Deals Of The Week Is Keeping Score – Valeant Wants Actavis, Which Covets Warner Chilcott …

Whether the pastime is baseball, Broadway or the daytime soaps, the old adage is that you can’t keep track of the players without a scorecard. The M&A front involving specialty pharma and generic drug makers has become similarly frenzied, as Canada’s acquisition-driven Valeant Pharmaceuticals sought after the newly minted Actavis, with Actavis then turning to a pursuit of Warner Chilcott once negotiations with Valeant broke down.

What, exactly, is going on here? And just as vitally, why?

Recall that the dust only recently settled on Actavis, the re-branded Watson Pharma, following the merger of those two firms last year. At an investor day presentation Jan. 25, CEO Paul Bisaro proclaimed that the new Actavis could boast a widened geographic footprint and a diversified portfolio comprising regular and branded generics, brand-name pharmaceuticals and over-the-counter products.

With the Watson/Actavis combination, the resulting company merely was trying to keep pace in a consolidating generics industry that had seen sector-leader Teva continually branching out into branded drugs and perhaps biosimilars and Mylan increasing its capabilities and geographic reach via a run of targeted deal-making.

In late April, reports surfaced that talks of a merger between Valeant and Actavis had collapsed, apparently due to Actavis shareholder concerns over valuation. Actavis has been a centerpiece of Wall Street discussion in recent months, due to a consistently rising share price. (Or has the conversation lifted the share price? A chicken vs. egg conundrum, to be sure.) The stock opened trading March 1 at $85.17, and rose to $92.33 on April 1 and to $105.24 on May 1. At the close of trading on May 16, Actavis’ stock price stood at $123.61.

Meanwhile, it was not necessarily clear who was the suitor in the Valeant/Actavis talks, although the safer bet seemed to be Valeant, helmed by acquisition-hungry CEO Michael Pearson. A Wall Street investment analyst said that the Valeant/Actavis talks seemed to be the catalyst for the resulting Actavis/Warner Chilcott rumors as well as possibly emerging interest in buying out Actavis from Mylan and from Novartis.

“We know that Valeant is an aggressive negotiator in terms of valuation,” the analyst said. “Going by their track record, they’re not going to pay some kind of excessive premium. The question we had was if nothing happened, did Valeant learn something really negative about Actavis during its due diligence?”
The analyst opined that the talks might have been a power-play by Bisaro himself, with the Actavis CEO picturing himself as the leader of a combined company with Valeant. “If Bisaro is talking with Pearson and trying to sell the business for $120 a share, isn’t he sending a signal that the game is up?,” asked our source. “Now, Bisaro might be saying Actavis is undervalued and going to do all these things, but his wallet is doing the talking. Actions speak louder than words, and they’re saying now is the time to pull the ripcord on the parachute.”

But if Valeant was the pursuer, Actavis’ current gambit for Warner Chilcott might have a “poison pill” element, an effort to make Actavis too rich for the Canadian specialty pharma to swallow. “It seems too coincidental that this happened so quickly after the Valeant story,” the analyst said.

In any event, the analyst perceives an Actavis/Warner Chilcott merger as highly likely, given how much the Irish firm has to lose if it puts itself up for sale and fails for a second year in a row. It would broaden Actavis’ portfolio in women’s health and dermatology and a strong sales force that could bolster Actavis’ commercial capabilities. What’s more, a reverse merger would domicile the resulting business in Ireland, providing tax advantages.

More elements were added to the story mid-week: Pittsburgh-based Mylan was reported to have made a roughly $15 billion offer to acquire Actavis, and then multinational pharma Novartis was said to be weighing its own bid. Novartis later publicly denied interest in Actavis, however. - Joseph Haas

The final chapters of that story remain to be written, but other biopharma deal-making has come to fruition in the latest installment of …

Elan/Theravance: In one of the more interesting deals of the past week, or for that matter the year, Elan announced a deal May 13 in which it agreed to pay Theravance $1 billion upfront in exchange for a portion of the potential future royalty payments it will receive from four respiratory programs partnered with Theravance. It’s a hefty up-front that many analysts believe exceeds the value of the interest Elan would acquire. The deal is the first of several Elan plans to make as it looks to reinvent the company through licensing and acquisitions. The announcement also comes as Elan looks to push back a hostile takeover bid from Royalty Pharma. Under Irish takeover law, the Theravance deal will require approval from investors, who already are considering an $11.25 per share buyout offer from Royalty. Elan would gain a 21% interest in potential future royalty payments to Theravance from GSK on four partnered respiratory drugs, including Breo Ellipta, which was approved by FDA May 10 for the treatment of chronic obstructive pulmonary disease. It also includes Anoro Ellipta, a combination of vilanterol with the LAMA umeclidinium, which is pending at FDA with a Dec. 18 user fee date, as well as in a bifunctional muscarinic antagonist-beta1 agonist (MABA) monotherapy and vilanterol monotherapy, both in development. For Theravance, the deal would have been hard to refuse given the rich terms, even though the company recently announced a separation to form one entity to manage the royalty revenue stream from Breo. Management said the arrangement will complement the company’s previously announced plan to separate into two companies. The firm said April 25 it will split into two entities, a royalty company called Royalty Management. Co. with a focus on near-term profitability and returning capital to shareholders, and Theravance Biopharma, a research-focused biopharmaceutical company. - Jessica Merrill

Alvine/AbbVie: On May 14, AbbVie signed its second deal since spinning out from parent company Abbott Laboratories in January, this time with San Carlos, Calif.-based biotech Alvine Pharmaceuticals. AbbVie agreed to pay $70 million upfront for an option to either acquire Alvine outright or license all of the assets related to its lead compound ALV003 for the treatment of celiac disease. The disease, which is characterized by gastrointestinal inflammation due to the ingestion of gluten-containing foods, affects about 3 million Americans and currently has no treatment options other than limiting gluten intake. ALV003 has completed a Phase IIa study and Alvine is prepared to take the drug through a 500-patient Phase IIb study, slated to read out in late 2014. Should AbbVie opt into the program, it will pay a “substantial” option fee, as well as further near-term milestone payments. The amount of those payments was not disclosed. The relationship between Alvine and AbbVie has a rich history; AbbVie’s venture arm (then Abbott Biotech Ventures) backed the biotech in May 2010 when it invested an undisclosed amount. AbbVie’s funds were an extension of Alvine’s Series A – the initial tranche was $21 million in 2006 led by Sofinnova Ventures with additional participation from Prospect Venture Partners, InterWest Partners, Cargill Ventures and Flagship Ventures. Another $21.5 million was raised when Panorama Capital and Black River Asset Management joined the syndicate in 2009. - Lisa LaMotta

RuiYi/Genor/CMC Biologics: China-U.S. hybrid RuiYi announced May 16 a series of partnerships to develop RYI-008, a novel anti-interleukin-6 monoclonal antibody in China to treat autoimmune disease and cancer. Formerly Anaphore, the hybrid is 90% a Chinese company, and about 10% U.S.-based, CEO Paul Grayson said. RuiYi conducts research at a facility in the Zhangjiang Hi-Tech Park in Pudong Shanghai, China, with only its executive management team based in offices in La Jolla, Calif. The antibody, in preclinical development now, will be developed first in China, and the company has forged a partnership with three other companies to get it there. China has said it would make biotech innovation a priority, but few companies have been bold enough to develop innovative biologics in the country, choosing instead to focus on biosimilars and generics for China, Grayson said. RYI-008, formerly ARGX-109, was in-licensed from Belgian/Dutch biotech arGEN-X in October 2012. RuiYi inked an exclusive licensing and co-development agreement with Shanghai-based Genor Biopharma to develop RYI-008 in China. Financial details of the deal were not disclosed. The company was chosen partly due to its close relationship with China FDA and its deep knowledge of China’s regulatory environment. Founded in 2007, Genor is focused on development and commercialization of therapeutic mAbs and Fc-fusion proteins. The company has more than 10 products in its pipeline, three of which are at IND and clinical stages. Danish contract manufacturer CMC Biologics will develop a cell line for RYI-008 for global manufacturing in all markets. Specific terms of the agreement were not disclosed. - Tamra Sami
Roche/Curie-Cancer: France’s Curie-Cancer and Roche announced May 15 that they are building upon a four-year partnership to expand their translational research programs and hasten development of new cancer treatments. In 2009, they agreed to partner around a preclinical research program which gave Roche access to a platform of preclinical models developed by the research teams at the Institut Curie. Curie-Cancer develops Institut Curie’s industry partnership activities. The Roche Institute for Research and Translational Medicine is the Swiss group’s arm there which aims to identify leading French academic research teams and build partnerships with them in areas of shared interest. The initial partnership gave Roche access to preclinical models that are highly representative of the tumors observed in patients. Using the platform, Roche determined in which sub-type of breast cancer an antibody was most effective. The Institut Curie also owns the Reverse Phase Protein Analysis platform, which gives researchers better understanding of how a Roche antibody works on the cancer cells at the molecular level, and also helps to identify predictive response markers. Curie-Cancer and Roche currently are working on a number of translational research programs involving Roche molecules that make use of the same technology. For example, a team of Curie-Cancer clinicians, anatomopathologists and researchers are working on developing a new Roche molecule targeting tumors. No financial details of the partnership were disclosed. - Sten Stovall

