Deals Of The Week: Clinical Failures Result From Predictable Business Development Strategy

Wall Street analyst Raghuram Selveraju likens today’s drug-development landscape to the changes seen in men’s professional tennis between the era of Bjorn Borg and John McEnroe and the completely different game played today by the likes of Roger Federer and Novak Djokovic. In today’s tennis, the ball is hit much harder and yet at the same time there is almost no margin for error. Likewise, he says, in drug-development today, companies must navigate tougher regulatory requirements for both efficacy and safety.

“The margin for error is razor thin and if you miss it, you lose big time. Aspirin would not get approved at the FDA in today’s atmosphere,” said Selveraju, managing director and head of health care equity research at Aegis Capital.

His comments reflected the news of Oct. 18 of yet another big pharma/biotech collaboration undone by devastating results in the clinic, the latest being Reata Pharmaceuticals’ termination of its Phase III trial for bardoxolone in chronic kidney disease due to excess serious adverse events and mortality in the study-drug arm. Abbott Laboratories had paid $450 million upfront in 2010 for ex-U.S. rights to bardoxolone, with another $350 million possible in milestones and royalties, and then doubled-down in 2011 by partnering with Reata on second-generation antioxidant inflammation modulators.

Abbott hardly is alone, though, in seeing a major investment in early- or mid-stage biotech science blow up in its face in recent months. In August, Bristol-Myers Squibb had to pull the plug on hepatitis C candidate BMS-986094 due to cardiotoxicity, just months after acquiring the Phase II nucleoside polymerase inhibitor by buying out the company that discovered and initially developed it, Inhibitex, for $2.5 billion.

In January, one of the most-celebrated of big pharma/biotech tie-ups died in the clinic as Pfizer finally gave up on Medivation's Alzheimer’s disease candidate Dimebon (latrepirdine) following several failed attempts to demonstrate efficacy. Then, in March, Merck accepted failure in a $60 million investment in Cardiome Pharma’s oral anti-arrhythmic drug vernakalant in March, saying the regulatory hurdles were just too high. In May, Roche ceased development of dalcetrapib, in-licensed from Japan Tobacco for dyslipidemia, due to lack of significant efficacy data.

And in March, AstraZeneca announced its latest setback in a long collaboration with Targacept around neuronal nicotinic receptors, saying it no longer would investigate TC-5214 for major depressive disorder. That news followed a 2011 decision by AstraZeneca to opt out of a partnership with Targacept around TC-5619 in schizophrenia, which itself followed a 2010 decision to drop an attention deficit/hyperactivity disorder compound, AZD1446, on which the two firms were partnered.

On the surface, it is difficult to find a common thread in these thwarted transactions – as Selveraju pointed out, some of the drugs failed due to safety implications, others due to insufficient efficacy. “What all of these deals had in common was the desperation of big pharma, because its R&D productivity has been dropping and we’ve known that for a long time,” he said.

That desperation leads to the repetition of familiar mistakes which derive from the predictable thinking of too many business development executives at big pharma, Selveraju opined. First, when looking for licensing opportunities, pharmas very often seek out their comfort zone – a potential product for which they can deploy an existing sales force or promote to doctors they already know and communicate with. Also, to be confident in an experimental drug’s preclinical and clinical data, pharmas often want to go into areas where their competitors also have a compound as well as into validated targets.

“Basically, they’re a bunch of lemmings,” Selveraju said. “As soon as a target becomes hot, they all have to have a molecule in that space, hitting that target. We’ve seen that multiple times: with the DPP4 inhibitors, the statins, the S1P inhibitors now, the nucs in hepatitis C.” Bristol paid $2.5 billion for Inhibitex and its nuc in part because months before Gilead had paid $11 billion for Pharmasset and its promising, mid-stage nuc.

“Bristol felt at the time that it could afford to pay a high price for the Inhibitex molecule because this was a validated mechanism of action,” Selveraju said. “What was the real risk that it was taking? All Bristol had to do was what Pharmasset did; Pharmasset wrote the blueprint for them, and they’re home and dry. I’m pretty sure Lamberto Andreotti knew that he was overpaying for Inhibitex but he went ahead and did it anyway, because Bristol thought it was money in the bank. That’s the problem with the way that big pharma does licensing; it only goes after things that it thinks are money in the bank.”

And it’s just not that easy, at least not today. The low-hanging fruit largely has been picked – there is no preponderance of easy-to-hit, druggable targets available to business development groups, Selveraju explained. Faced instead with a panoply of more difficult to address therapeutic indications, business development officials often must make decisions based on incomplete data and at the same time pay out huge premiums because of the competition with other companies to find “the next big thing.”

“Big pharma chases targets and it chases indications,” he said. “That’s what leads to these deals with outsized valuations and to the disappointingly high failure rate. If big pharma were to take a more pragmatic approach, a more rational approach, then we might not be seeing so many of these failures and we’d certainly be seeing more judiciously priced deals.”

What then is Selveraju’s prescription for better business development practices? It might disappoint those who want pharma to be in the vanguard of innovation. He recommends incremental innovation – using FDA’s 505b2 pathway to develop products with already defined efficacy and safety – as well as biosimilars and re-purposing. Pharma also should focus on niche and specialty indications, and largely eliminate primary care products and the large commercial operations that come with them.

That may be an unappealing remedy for many, but given the spate of recent blow-ups in pharma/biotech deal-making, something needs to change. Right?

In the meantime, the deal-making continues, so we bring you ...

BioCryst/Presidio: BioCryst announced Oct. 18 that it intends to merge with privately held Presidio Pharmaceuticals to create a new company that will be focused on the development of an all-oral hepatitis C treatment. The all-stock transaction, which values Presidio at $101 million, is expected to close in the first quarter of 2013. Closing is contingent upon a $60 million financing, $25 million of which Presidio shareholders already are committed to contractually. The new company will shift its focus to three early-stage HCV drugs – PPI-668, a Phase II-ready NS5A inhibitor; PPI-338, a preclinical pan-genotypic non-nucleoside polymerase inhibitor; and BCX5191, a nucleoside analog. PPI-338 is expected to begin clinical trials in the first quarter and BCX5191 will begin human trials before the end of 2012. BioCryst/Presidio’s biggest advantage at this point – considering how far behind the competition the company is – is its wholly-owned pipeline; possessing three drugs that activate different targets and could potentially could be used in combination gives the company a leg up. This allows the company to test the drugs in various combinations. “Having the ability to do these [combination] studies creates greater value than out-licensing our new nuc after, say, Phase Ib. That was really the rationale for doing this,” said BioCryst CEO Jon Stonehouse. – Lisa LaMotta

Merck/AiCuris: Antiviral startup AiCuris GMBH got its first big pharma partner – and €110 million upfront ($143.5 million) – in a deal with Merck for a portfolio of treatments for human cytomegalovirus, in a deal announced Oct. 15. The deal includes worldwide rights to AiCuris’ lead drug letermovir, which is ready to move into Phase III clinical trials in transplant patients. In addition, Merck gains rights to develop and commercialize a backup candidate and other Phase I assets that work through an alternate mechanism in exchange for the upfront and €332.5 million ($433.7 million) in development, regulatory and commercial milestones. Now AiCuris – a German drug developer spun out from Bayer in 2006 – is focused on finding another development partner for its other late-stage asset, a nucleoside analogue AIC316 for the treatment of the herpes simplex virus. The company is currently seeking a partner for AIC316, which has also completed Phase II testing, according to CEO Helga Rübsamen-Schaeff. The company plans to use the cash from the Merck collaboration to push forward one of the earlier-stage projects; it has earlier stage projects in development for hepatitis B infection, HIV and bacterial infections. For Merck, letermovir and the other HCMV molecules will complement the big pharma’s existing antiviral portfolio, which includes drugs like Isentress for HIV and Victrelis for hepatitis C. The deal marks Merck’s second recent infectious disease collaboration. In July, Merck partnered with Chimerix on a Phase I HIV asset, CMX157, paying $17.5 million upfront for worldwide rights 14120724001. – Jessica Merrill

