Financings Of the Fortnight Sees Drug Companies Making It Rain

When the Nasdaq’s biotech index topped 1,600 late last week, many people noted it was an all-time high, even higher than the 2000 bubble. (Not adjusting for inflation, however.)

It has stayed above 1,600 all week, and no surprise, the money-chasers have followed. As of this writing, two biotechs have gone public the past few days, and the waiting room is starting to fill up. Companies recently joining the queue include Omthera Pharmaceuticals, Chimerix, and GW Pharmaceuticals. 

Meanwhile, a new study shows that seven of the top 50 cash-rich US corporations are drug companies: Pfizer, Amgen, Johnson & Johnson, Merck, Abbott Laboratories, Eli Lilly and Bristol-Myers Squibb. (Abbott has since split into device and drug companies, but the drug spin-out AbbVie has enough cash to qualify for the list.)

Much of that cash is held overseas, and it’ll likely stay there. Cash earned abroad and brought back to the US carries a 35% tax rate. Drug firms and other corporate lobbyists convinced the US government to grant a tax holiday – a temporary 5% rate -- in the mid-2000s in large part on the grounds that all that cash coming home would create jobs. The Congress said – nudge, nudge, wink, wink – well, sure, who doesn’t love jobs? Instead, we saw massive cuts in the drug business. The legislation was called the “American Jobs Creation Act,” a title so patently false it still serves as a convenient reminder to arch an eyebrow or three whenever the drug industry launches cries of duress. With apologies to Mark Twain, the demise of Big Pharma is always greatly exaggerated, often by the industry itself.

Even if much of the cash underscored in the Moody’s report is “locked” overseas, cash is plentiful at home, too, for certain sectors of the life sciences world. Debt is dirt cheap, and the stock market is booming. When a Big Pharma decides to divest a non-core asset, rewards await. Bristol-Myers Squibb did just fine spinning out its Mead Johnson nutritionals group in early 2009 and divesting its 83% stake before the end of that year. Earlier this year Pfizer floated its animal health division as the public company Zoetis but retained an iron grip on ownership and board control; its stake has gone up 29% in less than two months.

Farther down the food chain, public investors were choosy about which biotechs got through the IPO looking glass in 2012, but those that squeezed through have fared extremely well. At the closing bell March 20, the class of 2012 (biopharma and diagnostics companies, IPOs on US exchanges only) is up 57% as a portfolio, 13 companies in all. Only three are in the red; one, coincidentally, is Verastem, a cancer stem-cell company brought to you by some the same people who cofounded OvaScience, which just raised $35 million in a private placement after going public last year via a different route than Verastem (see more below). 

Below the IPO threshold, amongst the private biotechs, it’s hard to argue that there’s plenty of cash from the traditional source of early-stage venture capital. But then something like Savara Pharmaceuticals comes along; as we note below in our roundup, the Austin, Texas company working on powdered drug delivery has now raised $19 million, mainly from angels, through its Series B round. We did a double-take, too, when we saw that number. When angel networks can pony up those kinds of sums, are reports that bemoan the funding struggles of early-stage biotech greatly exaggerated?

And while you’re mulling that over, answer this, too: Was the coldest winter you ever spent really a summer in San Francisco? Mark Twain was always good for an aphorism, but when it came to the biotech money scene, he could never match…

Savara Pharmaceuticals: The Austin, Texas developer said March 20 it has landed a $7.4 million second tranche of its Series B round, bringing the total to $16 million. New investors include Tech Coast Angels and North Texas Angel Network, and Central Texas Angel Network is a returning investor. The B round began with angels, too: The Keiretsu Forum, the largest angel “community” in the world, led the first tranche of $3.2 million in the round with participation from 117 investors. To add to the juiced-up B round, the firm also has brought in non-dilutive funding – a three-year, $4 million grant from NIH’s National Heart, Lung and Blood Institute. Initially founded in 2007 on a plan to build an out-licensing business centered on the NanoCluster dry powder aerosol delivery platform in-licensed from the University of Kansas, Savara changed directions along the way to focus on developing its own drug-delivery solutions for pulmonary conditions. It raised a $1.4 million Series A mainly from angels in 2009. The new cash will help fund a Phase II trial for AeroVanc, Savara’s dry-powder inhalation formulation of vancomycin intended to treat MRSA (methicillin-resistant Staphylococcus aureus)  infections in cystic fibrosis patients. AeroVanc, which includes a capsule inhalation device in-licensed by Savara, has been granted orphan drug designation by FDA, meaning it will have seven years of market exclusivity if approved. – Joseph Haas 

OvaScience: The infertility treatment company announced March 13 a private placement of its over-the-counter shares that raised $35 million. The firm, which went public in 2012 without an initial public offering, sold 3.9 million shares at $9 each to Adage Capital Management, Deerfield Management Company, EcoR1 Capital Fund, Jennison Associates and other institutional investors. Leerink Swann served as placement agent. We highlighted OvaScience in a column last year
for a few reasons: It has high-profile founders, it went public via an odd route that has gained some attention recently, and among its dozens and dozens of individual investors were several standout names. Also, it gave us the chance to crack a few egg puns. OvaScience is one of several companies recently to attract to their private fundraising crossover investors who normally stay in the public realm. (OvaScience had hedge fund RA Capital in its Series B round in early 2012.) The firm's lead product AUGMENT is a process to revitalize a woman’s mitochondria in her eggs, improve their viability, and boost the chances of success during in-vitro fertilization. -- Alex Lash

Tetraphase Pharmaceuticals: The antibiotic maker became the fifth health care company and the third biopharma (for humans, that is) to go public in 2013. It raised $75 million on March 20 by selling 10.7 million shares at $7 each, which missed the revised target range of $8 - $10. Tetraphase first filed in February and is the first biotech to jump to the public markets since the national biotech indices hit record highs in March. If it hadn’t gone public, Tetraphase likely would have raised another round of venture funding, a choice another antibiotic developer Rib-X Pharmaceuticals made in 2012. With $80 million raised in three previous rounds, Tetraphase needs cash to begin Phase III studies of its lead candidate eravacycline – a synthetic next-generation tetracycline – for multi-drug resistant Gram negative infections including intra-abdominal infections. It should benefit from a more favorable regulatory climate, including new draft guidance from FDA that allows sponsors to run two Phase III studies in different patient populations, one in patients with intra-abdominal infections and the other in patients with complicated urinary tract infections. Previously sponsors would have been required to conduct two Phase III studies, enrolling 500 to 600 patients each, in intra-abdominal infections. The new guidance gives sponsors an opportunity to go after two indications at the same time, and the different patient populations could make the trials faster to enroll. – Jessica Merrill and Alex Lash

