The IN VIVO Blog

Deals Of The Week Jump Starts The Summer Reading List

2012-05-25T13:33:00.002-05:00

High on the New York Times List of Bestsellers (in the hardcover advice & miscellaneous category) this spring has been the book “Innovation: Create Far From Home, Win Everywhere.”

It’s by two well-known Dartmouth business school professors, Vijay Govindarajan and Chris Trimble, and tracks how innovation originating in emerging markets is finding its way into the broader global business world. Since the topic’s increasingly relevant to pharma – although the book isn’t specific to healthcare -- and since the book arrived on my desk this morning, I’m giving it priority status for my Memorial Day weekend reading. Besides, it ties in nicely with one of the themes on my mind since attending the US-India Chamber Of Commerce Healthcare Summit on May 11 in Cambridge, MA.

That meeting was focused on biopharma, and started with a talk by Elias Zerhouni, president of Sanofi's Global R&D, on innovation and India. Billed as the keynote, he had to cancel plans to attend at the last minute and instead participated from Paris, via a near-lifelike videocast. “I was struck several years ago by the extraordinary ability of the healthcare system in India to adopt new technologies to provide high quality care at low cost…so I know there is the fundamental power and energy to create in India,” he started off.

Sanofi, of course, bought India’s Shantha Biotechnics vaccines business, where it is working to produce vaccines at low cost for the global market. The company also has a partnership with Glenmark on developing a monoclonal antibody for inflammatory diseases. “It is possible to see that India has capability of addressing very fundamental obstacles that exist in R&D,” Zerhouni said. "…No one, no country, no organization, has all the needs to master the complexity of biology and to have access patient population and patient samples that would give us profound insights into disease. The role of India is to innovate, not just the delivery of health care, which it has been excellent at doing, not just be less costly, what makes the difference is creativity.”

Zerhouni wasn’t specific but others at the one-day conference gave examples. The Boston Consulting Group has studied India’s capacity for innovation in healthcare, which BCG partner Bart Janssens, who is based in Mumbai, called India’s “magic beans.” According to BCG, these are information technology and computational research, which could help direct pharma’s growing appetite for big datasets (biology is becoming an information science, one speaker noted). Also on the list: nanotechnology and, to no one’s surprise, process efficiencies, a hot topic, particularly in the area of translational research .

And much of the discussion centered around innovative approaches to clinical trials, where India and U.S. academic institutions and MNCs are working aggressively on projects that are sure to change the nature of the way clinical trials are done globally -- but may not be moving fast enough, as colleague Josh Berlin points out in his excellent take on the summit.

In health care, much of the reverse innovation activity has been on the device side, which Govindarajan and Trimble, along with GE CEO Jeff Immelt, wrote about in the Harvard Business Review in October 2009. That article received a lot of attention and gave some circles in pharma food for thought, although pharma seems to be a step behind.

Nevertheless, as I grab the book and run out the door, with more say on this post-holiday, it seems worth pointing out a mainstay of pharma's efforts to capture innovation, namely through deal making. And this week's activities boil down to....

IMI/GSK/AZ/Sanofi/Basilea/Janssen Pharmaceuticals: In an effort to address concerns about the increasing resistance of bacteria to the currently available antibiotics, a European initiative launched in November announced May 24 that it is forming a public-private collaboration coined NewDrugs4BadBugs to fund the development of new antibiotics. The Innovative Medicines Initiative, part of the EuropeanCommission’s Action Plan against the Rising Threat From Antimicrobial Resistance, is providing €119 million ($149.6 million) in funding. Private companies – GlaxoSmithKline, Sanofi, AstraZeneca, Janssen, and Basilea – will contribute a combined €114.7 million ($144.1 million). Perhaps more important, however, is the companies’ commitment to share data. The group is forming a committee, which will build a website that can facilitate the sharing of this information, including specifics on failed targets and clinical trial data. The focus of the overall program will be to develop better networks of researchers, create more fluid trial designs, and provide incentives for companies to participate. The collaboration in the EU happens to parallel proposed legislation in the U.S. that is meant to increase the exclusivity period for antibiotics developed to combat certain types of multi-drug resistant bacteria. Both the U.S. and EU are trying to increase the number of antibiotics under development as more and more people continue to die from infections that were not previously fatal. --Lisa LaMotta