Kite Pharma/National Cancer Institute: Kite Pharma will enhance its pipeline significantly under an arrangement with the National Cancer Institute in which it will provide R&D funding for novel engineered peripheral blood autologous T cell (eACT) therapeutics for a variety of oncologic indications. The Cooperative Research and Development Agreement (CRADA) announced Oct. 16 also gives Kite an exclusive option to license any or all candidates resulting from the tie-up. Based in Los Angeles, Kite raised a $15 million Series A in 2011 from a 40-investor syndicate including TPG Capital founder David Bonderman. Its initial program was a virus-based alpha fetoprotein (AFP) vaccine to fight against hepatocellular carcinomas that express AFP. NCI partially funded that program. No financial terms related to the CRADA were disclosed, although Kite CEO Aya Jakobovits explained that licensing agreements will be written as needed for the programs her firm might option. The work centers on candidates, some already in the clinic, discovered and developed by NCI using its proprietary tumor-specific T Cell Receptors (TCRs) and Chimeric Antigen Receptors (CARs). Through its surgery branch, NCI already has advanced some of these programs into single-site trials in patients with hematological and solid tumors. Early clinical evidence has shown that patients’ peripheral blood T cells engineered with TCRs or CARs and then administered as an intravenous infusion can recognize tumor-specific molecules that will enable them to traffic directly to tumor sites, become activated upon engagement with the tumor antigen and then selectively kill the tumors, Kite says. – Joseph Haas

Amdipharm Group/Cinven: Two months after buying another U.K.-based specialty company, Mercury Pharma Group, the European private equity company Cinven has acquired the Patel family-owned niche pharmaceuticals business Amdipharm for £367 million ($593.3 million). Buyout specialist Cinven said in August that its strategy was to consolidate the specialty pharmaceuticals sector, and after the Amdipharm acquisition it is continuing to hint at more international acquisitions to come. Amdipharm was founded in 2002 by brothers Vijay and Bhikhu Patel, to acquire medicines from research-based pharmaceutical companies, particularly medicines for niche indications and patients, both branded and generics. It has annual revenues of more than £110 million, and the founders will retain a significant minority stake in the business after it is combined with Mercury. Amdipharm's business is international, with products sold in more than 60 countries, while Mercury is more U.K.-focused. The brothers founded in 1984 the U.K.-based pharmaceutical distributor and importer Waymade Healthcare PLC and are active in generics through the generics marketer Sovereign Medical. – John Davis

AstraZeneca/Charles River: AstraZeneca has tapped yet another outsourcing partner to conduct in depth research, most recently choosing Massachusetts-based Charles River Laboratories to provide it with safety assessment and development drug metabolism and pharmacokinetics testing. The British drug maker on Oct 17 said it chose the U.S. CRO as its preferred strategy partner, raising their previous ad hoc relationship to another level. The news comes hard on the heels of AstraZeneca’s discovery partnership with Chinese CRO Pharmaron Beijing. Charles River was selected from a shortlist of competitors who tendered for the role, which will see it and AstraZeneca work closely as partners and allow the CRO to intimately understand the pure pharma group’s portfolio. The current plan is to work together on small-molecules. But both hope that their arrangement can expand into large-molecules involving AZ’s U.S.-based biologics arm, leading to eventual partnering in promising discovery areas that AZ wants to outsource under its new R&D regime. Charles River’s Chief Science Officer Nancy Gillett says that hopefully would come from both sides working together and understanding AstraZeneca’s preferences, formats and reporting times and trust-building. AstraZeneca will be committing at least 10 scientists. Most of the work will be conducted in AstraZeneca’s R&D site in Edinburgh, Scotland, while several Charles River sites will be used in the U.S. Gillett said the partnership as currently outlined will involve at least 100 researchers at Charles River and probably more as time passes. Charles River currently has another larger-scale partnership with an as-yet unidentified big pharma company which extended an in vivo pharmacology collaboration into an in vivo biology partnership. Charles River has relationships with most big pharma companies but the AstraZeneca relationship will be unique for the CRO. It will have a six-person steering committee and a multi-layered governance structure from the bottom up that aims to improve the partnership over time. James Lynch, vice president of global drug metabolism & pharmacokinetics at AstraZeneca, said the deal is all part of trying to simplify its supplier base, in this case bundling most of what it had outsourced in the toxicology and DKMP space. He said the difference between the Pharmaron deal and that with Charles River is that with the Chinese CRO, AstraZeneca effectively is buying a capacity which will have AstraZeneca-dedicated scientists there who will work exclusively on AstraZeneca chemistry and drug metabolism screening for the British-based company. The Charles River partnership’s preclinical work will be later in the value chain and in the research and development process, focusing on early development through to late development to make use of Charles River’s width and breadth of science in a scalable manner, depending on individual program requirements. The three-year agreement extends into 2015. AstraZeneca began the process of transferring programs to Charles River earlier this year. AstraZeneca’s latest partnering arrangement is another example of pharma’s changing working paradigm, in response to its need to improve efficiencies, maximize resources while raising productivity and also be able to make fast decisions around its portfolios. This trend allows global CROs such as Charles River to get involved, offer capabilities to come in and take control of portions of portfolios, freeing up big pharma scientists who then can focus more on discovery and science decision-making as they progress compounds into development. – Sten Stovall

Merck/Theravance: Merck inked a deal Oct. 19 with San Francisco-based Theravance for the discovery, development and commercialization of treatments for hypertension and heart failure. Merck will pay Theravance $5 million upfront, as well as research funding. Under the deal, Theravance also could earn $148 million in milestone payments for the first indication as well as royalties. The deal is the second in as many weeks for Theravance. It just granted Alfa Wassermann an option to its gastrointestinal motility disorder compound velusetrag. Theravance also maintains an ongoing relationship with GlaxoSmithKline for the development and commercialization of respiratory disease therapeutics. Merck has said over the last year that it has plans to maintain its presence in the cardiovascular space despite many of its competitors pulling out of the area. Yet, the pharma announced in August that it had made the decision to put one of the key cardiovascular drugs in its pipeline, MK-0524B, on hold indefinitely. MK-0524B was a combination of the investigational drug Tredaptive (long-acting niacin/laropiprant), aka MK-0524A, and Merck’s blockbuster simvastatin (Zocor), which went off patent in 2006. The combination was meant to lower the amount of fatty substances in the blood like LDL cholesterol and boost HDL cholesterol. It no longer will be put forth for FDA approval in 2014 as Merck had intended. – LL
Photo credit: Wikimedia Commons

Financings of the Fortnight Goes Around The Middle Man

This fortnight’s theme is DIY. That’s shorthand for “do it yourself,” in case you’re one of those people who has only used a hammer to pry open a beer bottle.

There’s a fancier word for DIY, often heard during the first dot-com boom: Disintermediation. Cutting out the middle man. If you want to get something done, don’t pay someone else to do it. Buy your pet food straight from the source, online! Some of those ideas didn’t go over so well at first, but more than a decade into the Internet age, people and businesses are catching on. (And some businesses have simply figured out how to be better middle men.)

The same might be said about life-science venture capital. VCs are, in effect, middle men and women (middlepeople?), standing between those who manage giant pools of cash and the businesses that need cash to make a go of it. The shakeout has left fewer middlepeople, er, VCs, standing. But there are still giant pools of cash, and people managing them. This past fortnight, we’ve had some indications of them taking matters into their own hands.

First up, an intriguing paper was published October 9 by a tag team from Harvard University and INSEAD, the top French business school, that purports to show LPs might do better investing directly than via an intermediary. “Direct investments generally outperform fund investments,” the authors write.

The study doesn’t specifically address the life sciences, and in fact there’s a caveat that might make it less relevant in our little corner of the world: “We also find that the outperformance is driven by deals where informational problems are not too great, such as more proximate transactions to the investor and later-stage deals, and by an ability to avoid the deleterious effects on returns often seen in periods with large inflows into the private equity market.”