Pharmacyclics: The small-molecule oncology company said March 8 it raised $207 million in a secondary share offering. Like Tetraphase, the Sunnyvale, Calif.-based Pharmacyclics is striking quickly in the wake of good regulatory news. In February, the FDA granted its ibrutinib, partnered with Johnson & Johnson, breakthrough status in two blood cancers. Pharmacyclics sold 2.2 million shares, about 3% of outstanding shares, at $94.20 each, capping for now a remarkable run that saw the firm’s share price nearly quadruple in 12 months. It closed March 8, 2012 at $25.40. Most of that rise came before the FDA’s breakthrough designation for ibrutinib, the first for an oncology drug. FDA’s Office of New Drugs Director John Jenkins has described as reserved for drugs with early results that are “so impressive, so unexpected and ha[ve] such a dramatic impact on the treatment of patients with that disease” that the sponsors and drug regulators should do all they can to move it forward. One of the few clear criteria for breakthrough status is that there is early clinical evidence of substantial improvement over existing therapy. FDA granted breakthrough designation to ibrutinib for two B-cell malignancies: relapsed/refractory mantle cell lymphoma (MCL), for which there are an estimated 5,000 new cases in the U.S. per year, and Waldenstrom’s macroglobulinemia (WM), an even rarer disease with about 1,500 cases in the U.S. per year. Ibrutinib is a Bruton’s tyrosine kinase inhibitor. J&J’s Janssen Biotech licensed rights to the drug in December 2011 in a deal that included a $150 million upfront payment, the largest paid for a single asset that year. Vertex Pharmaceuticals' Kalydeco (ivacaftor) was the first drug to receive breakthrough designation. - Alex Lash and Emily Hayes

All The Rest: With participation from Celgene and Novo AS, PTC Therapeutics (small-molecule therapies) snagged $60 million in its Series G round, the largest venture financing of the fortnight… Research-focused Nabsys brought in $20mm through a Series D financing… UK regenerative medicine company Progenitor Labs received $5.8 million in seed funding from SR One’s UK Fund… KannaLife Sciences, a start-up developing phyto-medical pharmacological products derived from botanical sources rolled up $1.5 million in a Series A investment from Medical Marijuana and CannaVest…To commercialize its biopharmaceutical affinity purification technology, Avitide completed a $1.4 million Series A round led by Borealis Ventures, and joined by SV Life Sciences, Polaris Venture Partners, OrbiMed Advisors, and Angeli Parvi… In a private placement by public Australian stem cell developer Mesoblast, the company issued new shares priced at AU$6.30, for $174.6mm in proceeds to fund a clinical trial program… Public Evolva Holding SA (small molecules), through a rights offering and subsequent private placement, took in $33 million... In a PIPE of 113mm common shares @ $0.145 to lead investors Opko Health and Frost Gamma Investments Trust, RXi Pharmaceuticals (RNAi therapies) grossed $16.4 million… Renal-focused Rockwell Medical plans to sell 4.3 million shares at $3 in a registered direct offering for net proceeds of about $12 million… Public Canadian spec pharma Cynapsus (CNS drug delivery) completed a 13. 1 million unit placement, taking in $5.6 million…The $3.1 million in proceeds from Stem Cell Therapeutics’ PIPE will allow the company to conclude its acquisition of Trillium Therapeutics (announced in February) and also triggers a condition of a December 2012 deal that enables SCT to exercise its option for an exclusive license to University Health Network/MaRS Innovation's tigecycline, an FDA-approved antibiotic capable of selectively targeting leukemia cells… Hyperion Therapeutics (urea cycle disorders) netted $65.4 million in a FOPO of 3.3 million shares @ $20.75 – including the overallotment…Women’s health care-focused TherapeuticsMD reaped $50 million through a public offering of 29 million common shares at $1.70… Inovio Pharma (cancer and infectious disease therapeutics) netted $14.2 million through the follow-on public offering of 27.4 million units, priced at $0.55 each…Oculus Innovative Sciences (dermatology and wound care) netted $3.2 million in a public offering of 8.6 million shares, including the overallotment, priced at $0.40…Infectious disease-focused Enanta Pharmaceuticals priced its IPO of 4 million shares at $14, the low end of its $14-16 range… Israeli biotech Alocobra set terms for its Nasdaq IPO at $10-12 for 1.4mm shares… Animal health company Aranata Therapeutics also announced plans to go public…Chinese drug distributor Sinopharm Group plans to issue $640mm worth of five-year corporate bonds on the Shanghai Stock Exchange. -- Maureen Riordan

Big thanks to Stacy Lawrence for help with this fortnight's column. 

Deals Of The Week: Exit From Ambit Tie-Up Just A Blip In Astellas’ Oncology Aspirations

Despite ambitions to become the “global category leader in oncology,” Astellas Pharma has decided to pull the plug on a promising collaboration in acute myeloid leukemia with privately held Ambit Biosciences, potentially throwing a wrench into the machinery of the latter’s upcoming initial public offering. On March 12, Ambit announced that Astellas has exercised its right to opt out of the partnership, effective Sept. 3, at which time all program rights revert to the biotech.

The two firms have been partnered since 2009 to co-develop FMS-like tyrosine kinase-3 (FLT3) inhibitors for cancer, with a focus on lead compound quizartinib (AC220), which showed off promising Phase II data at the American Society of Hematology meeting this past December. Quizartinib, seen as a potential competitor to Novartis' Gleevec (imatinib), was discovered by Ambit using its KINOMEscan high-throughput small-molecule kinase screening engine, since off-loaded to DiscoveRx Corp. in a 2010 transaction so that Ambit could focus on drug development.

Astellas paid $40 million upfront in 2009 for worldwide rights to quizartinib and other FLT3 inhibitors for cancer and non-cancer indications, although Ambit retained a right to co-promote all deal-related compounds. The Japanese pharma also was on the line for up to $350 million in pre-commercialization milestones as well as sales milestones and tiered double-digit royalties. The partners were sharing quizartinib development costs in the U.S. and Europe while Astellas was to shoulder rest-of-world costs.

Concurrent with the deal, Ambit has been trying to go public. It first announced plans to file an initial public offering in November 2010, but withdrew in June 2011 citing the ubiquitous unfavorable market conditions.  However, in February, it announced new plans for an IPO.

Ambit had only $14.5 million in cash on hand at the end of 2012, nowhere near enough to advance an AML candidate by itself, but recently raised $25 million in the first tranche of a planned $50 million Series B financing. In the meantime, it is working on a companion diagnostic to identify suitable patients for the drug with Novartis unit Genoptix.

FLT3 inhibitors are not a crowded class at present. Novartis has midostaurin (PKC412) in a Phase III trial (RATIFY) in newly diagnosed AML patients with FLT3 mutations, as well as in Phase II in aggressive systemic mastocytosis. Bayer’s multi-kinase inhibitor Nexavar (sorafenib) for renal and liver cancer and Pfizer’s Sutent (sunitinib) for renal and pancreatic cancer are multiple kinase inhibitors that affect FLT3.

Teva has lestaurtinib (CEP-701), also a multi-kinase inhibitor that has been investigated in relapsed AML, under its 2011 buyout of Cephalon. However, the compound was not referenced in a December 2012 pipeline review for investors by the Israeli pharma.

Meanwhile, China’s SBIO licensed worldwide rights to multi-kinase inhibitor SB1317 to Tragara Pharmaceuticals in 2009 in a deal that could bring SBIO a combined $112.5 million in upfront cash and milestones. Now known as TG02, the compound is being developed in multiple myeloma, chronic lymphocytic leukemia and acute leukemia by San Diego-based Tragara.

In a release to announce the split, Astellas President and CEO Yoshihiko Hatanaka said the decision was made for strategic reasons. “We remain committed to the field of oncology as a major area of focus for the company,” he added. Indeed, in an interview with “The Pink Sheet” a little over one year ago, the exec talked up Astellas’ prospects in cancer, thanks in part to intellectual property obtained in its 2010 buyout of OSI Pharmaceuticals.