Quintiles/Merck Serono: Merck-Serono and newly public CRO Quintiles Transnational announced May 15 a five-year strategic collaboration that appears to go beyond the typical consolidation which the provider services industry’s larger pharmaceutical companies have pursued over the past few years. The deal, which the companies described as “first of its kind,” will create a drug-development engine by combining “expertise and experience” from the two organizations. Merck-Serono will lead strategically while Quintiles will handle the nuts and bolts of clinical trial planning and execution. In short, this is about more than saving money for Merck-Serono, a company that apparently is saving quite a bit these days. The mid-sized pharma’s parent company Merck KGAA reported May 14 during its quarterly earnings call that it was ahead of schedule in executing on its restructuring – which involved the closure of Merck-Serono’s Geneva headquarters – and that it would move forward its financial targets from 2014 to this year. Merck-Serono Executive VP and Global Head of Development and Medicine Annalisa Jenkins said that the partnership transcends the typical preferred-partnership outsourcing model. The deal moves beyond trading volume for “a better rate card,” she said. Quintiles has the benefit of seeing across different companies throughout industry, she said, and of integrating that knowledge, adding, “it’s remarkable that we don’t make a greater attempt to embrace and integrate that knowledge in how industry plans and executes studies.” The Merck-Serono/Quintiles tie-up does just that, she said, and “financially the incentives are set up to drive to more efficient decision making.” Specifics of the financials weren’t disclosed. The deal is Quintiles’ first since its public market debut May 8. The industry’s largest CRO and its existing investors sold more than 27 million shares combined at $40 apiece, raising about $950 million (Quintiles netted about $500 million). - Chris Morrison

AbbVie/Galapagos: AbbVie made further news May 17 when it and partner Galapagos announced that they will extend their 2012 collaboration centered on GLPG0634, a Phase II Janus kinase inhibitor, to development in Crohn’s disease. Under the revised agreement, the Belgian biotech will fund and complete a Phase II trial in Crohn’s, which should facilitate rapid progression into Phase III. AbbVie will pay Galapagos $50 million upon completion of the study, expected in mid-2015. Galapagos will initiate what is planned as a 20-week, Phase IIa/b study of ‘0634 in Crohn’s patients in early 2014, investigating for both disease remission and early maintenance of the drug’s beneficial effects. The study will be performed in parallel with a Phase IIb study in rheumatoid arthritis, pursuant to the agreement Galapagos signed with then Abbott Laboratories in February 2012. At the time, Abbott paid $150 million upfront with a commitment for $200 million more if the JAK inhibitor met pre-determined criteria in Phase II study in RA. - J.A.H.
Photo Credit: Wikimedia Commons

Financings of the Fortnight Waits For Public Investors To Hop On Bluebird

It’s been another IPO-intensive couple of weeks here at FOTF HQ. We keep looking for other things to write about, but sometimes the fastest shave on deadline is with Occam’s razor. Or something like that. We didn't exactly ace our philosophy classes in college.

You don’t have to be the sharpest tool in the shed to notice how life-science IPOs have re-inserted themselves into the daily chatter this year, and there’s one upcoming issue that makes for fascinating conversation: bluebird bio, a big-idea company (gene therapy for rare diseases) that apparently strives to avoid capital letters. The firm later this year expects to enter a Phase II/III study with its lead program Lenti-D to treat young boys with the rare hereditary disorder childhood cerebral adrenoleukodystrophy, or CCALD. Also this year, bluebird should launch a Phase I/II trial for another gene transfer product, LentiGlobin, to treat ß-thalassemia major and sickle cell disease.

A bell-ringing IPO would be notable for at least three reasons. First, if someone told you five years ago that public investors would one day line up to buy shares in a gene therapy company, you probably would have had that person tested for the stark-raving-mad gene. But this decade the field has enjoyed quite a turn-around, as our Start-Up colleagues explained last summer. A large step in that journey came a couple of months later, when the European Union approved uniQure's Glybera despite a spotty track record.

Perhaps true optimists would say they never doubted that gene therapy, like so many biomedical technologies, would take more than two decades to find its way into commercial products. But a lot of other biomedical technologies aren't effectively shut down for years because of daunting safety concerns. Glybera’s approval was one kind of validation of gene therapy; a bluebird IPO would be another.

In a sense, though, public investor validation happened nearly a year ago, before the Glybera approval, when bluebird raised its $60 million Series D. The round included its previous VC backers, but new to the company’s cap table were hedge funds, so-called “crossovers” that have made their presence felt in biotech the past few years. The idea is that public investors with biotech savvy want a foothold in an elite circle of privately held firms so they’re in position to benefit from a boffo takeout offer or from an inside seat at IPO. Once in, as with bluebird’s D round, liquidity is probably no more than a couple years away. The crossovers bring much-needed cash to a mezzanine round, but they also bring a certain amount of impatience.

So when bluebird said Deerfield Capital, RA Capital Management, Ramius Capital Group and two undisclosed public funds pitched into last year Series D, it was pretty clear where the firm’s sights were set. Those undisclosed public funds are likely affiliated with Fidelity and The Capital Group, both of which are listed in bluebird’s S-1 as having invested for the first time in the Series D, and which own about 12% and 9% pre-IPO respectively. We don’t know yet how much bluebird is aiming for, but the firm has raised north of $100 million since a 2004 recapitalization. (It was known as Genetix Pharmaceuticals until 2010.)

Raj Shah, partner at RA Capital Management, one of bluebird's "crossovers," told FOTF that his firm had been waiting for a gene therapy company to produce good animal data. When bluebird showed its two lead programs were “unequivocally active” in humans, RA jumped in and is prepared to increase its position at the IPO. “We want exposure to the best technologies in this space,” said Shah. The EU approval of Glybera was encouraging, said Shah, but “FDA's recent IND acceptances of bluebird’s programs are also quite validating for the gene therapy space.”

It’s not the same as approval, of course – no gene therapy product has made it to market in the US – but it’s a significant point and speaks to the company’s approach of using a method that has elements familiar to regulators. The company extracts the patient’s own hematopoetic stem cells, makes the genetic modification ex-vivo, and transfuses the modified cells back into the patient.

The third reason to take note of bluebird is its largest owner, Third Rock Ventures, which appears in this column as often as a Kardashian on the New York Post’s Page Six. Third Rock owns 28.1% of bluebird, double the stake of the next largest owner, TVM Capital (with 14.3%, and ARCH Venture Partners is next with 10.6%). The Boston firm has had no problem raising funds – and funds, and funds, and more funds – with two exits, and two other portfolio companies in option-to-acquire agreements with larger partners.

But bluebird as far as we can tell would be its first IPO, and cofounder Mark Levin told our "Pink Sheet" DAILY colleagues that there should be more in the coming year. (The story on Levin’s talk this week at the Harvard Club in New York is coming soon. The dressed-down Levin had to don a tie to speak at the stuffy club, which made for good comedy at the start of his talk: "How many people here had to borrow a tie to get in?" he asked the crowd. "I actually heard someone had to get a pair of pants.")

Fully clothed or not, every venture firm wants its portfolio companies to be public and liquid, of course, but if TRV notches multiple issues in the next several months, it could be a big validation not only of its company formation process but also its ability to shepherd those firms quickly to important milestones -- important enough for the still-small coterie of public biotech specialists to buy in. That is, if the companies going public are the ones in TRV’s portfolio that have grown from true early-stage seedlings into viable businesses.

We’re getting a bit ahead of ourselves. Yes, biopharma firms are going public, but on the whole, they’re still not big-science risk takers. A couple pain-med companies here, a PE-backed CRO there (see our Quintiles blurb below), and the next out the door is probably going to be a firm with $300 million-plus in venture backing that’s hoping public investors buy its rationale for yet another blood thinner on the market. (See our Portola Pharmaceuticals blurb below.)