“Informational problems” are a tough nut to crack, for sure, especially with early stage, cutting-edge R&D that’s years away from clinical trials, let alone the commercial markets. That’s why some VCs are going later stage; one such firm, Longitude Capital, made a successful pitch to LPs and has closed a new health-care fund. See our description in the round-up below.

One type of cash holder making more direct investments are drug companies themselves. Nearly every major firm – which, if nothing else, have plenty of cash to spare – has a venture group. And they’re getting bolder, investing in biotech firms earlier, even helping to shape company formation. That’s what happened twice this past fortnight, as we detail below in our roundup. First Roche, then Celgene, made sure they were present at the creation, or nearly so, of two firms related to the former Amira Pharmaceuticals. We’re seeing it more and more: Big pharmas and biotechs provide crucial early funding, either for equity or as non-dilutive R&D dollars, for an option to buy the company outright if all goes well. The company might be in fact a single asset, more or less, but that’s no coincidence. What passes as a biotech these days is often one product packaged in a way that makes acquisition as hassle-free as possible.

Another big group with plenty of cash is also making direct investments. The Bill and Melinda Gates Foundation’s new head of global health, ex-Novartis head of global development Trevor Mundel, said this summer his group would start taking ownership stakes in biotechs while it continued its bounteous grant-making largesse.

Its highest profile commitment to date was announced October 10, participating in a $30 million Series C round for Genocea Biosciences, a Cambridge, Mass. vaccine developer. Gates led the scientific due diligence, said Genocea CEO Chip Clark, and an affiliate of the Chicago family investment firm Henry Crown and Co. – not a name you see much associated with private biotech funding – led the financing.

It makes sense for The Gates Foundation, which knows vaccines perhaps better than any organization on the planet. Genocea has developed a platform to create vaccines from T-cell immune response, instead of B-cell response. The difference is that there’s genetic diversity of T-cell response in humans that to date has been impossible to capture in a vaccine, which by definition is broadly administered. Genocea’s discovery platform recreates human T-cell responses to pathogens in vitro and finds common targets on pathogens that, with a thousand or more proteins, are hard to investigate with traditional methods. That’s the aim, at least. The amount of the Gates investment is undisclosed, but Genocea CEO Chip Clark told FOTF that roughly half the cash is earmarked for Genocea’s malaria program. The malarial parasite Plasmodium falciparum has a huge proteome, and the Gates money will help Genocea interrogate it more thoroughly. “We think we’ll have one of, if not the most robust malaria antigen discovery efforts,” Clark said.

The financing is tranched but not dependent on hitting milestones in the malaria program to trigger future payments, Clark said. Gates does not have a board seat.

So far, the direct biotech investments from The Gates Foundation have targeted vaccine discovery technologies. In late September the start-up Atreca said the foundation would put in $6 million to push the firm’s antibody survey technology. Last year, the foundation invested $10 million in Liquidia Technologies, a North Carolina developer of particle engineering technology it hopes will improve vaccine delivery and manufacturing.

A Gates representative was not available for comment by press time, but it's worth noting the Big Kahuna himself has been a vocal advocate for a wide array of mechanisms, from a global tax on financial transactions to private investment in public infrastructure, to improve global health and education programs. As he said at the 2011 G-20 meeting in Cannes, France – a speech in which he advocated for a financial-transaction tax to fund anti-poverty programs -- "It’s important to keep experimenting with new business models, because impact investors could eventually bring a great deal of money into development.”

We hope to have more soon for you on the Gates Foundation, and of course whenever anyone experiments with business models, we'll have the breakdown for you in...

PharmAria: The six-month-old start-up announced Oct. 15 that Celgene has provided its seed funding, will help fund its Series A round and has taken an option to buy the company. Celgene’s equity stake in the new company is undisclosed, but the deal structure hews to the big biotech’s philosophy in recent years of finding early science, partnering deeply with the company, and having its own cash riding on the outcome. For example, Celgene and Versant Ventures are the only backers of Quanticel Pharmaceuticals, which we wrote about here. Funny we should mention Versant. PharmAria was started by three former executives of Amira Pharmaceuticals, which Bristol-Myers Squibb bought in 2011 for $325 million. One of Amira’s biggest backers was Versant, and the West Coast venture firm helped turn Amira’s post-acquisition assets and talent into new enterprises with new business models. (See Inception 3, below.) The connections don’t stop there: One of the ex-Amira executives now at PharmAria, Jilly Evans, worked for Celgene as consultant after the Bristol buyout. The start-up, which plans to develop small-molecule therapeutics for cancer and fibrotic diseases, would not discuss the amount of money it is seeking or other terms of the deal. The goal, however, will be to raise enough money for PharmAria to advance its first candidate through Phase I, president John Hutchinson told “The Pink Sheet” DAILY. -- Joseph Haas

Inception 3: PharmAria is not the only new company to rise recently from the Bristol buyout of Amira in 2011. Amira investor Versant Ventures and former Amira CEO Peppi Prasit have formed Inception Sciences, an incubator and drug discovery platform, with the intent of spinning drug candidates out into satellite companies. The candidates could come from Inception’s own “drug hunters,” as they like to call themselves, or from outside sources. The latter has provided Inception with its first public deal. It has created a subunit – called Inception 3 – to discover and develop small-molecule drug candidates for sensorineural hearing loss based on technology licensed from Stanford University. Versant is Inception 3’s sole equity financier for now, and Roche is the development partner. Roche will fund Inception 3’s work with milestone-based R&D payments, and the Swiss firm will hold an option to acquire the program upon filing of the first IND based on the Stanford technology. “The reason we didn’t go for a straightforward collaboration with academia here … is that the fact that it brings in a team of drug-hunters with a great track record of discovering drug candidates for intractable targets and then driving those to the IND stage,” explained Shafique Virani, head of neuroscience partnering at Roche. The various parties are not disclosing any financial details about the collaboration nor providing a timeline for a potential IND filing. However, Clare Ozawa, chief business officer at Inception and a former officer at Versant, said the combined capabilities of Inception and Roche should result in rapid progress toward a clinical candidate. -- J.H.

Longitude Capital: The expansion-stage investor said October 10 it has closed its second health care-only fund, Longitude Venture Partners II L.P., with $385 million in new capital. The fund exceeded Longitude’s $325 million goal, which would have matched the size of its 2008-vintage first fund, and it bumps the Connecticut firm to the top of Start-Up’s gas tank chart, which we most recently published here. Longitude plans to target both biotechs and device companies, with emphasis on mid-to-late-stage opportunities as well as what it calls “special situations”: spin-outs, recapitalizations, investments in public companies and structured transactions. Managing director Juliet Tammenoms Bakker told “The Pink Sheet” DAILY that Longitude received renewed commitments from many limited partners in its first fund, but also retained Probitas Partners as a placement agent for the new vehicle. She declined to discuss exits from the first fund, but said Longitude has received partial liquidity in two companies and full liquidity from another. The firm typically invests between $10 million and $30 million over time in each portfolio company, and expects to make about 20 investments from the new fund; about 30% of the money will be deployed in public companies, Tammenoms Bakker said. Longitude Venture Partners I L.P. invested in public companies such as Amarin Corp., Jazz Pharmaceuticals, Corcept Therapeutics, and Cadence Pharmaceuticals, and private drug developers such as Civitas Therapeutics, Collegium Pharmaceutical, InfaCare Pharmaceutical and Xanodyne Pharmaceuticals. – Paul Bonanos

Kythera Biopharmaceuticals / Intercept Pharmaceuticals: We’re putting these two together because they’re twins, of a sort. They both emerged into the publicly-traded world on the same day, October 11, with initial public offerings that raised $70 million with a $278 million post-money valuation for Kythera, and $75 million with a $225 million valuation for Intercept. It’s an odd occurrence at a time when biotechs aren’t going public much at all; analysts predict the count, now at 11, could hit 15 or 16 by the end of the year. Both also priced at the top of their ranges; no haircuts this fortnight. Kythera, which makes a cosmetic treatment that breaks down the fat in a double chin, sold 4.4 million shares at $16 per share, after aiming for the $14 to $16 range. Intercept sold 5 million shares at $15 per share; its range was $13 to $15 per share. The firm has a compound to treat primary biliary cirrhosis, a condition that can lead to liver failure. It expects Phase III data in 2013 from the drug, which is a bile acid analog it acquired from the University of Perugia in Italy. And that makes for another odd coincidence: Kythera’s treatment, for a vastly different indication, is a formulation of sodium deoxycholate, a component of human bile that breaks down fat. As of this writing, both companies’ investors have no reason to spew bile. Kythera shares closed October 17 at $23.41, up nearly 50% from the IPO. And Intercept closed at $19.78 a share, up nearly a third. There’s a long way to go however until investors, including Versant, ARCH Venture Partners and Prospect Venture Partners (for Kythera) and Italian investment firm Genextra (for Intercept), can reap gains. Even if share prices stay buoyant, investors have a lot to recoup. Both firms raised more than $100 million in private capital before going public. – Lisa LaMotta

Cebix Taps New CEO, Pockets $30.9M In Advance Of Phase IIb Trial

UPDATED: Cebix has made its announcement, revealing that the round's size is actually $30.9 million.