That transaction brought Astellas the non-small cell lung cancer drug Tarceva (erlotinib), for which Astellas continues to seek label expansions, including first-line lung cancer. In addition, with Medivation, Astellas obtained FDA approval last September for Xtandi (enzalutamide) in prostate cancer, a setting where it is expected to compete with Johnson & Johnson’s Zytiga (abiraterone).

Another big oncology opportunity for Astellas is renal cell carcinoma candidate tivozanib, partnered with Aveo Pharmaceuticals. FDA’s Oncology Drugs Advisory Committee is scheduled to review the compound, which showed an unfavorable survival trend in a pivotal study, on May 2. An oral tyrosine kinase inhibitor, tivozanib previously out-performed Nexavar in a head-to-head study measuring progression-free survival in RCC patients.

In the meantime, DOTW fanatics await Ambit’s next move, be it the pricing of its IPO or a search for a new development partner for quizartinib. But while we wait, we also can mull this new collection of

Shire/Premacure: Shire’s acquisition of Swedish biotech Premacure announced March 12 is the first deal the specialty pharma has completed since Flemming Ornskov was appointed CEO designate. The former Bayer executive began working at Shire in January as part of a phased-in succession plan to replace CEO Angus Russell, who will leave the company at the end of April. Shire has said it will continue its M&A strategy under the new leadership regime, but Russell has been particularly adept at winning investor confidence in that area. The acquisition of Premacure for an undisclosed upfront and milestones is the most recent in a string of deals that has diversified Shire’s pipeline with interesting assets in niche market opportunities. Premacure brings Shire a Phase II protein-replacement therapy for a rare eye disease that affects premature infants, retinopathy of prematurity (ROP). It expands Shire’s Human Genetic Therapies rare disease unit into neonatology. The product in development, a formulation of recombinant human insulin-like growth factor 1 (IGF-1) combined with a recombinant version of its naturally occurring binding protein, insulin-like growth factor-1 binding protein-3 (IGFBP3), is potentially the first preventive treatment for ROP. - Jessica Merrill

AbbVie/Receptos: San Diego-based Receptos has licensed an antibody to treat the rare disease eosinophilic esophagitis from AbbVie, although the Chicago pharma retains an option to reacquire some rights to the drug. In a March 13 deal, Receptos received global rights to an interleukin-13 antagonist now known as RPC4046, for which it plans to perform a Phase II trial. Upon receipt of Phase II data, AbbVie can exercise an option for a pre-negotiated fee, under which it would obtain full rights to the drug outside the U.S., and split U.S. proceeds equally with Receptos in a co-promotion agreement. The two companies would also split the costs of Phase III trials equally. AbbVie predecessor Abbott Laboratories previously had studied the drug’s safety in a Phase I trial in mild-to-moderate persistent asthma. Receptos typically focuses on immune and metabolic disorders; the start-up’s lead program, RPC1063, is in Phase II for multiple sclerosis and ulcerative colitis. The company raised $50 million in a 2012 Series B round, and has G protein-coupled receptor discovery partnerships with Eli Lilly, Ono Pharmaceutical and Ortho-McNeil-Janssen Pharmaceuticals. Other drugs targeting IL-13, a protein linked to airway diseases and inflammation, include Genentech’s Phase III lebrikizumab and Rigel Pharmaceuticals' R256, the subject of a partnership with AstraZeneca. Receptos said about 300,000 patients in the U.S. and EU suffer from eosinophilic esophagitis, which affects swallowing and can lead to food impaction; the disease typically is treated with topical steroids. - Paul Bonanos

Merck/Luminex: Merck & Co. has signed on a second partner to make a companion diagnostic for its mid-to-late-stage Alzheimer’s disease drug, MK-8931. The New Jersey-based pharma announced March 13 that it will team up with Luminex Corp. on a diagnostic device that will use the Austin, Texas-based company’s xMAP technology to test patients for the presence of two biomarkers – total-tau and Aβ42. The diagnostic will use samples of cerebrospinal fluid (CSF) obtained through a spinal tap from patients to test for the biomarkers. Financial terms of the deal were not disclosed. MK-8931 is an oral beta amyloid precursor protein site cleaving enzyme (BACE) inhibitor that is meant to slow the development of beta amyloid plaque in the brain. The drug is being tested in a 200-patient Phase II safety study that is expected to advance into a larger Phase III that includes 1,700 to 1,800 patients later in the year. Merck announced in December that it also signed a deal with GE Healthcare to create a companion diagnostic for MK-8931 that would use flutemetamol – a positron emission tomography (PET) imaging agent – to detect beta amyloid deposits in the brain. Both diagnostic tests will be used in the Phase III trial to help determine secondary endpoints. The diagnostics also will be used for patient selection in a trial of prodromal Alzheimer’s patients; a timeline for this trial is not yet determined. - Lisa LaMotta

Theravance/Clinigen: In its first deal since floating on the U.K.’s Alternative Stock Market (AIM) in September 2012, England-based Clinigen Group has licensed Theravance’s antibacterial Vibativ (telavancin) for marketing in the EU and certain other countries, including Switzerland and Norway. In return, Theravance will receive a $5 million upfront payment and tiered royalties on net sales ranging from 20% to 30%. Vibativ is unusual in that its marketing in the EU was suspended in May 2012 because of concerns about its then-manufacturer Ben Venue Laboratories not meeting cGMP standards. However, Clinigen can offer expertise in manufacturing, already has recruited another supplier and expects to meet with regulators shortly in order to get the suspension lifted. Clinigen usually acquires a product in order to revitalize its marketing in new geographies and indications, but the strength of the Vibativ license is that it lasts for 15 years and the product is patented until 2026, said Clinigen CEO Peter George. Clinigen also has an option to extend its license. The company also is looking to acquire or license several other products, as noted at its initial public offering last year. Telavancin is indicated in Europe for the treatment of hospital-acquired pneumonias (HAPs) due to methicillin-resistant Staphylococcus Aureus (MRSA) infections that are refractory to other therapies, and should fit well with Clinigen’s other infectious disease product, Foscavir (foscarnet sodium), which is indicated as a last-line treatment for HAPs due to viral infections. Foscavir was acquired from AstraZeneca in 2010. The antibiotic is marketed in the U.S. for complicated skin infections and received a favorable recommendation for use in HAPs from an FDA advisory panel in November 2012. - John Davis

Boehringer Ingelheim/Presidio: Germany’s privately held Boehringer Ingelheim is teaming up with Presidio Pharmaceuticals in a non-exclusive collaboration to test three direct-acting antiviral candidates in combination therapy in hepatitis C patients with genotype 1a infection. No deal terms were released for the collaboration announced March 12. San Francisco-based Presidio will have primary responsibility for running the Phase IIa trial, slated to start during the second quarter, and each firm will retain rights to their proprietary compounds. The collaboration will team PPI-668, a pan-genotypic NS5A inhibitor from Presidio with two BI Phase III compounds – protease inhibitor faldaprevir (BI201335) and non-nucleoside polymerase inhibitor BI207127. Patients will be dosed the combination with or without ribavirin – the trial will be interferon-free. The trial will measure on-treatment antiviral response and sustained virologic response (SVR) rates, with SVR data for four and 12 weeks post-treatment expected to be available in the fourth quarter, Presidio said. Presidio Chief Medical Officer Nathaniel Brown said the study will focus on genotype 1a patients, because that variant has proven more difficult to treat in various companies’ HCV trials to date than genotype 1b. Genotype 1 virus is the most prevalent form of HCV in North America. - Joseph Haas
Photo credit: Wikimedia Commons

CMEA 8 Is "Dissolved"

Hark back to the golden days of JP Morgan, all of two months ago. The sun was shining, the cable cars were whirring, and CMEA Capital was touting its long-awaited CMEA 8 fund. It even had posted Web pages for two new partners, who were bellying up to the table with a lot of optimism about the new fund and a string of early-stage biotech successes on their resumés. We wrote about it here.
 