Meanwhile, venture firms continue to cozy up to Big Pharma to help raise new funds or to help defray the risk of their early-stage efforts, as Avalon did with GlaxoSmithKline, in a deal that got our DOTW brethren thinking deep thoughts a couple weeks ago.

Now Atlas Venture is the latest to pull in big drug companies as limited partners. The venerable firm said this week it has Amgen and Novartis on board, although neither is accorded special rights to either invest in or acquire the companies that Atlas starts up. However, Atlas pledges to “explore areas of mutual interest” with its Pharma LPs, and Amgen and Novartis are free to invest directly in the Atlas companies from their own venture funds, both of which are extremely active. The key, Atlas partner Jean-Francois Formela told our PSD colleagues, is not to do anything that would lead the firm or its LPs to “unnatural behavior,” which we have to nominate for quote of the year. Because, when you think about it, what exactly is natural behavior for a VC and its investors? (We know a few entrepreneurs who would love to answer that in a manner unsuitable for family viewing.)

It all brings us back to philosophy: the Platonic ideal of venture capital, and all that. Are your investments the true essence of your existence, or just shadows on the wall of your portfolio? A famous philosopher once said, "I know kung-fu." But, grasshopper, if you have traveled this far, it is infinitely better to know…

Quintiles Transnational: The massive contract research organization’s return to the public markets, timed perfectly, was by no means a typical biopharmaceutical IPO. The May 8 issue raised a staggering $1.1 billion and pushed the company's market value to $6 billion as Wall Street’s interest in biopharma continues to rise. As you might guess from the dollar totals and the fact that Quintiles went private a decade ago, this was a private equity deal, not a venture capital exit. Quintiles founder and Executive Chairman Dennis Gillings, Bain Capital and TPG Capital each made more than $150 million in the IPO, and each continues to hold about 20% of the company, assuming the percentage of shares to be sold was the same in the final sale as reported in the S-1. Bain became the lead Quintiles investor in 2008, when several new private equity investors came in. The investors weren’t waiting for an IPO to get paid; they've already cashed out about $1.5 billion in dividends in the last five years. In addition, Gillings and investors split a one-time $25 million payment upon the IPO. Quintiles will use most of the proceeds to make that investor payment and pay down more than $350 million in debt. The IPO priced at the top of its range at $40, and – in another sign this was no ordinary biopharma IPO – the number of shares sold by insiders ballooned at the last minute by more than 5 million. For most VC-backed biotechs, insiders have to buy shares to get an IPO done. – Stacy Lawrence

Portola Pharmaceuticals: The next biotech IPO likely to price is for hematology firm Portola, which is currently on the road to talk up an IPO slated for the week of May 20. Portola had $125 million in cash on March 31, and wants to raise $100 million through the sale of 6.9 million shares at $13-$16 each, not a massive sum considering the firm has raised at least $306 million in venture financing. Pre-IPO, the firm’s largest shareholders are an arm of the Singapore government’s investment company, MPM Capital, Prospect Venture Partners, and several other venture firms hold more than 5 percent. At the proposed mid-point, Portola would be valued at $469 million. Portola’s lead compound is the oral anticoagulant betrixaban, a once-daily Factor Xa inhibitor that ex-partner Merck handed back to Portola in 2011. Portola hopes to carve out a market in the crowded field for the drug after hospitalization. There are other differences that Portola hopes will catch the fancy of public investors. Betrixaban is in Phase III for the prevention of venous thromboembolism (VTE) in acute medically ill patients; there isn’t another novel oral anticoagulant in the clinic or approved for this indication, according to the company. On the road show, Portola CEO William Lis pegged the betrixaban market at $3 billion to $4 billion, based on the current price of orals of about $8 daily, and assuming 35 days of usage post-hospitalization. Lis expects to market betrixaban to hospitals, so he estimates a sales force of about 100 will be sufficient. The firm’s next candidate is PRT4445, a Phase II antidote for Factor Xa inhibitors. – S.L.

Isis Pharmaceuticals: The publicly traded antisense developer said May 8 it priced a secondary offering of 9 million shares of common stock at $19 per share. Isis gathered $162.5 million in net proceeds from the sale, a sizeable amount to help the firm push through its deep pipeline, with nine compounds expected to produce Phase III or significant Phase II data by early 2014. The offering cashes in on momentum the firm has seized in the past several months – not least of which was the Kynamro (mipomersen) approval in late January for the treatment of the very rare homozygous familial hypercholesterolemia. Meanwhile, Isis’s dealflow continues unabated, as our DOTW brothers and sisters note in this post. The firm has raised more through partnerships, about $2 billion, than it has from equity sales; at the end of 2012, the firm had the potential to earn up to $5.1 billion in future milestones. It’s also worth noting that Isis owned nearly 21% of Regulus Therapeutics, which it and Alnylam Pharmaceuticals established jointly in 2007, when Regulus went public in October 2012. As of the end of February, the most recent disclosure, the stake had dipped just below 20%. Regulus debuted at $4 a share and has risen 82% to $7.29 as of May 15. Underwriters led by Goldman Sachs and JP Morgan have the option to sell an additional 1.35 million shares.-- Alex Lash

Lumena Pharmaceuticals: It’s a new company wrapped around a very old product. Lumena announced a $23 million Series A round to redirect toward orphan indications a compound that was tested more than a decade ago in more than 1,400 patients. The tests were run by Searle and then Pharmacia, where Lumena’s current VP of research worked on the program to fight high cholesterol. (Subsequent acquirer Pfizer shelved the program.) Lumena is aiming to treat cholestatic liver disease, which is characterized by retention of bile acids in the liver, resulting in painful symptoms related to an intractable itch. Sufferers of various forms, including Primary Biliary Cirrhosis, the pediatric Alagille Syndrome and Progressive Familial Intrahepatic Cholestasis, often have difficulty sleeping, and have been known to scratch their skin until they bleed and scar. Lumera will use the Series A proceeds to run Phase III trials in each of the orphan indications. The firm has been in stealth mode since 2011 with Pappas Ventures partner Mike Grey serving as CEO. Pappas led the round and recruited Alta Partners and RiverVest Venture Partners to join. Like many venture firms seeking to avoid high-risk, high-cost projects, Pappas was interested especially in pharma opportunities with defrayed risk and short clinical development paths. Grey said the prior clinical work and orphan indications requiring smaller trials made LUM001 appealing. The compound inhibits apical sodium-dependent bile acid transporter (ASBT). That protein is critical in the process of reabsorption of bile acids from the small intestine, specifically the lumen, where the body absorbs nutrients from digested food. – Paul Bonanos