Cebix Inc. is preparing to announce a $21.3 $30.9 million Series B round of funding from insider investors and introduce a new chief executive, IN VIVO Blog has learned. The La Jolla, Calif.-based start-up will use the cash to fund a Phase IIb study on Ersatta (mono-pegylated form of C-peptide), its treatment for peripheral neuropathy associated with type 1 diabetes.

More details are expected to emerge soon. Full coverage will appear in The Pink Sheet “DAILY.”

Joel Martin, late of Isis Pharmaceuticals spinout Altair Therapeutics, has taken the reins as Cebix’s new CEO. The company hasn’t yet made clear what became of James Callaway, identified as Cebix president and CEO in this 2011 news release; his LinkedIn page says he left the company in June. Altair was established in 2007 to house respiratory drugs built on antisense technology, but was reacquired by Isis and dissolved after its lead program failed to show efficacy, according to a report. Martin was previously a partner with Forward Ventures, an Altair investor.

Cebix’s Series A investors, including InterWest Partners, Sofinnova Ventures, and Thomas, McNerny & Partners, returned for the new round. (Thomas, McNerney was also an Altair investor.) Cebix had raised $16.8 million in its first round. The start-up has completed a Phase I/II study on Ersatta, which showed a favorable efficacy signal with no serious adverse effects. Beginning in early 2013, it plans to study the drug’s effect on nerve conduction velocity in patients who self-administer the once-weekly injection over the course of a year. The drug is a replacement therapy for C-peptide, a well-studied biomarker of insulin secretion that is also known to be bioactive; the peptide's absence has been linked to nerve damage. About 60%-70% of type 1 diabetes patients, including 1 million in the U.S., develop peripheral neuropathy, according to Cebix.

In a Sept. 12 regulatory filing, Cebix said it had raised just under $13 million of a planned $30.9 million equity round.

Thanks to Flickr user mikeschmid, who saved us some change on photo licensing by sharing via Creative Commons.

Deals Of The Week: Vaxxas To Help Shape The Next Generation Of Vaccines

Australian/U.S. biotech Vaxxas came out of stealth mode Oct. 8, announcing a deal with Merck & Co. in which the biotech’s proprietary Nanopatch technology will be tested with Merck vaccines as a delivery vehicle offering potential advantages for ease of administration and potency.

Based on technology developed in the lab of Dr. Mark Kendall at Australia’s University of Queensland, Nanopatch, a patch delivery system said to induce robust immune system activation by targeting vaccine to immunological cells just below the patient’s skin surface, may offer Vaxxas a string of licensing deals, including milestone payments and royalties, similar to a biotech offering small- or large-molecule drug candidates to bigger companies.

“As a vaccine-delivery mode, Nanopatch is capable of delivering a very potent immunogenic response that in some respects is akin to what you’d see in using an adjuvant. We call it a physical adjuvant,” Vaxxas CEO David Hoey told Deals of the Week. “Even though our business model is to partner with companies that are producing vaccines, we believe that use of the patch actually can provide a lot more than simply a delivery vehicle can by making vaccines more potent and perhaps opening new windows for use of vaccines in development.”

Merck and Vaxxas are not disclosing which vaccine will be tested with the technology. The agreement calls for Merck to make an undisclosed upfront payment and R&D funding and then pay potential development and approval milestones plus royalties on commercial sales for a vaccine which Vaxxas will test with the Nanopatch system. Merck gets an option to an exclusive license to produce a vaccine using Nanopatch, meaning that Vaxxas will not partner its technology with another company selling or developing a vaccine for the same indication.

The pharma also gets the option to expand the agreement to two additional vaccine types, although Hoey said exclusivity for additional indications will have to be negotiated between the two companies. “The structure of the initial vaccine candidate agreement is exclusive and has been defined, and the subsequent vaccine candidates have the potential to be exclusive but have not been defined yet,” he said. “At present, we have a landscape of opportunity minus the vaccine field that we’ve licensed under this arrangement with Merck.”

While R&D will continue in Australia at Kendall’s labs, Vaxxas also has opened an 18-person office in Cambridge, Mass., which  will focus on business development. The Boston area was chosen because it offers numerous potential licensing partners for the Nanopatch technology, added Hoey, previously the VP of business development at PathoGenetix.

Vaxxas raised a $15 million Australian (about $16 million) Series A in August 2011 backed by Australian venture capital firms OneVentures and Brandon Capital, U.S. VC firm HealthCare Ventures LLC and an Australian non-profit, Medical Research Commercialisation Fund. It was the largest venture round for an Australian company since anti-infectives biotech Avexa raised $12 million Australian in 2004.

Nanopatch is a stamp-sized device designed for painless vaccination over a period of two minutes. Providing direct access to immune cells in the skin, the self-administered, needle-free vaccine delivery system contains a nano-projection array patch to which the drug is dry-coated, so there is no need for refrigeration. It was tested in animals to deliver a flu vaccine at 1/150 the dose compared with syringe administration and also has been evaluated for vaccines for human papillomavirus, human simplex virus, Chikungunya disease and West Nile virus.

The patches are produced in the same facilities that manufacture chips for cell phones and computers, Hoey said. They are coated with projections a micron in length using a high-density array that can apply thousands to tens of thousands of projections to a single patch. A dry, needle-free delivery system, Hoey said he is confident the technology can work with many different companies’ vaccines without great formulation challenges.

“Most vaccines today are derived as liquids because needles and syringes are the predominant delivery method, however, the work that has been done by Kendall shows that by a pretty standard set of steps you can prepare a vaccine to be deposited and dried down on a patch,” he explained. “There’s a series of excipients that can be added to existing vaccines to make them adaptable in a format suitable for use in conjunction with the patch. So there’s no specific formulation required of the vaccine provider.”

In searching for partners, Vaxxas is not prioritizing certain indications but trying to position itself by sharing data with vaccine makers showing the technology’s potential to increase vaccine potency and offer the possibility of easier dosing, possibly even self-administration. And Vaxxas will not compete with its partners, Hoey said; the firm has no plans to develop its own vaccines using the Nanopatch technology.