Labcorp/XDx: With Labcorp., molecular diagnostics developer XDx has found a partner to enable it to resume development of a diagnostic to predict when lupus flares may occur. Lupus has always been in XDx’s sights. But its early discovery efforts were not sufficient to winnow down potential candidate markers to a set ripe for clinical validation. It also had tabled a clinical study in 2010, SAGE, 600 patients short of its original goal of 1000, because it had to direct resources toward its lead product, the heart transplant diagnostic, AlloMap.

However, through SAGE, XDx obtained an exotic lupus-oriented set of samples: blood and information on clinical parameters collected monthly from patients. “We knew a certain percentage of these patients would have a significant flare event,” says COO Mitchell Nelles. By drawing blood monthly, the company would have samples before and after flare events, allowing XDx to look for biomarker signatures which could then be used to predict those flares. Now, Labcorp has shown interest in this diagnostics discovery approach. In a deal announced May 23, the companies are collaborating to develop a test to predict lupus flares, to which Labcorp will have full US commercial rights.

A flare predictor test could potentially tell a physician when to intervene with a drug. Even more important, if it were to have a high negative predictive value, the test could tell a physician when to reduce the use of steroids and minimize side effects or generally adjust downward the level of medication. The aim would be “not just preventing the flare, it’s not having to give more medicine than a patient needs,” Nelles says. “We’ve seen that in the transplant field and also autoimmunity. The opportunities to reduce medication to the lowest level possible can have a profound clinical impact.” The test would likely contain a combination of gene expression and protein biomarkers. XDx retains the right to work with other potential pharma/biotech partners to develop a companion diagnostic to predict drug response and otherwise manage therapy. It had previously worked with Bristol-Myers as part of BMS’s clinical plan to develop its arthritis drug Orencia in lupus, an effort which ultimately failed due to the drug's lack of efficacy in Phase III. – Mark Ratner

GSK/Auxilium: GlaxoSmithKline and Auxilium Pharmaceuticals announced May 21 that they have teamed up on the marketing of the Malvern, Pa-based biotech’s testosterone gel, Testim. The co-promotion agreement is set to begin early in the third quarter and is slated to last until September 2015. That's when generics start to infiltrate the $1.4 billion testosterone gel market, which is currently all branded. In the meantime, this promotion will help Auxilium maximize its product before competition arrives. The British pharma will be responsible for increasing awareness of U.S. physicians, while Auxilium will still manufacture the product. GSK will receive revenues on the drug if it exceeds an undisclosed baseline sales figure. Testim, which is meant to treat conditions related to low testosterone levels, generated sales of $208 million in 2011 and accounted for about 80% of Auxilium’s revenues. Just a day after announcing the deal, Auxilium filed suit against Watson Pharmaceuticals in the U.S. District Court of N.J. claiming the generic drug maker’s plan to launch a generic of Testim is in violation of several patents. Other testosterone gel manufacturers like Par Pharmaceuticals and Abbott have reached agreements with Watson to keep a low-cost generic off the market until at least August 2015 – it appears Auxilium is trying to get the most out of its branded product before the competition arrives. --LL

DaVita Inc./HealthCare Partners: DaVita, which manages more than 1,800 dialysis centers across the U.S serving 145,000 patients, is buying one of California’s largest independent physician associations, HealthCare Partners, for $4.4 billion. HCP generated $2.4 billion in revenues in 2011 from services its 700 physicians provide to 667,000 people in Southern California, Central Florida and Nevada. The deal is valued at about 8.4x HCP’s 2011 EBITDA. That’s big news in the provider services and dialysis worlds, but what does it mean for pharma?