All The Rest: The fortnight’s largest venture round was GPCR therapeutics developer Trevena’s $60mm Series C round to which Forest Labs committed $30mm and also optioned the company’s Phase IIb-ready TRV027 for acute decompensated heart failure… In a Series E round, oncology-focused Tokai Pharmaceuticals took in $35.5mm…Kite Pharma’s Series A preferred stock financing – including the conversion of $15mm in outstanding promissory notes – garnered the cancer immunotherapeutics developer $35mm…Belgian biotech Cardio3 Biosciences raised €19mm ($25mm) in venture funding: €7mm in new equity committed by existing investors and €12mm from the conversion of existing convertible loans…Virtual company Tacurion Pharma (formed by Drais Pharmaceuticals) raised $15mm in an A round from backers including Astellas, which also out-licensed its nocturia candidate to the start-up…In a round led by Mérieux Développement, which was joined by return backer Shire, NeuroPhage Pharmaceuticals scored $6.4mm…Callidus Biopharma closed a $4.6mm Series A financing to speed up preclinical studies of candidates in Pompe and Gaucher diseases…In a registered direct offering, Dyax will issue 8.9mm common shares priced at $2.30 and 41k Series 1 preferred shares (priced at $230 and convertible into 100 shares) for proceeds of $30mm…A stock purchase agreement with Lincoln Park Capital Fund grants Zalicus the right to sell up to $25mm worth of its common stock to support clinical trials of lead pain candidates Z160 (Phase II) and Z944 (Phase I)…Through an RDO of 3.9mm shares at $4.14, Omeros brought in $16.1mm…A follow-on public offering of 63.3mm shares at RMB12.25 ($1.99) each, resulted in proceeds of  $126mm for Chinese CRO Zhejiang Huahai Pharmaceuticals…Acadia Pharma netted $94mm through its FOPO of 8mm shares priced at $12.50…Rockwell Medical brought in net proceeds of $33.1mm in its FOPO, selling 11.5mm shares at $3.05…Cyclacel Pharmaceuticals expects to see $20mm in proceeds from a public offering of 6.7mm shares at $3…In a FOPO of 9.5mm shares at $1.50, Discovery Laboratories netted $13.4mm…Initial public offerings that priced: Receptos netted $68.3mm through the sale of 5.2mm shares at $14, the low-end of its $14-16 range; Ambit Biosciences, first planning to sell 4.6mm shares at a $13-15 range, priced 8.1mm shares at $8, still bringing in $65mm; and after trying since 2007, Insys Therapeutics finally completed a $34.2mm IPO by selling 4.6mm shares (including overallotment) at $8, way below its $16-18 range, which was later cut to $8-$10…Alocobra upped the number of IPO shares it plans to sell to 2.275mm at a $10-12 range; increased from the 1.4 mm shares in its March S-1 filing…Kamada, which filed for its IPO in April, announced it would sell 5.6mm ordinary shares…Biotechs that filed for IPOs: OTC cellular therapeutic vaccines developer Heat Biologics and Esperion Therapeutics; the latter cardio-focused company went public in 2000, but was acquired in 2003 by Pfizer, which spun it off to investors five years later…Vivus plans to offer $200mm worth of 7-year, convertible senior unsecured notes…Alimera Sciences (ophthalmic pharmaceuticals) has secured a $20mm debt facility – $5mm in a principal term loan, plus up to $15mm more as a working capital line of credit – through Silicon Valley Bank…Theravance is splitting into two separate public entities, one to focus on its 2004 GlaxoSmithKline deal, the other to perform R&D; and in a separate arrangement, Elan will make a $1bn cash payment to Theravance in exchange for a 21% stake (held by GSK under the 2004 deal) in royalties related to a portfolio of four Theravance respiratory drug programs…In fund news: Merck KGAA pledged to increase its investment in its corporate venture capital fund MS Ventures, raising its funding level to €100mm ($129mm) from up from its initial €40mm at the fund's inception in March 2009. -- Maureen Riordan

Photo courtesy of IngytheWingy, who seems to have a thing for public transportation. 

Thanks to Mike Goodman for his contributions this week. 

Deals of the Week: With Option Deal, Forest Keeps An Eye On The Prize-Winner

It’s an optimistic time for pharma dealmakers, with the Dow and the Nasdaq Biotechnology Index climbing, buyers sitting on big piles of cash, and the IPO window as wide-open as it’s been in years. But for smaller companies that have long lamented that pharmas hold all the cards in licensing and M&A deals, it can still be tough to wring the best value out of a deal. When even a Nobel Prize-winning technology leads to a wait-and-see option deal – as we’ll explain shortly -- structured dealmaking is clearly here to stay.

Pharmas seeking to defray or share risk as they license clinical-stage compounds have come to favor option deals over the past few years. Once a relative rarity, options came into vogue around 2007, according to statistics presented April 30 at Deloitte Recap’s Allicense conference in San Francisco. Senior biotech analyst Chris Dokomajilar reported that a few dozen option deals, including both licensing and buyout arrangements, have occurred annually since 2007. That figure has ballooned from fewer than 10 during each of the previous few years.

Typically, an option-to-license arrangement gives the buyer a close, exclusive look at an asset’s development path – most often through mid-stage trials – before it jumps in with both feet and licenses the drug completely. The asset’s original owner generally gets an option fee, which features non-dilutive funding, often more than it takes to develop the drug, up until the option period ends. Dokomajilar said that among 73 licensing deals with options since 2007, buyers paid an average up-front of $24 million for pre-clinical or Phase I assets, with an opportunity to license them at the end of Phase II.

But the choice to take an option rather than license right away is often telling. Dokomajilar said that 62% of buyout and licensing options are never exercised, and 90% of option deals are renegotiated in one way or another, based on a survey of 581 deals. (UCB Group’s recently adjusted arrangement with Biotie Therapies Corp. concerning Parkinson’s treatment tozadenant is an example.) Moreover, he noted, options “leave licensors with industry-perceived ‘damaged goods,’” making future deals less likely. (There are exceptions, of course; Singapore’s SBIO Pte. Ltd. licensed its JAK2 inhibitor pacritinib to Cell Therapeutics Inc. last year after Onyx Pharmaceuticals Inc. declined its option.)

Over the past year or two, when private companies in need of cash are involved, option arrangements have spilled over into venture fundraising deals. Thus far, most of those alliances include options to acquire start-ups, establishing a path to exit for founding investors. Some have been struck as early as a company’s Series A round: Sanofi, for example, took an option to acquire Warp Drive Bio as the company closed its initial round of funding in early 2012.

The latest twist arrived this week, when Forest Laboratories Inc. forged a deal with five-year-old Trevena Inc., a Duke University spin-out. Trevena co-founder Robert Lefkowitz earned a share of the 2012 Nobel Prize in Chemistry for his work studying G protein-coupled receptors. In the new deal, Forest took an option to license the start-up’s lead program, the Phase II compound TRV027 for acute heart failure. Rather than make an up-front payment, however, Forest invested $30 million as part of King of Prussia, Pa.-based Trevena’s new $60 million Series C round. Milestone payments could add $430 million to the deal’s value, which also includes eventual royalties if the drug is approved and marketed.

TRV027 would augment Forest’s cardiovascular program, if it licenses the drug. It will have the chance once results come back from a Phase IIb trial slated to begin later this year. But the companies may eventually share closer ties in the central nervous system space: Most of Trevena’s remaining pipeline programs address pain, and Forest will eventually have to replace revenues lost when top seller Namenda (memantine) loses patent protection in 2015.

Trevena CEO Maxine Gowen, a GlaxoSmithKline PLC veteran who worked on both its external drug discovery projects and its corporate venture team at SR One, said the deal structure was unique as far as she knew. Forest strategy chief David Solomon declined to comment on how closely the companies considered an outright buyout, saying only that both sides were comfortable with the type of transaction they worked out. - Paul Bonanos

More big companies opted for option deals of different stripes in recent days. Find out who as we pick and choose our way through...

Celgene/Concert: Some companies arrange option deals around platform technologies. Lexington, Mass-based Concert Pharmaceuticals Inc. has nailed down its fourth partnership for its deuterium chemical entity platform. On May 6, it announced a tie-up with Celgene Corp. in a deal that will use the platform to develop and commercialize drugs for cancer and inflammatory conditions. Celgene paid an undisclosed amount upfront and is on hook for $300 million in development, regulatory, and commercialization milestones on each compound, should it opt into the program. The companies would not reveal how many compounds on which they intend to collaborate, or what targets they willpursue. Work has already begun on the project. If it chooses to opt in, Celgene will take over the compounds at an unspecified point in development. Concert’s technology platform replaces a hydrogen atom with deuterium, also known as heavy hydrogen, at a specific point on a drug molecule, forming a more stable bond, but keeping the compound’s biochemical selectivity. The deuterium-conjugated drugs tend to have a better safety profile and a longer half-life, allowing for better dosing. Concert is using the funds it gains through its platform partnerships to bring its lead compound forward, CTP-499, an analog of HDX, which is an active metabolite of pentoxifylline (Sanofi’s Trental). The drug may offer favorable biologic activity as an anti-inflammatory, anti-oxidant and anti-fibrotic agent in chronic kidney disease. Concert also has deals with Jazz Pharmaceuticals PLC, Avanir Pharmaceuticals Inc. and GlaxoSmithKline. - Lisa LaMotta

Astellas/Drais: On May 7, Astellas Pharma Inc. and Drais Pharmaceuticals Inc. announced a development partnership in which Drais, through a special-purpose, virtual vehicle it created called Tacurion Pharma Inc. will take ASP7035, a Phase IIa-ready, vasopressin V2 receptor agonist for nocturia, to proof of concept. (Nocturia is characterized by the need to get up at night to urinate.) Per the May 7 deal announcement, Drais will pay Astellas an undisclosed milestone and royalties on potential sales of the drug. Astellas also retains a one-time option to acquire Tacurion on success of a proof-of-concept study planned to begin in the third quarter of 2013. As in two prior development deals with Drais, Astellas Venture Management – the venture arm of Astellas Pharma – joined as a minority investor along with Sutter Hill Ventures and InterWest Partners in a $15 million Series A round to fund Tacurion. Sutter Hill and InterWest also seeded Drais, and have seats on its board. According to Drais founder and CEO Donna Tempel, this deal differs slightly from the two predecessor deals with respect to the option. In those earlier deals Astellas’ option carried various territorial rights including the right of first refusal for the Japanese market and the right of first exclusive negotiation for any future partnering for the compound. In the deal for ASP7035, Astellas has an option to acquire Tacurion for a specified price. Tempel and co-founder Robert Desjardins, former R&D executives at Yamanouchi, helped found AkaRx in 2005 as a spin out of the merger of Yamanouchi and Fujisawa to form Astellas. Both Sutter Hill and InterWest seed funded AkaRx, along with Astellas Venture Management. Eisai bought it for $300 million in 2009. -- Michael Goodman