Two months later, the fund's plug has been pulled, according to all three partners involved. In response to inquiries, Troy Wilson, the cofounder of PI3 kinase developer Intellikine, Kent Hawryluk, an Indianapolis-based VC, and CMEA life sciences managing director Karl Handelsman issued a joint statement to our sister publication START-UP: “CMEA 8 is dissolved. The decision was mutual and we have amicably parted ways.”
 
CMEA has had on-again, off-again plans for this fund, going back to 2010 when it was pitching prospective investors on an asset-centric biotech fund, backed in part by Eli Lilly and code-named "Velocity." START-UP wrote about those plans here.

In 2011, CMEA jettisoned plans for Velocity as a standalone fund -- around the same time managing general partner Jim Watson said there would be no eighth fund -- instead carving Velocity out of CMEA VII and making it one of many VC experiments that, in the past couple years, have prioritized lean-and-mean development of in-licensed compounds. (In its current incarnation, Velocity's tag line is "We build drugs, not companies.")

We shouldn't go any further without mentioning the elephant in the room: the sexual harassment suit against CMEA and one of its former executives that went public March 7. Let's be clear: there is no indication that the unraveling of CMEA 8 is linked to the lawsuit, and the two new would-be partners, Wilson and Hawryluk -- no longer listed on CMEA’s Web site, by the way -- are not mentioned in the legal complaint.

After the suit became public (you can find more details and the full text of it here), Wilson, Hawryluk and Handelsman would make no comment except for the statement previously noted.
 
So what's next? Handelsman referred all inquiries about the lawsuit to CMEA’s lawyer, Lara Villareal-Hutner, who responded with a prepared statement that other media outlets have also received in recent days. It read, in part: “CMEA acted at all times professionally and with integrity, underscored by the fact that for the last eight months the administrative assistants continued working for the Firm, and resigned only after retaining an attorney and filing this lawsuit. While the statements asserted in this lawsuit are salacious, CMEA is confident that the true facts supported by evidence - not others' self-interested mudslinging - will determine the outcome of this case. As such, CMEA is fully prepared to vigorously defend itself and its reputation, and is supremely confident in its ability to prevail.”

Reached in Indianapolis, Hawryluk declined to comment. Meanwhile, Wilson has been busy building, with the help of his former Intellikine colleagues, a self-described “drug discovery incubator” called Wellspring Biosciences, a variation on the increasingly common theme of asset-centric biotech company creation. We noted Wellspring's first deal -- the spinout and partnership of its offshoot Araxes Pharma -- in the March 4 Deals of The Week column. On Wilson’s now-defunct CMEA page, he’s quoted as saying that Wellspring is “exactly the sort of company we want in CMEA 8.”

 We'll have a full report on all these doings in the upcoming START-UP.
 
Photo courtesy of flickr user Eschipul.

Deals Of The Week Untangles The String of Pearls

Speculation has abounded of late that Bristol-Myers Squibb is looking to do its largest acquisition ever – to add a crown jewel to its string-of-pearls. That’s the pharma’s loving nickname for an aggressive deal-making strategy in which it has lined up a series of about two dozen acquisitions and partnerships to complement its internal pipeline and existing products. These deals have largely been focused on cancer, cardiovascular disease, immunology, neuroscience, and virology.

BMS has made only three acquisitions worth more than $1 billion since 2007 when the pharma first put this strategy in place, according to Elsevier’s Strategic Transactions database.  Two out of three of them may eventually contribute substantially to the top-line.

The most recent, of course, was the $6.8 billion joint acquisition in August of Amylin alongside BMS’ existing diabetes partner AstraZeneca. The idea was that the pair would put their marketing muscle behind a trio of classes of diabetes drugs. In the fourth quarter, its first full quarter of U.S. sales, BMS reported revenues of $55 million for Bydureon (exenatide extended-release) and $92 million for Byetta (exenatide). The partners hope to ramp up revenue as they expand their marketing effort internationally and roll-out a pen for Bydureon.

Another BMS buy for over $1 billion was HCV play Inhibitex, which after a $2 billion acquisition early last year took a well-chronicled swan dive. Safety problems forced BMS to halt a trial for the lead acquired candidate. But BMS hasn’t given up on HCV; it’s targeting genotype 1b, which is prevalent in Japan where it accounts for 70% of HCV infection. BMS is currently in Phase III combination testing with NS5A inhibitor daclatasvir and NS3A inhibitor asunaprevir. Both of these are internal BMS candidates.

BMS expects to present data from the trial at the American Association for the Study of Liver Diseases conference in November and to file for approval of the combo in Japan by year-end. The company is also testing that regimen in genotype 1b patients in the U.S. and Europe and pursuing triple and quad HCV combination treatments. Part of these could be Peginterferon lambda-1a, which BMS gained with its 2010 acquisition of ZymoGenetics for $841 million.

So, that gives BMS one possible marketing-driven success and one outright failure among its big, recent acquisitions. The third big deal, for Medarex, has been an unabashed success. BMS acquired the biotech in 2009 for $2 billion, when its ipilimumab was in Phase III trials for metastatic melanoma. After a 2011 approval, Yervoy (ipilimumab) had 2012 sales of $706 million; it’s expected to become a blockbuster.

BMS is looking to expand upon Yervoy's success. Immuno-oncology and HCV are its two top pipeline priorities, BMS said at this week’s Cowen Health Care Conference. Its immune-oncology line-up includes Medarex candidate anti-PD1 antibody nivolumab (in Phase III testing for melanoma as well as lung and kidney cancers) and elotuzumab (in Phase III testing for multiple myeloma). BMS has rights to the latter with partner AbbVie under a 2008 deal. The original deal was with PDL Biopharma, which then spun-out Facet, which was acquired by Abbott, which itself then spun out AbbVie.

Wall Street expects that Yervoy, along with anti-fibrillation drug Eliquis (apixaban) and diabetes drug Onglyza (saxagliptin), could have blockbuster potential. Both Eliquis and Onglyza were discovered internally at BMS (and both are shared with partners -- Pfizer and AZ, respectively).

But new blockbusters aren’t coming on-line quite fast enough to replace lost revenue. Of its current stable of seven blockbusters, BMS is already losing Plavix sales to generics and stands to lose patent exclusivity on three more within the next few years – anti-psychotic Abilify (aripiprazole), HIV franchise Sustiva and hepatitis B treatment Baraclude (entecavir). Even before the string-of-pearls, dealmaking was essential to portfolio building at BMS. It acquired Sustiva in its largest deal to date – the 2001 purchase of DuPont Pharma for $7.8 billion. Its rights to Abilify stem from a 1999 partnership with Otsuka.

To do an even bigger deal, BMS would have to do some fancy wheeling-and-dealing. To execute on rumored buyouts of Biogen Idec with its $40.5 billion market cap or Shire with its $17.2 billion market cap, the $61.5 billion BMS would have to get creative and come up with a lot more cash than the $6.4 billion it had at year end. But, if nothing else, the Amylin transaction has shown BMS can do some creative deal-making.