Once integrated into DaVita, HCP will operate as a separate subsidiary and its current management will continue to run daily operations. DaVita isn’t likely to get much of a bump in its presence in the dialysis market. Rather, it sees the addition of HCP as a way to build on an integrated care approach, based on HCP’s ongoing efforts to work closely with payers and consumers. While the companies were not specific about how HCP interacts with the groups it services, they noted in the analysts’ call that in certain disease categories — chronic obstructive pulmonary disease, for example — more integrated care with physicians and patients working closely together resulted in shorter hospital stays and no increase in hospital readmissions. In addition, HCP collects claims and administrative data, which, combined with clinical data, allows it to develop clinical programs geared to specific patient populations.

This strategy, while not directly impacting pharma in the near-term, reflects a move on the part of providers and payers to seek what is increasingly known as “a continuum of care” for patients. Pharmaceutical companies have generally taken a wait-and-see approach to such efforts, before responding with new product portfolios and commercial models that address the shifting needs of their constituents. But the trend is on their minds and some, particularly those involved in diabetes, such as Sanofi, are forging ahead with continuum of care strategies; Endo Health Solutions, which recently changed its name from Endo Pharmaceuticals to better reflect the diversity and focus of its pipeline, is taking a continuum of care approach to the urology and oncology sub-segments.—LL

Takeda/Multilab Industria: Japanese firm Takeda Pharmaceutical claims a leading position in Brazil’s pharmaceutical space with the May 25 purchase of Multilab Industria e Comercio de Produtos Farmaceuticos, which manufactures branded generics and OTCs. The transaction, worth an upfront payment of BRL 500 million ($245.5 million), plus up to BRL 40 million, makes Osaka-based Takeda one of Brazil’s top 10 pharma players and brings it the country’s top-selling OTC cold and flu remedy, Multigrip. Takeda expects to close the deal by September.

Through its 2011 acquisition of Swiss firm Nycomed, Takeda has an OTC presence in Brazil, including the analgesic brand Neosaldina, and Rio Grande do Sul-based Multilab is expected to complement that business via its established distribution network, especially in emerging parts of Brazil. Takeda recently projected sales in Latin America, including Brazil, will reach JPY 52 billion ($651.9 million) in 2012, and the firm does not plan to revise this year’s earnings guidance following the deal. Multilab generated revenue of about $68.8 million in 2011.--Dan Schiff

Valeant/Swiss Herbal Remedies Ltd.: Aggressive pharma acquirer Valeant Pharmaceuticals purchases assets from Canadian natural health product firm Swiss Herbal Remedies, the latest consumer health pickup for Montreal-based Valeant. In a May 24 release, Valeant said Swiss Herbal is well-known in Canada and will complement the Cold-FX NHP brand Valeant acquired along with Afexa Life Sciences in 2011. Valeant paid less than 1x sales for the assets from Richmond Hill, Ontario-based Swiss Herbal; the assets generated 2011 net revenue of CA $28 million (U.S. $27.4 million).—DS

Suneva/Spear: Fallout from Valeant's hectic deal-making pace continued May 24 as the anti-wrinkle product Refissa(tretinoin 0.5%) moved to a new home for the second time in less than a year. In December 2011, following Valeant’s buyouts of Sanofi’s Dermik Laboratories and Janssen’s Ortho Dermatologics, the Federal Trade Commission required the specialty pharma todivest three dermatology products from its portfolio – Refissa, acne medication BenzaClin and topical flurorouracil cream 5FU. Valeant sold Refissa, indicated for fine facial lines, hyperpigmentation and tactile roughness, to Spear Pharmaceuticals, and the other two products to Mylan Pharmaceuticals. For undisclosed financial terms, Spear has sold worldwide rights to Refissa and a generic version developed and launched by Spear to privately held Suneva. Suneva CEO Nick Teti said his firm is entering the prescription topical aesthetic space, which he called a potential $100 million market opportunity. The addition will enable its marketing force to offer aesthetic physicians “a comprehensive anti-aging solution,” also include Suneva’s proprietary ReGenicaskincare products and its injectable filler Artefill. Suneva called the deal transformational and said Refissa will be a key driver of sales growth over the next five years.—Joseph Haas