Shire/Nimbus: Seventeen months after Shire PLC said it would work with Atlas Venture to incubate and finance new start-ups that address rare diseases, the collaboration has resulted in its first deal. But rather than create a new company, Shire has inked a partnership with an existing one. Atlas portfolio company Nimbus Discovery LLC, a computational chemistry specialist will team up with Shire to discover and develop new therapies for lysosomal storage disorders, according to a May 8 announcement. The two companies have already chosen their first target, though it remains undisclosed; the companies will aim to develop an oral therapy that reaches previously inaccessible tissues. Financial terms weren’t released, but Shire has an option to acquire the program after Nimbus identifies a suitable candidate in the late preclinical stage; Nimbus will receive milestone payments of undisclosed size if and when the program advances through the clinic. Nimbus’s backers also include Bill Gates (investing his own money), Lilly Ventures and SR One. The start-up raised $24 million in Series A funding during the summer of 2011. Shire and Atlas announced their alliance in December of the same year. - P.B.

Takeda/Inviragen: Aiming to deliver on its promise to establish a world-class vaccines business, Takeda Pharmaceutical Co. Ltd. announced plans to buy privately-held Inviragen Inc. May 9. It’s the second acquisition for Takeda in vaccines in just over six months, following its takeout of LigoCyte Pharmaceuticals Inc. for $60 million upfront in October. In the latest deal, Takeda paid $35 million upfront and agreed to $215 million in development and commercial milestones. In exchange, Takeda gains DENVax, a vaccine in mid-stage development for the prevention of dengue infection. The vaccine is believed to be active against four strains of the virus, with a two-dose administration schedule currently being evaluated in Phase II clinical trials. LigoCyte and now Inviragen will form the basis of Takeda’s burgeoning vaccines portfolio. The company announced plans to create a vaccines business division in January 2012 and hired the former director of vaccine delivery in the Global Health Program at the Bill & Melinda Gates Foundation Rajeev Venkayya, to head it. The initiative is aimed at building a portfolio that rivals established leaders such as GlaxoSmithKline PLC, Sanofi and Merck & Co. Inc. - Jessica Merrill

Alexza/Teva: Alexza Pharmaceuticals Inc. put another piece of the puzzle in place for the launch of the inhalable antipsychotic Adasuve (loxapine) with an announcement May 8 that it has partnered with Teva Pharmaceutical Industries Ltd.’s U.S. affiliate to market the drug domestically. Teva will pay $40 million upfront and up to $195 million in post-approval and sales milestones under a deal that brings it rights to develop the product in other indications. Alexza also can earn tiered royalties based on Teva’s net commercial sales of Adasuve. In addition, the Israeli pharma is lending Alexza $25 million in the form of a five-year convertible note. Alexza can pay back up to 50% of the principal at any time prior to maturity, while Teva will have the option of converting at maturity all or part of any outstanding balance into equity in Alexza. This mirrors a facet of Alexza’s ex-U.S. partnership for Adasuve with Grupo Ferrer Internacional SA, which initially paid $10 million upfront along with potential regulatory milestones, including $3 million for EU approval of Adasuve. In March 2012, Alexza cashed out that milestone, with Grupo Ferrer buying 2.42 million shares in its partner at a 120% premium price. Alexza can convert other potential milestones under that deal to equity arrangements worth up to $8 million. Teva is stepping in where Biovail Pharmaceuticals Inc. exited in 2011, after being acquired by Valeant Pharmaceuticals. Alexza agreed with Grupo Ferrer in 2011 to market the product in Europe, Latin America, Russia and the Commonwealth of Independent States. Slated for launch in both the U.S. and Europe during the third quarter, Adasuve is an inhalable formulation of Watson Laboratories Inc.’s Loxitane, administered via Alexza’s proprietary Staccato inhaler technology. It is approved by FDA and the European Medicines Agency to treat episodes of agitation in adult patients with schizophrenia or bipolar disorder. - Joseph Haas

Amgen/Beta Pharma: Amgen Inc. and Chinese oncology specialist Beta Pharma Inc. have created a joint venture to commercialize colorectal cancer drug Vectibix (panitumumab) in China. Financial terms weren’t disclosed, but Beta will own 51% of the JV, to be named Amgen-Beta Pharmaceuticals Co. Ltd., while Amgen will hold the balance. The endeavor appears to be the first of its kind, mating Amgen’s expertise in developing large-molecule drugs with Beta’s local oncology development and marketing expertise in China. With Beta taking the majority stake, the JV could benefit Vectibix due to regulatory incentives in place for local firms, including an accelerated approval pathway. Vectibix is already approved in the West. Incidence of colorectal cancer in China is on the rise, with more than 250,000 new patients diagnosed in 2008, according to China Cancer Registration Center. Other oncology drugs such as Eli Lilly & Co. and Merck KGAA’s Erbitux (cetuximab) and Roche’s Avastin (bevacizumab) have already received approval in China. - P.B.

Thanks to Flickr user Mediocre2010 for a better-than-average photo of a better-than-average award, reproduced under Creative Commons license.

Deals of the Week Looks at Ultra-Orphan Drug Pricing

In the first half of 2013, two drugs will have launched in the US priced at $250,000 per patient annually: Both address serious, ultra-rare diseases and are backed by KOLs and patients. But the similarities stop there. Three months into its launch, one is encountering minimal resistance among payers. Although it’s too early to know how payers will cover the other drug, the expectation is that it will face a hard road.

The received wisdom about ultra-high priced drugs for ultra-rare conditions is that they’re a blip on payers’ radar screens. The idea that payers are attuned to blips on radar screens is laughable. Many don’t have the basic IT capability to track drug utilization, physician prescription patterns, or therapeutic outcomes.

But payers are waking up to high-price drugs. What’s getting their attention is not so much the impact of a particular drug and its price tag, but rather the aggregate of rare diseases, and the drugs that treat them, represented in their plans. Over the past decade FDA has approved 27 drugs for rare diseases.

Some big pharmas, like Pfizer Inc. and GlaxoSmithKline PLC, have recently started rare disease initiatives, while others, like Roche, believe rare disease R&D is a specialist’s game. Pfizer has had its share of disappointments, most notably with Vyndaqel (tafamidis meglumine) for transthyretin amyloid polyneuropathy, which it acquired along with FoldRx in 2010. The drug received a complete response letter in June 2012 after a mixed advisory committee review.

And GSK has recently retreated somewhat from its focus on rare diseases, preferring to invest its R&D dollars in “sound opportunities in major markets,” according to CEO Andrew Witty. Its head of rare diseases, Marc Dunoyer, bailed a few weeks ago to sign on with AstraZeneca PLC as EVP global portfolio and product strategy. (AstraZeneca isn’t a rare-diseases powerhouse and the company tells Deals of the Week that Dunoyer’s appointment shouldn’t be taken as a sign that its rare disease ambitions have changed.)

But with some 7,000 rare diseases still to be investigated, and with new orphan disease start-ups being minted every week, the rate of rare disease drug approvals is set to accelerate.

How payers respond to the stratospheric prices for rare disease drugs has to do with many factors whose weights are constantly changing, including the gravity of the condition, presence of existing drugs in the category, Phase III data, the age of the population, and the tenacity and resources of the disease foundation.

Aegerion Pharmaceuticals Inc.’s Juxtapid (lomitapide) launched in January 2013. The drug controls LDL cholesterol in patients with homozygous familial hypercholesterolemia (HoFH), a disease that causes premature and progressive atherosclerosis in approximately 3,000 patients in the U.S. It is priced at what amounts to $235,000 per patient per year for initiation, rising to $295,000 per patient per year for maintenance. The existing treatment for HoFH, diet and LDL apheresis, is inadequate to control LDL levels.