For now, Wall Street seems to think BMS has done a good enough job stanching its hemorrhaging sales. Since announcing its 2012 net sales declined 23% to $4.2 billion on Jan. 24, BMS shares have climbed 8%. That brings its year-to-date rise to 16%; a reversal of the 8% decline in 2012.

But rather than speculate further about BMS' dealings, let's take a look at actual deals that have transpired in this edition of . . .

Celgene/Presage: Celgene is looking to identify novel drug combinations for the treatment of solid tumors with the help of Presage Biosciences’ proprietary technology platform. The companies announced they signed a collaboration, the second major deal with a pharma partner for Presage, on March 5. Celgene paid $13 million upfront and agreed to undisclosed milestone payments for access to a drug array platform that allows for micro-doses of multiple drugs to be placed through the skin and directly into a tumor, permitting drug developers to measure and compare drug responses. One advantage of the technology is that it allows a drug manufacturer to compare drug responses in a living tumor rather than in an in vitro model, which can yield misleading results or fail to correlate with what happens to a tumor in the clinic. Celgene will pay $5 million in R&D funding and $8 million in exchange for an equity stake. Presage signed its first significant deal last year with Millennium: The Takeda Oncology Co. The Seattle-based start-up’s near-term goals call for signing one more partner for a total of three technology platform deals. The company plans to focus on executing on those tight-knit relationships and on expanding the uses for its technology in other areas. - Jessica Merrill

ViiV Healthcare/Medicines Patent Pool: This is an example of Big Pharma contributing IP to enable the manufacture of generic versions of HIV drugs for developing nations. In late February, ViiV  –  a GlaxoSmithKline, Pfizer, and Shionogi joint venture focused on HIV – granted MPP a royalty-free license for pediatric formulations of the antiretroviral drug abacavir in 118 developing countries. MPP is a United Nations-backed health care organization that collects intellectual property rights for HIV drugs from originators in order to transfer them to generics companies. It facilitates broader and faster access to HIV drug IP for these generics makers supplying developing markets. MPP first invited companies to contribute HIV IP into its pool in December 2010. In addition to ViiV, NIH and Gilead Sciences have also signed agreements. Johnson & Johnson has declined to participate, but Merck, Abbott, Bristol-Myers Squibb, Boehringer Ingelheim, and Roche are all still considering contributing HIV IP to MPP. - Stacy Lawrence

Array Biopharma/Global Blood Therapeutics: Cancer-focused Array is collaborating with start-up Global Blood Therapeutics in a drug-discovery agreement to focus on small-molecule compounds for chronic blood-related diseases. No deal terms or therapeutic targets were disclosed. Boulder, Colo.-based Array says it will develop assays and screen its proprietary library of 300,000 small molecules to identify active site and allosteric modulators of targets chosen by Global Blood. Array President Kevin Koch said the companies share a goal of accelerating drug discovery and development by combining Global Blood’s expertise in disease biology and computationally supported medicinal chemistry with Array’s lead-generation abilities. Based in South San Francisco, Calif., Global Blood was founded in 2012 with a $40.7 million Series A financed by Third Rock Ventures, under which Third Rock partner Mark Goldsmith took the CEO’s chair at the new company. With a therapeutic focus of using allosteric modulation to change the shape of proteins in the blood, Global Blood’s top priority is developing a therapy for sickle cell disease. - Joseph Haas

Targacept/AstraZeneca: North Carolina biotech Targacept and its Big Pharma partner AstraZeneca have agreed to amend their partnership agreement once again. The companies announced March 5 that AstraZeneca will give back the rights to Targacept’s alpha7 neuronal nicotinic receptor modulating compounds. Previously, AstraZeneca had the right to any compounds Targacept developed for cognitive disorders and schizophrenia. The Big Pharma opted out of development of TC-5619, a selective alpha7 NNR in 2011. The two companies paired up originally in 2005 on AZD3480 (TC-1734). The companies previously chose not to pursue AZD3480 in schizophrenia or Alzheimer’s disease after poor results for two mid-stage studies, but continued development in ADHD. Development of AZD3480 was later stalled in favor of another compound. AstraZeneca has now returned all rights to this compound to Targacept.

AstraZeneca will retain the rights to Targacept’s alpha4beta2 NNR modulators, including AZD1446 . The company now has the right to develop these compounds in any therapeutic area. Previously, AstraZeneca’s rights with regard to these compounds were limited to cognitive disorders and schizophrenia. - Lisa LaMotta

Cancer Research Technology/AstraZeneca: Britain’s Cancer Research Technology - the technology transfer arm of  the charity Cancer Research UK - has extended its alliance with AstraZeneca to develop new oncology therapies in another sign of Big Pharma's growing interest in tapping academics to help overcome chronic R&D productivity difficulties. The deal aims to develop a drug pipeline targeting cancer metabolism. The partnership, initially begun in February 2010 for a three-year period, marked the first time CRT had teamed up with industry to actually seek targets and hunt for viable lead molecules together, rather than just licensing out IP. The alliance has been extended for a further two years, to early 2015. Each side has allocated 30 researchers to their alliance. No financial terms were given. CRT will use its expertise in identifying and selecting new targets from existing CR UK cancer metabolism programs; CR UK's research in this area explores the differences in how cancer cells versus normal cells make and use oxygen and energy. Working at both partners' UK research facilities, the goal of the collaboration is to develop small-molecule drug candidates that can alter a cell's metabolism and potentially starve the cancer cells of nutrients necessary for survival. AstraZeneca will advance the most promising compounds into preclinical and clinical development; for those projects reaching the clinic, it will pay CRT milestones and royalties. The alliance team will continue to work at CRT’s Discovery Laboratories in London and Cambridge, and AstraZeneca’s cancer research centre, Alderley Park, Manchester, in the United Kingdom. - Sten Stovall

Galapagos/Roche: The partners went their separate ways, concluding a discovery partnership that was first started for COPD in 2009 and then broadened into fibrosis in 2010. Roche will pay Galapagos almost €6 million for work completed in 2012, bringing the total Galapagos received under the deal to €16 million in upfront and milestone payments. Galapagos has regained rights to all fibrosis assays and targets discovered; it hopes to find another partner. The biotech chalked up the partnership dissolution to Roche’s shift in therapeutic areas of focus. - S.L.

Entangled string and pearls photo courtesy of Flickr user bhollar.

Financings of the Fortnight Wonders About The Wolf

Huffing and puffing and blowing the NIH down?

The biggest financial news of the fortnight had to be the U.S. government’s failure to avoid the sequester budget cuts, and the odd collective yawn it produced. Even with the sword of Damocles poised above various agencies, markets kept climbing – including the Nasdaq and AMEX biotech indices (respectively up 3% and 2.5% this week, as of this writing). The stock shrug led some to accuse President Obama and his supporters of crying wolf.

Pre-sequester, one of the federal agency heads making dire predictions was NIH director Francis Collins, who said on a February 25 conference call that “somewhere in the neighborhood of 20,000 jobs will be lost.” Collins also pointed out the sequester will lead to delays and lost time in important drug development projects focused on cancer treatment, a universal influenza vaccine and Alzheimer’s disease.

(For "The Pink Sheet" DAILY's full sequester coverage, click here.) 

Now that the cuts are coming, we asked around to see if, in our little corner of the world, the wolf was still howling. In other words, how might the cuts trickle up into the biotech startup realm, with potentially fewer innovations to hone into new companies? Part of that trickle flows through the technology transfer offices of major non-profit research centers, so we started there. What do they think?