Elsewhere, it was a busy week in biopharma deal-making, as we detail in our latest edition of  …

AstraZeneca/Ardelyx: In its first deal under new CEO Pascal Soriot, AstraZeneca is licensing a Phase IIb-ready kidney drug from privately held Ardelyx. Announced Oct. 7, the deal brings AstraZeneca worldwide rights to oral NHE sodium transport inhibitor RDX5791, as well as other compounds in Ardelyx’s NHE3 inhibitor program. The Fremont, Calif.-based biotech receives an upfront payment of $35 million and can earn up to $237.5 million in development and commercial milestones, along with potential double-digit royalties on product sales. NHE3 is sodium-hydrogen antiporter 3, a protein essential to absorption of sodium by the intestines. The two companies believe these compounds can address end-stage renal disease, chronic kidney disease and other disorders related to sodium and fluid overload. Ardelyx has evaluated ‘5791 in a Phase IIa trial in constipation-predominant irritable bowel syndrome as well as a pair of Phase I studies in healthy subjects to determine the compound’s ability to divert sodium absorption from the gastrointestinal tract. The deal gives Ardelyx an option to co-promote ‘5791 in the U.S. AstraZeneca will assume development costs for the drug, while the biotech will conduct Phase IIb studies. - Joseph Haas

Roche/Inception: A drug-hunting venture borne out of the Bristol-Myers Squibb/Amira Pharmaceuticals buyout in 2011 has resulted in a new opportunity for Roche. Under a novel collaboration structure involving big pharma, venture capital and biotech, Inception Science will create a third company – called Inception 3 – to discover and develop small molecule drug candidates for sensorineural hearing loss based on technology licensed from Stanford University. Roche, which will fund Inception 3’s work with milestone-based R&D payments, will hold an option to acquire the program upon the filing of the first IND based on the Stanford technology. Inception’s backer Versant Ventures, meanwhile, will provide the equity financing for the new company, under an agreement announced Oct. 10. Inception, which consists of two current small biotechs (Inception 1 and Inception 2) focused on neurology and oncology, arose from assets spun out by Bristol after it acquired Amira for $325 million upfront in July 2011. Bristol’s focus was on idiopathic pulmonary fibrosis candidate AM152, and it spun out much of Amira’s remaining intellectual property into Inception, backed by Versant and led by former Amira CEO Peppi Prasit, known around the biopharma industry for his “drug-hunting” acumen. The various parties are not disclosing any financial details about the collaboration nor providing a timeline to the potential IND filing at FDA. However, Clare Ozawa, chief business officer at Inception and a former officer at Versant, said the combined capabilities of Inception and Roche should result in rapid progress toward a clinical candidate. “Because we’re combining capabilities across both Roche and Inception, we think we have the fastest ability possible to get to IND stage as quickly as possible,” she said in an interview. - JAH

GlaxoSmithKline/Aeras: The joint development of a tuberculosis vaccine, expected to be of use in addition to BCG vaccine to prevent pulmonary TB, is the aim of a collaboration also announced Oct. 10 between GlaxoSmithKline and Aeras Global TB Vaccine Foundation, the Rockville, Md.-based non-profit TB vaccine development organization. BCG vaccine prevents some forms of TB in infants, but does not prevent pulmonary TB, which accounts for the majority of infections and deaths among adolescents and adults. A new TB antigen, M72, a fusion protein which is compatible with adjuvant containing Agenus Inc.’s QS-21 Stimulon adjuvant, has been developed by GSK, and found in initial clinical trials to induce an immune response and offer an acceptable safety profile. GSK and Aeras have agreed to each provide resources in order for a Phase IIb clinical study to be conducted in Kenya, India and South Africa next year, in healthy adults aged between 18 and 50. Aeras is supporting the development of half a dozen TB vaccine candidates, the most advanced of which is Oxford University’s MVA85A, a candidate vaccine using a modified vaccinia virus as a vaccine delivery system and two other candidates initially developed by Crucell (now Johnson & Johnson) and Sanofi. Aeras is funded by the Bill & Melinda Gates Foundation and other private foundations and governments. - John Davis

UCB/Harvard University: In the third research collaboration to be set up under an alliance forged in 2011, the Belgian mid-sized pharma UCB is to work with Harvard University researchers on exploiting the human intestinal microbiome for therapeutic molecules. The microbiome comprises the 100 trillion bacteria found in each person’s gastrointestinal tract. These bacteria influence the well-being of individuals and their immune systems, and UCB will provide up to $4.5 million to fund the microbiome-related research of three professors of immunology at Harvard: Christophe Benoist, Dennis Kasper and Diane Mathis. They will systematically mine and classify any new species they find in the microbiome, evaluate the impact of the microbiome on the immune system, and look for new immune-modulating molecules with potential therapeutic applications, UCB announced Oct. 10. Several companies, including VC-backed start-ups, already are looking to exploit the microbiome to develop new therapies. In total, UCB expects to spend $6 million in a multi-year agreement to fund specific research projects at Harvard in the fields of central nervous system disorders and immunology. The first project funded was with Prof. Gokhan Hotamisligil, to identify antibodies against an undisclosed target in metabolic diseases. The second, concluded in June 2012, was with cell biology professor Junying Yuan, who was to develop small molecules which induce autophagy. This is the process in which cells ingest intracellular components and offers potential in the treatment of neurodegenerative diseases. - JD

Sanofi/Massachusetts General Hospital: Sanofi is expanding its presence in the Boston research community through a translational medicine collaboration with Massachusetts General Hospital. MGH will work with Sanofi’s oncology division on two preclinical molecules that were discovered in Sanofi’s labs. The teams will include scientists from both organizations and will be “highly collaborative.” Financial terms of the deal were not disclosed, but it will encompass a two-year period during which the compounds are expected to enter the clinic. The deal terms are flexible enough that other molecules may be added to the collaboration in the future and the timeframe of the collaboration may be extended. The focus of the collaboration will be on translational medicine solutions in oncology. “Sanofi Oncology takes a dedicated and integrated translational medicine approach by understanding the problems that doctors and patients are facing, both from the perspective of a pharmaceutical company and that of a diagnostic company,” said Donald Bergstrom, head of translational and experimental medicine at Sanofi Oncology. Bergstrom added that finding biomarkers will be a key part of the collaboration. The researchers will be focusing on which patient groups will benefit best from the drugs being developed and how to design the clinical program to achieve successful results. - Lisa LaMotta

Roche/Lilly/Washington University: Roche and Eli Lilly will see their investigational drugs tested in a large-scale Alzheimer’s disease trial run by Washington University in St. Louis. Roche’s amyloid beta antibody gantenerumab and Lilly’s solanezumab have been chosen by the university’s School of Medicine for testing in a clinical trial to study if the drugs can prevent the loss of cognitive function in people with inherited mutations that cause early-onset Alzheimer’s disease, the university announced Oct. 10. A third drug, a beta secretase inhibitor also developed by Lilly, is under consideration as well. The trial, expected to begin in early 2013, will be conducted by the university's  Dominantly Inherited Alzheimer’s Network Trials Unit , which is funded in part by NIH, the Alzheimer’s Association, and the DIAN Pharma Consortium composed of 10 pharmaceutical companies. The Roche and Lilly drugs were selected from more than a dozen nominations, with each offering a unique approach to counter the effects of amyloid beta, which builds up in the brains of patients with Alzheimer’s disease. All three drugs have been tested in earlier clinical trials to evaluate safety and efficacy. Gantenerumab is in a Phase III trial testing the drug in early-stage Alzheimer’s patients who have not yet experienced symptoms of dementia. Solanezumab has been making headlines recently; it failed in two high-profile Phase III trials in patients with Alzheimer’s disease, but did show signs of efficacy for slowing cognitive decline in a secondary analysis of pooled data. Roche and Lilly will make the treatments available at no cost and provide supporting grants. The Alzheimer’s Association provided a $4.2 million grant. The trial will enroll 160 people with inherited mutations for Alzheimer’s at a point when they would be within 10 to 15 years of the anticipated age when symptoms of cognitive decline and dementia would appear. An additional 80 participants who did not inherit the mutations also will be monitored. - Jessica Merrill

MedImmune/Cancer Research Institute/Ludwig Institute for Cancer Research: MedImmune, the biologics arm of AstraZeneca, has set up a collaboration with two non-profit research organizations, the Cancer Research Institute and the Ludwig Institute for Cancer Research, to collaborate on clinical trials to test combinations of three novel monoclonal antibodies from MedImmune’s pipeline. The partners also said they are open to including promising non-MedImmune novel compounds in the trials. The agreement, announced Oct. 9, calls for Ludwig and CRI, with input from MedImmune, to conduct the trials using yet-to-be determined combinations of the three compounds, and/or other compounds the partners are working on, or other potential partners might offer up. One of the compounds is tremelimumab, which Pfizer gave up on several years ago and which belongs to the same class as Bristol’s successful melanoma treatment Yervoy (ipilimumab), but MedImmune and its collaborators insist that the problem with tremelimumab was due to the clinical trial design, not the compound itself. CRI’s Cancer Vaccine Acceleration Fund, a two-year-old venture philanthropy group set up to invest in and facilitate innovative cancer immunotherapy trials, is funding the trials. MedImmune is supplying the drugs and, depending on results of the clinical trials, plans to commercialize them and make milestone payments to its backers. The biotech also is continuing to develop the compounds separately, based on its original plans. - Wendy Diller

Picture credit: Nano-structure geometry

Say What: Inception Inks Hearing-Loss Deal With Roche

Inception Sciences, the discovery-stage biotech firm-slash-incubator created from the ground up to spin out assets in a buyer-friendly manner, has its first pharma partner.