image from flickr user mySAPL used under creative commons

Deals of the Week Ponders The Complications

2012-05-18T12:26:00.003-05:00

Sometimes, a pharma partnership is a prelude to a buyout deal. Other times, as some lovelorn users of one newsworthy social network like to say, it’s complicated. For GlaxoSmithKline, its relationships with three different companies show how one kind of deal can lead to another – or not.

This week, GSK acquired one longtime partner, wrestled with another after it rejected a hostile bid, and raised its stake in a third. First, it paid GBP 61 million ($99 million) to acquire the portion of proteomics drug discovery company and longtime partner Cellzome that it does not already own. GSK will pay cash for just over 80% of Cellzome shares; it previously owned a shade less than 20% of the company, thanks to a 2001 deal in which GSK sold its Cell Map division to the privately-held German start-up, then just a year old. The deal, expected to close Monday, gives GSK access to additional tools to assess interactions between drugs and proteins, potentially leading to better visibility into drug successes and failures during the discovery process. The two are already familiar with one another: They’ve been collaborators in an inflammatory disease partnership since 2008.

The first-comes-love-then-comes-marriage arrangement doesn’t seem to be happening for GSK and Human Genome Sciences, though. As we noted last week, that deal turned hostile as HGS rejected a $13-per-share bid that valued it at $2.6 billion. Now, HGS is trying to remain independent by adopting a poison-pill strategy, a shareholder rights plan that would kick in if a third party acquires 15% of HGS stock. While HGS is still retaining banks to explore strategic options, the new provision would allow its stakeholders to thwart a takeover attempt; it reiterated that it believes GSK’s offer is inadequate this week as well. GSK and HGS are already partners on the lupus drug Benlysta (belimumab), as well as a pair of pipeline drugs including Phase III cardiovascular drug darapladib.

Is there a middle ground between outright acquisition of a partner and a hostile takeover of one that doesn’t want to be bought? How about what GSK did with its collaborator Theravance this week? The British pharma took that relationship to the next level when it acquired 10 million additional shares of publicly traded Theravance for $213 million, based on terms announced in April. That boosts its ownership stake from 18.3% to 26.8%. The two have been allies since 2002, and have expanded their partnerships around bifunctional muscarinic antagonistic beta-2 agonist (MABA) and long-acting beta-2 agonist (LABA) programs under development for chronic obstructive pulmonary disease, including Relovair (fluticasone furoate/vilanterol).

Sound complicated? Some deals are easier to complete than others, but we've got more news than that to report this week. Now stop hitting 'refresh' and read...

Agilent/Dako: The words “biggest tech IPO in history,” were frequently spoken of Facebook’s offering this week, but it’s worth remembering that the spinout of Agilent Technologies from Hewlett-Packard in a 1999 offering was once ranked among the biggest ever. Agilent made a move in the life sciences May 18, when it acquired Danish cancer diagnostics company Dako for $2.2 billion in cash. Agilent, a Santa Clara, Calif.-based maker of electronics measurement equipment, already markets a variety of life sciences and chemical analysis products. Its microscopes, imaging equipment, software and other laboratory gear allow study of biological samples at the molecular level; they are sold into the commercial pharma, biotech and research market as well as the academic and government markets. Dako sells antibodies, software and instruments for cancer diagnostics, including diagnostic kits, probes, and reagents used in flow cytometry. It posted revenues of about $340 million in 2010. Swedish private equitiy firm EQT Partners AB acquired Dako from its founding family for about $1.3 billion in February 2007; Novo Nordisk held a minority stake at the time. – Paul Bonanos