Scott Forrest, the tech transfer chief at the prolific Scripps Research Institute  of Technology in La Jolla, Calif. – which has helped spawn biotechs such as FoldRx Pharmaceuticals, now part of Pfizer, aTyr Pharma, CovX Research (also bought by Pfizer), Receptos and Ambrx -- told The In Vivo Blog he didn’t expect any near-term pain in the next, say, six months. "Beyond that, we’re practicing watchful waiting," said Forrest. "We just don’t know what to expect."

We wondered if there's a correlation between NIH budgets and biotech company formation. Bob Coughlin, the head of the biotech trade group in Massachusetts, the state that receives the most NIH funding, told us "the long-term effect will be seen four, five, ten years from now when we don’t have new therapies and ideas in our pipeline of future companies." 

But the National Venture Capital Association has never done a study on such correlation -- and its life science policy VP Kelly Slone told FOTF she isn't aware of one. So until we crunch those numbers ourselves, there’s no precedent to gauge potential fallout by that measure.

Todd Sherer, the president of the Association of University Technology Managers wouldn’t go as far as to predict the impact on company formation. But Sherer, who also runs tech transfer at Emory University in Atlanta, said funding does correlate to invention disclosures: "So if funding dollars go down, there will be some latency, perhaps two or three years, but expect to see a drop in the number of new invention disclosures that turn into licensable technology."

Sherer also said that the tech transfer bottleneck, already an impediment, will only get worse. "Through the global financial crisis, universities haven’t increased patent budgets or [added staff], despite the federal funding increases and the number of new inventions arriving. So we’ve had more inventions coming our way, but no increase in staff or budget to handle them, and with fewer outlets [among VCs or pharmas to license them]. We’re just now coming out of a perfect storm. I’m afraid we left important innovation along the roadside during the financial crisis, and we’re about to head that way again," said Sherer.

VCs like to say that the best technologies and product candidates will always rise to the top and attract money. But with the life-science venture population shrinking, and those remaining often in pursuit of later-stage investments that won’t take so long to mature, fewer VCs are even looking toward academia. As part of its annual A-List feature in January, START-UP asked dozens of life-science VCs to name the best sources of innovation. Only 15% said academia. Unscientific, true – but Sherer wasn't surprised by the sentiment. With universities dabbling more in translational science, and big drug companies forging ties left and right with academics, he said the odds of getting something licensed might be better when going "directly to Big Pharma and big biotechs and avoiding the start-up route. I haven’t seen data that that’s the case, but conceptually it seems possible." 

This all may be moot when the new federal budget is negotiated. But with wolves at the door and fiscal hawks flapping their wings -- and gums -- we aren't predicting anything. Howl as much as you want, but you'll never filibuster long enough to avoid...

Tesaro: Basking in the afterglow of its successful 2012 IPO, the publicly traded oncology developer sold 5.4 million common shares in a secondary offering at $18 per share that raised net proceeds of $91 million for the Boston-area company. Tesaro says the cash will go toward its development programs, rolapitant, niraparib and TSR-011, which were all in-licensed. The $18 price was $1.09 below the firm’s closing price February 22, the last business day before the offer was announced. Since the announcement Tesaro shares have risen to $24.36 a piece as of mid-day trading March 7. The firm, which debuted in late June at $14 a share, was one of several in the IPO class of 2012 to finish the year above its offer price. It’s a prime example of a recent biotech phenomenon that constrains the number of companies able to go public, but rewards those that manage to squeeze through the window. Tesaro executives and directors stand to benefit, as they owned nearly 70% of the company before the secondary offering. Their holding now stand at nearly 60%. Tesaro was formed by the former executive team of MGI Pharma, which was bought by Eisai in late 2007 for $3.3 billion. New Enterprise Associates, InterWest Partners and Kleiner Perkins Caufield & Byers were Tesaro’s three main venture backers, and all three still have Tesaro board seats. There were 13 biopharma and diagnostic IPOs on U.S. exchanges in 2012, and three venture-backed firms have debuted so far this year. (We’re not counting Pfizer’s animal-health spinoff Zoetis.) Citigroup and Morgan Stanley led Tesaro’s underwriters, who sold their full overallotment of 708,000 shares. -- Alex Lash

Ablynx: Belgium's publicly-traded Ablynx has raised €31.5 million ($41.2 million) in a private placement announced February 28, two weeks after announcing positive Phase II results for ALX-0061, a second rheumatoid arthritis-targeted product from the company’s Nanobody platform. The placement is the second largest financing in Europe’s therapeutic biotech sector this year, trailing only the $60.9 million raised by e-Therapeutics in February. Nanobodies are small-sized, single-domain antibody fragments that penetrate deep into target tissues. They also bind strongly to human serum albumin, which prolongs their circulation time in the body. The funds will support further development of ALX-0061, an IL6R inhibitor, and other Nanobodies. The funds give Ablynx greater flexibility over future development plans, allowing it to consider co-development or co-promotion – it has 25 programs in its pipeline, including five at the clinical development stage, and a roster of Big Pharma partners, including Boehringer Ingelheim, Merck Serono, Novartis and Merck & Co. It is also evaluating the attachment of therapeutic payloads to Nanobodies through recent agreements with Spirogen and Algeta. Euronext Brussels-listed Ablynx sold 4.4 million new shares at €7.20 per share, a 6.7% discount to the February 27 closing price. Pre-IPO shareholders and warrant holders also sold 1.9 million shares at the same price, bringing the total amount placed to €45 million. -- John Davis

Spring Bank Pharmaceuticals: Looking to create a new class of drug that potentially could be included in next-generation, all-oral antiviral regimens for chronic hepatitis C, Spring Bank announced a $10.5 million Series A financing on February 28. The funding, from Brock Securities and Gilford Securities, will help advance lead candidate SB 9200 into a Phase I safety and antiviral efficacy trial this quarter and further the Massachusetts biotech’s preclinical pipeline. SB 9200, derived from Spring Bank’s proprietary Small Molecule Nucleic Acid Hybrid technology platform, produces an antiviral effect by activating the host-immune response in HCV-infected cells, the company says. It targets two host cytosolic proteins, RIG-I and NOD2, to set off selective activation of immune response in the presence of viral infection. In preclinical study, the compound has shown synergistic activity with other HCV antivirals and demonstrated a clean safety profile. Spring Bank thinks ‘9200 will prove to pair well with other new direct-acting antivirals for HCV thanks to the potential for pan-genotypic activity and a high barrier to resistance. Previously, Spring Bank raised $600,000 in angel financing in 2009, got a $244,000 grant under the U.S. Qualifying Therapeutic Discovery Project in 2010 and received a $3.9 million grant in 2011 from NIH. The company’s preclinical pipeline includes programs for hepatitis B, respiratory syncytial virus, chronic obstructive pulmonary disease and broad-spectrum antibiotics. -- Joseph Haas

Daiichi Sankyo: The Japanese drug giant with a long history has jumped on a recent bandwagon by forming its own venture group, as our friends at PharmAsia News reported March 4. To date, Daiichi Sankyo has invested as a limited partner in other venture funds as a window into deal flow and to gain preferential co-investment rights. But it has now created its own direct-investment vehicle to be overseen by global R&D chief Glenn Gormley, who is based in New Jersey. It joins Merck Serono, Merck & Co., Shire and other pharma companies with relatively new venture groups. Daiichi Sankyo didn’t disclose how much cash the group will have to invest, but corporations are using even relatively small amounts to invest aggressively, as corporate venture becomes a larger part of the biotech funding landscape. Corporate groups are now frequent investors in early-stage companies, once a no-go zone. In 2012, for example, Novartis’s venture group was just as active in Series A investments as Third Rock Ventures, which is one of the few traditional VCs still gung-ho for company formation. -- Daniel Poppy and Alex Lash