On an April 30th first quarter earnings call, Aegerion CEO Marc Beer said the drug was seeing an accelerating uptake among cardiologists and lipidologists. His national accounts team was calling on over 100 payers. “The prior auth process is on or slightly better than plan from a timing standpoint. We do see appeals – you see this in the ultra orphan space – it’s just the way insurance companies manage their business. We’re working through them effectively. I don’t see an access problem right now.”

Raptor Pharmaceutical Corp.’s Procysbi (cysteamine delayed release) was approved on the day of Aegerion’s earnings call. Raptor expects to launch it in six to eight weeks to a US population of about 500 people. The drug acts against nephropathic cystinosis, a lysosomal storage disease that leads to progressive irreversible tissue damage and organ failure, particularly of the kidneys.  Its price will be based on each patient’s weight and dose; Raptor expects the average annual cost per patient to be around $250,000.

Now here’s the thing. Procysbi is a delayed release formulation of an existing drug, Cystagon (cysteamine bitartrate), sold by Mylan Inc. for $9,000/patient/year. Its chief benefit over Cystagon is its 12 hour dosing schedule, a significant convenience over Cystagon’s six hour dosing schedule, which is particularly burdensome for children and leads to poor compliance.

The FDA label for Procysbi states that it is non-inferior to immediate release cysteamine, but does not indicate that it improves compliance or kidney function over the standard of care.

So, the drug is no more effective than the standard of care in controlling the disease, it brings a dosing convenience, and it costs a whopping $250K/patient.

Gary Owens, chair of Tower & Watson Rx Collaborative P&T Committee, said that Procysbi will surely be excluded from closed formulary plans, or only covered under exception. About 20%-25% of plans are closed formulary. He does not envision that new patients will be started on Procysbi, unless they have trouble tolerating Cystagon. And he expects use of the drug to be hemmed in by clinical edits to verify that it isn’t being wrongly prescribed or a patient being controlled on Cystagon isn’t requesting Procysbi for what the plan considers a trivial reason.

The U.S. has prided itself on its relative freedom to price drugs. But pride, goes the proverb, hath a fall. Richard Pops, CEO of Alkermes PLC, recently said at BIO 2013 that treatment of orphan and ultra-orphan diseases won’t significantly impact health care costs. “The country isn’t going to go bankrupt because of diseases like cystic fibrosis.” But it’s not about a few diseases and a few drugs. It’s about 7,000 diseases like cystic fibrosis. (Vertex Pharmaceuticals Inc.’s Kalydeco launched last year to a population of 1,200 CF patients in the U.S. who harbor a specific gene mutation, at an annual per patient price of $294,000.)

Forces new and old are at work that will push down the pricing of orphan drugs. They include the glacial move from fee-for-service to bundled services and outcomes-driven payment. The increasing competition in rare disease categories driven by the gathering stream of approvals. New stakeholder pressures, like the hundred-plus oncologists from around the world who charged the industry with “profiteering” through high drug pricing in a recent issue of the journal Blood. The head of the National Organization for Rare Disorders, Peter Saltonstall, said that he expects Congress to start engaging with NORD about the cost of drugs. “It’s going to be an issue that we’re going to have to start to deal with in one fashion or another.” NORD advocates for millions of rare disease patients.

Ben Bonifant, of consultancy Bonifant Insights Group, comes at the pricing issue from another angle. “You look five years out, and [analysts] are still putting annual price increases into their U.S. models, but flat pricing in Europe and declining pricing in Japan”. He projects that we’re heading for an unsupportable separation in revenue per patient between the U.S. and Europe.

Things will really start getting interesting when researchers, harnessing massively parallel sequencing, start parsing large-population diseases into tiny, high-value sub-populations based on somatic mutations, methylation patterns, DNA copy number, etc.--Mike Goodman

Maybe the brave new world we’re hurtling toward will be one where precision medicine and rational drug prices co-exist? Until that happy day, kick back and enjoy this week's cavalcade of deals in . . .

Celgene/Forma: Drug discovery play Forma Therapeutics Inc. has intentionally, with each Big Biotech or Big Pharma deal it signs, moved further down the road toward becoming an integrated R&D company. With this week’s Celgene Corp. deal it may for the first time find itself playing the role of development partner. And importantly for its long-term ambitions to remain an independent and fully integrated company, Forma has hung onto U.S. rights to programs that emerge from the alliance.

The small, Watertown, MA-based biotech now has seven strategic alliances that it expects to generate $350 million in partnership revenue through 2017. This latest effort, focused on the intriguing but nascent field of protein homeostasis, “is the largest deal we’ve done, in terms of scale, but also in terms of capabilities and responsibilities for Forma,” CEO Steven Tregay said in an interview with “The Pink Sheet” DAILY.

The alliance will tap Forma’s translational development capabilities secured through a strategic relationship with Translational Drug Development (TD2), the oncology development group run by Daniel Von Hoff out of the Translational Genomics Research Institute. Forma, with TD2, will be responsible for the first time for early clinical development of the compounds it discovers for a partner, handing off potential drugs to Celgene after Phase I. Forma receives an undisclosed upfront payment and is eligible to gain up to $200 million in research and early development payments from Celgene, which will be responsible for full global development for each candidate it options at Phase I. Milestone payments – including payments for hitting certain sales targets – range from $315 million (for the first selected asset) to a maximum of $430 million per program.

Forma also will get undisclosed royalties on ex-U.S. sales and further milestone payments based on pre-defined cumulative development and sales objectives for projects in the partnership.--Chris Morrison

Bayer/Conceptus: Bayer AG is adding to its women’s health unit with the $1.1 billion acquisition of contraceptive device maker Conceptus Inc. Bayer is paying $31 per share for the California-based company and its nonsurgical, permanent contraceptive solution for women, Essure. The deal is expected to close by mid-year. Essure was approved by FDA in 2002. It is the only surgery-free, hormone-free permanent birth control option available to women in the U.S. Conceptus had net sales of $141 million in 2012 – Essure is its only marketed product. The company is currently developing a follow-on product that works to block the fallopian tubes immediately. Essure is not effective until three months after it has been implanted.

“Both Bayer and Conceptus are focusing on innovative solutions to advance women's healthcare. Essure completes Bayer’s portfolio of long-acting intrauterine systems and short-acting oral contraceptives. Our experience in the field of gynecology combined with our sales and distribution expertise will help to further develop Conceptus’ business,” said Andreas Fibig, President of Bayer HealthCare Pharmaceuticals, in a statement.

The deal comes on the heels of Bayer facing scrutiny for its own birth control products. The German company has faced a slew of lawsuits related to its failure to inadequately inform patients about the risks of thrombosis related to its Yaz franchise. Yaz and Yasmin have both lost patent protection and face generic competition.--Lisa LaMotta

Soligenix/Intrexon: Princeton, N.J.-based Soligenix Inc. has partnered with synthetic biology specialist Intrexon Corp. to develop treatments for melioidosis, a bacterial infection prevalent in Southeast Asia. In lieu of an up-front cash payment, Intrexon received 1.03 million shares of Soligenix stock, representing 8.5% of its total shares outstanding after the deal. Soligenix also owes Intrexon milestone payments and royalties, while Intrexon received the right to take more Soligenix shares in future public offerings or other transactions. The biopharma, traded over-the-counter, receives access to Intrexon’s antibody discovery and manufacturing technologies; Soligenix will also pay for pre-clinical and development of products discovered as part of their collaboration.

Backed by billionaire chairman Randal Kirk, Intrexon has raised at least $509 million as of mid-2011, and has taken equity in similar partnerships with Oragenics Inc., Ziopharm Oncology Inc., and AmpliPhi BioSciences Corp.  Melioidosis is caused by aerosol forms of Burkholderia pseudomallei, which the U.S. Department of Health & Human Services considers a potential bioterror agent; Soligenix has previously developed vaccines against ricin and anthrax.--Paul Bonanos

Auxilium/Actient: Auxilium Pharmaceuticals Inc. is buying – not selling. In a move intended to diversify beyond its leading Testim testosterone gel product, the company announced April 29 it has acquired Actient Holdings LLC for $585 million upfront plus contingency payments. The company said the deal will create a leading urology company and add nine commercial products to Auxilium’s portfolio, which also includes Xiaflex (collagenase clostridium histolyticum) for Dupuytren’s contracture. Actient generated $125 million in revenues in 2012 and EBITDA of $61 million, sales and earnings that will help pad Auxilium’s top- and bottom-line as it looks for ways to grow amid increasing headwinds. Testim, which accounted for 78% of Auxilium’s 2012 sales, will face generic competition in 2015.