The San Diego firm has created a spin-off dubbed Inception 3 that will house a technology platform from Stanford University and develop drugs to treat permanent hearing loss. Roche is the partner, pledging R&D funds via undisclosed milestones in exchange for an option to acquire the company when Inception files its IND package for the first lead compound.

If you're wondering what happened to Inception 1 and 2, they were announced when Inception was unveiled in the summer of 2011 with general therapeutic areas of focus, one neurology, one oncology. But to date there's been no word of their products, programs, or outside partners.

Inception itself came from the aftermath of Bristol-Myers Squibb's acquisition of Amira Pharmaceuticals, a lucrative but complicated affair that saw BMS extract Amira's lead candidate for idiopathic pulmonary fibrosis, plus a preclinical program, for $325 million in upfront cash. BMS did not take hold of other Amira assets, however, and spinning them into separate entities was a headache. So Amira CEO Peppi Prasit and Versant partner Brad Bolzon formed Inception in anticipation of Prasit's team, once a drug-hunting unit at Merck, remaining similarly productive.

In addition to the little Inceptions potentially housing the fruits of labor from Inception's drug hunting team, the company has also created a "build to buy" strategy, according to chief business officer Clare Ozawa. The idea is to hitch a program early to a potential acquirer with prearranged options. Versant has already accomplished the trick outside of the Inception structure with Quanticel Pharmaceuticals, also a Stanford spinout (unrelated to the hearing-loss program). After a long incubation, Versant brought Quanticel out of stealth in 2011 with Celgene on board.

The Roche deal for Inception 3 was revealed Wednesday in unusual fashion, in an "advertorial" article penned by Roche touting its neurology partnering program in the October 10 issue of Nature. Ozawa confirmed the deal but declined to comment further. Our "Pink Sheet" colleagues will have more details later today, so stay tuned. -- Alex Lash

Deals of the Week Takes Time to Travel

Like any conscientious time traveller, a biopharma needs to tread carefully around iterations of its current, past and future deal-making self. (Spoiler alert!) In the new sci-fi flick Looper, the younger version of Bruce Willis does a terrible job cultivating his present while tending to his future and reconciling himself to his past. But this week Celgene proved a bit more adept than the action hero at tending to its past and future self. The biotech bellwether disclosed a pair of early stage deals, while putting out positive data that helps justify its largest acquisition to date.

The biotech added two cancer deals, one to develop a Phase I immunotherapy with VentiRx and the other a research partnership with the Leukemia & Lymphoma Society (LLS). Celgene has now disclosed six partnerships this year, the most since 2007 when it inked 10.

Celgene will pay VentiRx $35 million upfront to develop Toll-like receptor 8 (TLR8) agonist, VTX-2337, in cancer indications. The two companies will advance the compound in a pair of Phase II trials in ovarian and head-and-neck cancer over the next few years under an exclusive, worldwide partnership. Celgene also gains an option to purchase the company. VentiRx is eligible to receive additional funding during the option period, including a potential equity investment by Celgene.

In-licensed from Array BioPharma in 2007, ‘2337 is an immunotherapy that directly activates human myeloid dendritic cells, monocytes and natural killer cells to produce high levels of mediators which orchestrate the integration of a patient’s innate and adaptive anti-tumor responses, according to VentiRx.

Celgene included a similar option to purchase in its deal late last year with genomics start-up Quanticel, which got $45 million upfront and sold an undisclosed amount of equity to Celgene. The biopharma gained exclusive third-party rights to Quanticel's platform, which conducts single-cell genomic analysis of tumor samples.

Likely even more long range than the VentiRx deal, the LLS partnership seeks to identify and fund blood cancer research projects. The idea is to use the patient advocacy group’s connections with academic research centers to advance the scientific and medical understanding of hematological malignancies. The partners will also work with biotech companies to help develop of novel treatments for blood cancer.

Defining its present and past, Celgene also helped make the case this week for its $2.9 billion acquisition of Abraxis BioScience, which was met with skepticism when announced in 2010, with the disclosure of positive Phase III data for Abraxane in melanoma. The company’s share price climbed nearly to $80 on the news. That’s close to its 52-week high, but Celgene still hasn’t broken out of the roughly $50-$80 range it’s been in for about six years.

Now that Abraxane has hit some milestones and has a slew of upcoming catalysts Celgene may not wish it could go back in time to undo the deal, although there were plenty of investors who wished it could do so in the deal’s aftermath.

Abraxane (paclitaxel protein-bound particles for intravenous suspension) has an Oct. 12 PDUFA date for the treatment of non-small cell lung cancer (NSCLC). An approval in NSCLS would be the first new indication for the drug since Celgene acquired Abraxis. At the time, Abraxane was already approved as a second-line treatment for metastatic breast cancer.

If it can successfully add NSCLC, along with melanoma and pancreatic cancers, Celgene is expected to build Abraxane into its next blockbuster franchise. Just modelling sales for second-line breast cancer and NSCLC, Jefferies analyst Thomas Wei expects Abraxane could hit more than $1 billion in sales by 2016 or 2017.

Still, Abraxane may be little help when it comes to Celgene’s long-term patent issues. The drug comes off patent in the U.S. next year, but newly approved indications would have five to seven years of protection, said ISI Group’s Mark Schoenebaum in a note this week. He expects Abraxane IP to hold up through 2020 in the U.S. Revlimid (lenalidomide) starts losing IP protection as early as 2019; it accounted for two-thirds of Celgene’s $4.7 billion in net product sales last year.

But as sci-fi aficionados know, when time travel is involved current and future selves often end up at odds, if not at outright war. Celgene needs to hit a lot of milestones including next week’s Abraxane PDUFA date and Phase III pancreatic data for the drug this quarter.

Celgene isn’t the only one working to get a glimpse of a rosier future. See who else is partnering up to do so in this week’s installment of . . .

Sanofi/Genfar: Sanofi chief executive Chris Viehbacher seems as good as his word when it comes acquisitions. Three weeks after identifying Colombia as an attractive emerging market to be in, he bagged the country’s second-biggest generics maker, Genfar. While in China last month at the World Economic Forum, Viehbacher identified Colombia, Vietnam and Indonesia as emerging markets that look attractive in terms of growth. On Oct. 2 Sanofi announced it was buying Genfar, which had total sales last year of $133 million, some 30% of that from outside Columbia. The purchase builds on Sanofi’s previous forays into Latin America comprising the $662 million purchase of Medley Pharmaceuticals, the big Brazilian generics maker, in April 2009, just days after the French company bought Mexico's Kendrick Farmaceutica. Genfar does business in Venezuela, Peru, Ecuador and 10 other countries. No financial terms were announced. Viehbacher has been diversifying the group since he took control in 2008 by acquiring small or mid-sized companies in areas including vaccines, over-the counter drugs and generics, especially in fast-growing emerging markets, such as Eastern Europe, Latin America and Asia. So, does the Genfar purchase mean Viehbacher – who has said Sanofi is open to “bolt-on” transactions of as much as €2 billion ($2.6 billion) this year – will soon announce deals in Vietnam and Indonesia? It would seem a safe bet. – Sten Stovall

