6 million) annually to Newcastle University for research across biology, chemistry, pharmacology and imaging to identify new cancer drugs and associated biomarkers for diagnostic tests. The three-way pact builds on a previous collaboration between Astex, Newcastle and the CRT on fibroblast growth factor receptor, a key cancer target, which led to the development of a clinical candidate that Astex partner Janssen Pharmaceuticals recently took into Phase I clinical trialing.

Astex will retain options to exclusive worldwide licenses to develop and commercialize pharmaceutical products from each alliance project.  CRT is a non-profit organization that links discoverers of new cancer compounds to potential partners which can develop and potentially commercialize the compounds. The three-way partnership makes CRT and Newcastle University eligible to receive development and regulatory milestone payments on exercise of the options, and on products that Astex takes into development, and royalties on sales.  Financial terms of the milestone payments and royalties were not disclosed.--SS

Menarini Group/Oxord BioTherapeutics: Oxford BioTherapeutics Ltd. has entered a pact with Italy’s biggest drug maker, the family-owned Menarini Group, to jointly develop a portfolio of antibody-based oncology drugs, the firms announced Oct. 29. The deal covers five of OBT’s antibody and antibody drug conjugate (ADC) programs, each of which is in pre-clinical stages and focused on a different cancer indication using a different novel oncology target. Menarini, which has around €4 billion in annual revenues, says it is pumping €800 million into the collaboration, though would not divulge details on how that cash breaks down into R&D funding, access payments, and milestones. Its British president Andrew Slade says the deal resulted after Menarini’s main ADC hope turned out to be a dud, which sent him scurrying to find alternative assets and interviewing more than 100 companies. OBT won the contest on the strength of its discovery expertise using a platform for the development of antibody-dependent cellular cytotoxicity (ADCC) enhanced antibodies. Slade says the long view investment approach that family-owned drug makers can offer biotechs is very attractive in the current financing environment. Family-owned drug makers – most usually found in continental Europe – can offer stable management, access to long-term funding for long-term projects, and traditionally have low turnover of staff.--SS

Boehringer Ingelheim/Ensemble Therapeutics: The German pharma Boehringer Ingelheim became the latest drugmaker to strike a deal with privately held, Cambridge, Mass.-based Ensemble Therapeutics, which uses a proprietary chemistry platform to discover orally available macrocyle drugs that affect protein-protein interactions. The parties said the deal includes an up-front payment and research funding, as well as milestone payments that could bring its total value to $186 million plus royalties, if multiple drugs are developed, approved and commercialized. Specific details, including the number of drug targets covered, therapeutic areas involved, and size of the initial payments, weren’t released. BI will choose the targets, making the deal similar to Ensemble’s existing arrangements with Genentech, Bristol-Myers Squibb, and Pfizer. Ensemble chief executive Michael Taylor said that although the company’s 2009 Bristol deal covered eight targets, Ensemble has since pursued smaller partnerships. Eight-year-old Ensemble is also developing a pipeline of its own, including an interleukin-17 antagonist it expects to partner sometime in 2013. The company now subsists largely on non-dilutive capital, and is unlikely to raise more beyond the $38.5 million it took in two rounds from Flagship Ventures, CMEA, ARCH Venture Partners, Harris & Harris, Kisco Ltd., and Boston University.--Paul Bonanos

Financings of the Fortnight Checks The Forecast

We’ve got forecasts on the brain this fortnight. No laughing matter: What happened on the East Coast with Hurricane Sandy was grim, and as of this writing remains so. If you haven’t yet, please take a minute to donate to the relief effort.

A continent away, we here at FOTF HQ have many colleagues, friends and loved ones directly affected by the storm; before, during and after we have watched intently. The forecast called for disaster, and the storm brought fresh appreciation for what that overused term really means. We’re always amazed how people shrug away warnings of impending danger by saying previous warnings didn’t live up to their billing. Hurricane Irene barely ruffled New York City’s feathers, so how was Sandy going to be any different? Psychologists say this all-too-human trait is a reliance on cognitive schemas – forming assumptions or predictions upon an organization of previous experience.

We here in earthquake country are taking some time this weekend to make sure our emergency supplies are refreshed and at hand. Just because there hasn’t been a Big One in our lifetimes doesn’t mean there won’t be one tomorrow.

One example of humans – indeed, Californians – trying to imagine beyond their previous experience was the creation of the California Institute for Regenerative Medicine, or CIRM, a $3 billion bond measure the state voted for in 2004 to create an untouchable reservoir of funding for stem-cell and regenerative-medicine research. Whether such a measure would pass today, with the state fighting its way through a mountain of debt, is another matter. But Californians agreed eight years ago with the forecast that warned this brave new scientific world needed a protectorate. Eight years later, those monies are slowly making their way up the R&D food chain. In our next issue of Start-Up, we’ll check in on CIRM and the effect of its public largesse, including the new stem-cell-related companies that have sprung from CIRM-funded academic projects. CIRM has also funded a handful of for-profit companies through its various grant programs, and one thing our story will explain is a new initiative that awards grants to companies with solid venture backing or corporate partnerships. One of those awards just went to bluebird bio, which we detail in our roundup below.

Bluebird also happens to be part of another story in the next issue of Start-Up. The firm's $60 million Series D round, announced earlier this year, has significant participation from crossover investors; it's one of many big venture rounds in recent months to include hedge or mutual funds. The recession drove them away from investing in pre-IPO companies for the most part, but like a slow-moving weather system, the cycle has spun back around. The crossovers are back, investing the past 12 months in a sizable number of the venture rounds of $50 million or more, and we’ll explain why – and what’s different this time.

Another company in the news this fortnight is one of the biggest crossover successes to date, Puma Biotechnology, which became public in 2011 via reverse merger but only recently gained a listing on a major stock exchange – and raised $138 million to boot, as we explain below in our roundup.
 