Piramal/DRG: Flush with cash from the May 2010 sale of its branded generics business to Abbott Laboratories Inc., Piramal Healthcare Ltd. announced on May 16th that it will acquire life science analytics and consulting firm Decision Resources Group for $635 million. The acquisition is Piramal’s second this quarter; in April it moved to acquire Bayer AG’s molecular imaging business, including florbetaben, a Phase III molecular imaging agent for diagnosing Alzheimer’s disease. Last August, the company made a significant investment in Vodafone’s Indian operations. The DRG acquisition price represents a 4x multiple of DRG’s projected 2012 top line sales of $160 million. The beneficiary of the sale is Provident Equity Partners, which focuses on the media, communications, education and information sectors, and has over $23 billion under management. Provident took a majority stake in DRG for $193 million in May 2010, investing out of its $4.25 billion Fund V. The sale to Piramal, expected to close in the second quarter, will bring Provident a 2.1x return on investment. Piramal chairman Ajay Piramal cited rising demand in the pharma sector for “specialist information” during a time of rising research costs and increasing complexity in accessing global markets. In particular, he emphasized Piramal Healthcare’s reputation and relationships with global life science companies and its knowledge of emerging markets. DRG CEO Peter Hoenigsberg echoed the demand for information about emerging markets, which he called “the primary avenues for growth in the pharma industry” – and mentioned Piramal’s experience in emerging markets as a factor in the deal. - Michael Goodman

Bristol-Myers Squibb/Tsinghua University: Bristol-Myers Squibb has teamed up with China’s Tsinghua University to develop novel targets for oncology and immunoscience on May 14. The partnership will focus on 3D protein structure mapping of biological targets, as well as structural biology research. "This is Bristol-Myers Squibb's first discovery collaboration in China and is an example of the company's deepening commitment to the country," said Francis Cuss, senior vice president of research at BMS. "We are delighted to be working with Tsinghua University, a world-renowned and highly esteemed research-based academic institution with expertise in target identification and structural biology that will support the discovery of new medicines to fight serious diseases in China and around the world," he said. The multi-year partnership is one of many that have popped up in recent years between innovation-hungry Big Pharma and the academic community. - Lisa LaMotta

Newron/Zambon: Two Italian companies struck a licensing deal around safinamide, a novel Parkinson's treatment that showed safety and efficacy in a recent Phase III trial. Chemical and pharmaceutical company Zambon paid a total of €20 million ($25.4 million) to Newron Pharmaceuticals of Milan to option and license the drug worldwide, not including Japan and other Asian territories already covered by a deal with Meiji Seika Pharma. (One-time rights holder to safinamide, Merck-Serono, returned the drug to Newron in October 2011, throwing a wrench in Newron's previous corporate development plans.) Newron will also receive milestone payments of unspecified size, as well as double-digit royalties if the drug is commercialized. Zambon will shoulder further development costs of the drug. Newron had been lining up safinamide for approval in 2013. The compound is expected to be marketed as an add-on treatment administered alongside dopamine agonists in patients with various stages of Parkinson's disease; Newron says it has both dopaminergic and non-dopaminergic properties. Separately, Newron said new chief executive Stefan Weber will replace founding CEO Luca Benatti, who stepped down from the position after 13 years. - P.B.

Financings of the Fortnight Ponders Neurodegenerative Death And Taxes

2012-05-18T07:00:00.000-05:00

The big funding news this fortnight doesn’t come from public or private investors, it comes from taxpayers. As "The Pink Sheet" DAILY reported May 15, the Obama administration formally rolled out its national Alzheimer’s plan, which has been in the works for more than a year.

Alzheimer’s and other dementia-related diseases were already slated to get $450 million in National Institutes of Health funding in 2012, with the same amount proposed by the White House for 2013, but the new plan adds extra money: $50 million right away this year and $80 million proposed for next year, with another $20 million for caregiver support, education, data collection and other services.