But some Auxilium investors may have been hoping for a sale of the company rather than an expensive acquisition, as sales of the company’s own products are slowing. CEO Adrian Adams, who joined the company in December 2011, has the closing of several sales on his resume: the acquisition of Inspire Pharmaceuticals Inc. by Merck & Co. Inc., the sale of Sepracor Inc. to Dainippon Sumitomo Pharma Co. Ltd., and Abbott Laboratories Inc.’s buyout of Kos Pharmaceuticals in 2006. Actient was founded in 2009 by the private equity firm GTCR, which put up $200 million to build the company through acquisitions. The bulk of the company’s products were acquired from UCB Pharma SA in July 2010.--Jess Merrill

Selexis/Ligand Pharmaceuticals: San Diego-based Ligand Pharmaceuticals Inc., which focuses on the acquisition of royalty-generating products, bought out on April 30 the potential milestone and royalty payments for more than 15 biologic products in development at Selexis. Deal terms were not disclosed.

Based in Geneva, Selexis SA is a clinical-stage biotech that uses its proprietary SUREtechnology platform, which uses novel DNA-based elements that control the organization of chromatin in all mammalian cells, for drug discovery and cell-line development in the creation of new therapeutic protein drugs. Programs and indications also were not disclosed but the related product candidates are in various stages of preclinical and clinical development, Selexis said.

The biotech, which retains earn-out rights to another 14 biologics in development, said it will use the funds from Ligand to cover R&D expenses around the next generation of candidates to emerge from the SUREtechnology platform. During a 14-month span beginning in late 2009, Ligand built its portfolio through acquisitions of Neurogen, Metabasis and CyDex. Each of those transactions were structured to include contingent-value rights going back to investors in the acquired firms.--Joe Haas

Merck/Abide Therapeutics: Just a week after announcing its tie-up in the diabetes space with Pfizer Inc., Merck & Co. Inc. has signed another diabetes collaboration with San Diego-based biotech Abide Therapeutics.

Merck will potentially pay $430 million in upfront, milestone and research funding. Abide is also eligible to receive royalty payments. Further financial details were not disclosed. The collaboration is around three novel targets involved in metabolic diseases. Abide develops drugs using serine hydrolases, an enzyme class that plays a key role in regulatory processes like metabolism, signaling, and digestion.

The deal comes just days after Merck announced it had signed a collaboration with Pfizer to develop and commercialize ertugliflozin, a Phase III sodium glucose co-transporter 2 (SGLT-2) inhibitor. Merck has already paid $60 million in upfront and milestone payments to Pfizer, but would not reveal the total deal value.

Merck currently only has one diabetes franchise, the dipeptidyl peptidase-4 (DPP-4) inhibitor Januvia (sitagliptin) and products that use Januvia in combination. Januvia sales came in shy during the first quarter at $884 million, prompting worry from investors and analysts.--LL

Regeneron/Sanofi: Regeneron Pharmaceuticals Inc. has acquired full exclusive rights to two antibody programs invented at Regeneron and included in the biotech’s fruitful, longstanding antibody alliance with Sanofi. The assets are both in preclinical development for ophthalmology and have potential in other indications. In exchange for $10 million upfront and up to $40 million in development milestones, as well as royalties on sales, the biotech announced on May 3 that it is taking control of the entire platelet-derived growth factor (PDGF) program. It is making another $10 million upfront payment to Sanofi, and offering a $5 million development milestone, as well as sales royalties for rights to ophthalmology indications for antibodies targeting the angiopoietin2 (ANG2) receptor and ligand. The partners continue to work jointly on development of ANG2 antibodies in other indications, and have an ANG2 antibody in Phase 1 in combination with their jointly developed oncology drug Zaltrap (ziv-aflibercept), which is already on the market.

On a quarterly earnings call, also on May 3, president of Regeneron Research Labs George Yancopoulos explained that both pathways appear to play an important role in angiogenesis and therefore the antibodies could be used in combination with the company’s lead drug Eylea (aflibercept), an anti-VEGF therapy. Sanofi has an ophthalmology business, Fovea. But the partners believe it makes sense for Regeneron to take over the programs, given Eylea’s success and the potential for combining the antibodies with Eylea to create best-in-class anti-VEGF, ANG2 and PDGF therapies, Yancopoulos said.

Regeneron plans to submit an IND to develop the ANG2 antibody target in an ophthalmic study later this year, and to submit another IND for a combination trial of the PDGF receptor antibody with Eylea in second half of year.--Wendy Diller

Bristol-Myers Squibb/Ambrx: In its third collaboration with Bristol-Myers Squibb Co., Ambrx Inc. will team again with the pharma to discover and develop next-generation antibody-drug conjugate (ADC) products for oncology indications. Under the deal announced May 3, Ambrx will receive $15 million upfront, as well as R&D funding and potential development, regulatory and sales-based milestones that could reach $97 million. Bristol obtains worldwide rights to develop and commercialize candidates, to be generated using Ambrx’s protein medicinal chemistry platform, from the collaboration, with the biotech holding rights to potential sales royalties.

Previously, in 2010, Ambrx signed a pair of agreements with Bristol to develop biologic therapies for type 2 diabetes and for heart failure. Those two candidates now are in development at Bristol. With a proprietary long-acting growth hormone in Phase IIb, Ambrx also partnered last month with Astellas Pharma Inc. on the development of ADCs and in 2012 with Merck on biologic drugs against undisclosed targets.--JH

Financing of the Fortnight Wonders If It's Time To Join The Parade

Biotech workers of the world unite, you have nothing to exercise but your stock options. At least a few more do these days. We’re far from the cries of “Mayday!” that echoed from the bottom of the financial canyon four years ago, and as we write this, the sector is abuzz with IPO pipeline activity.

GW Pharmaceuticals, a British purveyor of pain-relieving cannabinoid drugs already listed on the AIM, just raised $31 million and made its Nasdaq debut; and Insys Therapeutics, also in the prescription pain-relief business, raised $32 million in its IPO.

Both were modest, as are most dollars raised in biotech IPOs. But they’re the eighth and ninth of the year already. To relieve investors with grumpy LPs and give workers hope that stock options will one day put a little extra scratch in their pockets, it’s volume that’s needed. More liquidity across the board, please.

It seems the waters are about to flow. Ambit Biosciences, Regado Biosciences, Receptos, Epizyme, Portola Pharmaceuticals, and others are now in the queue, along with the mega-CRO Quintiles Transnational Holdings (with private equity, not venture capital, backers). We won’t make individual assessments of the worthiness of each company at this point, but on the whole it’s a well represented group.

Those are just the ones in the public eye. There could be plenty a few steps behind, thanks to the US JOBS Act of 2012. It made IPO registration easier and stealthier at first, giving companies the chance to lay the groundwork of a possible debut without having to open up to public scrutiny. Not so fun for journalists, of course, but it gives executives and their advisors more data to consider and more time to schmooze public investors before declaring themselves in pursuit of the brass ring. And that breathing room, people say, is helping. “The ability to make initial registration statement filings confidential, plus the ‘testing the waters’ rules have made a meaningful difference in helping companies pursue an IPO,” says Fenwick & West partner Matt Rossiter, whose clients include life science companies and venture investors.
  
Kleanthis Xanthopoulos took his microRNA company Regulus Therapeutics public last year and is a big believer in a long, slow IPO process. “The roadshow should be where people make their minds up, finally, rather than where they learn about you,” he said during a discussion about the IPO landscape at the recent Allicense conference in San Francisco.

The biotech analysts at Cowen & Co. agree that the JOBS Act, by allowing more investor exposure to pre-IPO companies, has increased investor comfort. Other factors besides the new rules are helping, too. Since 2004 there have been 332 biopharma acquisitions and 119 IPOs, they say, which leaves public investors hungry for new investments and new ideas. And the past couple years, IPO investments have on average outperformed the S&P 500. (A couple months ago, our friends at “The Pink Sheet” took a detailed look at the strong Class of 2012 here.)

“It seems quite reasonable that these factors have come together to produce a market more receptive to IPOs than at any point in the previous 5 to 10 years," write the Cowen team in a recent sector report.

Yes, but… (You knew that was coming.) If public investors are showing more interest, why is insider participation in IPOs so high? It’s a phenomenon we’ve tracked for a while now. A year ago it was startling. At his Allicense talk, Xanthopoulos cited data from Lazard Equity Capital Markets and FactSet that show why: For this current IPO window that began in late 2009, 71% of offerings have included insiders, and the median amount of proceeds they’ve bought at IPO is 43%. In the previous window, from 2003-2007, insiders participated in 29% of offerings and snapped up 20% of the proceeds.