Janssen/Astellas: J&J-owned Janssen Biotech beefed up its autoimmune pipeline by acquiring rights to Phase II Janus kinase inhibitor ASP015K from Astellas Pharma. Horsham, PA-based Janssen paid $65 million up-front in the Oct. 1 deal, which also includes development, regulatory and commercial milestones that could add $880 million to its value. Janssen would also pay double-digit royalties if the drug is commercialized. The deal covers the entire world except for Japan, where Astellas retains rights. Astellas has already conducted a Phase IIa study of the drug in moderate-to-severe plaque psoriasis patients, and will complete three Phase IIb trials already underway in rheumatoid arthritis. Janssen will assume all further development costs outside Japan after those studies are completed. The drug could be an eventual successor to Janssen’s top-selling Remicade (infliximab) and Simponi (golimumab), both of which are approved in RA, psoriatic arthritis and ankylosing spondylitis. No JAK inhibitor has yet been approved for rheumatoid arthritis, but FDA is soon expected to rule on Pfizer’s tofacitinib, with a PDUFA date of Nov. 21. – Paul Bonanos

Takeda/LigoCyte: The Japanese pharma is making good on its commitment to make vaccines a priority. Takeda will acquire vaccine play LigoCyte for an upfront payment of $60 million, with additional undisclosed contingent development payments. Late last year, Takeda announced the establishment of a Vaccine Business Division. To run the new division, Takeda hired the former director of vaccine delivery in the Global Health Program at the Bill & Melinda Gates Foundation, Rajeev Venkayya. Prior to the Gates Foundation, Venkayya was the special assistant to the President for Biodefense at the White House. With the Ligocyte acquisition, Takeda will gain a Phase I/II vaccine to prevent norovirus gastroenteritis, the only norovirus vaccine in clinical trials, according to the company. Novovirus is the most common cause of gastroenteritis and food-borne illness in the U.S. and the cause of about 200,000 deaths annually, mostly in developing countries. The norovirus vaccine uses LigoCytes proprietary vaccine-like particle (VLP) technology. Takeda will also gain LigoCyte’s preclinical vaccines against respiratory syncytial virus, influenza and rotavirus. LigoCyte management will join Takeda’ Vaccine Business Division and continue to operate in Bozeman, Montana. - Stacy Lawrence 

Evotec/Bayer: Two European pharmas forged a multi-target alliance to develop clinical candidates to treat endometriosis. Bayer Pharma paid €12 million ($15.5 million) up-front to enter a five-year collaboration with Hamburg-based Evotec, with a goal of discovering up to three clinical candidates and jointly bringing them through preclinical research. Bayer will assume development costs related to the drugs upon their entry into the clinic, and could owe Evotec up to €580 million in preclinical, regulatory, clinical and commercial milestone payments, plus low-double-digit sales royalties, if the drugs advance and are commercialized. Bayer already markets Visanne (dienogest), a once-daily oral tablet that treats pain and lesions associated with the disorder, as well as a variety of other women’s health products including contraceptives. Endometriosis, which most frequently afflicts women between 25 and 35, is said to affect 176 million women worldwide, including about 10 percent of women of reproductive age. – P.B.

Servier/Ethical Oncology Science: French drug maker Servier is again moving to bolster its oncology pipeline through a deal with the Italian biopharma Ethical Oncology Science, its second in-licensing deal in as many weeks. In the latest agreement, Servier has acquired rights to an early clinical-stage antitumor drug targeting Fibroblast Growth Factor Receptor 1 and Vascular Endothelial Growth Factor Receptor 1-3, the company announced Oct. 1. In exchange Servier will pay €45 million ($57.5 million) upfront for rights outside the U.S., Japan and China. In those territories, EOS will retain rights. EOS also stands to receive clinical and registration milestones as well as royalties. The focus of the development of the drug will be mainly on breast cancer, where it has demonstrated promising results in early human trials, according to the company. In an earlier deal, announced Sept. 20, Servier partnered with MacroGenics Inc. for an option to develop and commercialize Dual-Affinity Re-Targeting (DART) products from its bi-specific antibody platform directed at three undisclosed tumor targets. Servier paid $20 million upfront for an option to obtain licensing rights in markets outside the U.S., Canada, Mexico, Japan, Korea and India. - Jessica Merrill

Leo Pharma/Charité: The Charité, which started out in the 1700s as a plague hospital for the poor but now incorporates Berlin's university hospitals, one of the largest medical organizations in Europe, is to collaborate with Denmark's mid-sized company, Leo Pharma, to discover and develop new treatment options for patients with skin conditions like psoriasis and actinic keratosis. It’s a bold step for Leo Pharma, which has previously not been particularly active in forging scientific collaborations, and can be viewed as the next move in the company's quest to search for future growth opportunities. The partners will test treatment solutions that no one has explored before, and identify new therapeutic areas within dermatology for Leo Pharma, the company announced Oct. 3. The collaboration is billed as the first of five long-term research relationships that Leo Pharma wants to set up with external partners in four countries – the U.S., Germany, France and Australia - by the end of next year. The research will supplement Leo Pharma's own internal R&D activities.- John Davis

Theravance/Alfa Wassermann: Mid-sized Italian company Alfa Wassermann is continuing to focus its research on all things gastrointestinal by collaborating with San Francisco-based Theravance on the development of that company's Phase II 5HT4-agonist, velusetrag (TD-5108), in gastroparesis. There are few therapeutic options for the disorder, which is characterized by delayed gastric emptying leading to bloating, nausea and vomiting. Velusetrag has already shown significant prokinetic activity after once-daily dosing in 400 patients with chronic idiopathic constipation. Under the agreement, Alfa Wassermann will fund the velusetrag research program in gastroparesis until the end of Phase II, and at that point will have an exclusive option to license the product for further development and commercialization in the EU, Russia, China, Mexico and certain other countries. Theravance will retain full rights to velusetrag for the U.S., Canada, Japan, and certain additional countries. If Alfa Wassermann exercises the option, Theravance will receive a $10 million fee and could receive further development, regulatory and sales milestone payments totalling up to $53.5 million, the two companies announced Oct. 2. Theravance could also receive royalties on net sales ranging from the low teens to 20%. Alfa Wassermann, a private Bologna-based company with revenue of €335 million ($434 million) in 2011, is best known for its gut-selective antibiotic, Xifaxan (rifaximin), which is marketed in more than 30 countries. It also markets a low molecular heparin, Fluxum (parnaparin), and a heparinoid, Vessel (sulodexide), and has ambitions to extend its direct presence in the EU and emerging markets. Theravance markets the injectable antibiotic, Vibativ (telavancin) in the U.S., and is collaborating with GlaxoSmithKline on the development of a combination COPD product which has completed Phase III clinical studies.- J.D.

BioSante/ANI Pharmaceuticals: In perhaps a last-ditch effort to derive value from development-challenged, female sexual-dysfunction drug LibiGel (transdermal testosterone gel), BioSante is undertaking a reverse-merger with specialty branded and generic pharmaceutical company ANI Pharmaceuticals. Each company’s board of directors has approved the proposed all-stock transaction in which ANI shareholders would end up owning 53% of the combined company and BioSante shareholders the remaining 47%. The deal, announced Oct. 4, also includes a contingent value right tied to the potential sale, transfer or licensing of LibiGel that could yield up to $40 million for existing BioSante shareholders. After Phase III trial data were clouded by a higher-than-expected placebo response, BioSante was left to design new pivotal studies for LibiGel, intended to address female hypoactive sexual disorder, that would ameliorate the placebo effect. In July 2011, the Illinois-based firm raised $45.1 million in a follow-on public offering, selling 16 million shares at $3 per share to fund continued development of LibiGel. The new company will be called ANI Pharmaceuticals, Inc., with existing ANI President and CEO Arthur Przybyl at the helm. Przybyl also will hold a seat on the board of directors, along with four current ANI directors and two from BioSante. The new company will seek to out-license LibiGel and put BioSante’s cash toward ANI’s niche branded and generic drug business, which generated net sales of $16 million in 2011. BioSante also brings a pipeline of cancer vaccines being investigated in 17 Phase I and Phase II trials to the new entity, while ANI has a contract manufacturing organization. - Joseph Haas

Flashing back to 5AM? Trippy alarm photo courtesy of loopoboy 2.0.