Intriguing, then, that in a field where clinical trial costs are often cited as a major barrier to an already-skittish industry getting more deeply involved, nearly half of the extra $50 million for 2012 is earmarked for clinical trials. It won't help struggling biotechs push promising treatments, mind you; $16 million is going toward a prevention trial using the Roche/Genentech-sponsored antibody crenezumab to test still-healthy members of extended families in and around Medellin, Colombia, who share a rare genetic mutation that almost assures them of early-onset Alzheimer’s. The study, which the sponsors consider to be a Phase II adaptive trial, will cost an estimated $100 million. A private research group, the Banner Alzheimer’s Institute of Phoenix, is in charge, and chose crenezumab as the agent last December because it has demonstrated a better safety profile so far in early Alzheimer’s trials conducted by Genentech.

In addition to the NIH’s $16 million, Banner is putting up $15 million. Genentech will pay the remaining costs, but it’s unclear who will pay if the cost runs beyond $100 million. (Genentech spokeswoman Robin Snyder declined to speculate on additional costs but said the company doesn’t expect funding to be an issue.)

However it plays out, the fact of mighty Roche getting subsidies for as much as one-third of a major trial is, at the least, a sign of the importance of making progress – any progress at all – in Alzheimer’s R&D. We’re not complaining; if $16 million of our national treasure brings about an Alzheimer’s breakthrough, or simply speeds the progress toward one, it’s money well spent and a pittance compared to the costly burden of the disease now and a generation from now.

But to be clear: Neither Banner nor NIH accrue any rights to crenezumab, which Genentech licensed from Swiss biotech AC Immune in 2006, so if the trial points toward crenezumab as a viable treatment, Genentech/Roche could be sitting on a gold mine. The trial is expected to run five years, with an interim analysis after two. At that point the investigators would evaluate continuation of the trial to support an application for approval, said Snyder. “We are hopeful that the trial will support an indication, the specifics of which are yet to be discussed with regulatory authorities,” she wrote in an email. “If it works we would like crenezumab to be as broadly available to patients who may be eligible.”

The Banner Institute plans at some point to test the same antibody in people at higher risk for the more common form of Alzheimer’s.

A side note: Steering millions of federal dollars toward potentially groundbreaking Alzheimer’s trials hasn’t yet provoked the same skepticism as the millions being steered toward other drug discovery and development efforts under the new translational center known as NCATS.

Funding crucial Alzheimer’s trials is of course a different proposition than, say, repurposing drugs that have sat on industry shelves or fallen out of use, one of the mandates of NCATS, which had a $575 million budget this year. But both efforts are dollars spent that, in a parallel universe, perhaps, might have gone toward basic biomedical research, a common refrain from critics. (Our START-UP colleagues, who profile a different source of funding for biotech innovation every month in the “Capital Matters” column, wrote about one of the NCATS programs, the Therapeutics for Rare and Neglected Diseases, or TRND, a few months ago. You can read it here.)

Our friends at Pink Sheet are all over the NCATS story, and we suggest you follow along. It will require a subscription, but to paraphrase the late Donna Summer, they work hard for the money. So hard for it, honey. Rest in peace, disco queen, and same to you, go-go king. No one loves to love you, baby, more than…