Meanwhile, the real fundraising begins this week in thousands of towns, from the nation's largest on down, to put lives and communities back together. We're forecasting a lot of hard work ahead, and we're keeping everyone who was in Sandy's path in our thoughts as we head into another edition of...


  
bluebird bio: The gene therapy company said October 26 it received a $9.3 million grant from the California Institute of Regenerative Medicine to push forward a Phase I/II trial of its treatment for beta-thalassemia, a genetic blood disorder. Bluebird’s lentivirus technology inserts a gene into a patient’s hematopoetic stem cells ex vivo to correct a mutation, the cells are reintroduced to the patient and prompt the bone marrow to start producing healthy red blood cells. The stem-cell angle qualifies bluebird for a grant from CIRM, which was approved by California voters as a $3 million bond in 2004 to create a steady source of stem-cell and regenerative medicine support. The bluebird grant is part of CIRM's new $60 million fund earmarked for companies that have either rounded up significant venture backing or secured a partnership. Bluebird is in the former category, having announced in July a $60 million Series D round, and puts the Cambridge, Mass. firm in the spotlight of a small renaissance for gene therapy, as we detailed in a recent Start-Up article. The field fell into disfavor for much of the previous decade, but a gene-therapy product was approved today in Europe, and bluebird has made clinical progress, with safety concerns giving way to clinical, manufacturing and commercial problems to solve. -- Alex Lash

Puma Biotechnology: The single-asset company quietly went public through a reverse merger in late 2011, but only recently did it tap the public markets for the first time, all while upgrading its listing to the New York Stock Exchange. On October 24 Puma closed out a $138 million offer, selling 8.625 million shares at $16 apiece that included more than a million additional shares purchased by the underwriters. The company was formed to develop neratinib, a small-molecule PAN-HER inhibitor licensed from Pfizer in October 20011. The compound is currently in Phase II trials to treat HER2-positive breast cancer. In November 2011, Puma reverse-merged into a shell company and raised $60 million by selling 16 million shares at $3.75 each to a group led by Adage Capital Partners, even though its stock was not listed on an exchange. It began trading publicly in April on the over-the-counter bulletin boards. Its shares closed Wednesday Oct 31 at $20.60. Part of the company’s appeal is its founder's track record. Puma is led by Alan Auerbach, who built Cougar Biotechnology around the prostate cancer drug abiraterone, brought it into Phase III, and sold it to Johnson & Johnson in 2009 for $1 billion. J&J ushered abiraterone to an FDA approval in 2011 with the trade name Zytiga. Like Puma, Cougar in 2006 reverse-merged its way to public standing and raised cash to push forward its lead candidate. The J&J deal helped peel away some of the stigma reverse mergers carry (as in, “if you couldn’t go public the normal way, how good can your company really be?”). One high-profile VC actually said last year the acquisition provided inspiration to reverse-merge the osteoporosis company Radius Health into a shell. Radius recently filed for its first public offering, aiming to bring in $56 million, and a Nasdaq listing. -- A.L.

Atara Biotherapeutics: Amgen and venture firm Kleiner Perkins Caufield & Byers jointly announced the spinout and funding of Atara Biotherapeutics on Oct. 26, creating the company to house and develop six Amgen assets. The start-up will have programs in nephrology and oncology, with assets ranging from pre-clinical to Phase I. Amgen will retain an unspecified amount of equity in the new company, while Kleiner will provide funding in its early days. A former Kleiner partner, Isaac Ciechanover, will be its chairman and CEO. Neither Amgen nor Kleiner would comment specifically on the assets or why Amgen chose not to develop them itself, and it’s not yet clear whether Kleiner will eventually close a formal Series A round or attempt to form a funding syndicate with other VCs. The biotech and venture firm have a prior relationship: Boston-based cancer drug maker Tesaro, a Kleiner portfolio company, acquired a key asset from Amgen in 2011, a year before it went public. Amgen has spun out other companies as well; it created Relypsa to house assets that formerly belonged to Ilypsa, a company it acquired in 2007. – Paul Bonanos

Aclaris Therapeutics: Newly formed dermatology start-up Aclaris announced Oct. 24 a $21 million Series A funding with the founder and former CEO of Vicept Therapeutics and  support from the same three venture capital firms that backed Vicept. Vivo Ventures and Fidelity Biosciences led Aclaris’ initial funding, and Sofinnova Ventures provided a supplementary component of the round. A $16 million Series A round from those three firms supported Vicept from its inception in 2009 through its July 2011 buyout, in which Allergan paid $75 million upfront. Aclaris CEO Neal Walker wouldn’t disclose the nature of its primary asset except to say the compound is a preclinical, topical treatment for a highly prevalent condition. The drug will have both medical and aesthetic uses. Aclaris is the second entity to emerge from NeXeption, which establishes, funds and supplies management to independent operating companies tied to individual assets it believes are potential targets for pharma partnerships. The model echoes creative asset-based financing structures that venture firms have formed, such as the Velocity group carved out of venture firm CMEA Capital, the Atlas Venture Development Corp., or Inception Sciences, which was formed by Versant Ventures to discover drugs and spin them out into single-asset virtual operating companies. But the start-ups under NeXeption’s umbrella will license rather than discover new assets, and they will be standalone entities staffed by a combination of NeXeption executives and additional employees brought in to suit their specific needs. NeXeption also shares risk with outside venture investors, while taking equity itself. NeXeption’s first company was Ceptaris Therapeutics, which is developing a topical treatment for cutaneous T-cell lymphoma. Vivo also has invested in that company, formerly known as Yaupon Therapeutics. – P.B.

 Photo courtesy of flickr user Brian Birke via Creative Commons license.