Financings of the Fortnight, You're Now Cleared For Landing

 

As we write this, at least five biotechs are in registration for initial public offerings. Circling the runway, if you will. Could even be more, what with the allowances for hush-hush registration afforded by this year’s JOBS Act. One has just touched down – the first biotech issue in more than two months -- but only after making major concessions to the public markets. (See Regulus Therapeutics in our roundup below.)

There’s been buzz that 2012 could be the best year for biotech IPOs since 2007, the year before all things financial went to heck in a mortgage-backed handbasket. “Best since 2007” is a rather backhanded compliment, but we understand the feeling that there’s a little more sun shining. As our Pink Sheet brethren reported this week, for example, antibiotic developer Paratek Pharmaceuticals has picked itself off the mat to file for an IPO. In its filing the firm cites more confidence in the revamped FDA guidelines for antibiotic approvals – specifically in skin and skin-tissue infection, which Paratek’s lead candidate, once partnered with Novartis, aims to treat.

But there should be no illusion that landing an IPO will mean a short taxi to the gate and a swift, sprightly exit past the smiling cabin crew. In other words, there’s an oversized suitcase just waiting to tumble out of the overhead bin: IPOs aren’t boosting company valuations. This has been true for years, hence the motto “The IPO is just another round of financing.” But one would think that the rise in other indicators, such as slightly better post-IPO performance, less drastic “haircuts” (the difference between the proposed IPO terms and the eventual ones), and a broader pool of IPO buyers, would put some wind under the step-up wings. (OK, that metaphor is officially grounded.)

As our new colleague Stacy Lawrence reported last week, the step-ups from final venture round to IPO have remained tepid. In fact, according to research from law firm Fenwick & West, the real action recently has taken place earlier in the funding cycle: step-ups at Series B in the second quarter of 2012 averaged 63%, and at Series C, 26%. The jump in valuation at Series D was 9%, and at Series E or higher, it was -9%. Those early boosts in valuation, however, at least are helping the entire group trend in the right direction. In a four-quarter moving average, life sciences venture rounds had a 21% step-up. That’s up from 0% in the first quarter of 2010. Flatter than a flounder on a Nebraska two-lane blacktop, as Dan Rather might have said.

In other IPO news, the upcoming issue of Start-Up breaks down six years of biotech exits, both M&A and IPO, and looks at the companies with corporate venture backers. As we found more than a year ago, private biotechs with corporate VCs on board are acquired at higher returns than those without CVC backing.

Does the CVC magic rub off on IPOs, too? Tune into the new issue to find out. Also in the new Start-Up, we profile a biotech that could be first to market with a disease-modifying drug for an autism disorder; we delve into the unusual business model of a company fully owned by non-profit foundations but looking to attract venture backers; and we examine the strategies of companies working on psoriasis that patients hope will soon make the leap to orally administered treatments.

In Start-Up's annual VC survey, by the way, we asked participants if the aforementioned JOBS Act has had any of its intended effect on the IPO process:

It might be too soon to tell where the IPO market is going, but we, dear readers, are approaching our final destination. Please return your seat back to the upright position, lock your tray tables, and put your  electronic devices away -- except, of course, the one you're using to read the latest edition of....

Regulus Therapeutics: If haircuts have been less drastic this year, you wouldn’t know it from the Regulus IPO. The microRNA developer birthed by Alnylam Pharmaceuticals and Isis Pharmaceuticals made its public debut October 4, the first biotech IPO since July, selling 11.25 million shares at $4 a pop. It was a drastic shift from selling 4.55 million shares in the $10 to $12 range it hoped to hit. The cash raised by Regulus is roughly the same as it had first targeted, $45 million instead of $50 million, but the rest of the metrics were ugly. Seeing how the firm was owned by other drug companies, however, the immediate financial impact might not be as urgent as it would be for traditional venture backers. Before the IPO, Alnylam and Isis held 45% and 44% of Regulus, respectively, and Sanofi (9%) owned most of the rest. There were all sorts of side deals with the IPO, too. Regulus partner AstraZeneca agreed to buy $25 million in common stock at the IPO price, which gives AZ 6.25 million shares – practically an equal post-IPO share to Alnylam and Isis, according to the most recent regulatory filing. Other corporate owners are likely to buy in at the IPO, too: the filing indicates Sanofi, Isis and GlaxoSmithKline, which like AZ and Sanofi also is a development partner, have said they’re interested. Filings in coming days should reveal the extent of their purchases. Underwriters have 30 days to buy up to 1,687,500 extra shares. On its first day of trading Regulus closed at $4.20 a share, up 5%. – Alex Lash

Aragon Pharmaceuticals: When prostate cancer drug developer Aragon announced a $42 million Series C round in March, CEO Rich Heyman told "The Pink Sheet" DAILY that another private round was unlikely, but still on the table. Its new $50 million Series D round, then, represents somewhat of a course change for a company that was mulling a partnership before year’s end, and even acknowledged exploring a public offering late last year. Three days before revealing the D round, Aragon presented strong Phase II data for top candidate ARN-509. Unorthodox investor venBio led the round, and prior investors Topspin Fund, Aisling Capital, OrbiMed Advisors and The Column Group also joined. Validation for ARN-509 came with the August approval of another compound in the androgen receptor antagonist class, Medivation and Astellas’ Xtandi (enzalutamide), but that also could crowd the market as both drugs seek to compete with J&J’s Zytiga (abiraterone). Moreover, Aragon faces a breach-of-contract lawsuit from Medivation, which alleges that Aragon’s scientific co-founders, once researchers at the University of California, Los Angeles, hid ARN-509’s existence when Medivation licensed a series of similar compounds, including Xtandi, from the university. Aragon has filed a counterclaim; the original suit could reach trial early next year. – Paul Bonanos

Antabio: The French antibiotic discovery startup said October 1 it completed the first-ever crowdfunding round for a biotech. It’s a difficult claim to verify, but if not exactly true, it’s certainly one of the few not just to have tapped anonymous, Internet-based donors – akin to the grassroots Internet fundraising that President Obama famously put to use in 2008 – but to have cashed them out in the black. Again, a hard claim to verify, but an Antabio spokeswoman told The In Vivo Blog in an e-mail that every one of the more than 200 crowd funders got a 2x return on investment. The total amount the company raised from them was €300,000. The crowd funders exited when a former Swiss biopharma executive, Christophe Richard, and other angels made personal investments in the company earlier this year. The firm is aiming to have its first candidate in the clinic by 2016. One area of focus is on treatments for bacteria that have developed resistance against carbapenems, the antibiotic class traditionally deployed against Gram-negative bacteria such as Escherichia coli, Pseudomonas aeruginosa and Salmonella. – A.L.

Asceneuron: The Swiss firm spun out this week from Merck KgAA’s Merck Serono unit with the group’s preclinical Alzheimer’s assets that target tau, one of the two major misfolding proteins associated with Alzheimer’s disease. Research into drugs that attack the tau-associated pathologies of Alzheimer’s disease have had a resurgence of late, in part because longstanding approaches to attacking beta amyloid, the other misfolding protein of AD, have failed in late-stage drug trials. Merck Serono, through its venture arm, will invest  €5 million in Asceneuron. Its staff will consist of eight current Merck Serono employees to move the preclinical assets into the clinic up to Phase I, at which point the firm says it will look to out-license or partner the three programs. It’s the third firm to emerge from the closure of the unit’s Geneva headquarters, announced in January, tempered by a €30 million fund to back spin-outs like Asceneuron. Merck KgAA bought the family-owned Serono for roughly $13 billion in 2006. -- A.L.

Photo courtesy of honorary FOTF co-pilot alantankenghoe via a Creative Commons license.