All of the Rest: A Series E financing led by Invesco Perpetual brought Glide Pharma £14M… In a combination Series A/loan, Dezima Pharma raised €14.2M to fund development of a dyslipidemia candidate acquired from Mitsubishi Tanabe… Attempting to overcome mucosal barriers in treating disease, Kala Pharma closed on $11.5M in Series A financing… The Dundee Corp. provided $10.5M in additional funding to TauRx for its Alzheimer’s compound… Blaze Biosciences completed a $8.5M Series A to support work on high-res technology for tumor visualization… The venture arm of leading Korean aesthetic firm AmorePacific led a $7M Series B for Brickell Biotech… With proceeds going towards Alzheimer’s agent ladostigil, Avraham added $5.7M to its Series B, now totaling $8.7M… DecImmune raised $3.2M to help develop an antibody that reduces tissue damage due to heart attack… Botanical products company KannaLife raised $1.5M in Series A funds...using social media and nonprofit advocacy to solicit biomedical research materials, Sanguine Biosciences completed a seed round… Public Swedish autoimmune/cancer company Active Biotech raised SEK270M from Investor AB… Celsion’s zero coupon preferred stock offering grossed $15M… Opko Health led a $16.4M financing for RNA-targeting RXi Pharma...oncology-focused EntreMed privately raised $11M… To fund a clinical de-risking bioequivalence study of its lead Parkinson's candidate, Canadian biotech Cynapsus closed on $Cdn6M from a syndicate including an undisclosed strategic investor… In a follow-on offering, Immunomedics raised $14M… Diabetes-focused DiaMedica announced a public offering of units… Orphan drug company Hyperion is planning to sell 2.6M shares publicly…Merck Serono spun off (and seeded with €2.5M) its latest start-up Calypso Biotech to pursue inflammatory bowel diseases… OrbiMed Advisors is reportedly raising a second pain-Asia health care fund worth $500M. -- Amanda Micklus

Wolf yawn photo courtesy of Flickr user ArranET.  

Deals Of The Week: Elan Takes It All Off, Attracts Suitors

Elan Corp. PLC has been engaged in a slow motion strip-tease over the past five years; it has now shed so many assets that it may soon disappear entirely. On Feb. 25, Royalty Pharma fielded an $11/share, $6.5 billion bid for the company. That was a 12.7% premium over the volume weighted average closing share price for Elan between Feb. 6 and Feb. 15. Elan’s directors, predictably, said the offer was too low. But the offer may be fitting in that it reflects the notion that Elan, once a CNS R&D focused biopharma, is now a royalty-generating cash shell.

In 2009 Elan peeled off its Alzheimer’s immunotherapy pipeline in a deal with Janssen Pharmaceuticals Inc. in 2009; followed by the removal of its drug delivery business to Alkermes PLC in 2011; capped by the spinning off of its Neotope Biosciences PLC drug discovery business in 2012. The drug discovery spin-out, renamed Prothena Biosciences Ltd., was announced days after Elan’s AD development partners Janssen and Pfizer Inc. discontinued further IV clinical development of bapineuzumab.

The purpose of the asset sales was to reduce Elan’s runaway debt so it could foray into new approaches to treating AD and other CNS disorders. On the eve of the Janssen deal, it was carrying $1.7 billion in debt. By the time of the Neotope spinout, the goal was to position the company as a takeout target for a buyer interested in Tysabri’s revenue stream.

Tysabri partner Biogen Idec Inc. struck on Feb. 6. Elan secured a $3.2 billion upfront payment and a graduated royalty on Tysabri sales beginning at 12% in the first year, rising to 18% on sales below $2 billion and 25% on sales over $2 billion. Moreover, Elan’s royalties include all future indications, both MS and non-MS. Tysabri is being studied in secondary-progressive MS, and Biogen has indicated it may look into the drug as a treatment for stroke.

Elan told analysts in its same-day year-end 2012 earnings call, that it would spend its windfall on acquiring “income-producing assets,” despite not having a sales and marketing organization.

Elan’s recent history is reminiscent of PDL BioPharma Inc. Both companies have shed operating assets over the past five years, essentially reducing themselves to financial plays that relied on significant product royalties. Both companies also told shareholders that they would morph into commercial product companies.
But PDL made the transition because the clock on its patent estate – which gave it a slice of revenue from some of the most lucrative antibody franchises of the past decade – was running out. It hired a couple of dealmaking veterans and told its shareholders that if it didn’t find any revenue-bearing assets by some point in 2014 it would wind up shop. A January 2013 corporate presentation on PDL’s web site indicates that in the second half of 2012 the company invested $115.8 million dollars in three life science companies.

It’s unclear why Elan wants to go back to being a product company, much less a non-neurology focused company. Unfortunately, the Street hasn’t bought into its latest plan for reinvention, giving Royalty Pharma its current opportunity. UPDATE: In an effort to fend off Royalty’s unwanted offer, on Monday March 4th Elan’s board approved a twice-yearly dividend to shareholders linked directly to Tysabri’s performance. Beginning in Q4 2013, shareholders would receive an initial 20% share of Elan’s Tysabri royalty.

As of this writing, no other buyers have come forward to bid up the price. Marko Kozul, biotech analyst at Leerink Swann, advised shareholders to accept the offer. Royalty Pharma is certainly a motivated buyer; in May 2012, it paid $761 million for part of the earn-out for the oral MS drug BG-12 payable to the former shareholders of Fumapharm AG, which Biogen acquired in 2006. Kozul calculates that BG-12 revenues will peak at around $4 billion in 2018 and the NPV for the total royalty stream, an undisclosed piece of which goes to Royalty Pharma each year, sums to $3.1 billion.

There isn’t a compelling reason for Elan shareholders to prefer management’s risky plan to simply cashing in at the modest premium that Royalty is offering. They are perfectly capable of investing the money themselves, and needn’t trust Elan to pick winning investments. Or to execute on its vision.

And talk about investment ideas, here’s a sampling of  . . .

Jazz/Concert: Jazz Pharmaceuticals PLC is singing a happy tune now that it has secured a follow-on for its lead revenue driver, the narcolepsy drug Xyrem (sodium oxybate). The company announced Feb. 26 that it has inked a deal with Concert Pharmaceuticals Inc. to develop and commercialize a portfolio of deuterium-modified sodium oxybate compounds, including C-10323 ([A#14130227004]). The deal included an undisclosed upfront, as well as the potential for $120 million in milestone payments to Concert, which will handle Phase I development of C-10323. Should a product reach the market, Concert will be eligible for tiered double-digit royalties on worldwide sales.