Quite a bump. What gives? A small part of the bloated totals could be due to the crossover phenomenon, with hedge funds and other public buyers getting in before the IPO and bolstering their positions at the debut. And on any particular deal you might find an insider or two who are simply thrilled with the company, hungry for more, and in no rush to exit. But with so many firms out fundraising, or winding down operations, most of those insiders are wading in deeper simply to get deals done.

So keep an eye on those insider numbers. If IPO volume continues apace, and the insiders start to do what they really want to do -- own less stock, not more, after their companies go public -- we'll know the window is wide open.

In fact, May is the perfect time to throw windows open, let in the breeze, and do some housecleaning. We'll start right now by polishing up the latest edition of...

Symphogen: The privately held Danish antibody company said May 3 it has reeled in another €41 million ($53.9 million) to push forward its antibody mixture pipeline. The firm is developing products that contain more than one full-length monoclonal antibody, an approach that few companies have tried. As described in a START-UP feature earlier this year, Symphogen has pioneered the way for antibody mixtures (or combinations, or cocktails, as some might call them) into the clinic, and in 2012, it outlicensed its lead oncology program, a two-antibody mixture to treat head and neck and colon cancers, to Merck Serono following Phase II trials. The cash from that deal, plus its massive €100 million financing round announced in 2011, and the new funds, an extension of that round, has given the firm a long runway to develop its preclinical pipeline. Its lead program is now Sym013, a six-antibody mixture designed to inhibit HER1 (aka EGFR), HER2 and HER3 to prevent tumors from switching signaling pathways and building drug resistance. Ultimately the company wants to design combinations of antibodies that hit targets not just on the tumor cell surface but in the surrounding microenvironment.  The extension was led by existing investors Novo A/S and PKA, a Danish pension fund administrator, and included Danica Pension, making its first active investment in Symphogen. Symphogen has now raised €249 million in private capital. -- Alex Lash

ScioDerm: Dermatology start-up ScioDerm has raised the first $9 million of a planned $16 million Series A round, intended primarily to support clinical trials on lead program SD-101. The Raleigh, N.C., start-up’s backers were Morgenthaler Ventures and Technology Partners, which made us do a slight double take. Turns out Morgenthaler’s life sciences team is still investing the firm’s 2008-vintage ninth fund, even though the group has already joined forces with Advanced Technology Ventures’ biotech team to create a new firm, Lightstone Ventures. Morgenthaler is not expected to make new life sciences investments from future funds. In February, ScioDerm filed an IND to study SD-101 in epidermolysis bullosa, a rare genetic disorder that results in sensitive and fragile skin, disfigurement due to wounds from blistering and tearing, and early death. It had previously conducted a Phase II study of SD-101 in some subtypes, including the simplex, recessive dystrophic, and junctional forms of the disease. Also this fortnight, ScioDerm received Breakthrough Therapy designation from FDA, potentially speeding the drug’s clinical development. A Phase I study is expected soon, with a Phase IIb/III study expected as soon as late 2013. – Paul Bonanos

Esperion Therapeutics: Longitude Capital joined a roster of investors in cholesterol-fighting drug developer Esperion, leading a $33 million Series A extension that builds on $22.75 million the company raised in 2008. Returning backers included Aisling Capital, Alta Partners, Domain Associates, Arboretum Ventures and Asset Management. Esperion is attempting to grab a piece of the market for cholesterol-lowering prescription drugs that appeal to patients who cannot or prefer not to take statins such as former Pfizer blockbuster Lipitor (atorvastatin), generic since November 2011. The company recently presented encouraging data suggesting that Phase II candidate ESP-1002 reduced low-density lipoprotein cholesterol by more than 40% in type 2 diabetes patients; it’s studying the drug in additional patient populations as well. By some estimates, a fifth of high-cholesterol patients are statin-intolerant, suffering pain or muscle weakness. Other novel drug classes, such as PCSK9 inhibitors, are being studied for statin-intolerant patients, but Esperion co-founder Roger Newton – a co-discoverer of Lipitor – said ESP-1002’s oral availability and once-daily dosage may give it an advantage over injectable alternatives. Ann Arbor, Mich.-based Esperion expects to partner the drug “in a couple of years,” according to CEO Tim Mayleben. Pfizer acquired the original Esperion for $1.3 billion in 2004 and retained several key assets, even though it shifted many to the back-burner. A management team including Newton, an original Esperion founder, engineered a 2008 spinout, establishing the new company with an external investment. – P.B. 

Intrexon: The synthetic biology company said May 1 it has reeled in a $150 million Series F round of funding to continue building operations in its four areas, health care, food, energy, and environment. Health care is where Intrexon CEO and chairman Randal Kirk amassed the fortune that he’s been plowing into Intrexon since his first investment eight years ago. Kirk was majority owner of New River Pharmaceuticals, which he sold to Shire in 2007, and Clinical Data, bought by Forest Laboratories in 2011. He became CEO of Intrexon in 2009 and much of the $509 million the firm has raised has come from him or his affiliated venture funds. A majority of the Series F round came from undisclosed new investors, according to the company. The news of the financing came on the heels of the firm’s latest biopharmaceutical deal, an agreement with Soligenix to co-produce monoclonal antibodies for the treatment of melioidosis, an infection caused by Burkholderia pseudomallei endemic to Southeast Asia and Northern Australia. Other recent health care deals include an agreement with AmpliPhi BioSciences to develop a range of anti-infectives and a license of its technology to Fibrocell Science for use in development of fibroblasts and dermal cells for aesthetic and therapeutic applications. Oragenics, Adeona Pharmaceuticals and Halozyme Therapeutics have also partnered with Intrexon. – A.L.
 
All The Rest: New investor Oracle joined in for a second closing of Proteus Digital Health's Series F round, now totalling $62.5M… Celator closed a $39.3M financing to fund a Phase III study of CPX351 in acute myeloid leukemia… HPV vaccine developer Genticel raised €18.2M in Series C funds… Synthetic biology company Gen9 received a $21M investment from Agilent… Acumen Pharma, developing the ACU193 antibody for Alzheimer’s, completed the first close in a $20M Series A… Becker Ventures led a $15M round for AltheRx, developer of overactive bladder candidate solabegron... To support technology to distill real-time patient insights from social media, Treato raised $14.5M… ActoBiotics developer ActoGeniX completed a €10.7M Series B… Anterios collected $8.5M in venture funding for its aesthetic and dermatological drug candidates… viDA Therapeutics’ $3.6M seed round will fund a granzyme B inhibitor for fibrotic, autoimmune, degenerative, and age-related chronic inflammatory diseases… US and European institutional investors put €54M into Belgian biotech Galapagos… Radius Health, which is working on the transdermal and IV candidate BA058 for osteoporosis, raised $43M… Arrowhead Research completed a $36M private offering of common and Series B convertible preferred shares…concurrent with closing its reverse merger with publicly traded Tranzyme, Ocera plans to raise $20M… Health care-dedicated institutional buyers invested $10M in Northwest Biotherapeutics… Lincoln Park Capital Fund provided Elite Pharma with $10M… As it prepares to launch its radiopharmaceutical agent Lymphoseek, Navidea privately raised $5.1M… To pay for the NDA for male hypogonadism treatment CompleoTRT, Trimel publicly sold $Cdn40M in stock… Boron chemistry platform company Anacor completed a $20M FOPO… Cell therapeutics developer NeoStem raised $10M through a public stock sale... Immunomodulating company Idera raised $8.75M in a secondary offering... Less than a year after closing a $51M Series E round, cardiovascular firm Regado Biosciences filed for its IPO… Receptos, Quintiles, and Ambit all set terms for their IPOs… Theravance is spinning off into two independent publicly traded companies, one focused on the Breo deal with GSK, and the other on small-molecule R&D… Supernus netted $72M in a convertible senior secured notes offering… Immunotherapy-focused TNI Biotech filed a Form 10 to become public reporting entity… GSK and Avalon are partnering to start up multiple drug discovery companies over the next three years with a total of $495M in potential funding… Harvard University received a $50M donation to support translational research… Atlas Venture closed its $265M ninth fund... Capital Royalty announced an $805M fund for nondilutive financing. -- Amanda Micklus

Thanks to Paul Bonanos for help with this fortnight's column.  

Photo of ILGWU members in a 1937 May Day parade courtesy of the Kheel Center, Cornell University.