Xyrem, a treatment for sudden muscle weakness and daytime sleepiness in patients with narcolepsy, accounted for 65% of Jazz’s total 2012 revenues. The drug, which has to be tightly controlled due to its potential for abuse, is covered by 10 patents that expire from 2019 to 2024, with other patent applications pending. But Jazz is already facing patent challenges for the drug, and its deal with Concert is one way to shore up the franchise. C-10323 is expected to have a better dosing schedule, longer half-life, greater efficacy in cataplexy patients, and fewer side effects than its predecessor. Oh and by modifying the drug with deuterium, Jazz gets to reset the patent clock. - Lisa LaMotta

Mylan/Agila Specialities: Quelling months of speculation, Strides Arcolab Ltd. finally sold its highly profitable injectibles arm Agila Specialties Pvt. Ltd. to U.S. generics giant Mylan Inc. for $1.6 billion cash and $250 million in potential milestone payments. Mylan toppled several global contenders, reportedly Pfizer, Otsuka Holdings Co. Ltd., and Novartis AG, among others, to clinch the unit that multiplied in size in less than five years by seizing opportunities from a raft of injectable oncology drugs in the U.S. Mylan valued Agila at 18.7x EBITDA of $86 million. Agila had revenues of $255 million through the end of December 2012. Carved out of Strides Arcolab in November 2010, Bangalore-headquartered Agila has been consistently rolling out copies of hard-to-make cancer drugs. Its prospects brightened further by a series of manufacturing and compliance lapses that dogged its competitors, adding fuel to speculation last year of an impending sale by Strides.

Mylan expects to double its injectibles business in the first year after the acquisition, and believes its specialty segment will grow 30% in 2013, execs said during the company’s Feb. 27 earnings call. The deal strengthens Mylan’s global presence and gains it entry into high-growth emerging markets such as Brazil. Roughly 40% of Agila's revenue comes from the U.S., and one-fourth comes from Brazil, with the balance coming from Europe, Australia, and other established and developing markets.- Vikas Dandekar

UCB Group/Biotie Therapies: Finland's Biotie Therapies Corp. is having a good week, brightening up a traditionally gloomy time of the year for Europe's most northerly residents. Not only did the EU clear its lead product, Selincro (nalmefene) for marketing by partner Lundbeck Inc. on March 1, but another collaborator, Belgium's UCB SA, appears so pleased with a Phase II Parkinson's therapy that it has asked Biotie to conduct Phase III studies on the compound. UCB took out an option on Biotie's investigational Parkinson's therapy, tozadenant, in 2010. The company has now exercised the option after the completion of a Phase IIb clinical trial, earning Biotie a fee of $20 million, the companies announced Feb. 26. Biotie also remains eligible to receive a further $340 million in milestone payments. But with Biotie now conducting Phase III trials on tozadenant instead of UCB, as laid out in the original agreement, Biotie will also receive further payments, in the low triple digit millions, to fund that work.

In return, UCB has worldwide exclusive rights to tozadenant, and will be responsible for manufacturing and commercialization. Tozadenant is a selective inhibitor of the adenosine A2a receptor, expressed in high levels in parts of the CNS, particularly the striatum, involved in controlling movement. The binding of tozadenant blocks the effects of adenosine at its receptor, thereby increasing the effects of dopamine, and also inhibiting the effects of glutamine at the mGluR5 receptor. Dopaminergic processes are already targeted by numerous marketed Parkinson's disease therapies. - John Davis

Janssen Biotech/Araxes Pharma: The Johnson & Johnson division Janssen Inc. has paid an undisclosed amount for an option to license exclusively an oncology program being developed by Araxes Pharma LLC. The decision point to exercise the option for the program, which is focused on an undisclosed target, will come after Phase I, says Araxes CEO and president Troy Wilson. Araxes is the first announced spin-out from Wilson’s Wellspring Biosciences, a self-described “drug-discovery incubator” in San Diego that Wilson and his former colleagues at Intellikine Inc. have created as an umbrella organization for what they hope will be multiple drug programs. It’s the latest asset-centric biotech development plan, in which individual programs are housed separately from their discovery platform to simplify deal-making and create cleaner tax structures for investors. Others include Inception Sciences Inc., Forma Therapeutics LLC, and Nimbus Discovery LLC.

“There’s no one-size-fits-all structure,” says Wilson. Intellikine, which sold to Takeda Pharmaceutical Co. Ltd.’s Millennium Pharmaceuticals Inc. division for up to $310 million in late 2011, specialized in PI3 kinase inhibitors. Wellspring is, in effect, the employee agency for Araxes and affiliates that might follow; Wellspring employees will do the R&D but the affiliates will own the patents, the cash from partnerships, and the regulatory responsibility. In addition to an upfront fee, Janssen will also pay Araxes R&D funding and potential milestones and royalties. - Alex Lash

Takeda/Resolve: The Japanese pharma has inked an option agreement with three-year old Seattle biotech Resolve Therapeutics LLC that will give the larger company a new addition to its immunology pipeline. Takeda agreed to pay $8 million upfront to Resolve to develop RSLV-132 for the treatment of lupus. Resolve is expected to take the drug through Phase Ib with a readout of data at the end of 2014. Once data is available on the drug Takeda will have the right to option it for further development. Resolve will then be eligible for an undisclosed option fee and for $274 million in milestone payments, as well as royalties on the marketed product.

Takeda has been trying to bulk up its immunology business since acquiring several COPD drugs through its acquisition of Nycomed Pharma AS. The company expects immunology to account for 12% of its R&D budget during the 2012 -2014 timeframe. It spent about $3.5 billion on R&D in 2011. For Resolve, the option would serve as an exit for investors. The company is not developing any other drugs and never had any intention of pursing an exit through IPO or sale of the company The biotech has only used about $3 million (of a $7.8 million raised over two rounds) in cash since its founding in 2010.- Lisa LaMotta

Cubist/Adynxx: For an up front payment of $20 million, Cubist Pharmaceuticals Inc. has acquired an exclusive option to buy Adynxx Inc. following the data readout of Adynxx’s Phase II trial for its lead drug, AYX1, an oligonucleotide treatment for post-surgical pain. Should Cubist exercise its option, it will pay Adynxx $40 million, plus development, regulatory, and sales earn-outs. The deal, announced Feb. 25, would expand Cubist’s acute care pipeline beyond its portfolio of antibiotics, including key revenue driver Cubicin. (Cubist also has rights to Hydra Biosciences TRPA1 inhibitor CB625, in Phase I for acute pain.)  Administered once at the time of surgery, the Adynxx compound inhibits the early growth response protein 1 (EGR1), a transcription factor that triggers pain signals in the brain. This approach could reduce the need for pain medications and prevent acute pain from transitioning into chronic pain, said the company. The candidate is currently being tested in unilateral total knee arthroplasty to reduce movement evoked pain and to improve the rate and extent of functional recovery. Adynxx’ CEO Rick Orr was a co-founder of Cerexa Inc., which Forest Laboratories Inc. acquired in 2007 and more recently was COO of Corthera, which Novartis AG bought in 2010. - Wendy Diller

LEO Pharma/4SC Discovery: The psoriasis market has many drug makers just itching to get into it. The latest to move are Denmark-based Leo Pharma AS and German biotech company 4SC Discovery GmbH. The duo has entered a pact to jointly research, develop and commercialize a pill for treating inflammatory skin diseases like psoriasis. Leo Pharma will pay €1 million ($1.3 million) up-front to 4SC Discovery and additional funding for research and development. Leo Pharma will receive an exclusive option to license the worldwide marketing and commercialization rights of the compound. 4SC Discovery, a subsidiary of oncology and autoimmune specialist 4SC Group, will be eligible for a milestone payment of up to €3 million and further payments based on specific development milestones of up to €92 million along with double-digit royalties. - Sten Stovall


Russian dolls by London based artist Yana Elkassova