Arena Pharmaceuticals: Wasting little time, Arena announced May 16 it priced a secondary stock offering and grossed $60.5 million just six days after an FDA advisory committee voted 18-4 in favor of Arena’s weight-loss drug lorcaserin. Arena sold 11 million shares at $5.50 per share, although shares reached as high as $7.02 on May 11, the day of the committee vote. Shares closed May 16 at $5.67. The vote doesn’t guarantee approval of lorcaserin, but it’s a notable reversal. The panel voted down the drug in September 2010, largely due to data that showed an increase in tumors in rat studies. A reassessment of that data, plus new information on the tumors’ causes, reassured the panel this time around that the cancer risk is negligible. Obesity drugs need to meet only one of two criteria set out in FDA’s draft guidance on weight management products: they either must provide a 5% weight loss in 35% of patients on-treatment and twice as many patients on-treatment as on-placebo; or there must be at least a 5% difference between weight loss in the active-product and placebo groups. Lorcaserin met the former standard, but not the latter. (More details about the panel’s decision is here, courtesy of our Pink Sheet colleagues.) Lorcaserin’s PDUFA date is June 27, so Arena’s new cash reserves give it a boost for commercialization, although in a deal expanded just before the committee vote, Eisai owns commercial rights to the drug in the US, Mexico, Canada and Brazil. Underwriters Jeffries & Co. and Piper Jaffray & Co., with help from BMO Capital Markets, have the option to sell up to 1.65 million additional shares. Two other sponsors of obesity are vying for FDA approval. Qnexa from Vivus has a PDUFA date of July 17, and Orexigen Therapeutics, which agreed to conduct a cardiovascular outcomes trial, hopes to re-file Contrave for approval in 2014. -- Cathy Dombrowski and Alex Lash

OncoMed Pharmceuticals: One of the first cancer stem cell companies, OncoMed is now hoping to cash in on the cancer stem cell hype (which just happens to be the subject of a forthcoming feature in Start-Up magazine). After all, OncoMed, founded in 2004, is a relative graybeard of the field, with a couple of alliances under its belt and three programs in the clinic. Tiny Verastem notched a $63 million IPO in late January without anything yet in the clinic, and another company, Stemline Therapeutics, filed its IPO papers in April. OncoMed hasn’t set terms yet, but it won’t be a surprise if it aims sky-high. Venture backers have put at least $170 million into the company since its founding, most of it coming in a massive Series B in 2008. There are seven venture funds and one strategic investor with stakes of 5% or more in OncoMed, led by U.S. Venture Partners (17%), Latterell Venture Partners (12%), and GlaxoSmithKline (12%), which also owns options for worldwide rights to two OncoMed antibodies. GSK can exercise the options at either the end of Phase I or Phase II proof of concept trials. OncoMed owns exclusive rights to its lead compound, the antibody demcizumab, and is currently testing it in two Phase Ib trials, both in combination with chemotherapy agents. -- A.L.

Egalet: In its second incarnation, Danish pain management firm Egalet Ltd. has raised $14.3 million in Series B financing. The firm restructured and recapitalized in 2010, shedding its cardiovascular program to focus on its abuse-resistant Egalet technology for the development of opioid and non-opioid pain medications. The company is preparing to advance lead candidate EGP066, an extended-release form of morphine, into Phase III studies. The Egalet platform creates tablets that erode at a controlled rate to produce prolonged- or delayed-release delivery. It also prevents the drug ingredient from being easily extracted, which deters drug abusers from chewing, snorting, or injecting it. First-time investor CLS Capital joined returning shareholders Atlas Venture, Omega Funds, Sunstone Capital, and Index Ventures, which committed to a two-tranched €2 million ($2.6 million) Series A round in August 2010. Prior to the recap, Egalet A/S had raised at least $60mm in venture financing. In December 2009, it out-licensed its CV compound, the beta blocker EGP042, to RedHill Biopharma. The firm has a second formulation technology, Parvulet, that creates a soft pudding-like substance that can be eaten with a spoon. Farther down its pipeline are extended-release versions of oxycodone, hydrocodone, and hydromorphone. -- Amanda Micklus

Dynavax Technologies: Like Arena, Dynavax is a veteran biotech hoping to soon celebrate its first product launch, with the hepatitis B vaccine Heplisav now before the FDA for review. Dynavax tapped the public markets, raising $74.4 million on May 9 before deductions and expenses. It sold 17.5 million shares at $4.25 apiece, adding more than 10% of its share count to the outstanding base. If that’s not enough dilution, underwriters have the option to sell another 2.6 million shares. What’s more, Dynavax also announced just before the share sale that longtime CEO Dino Dina will step aside for a more commercially experienced successor. He’ll remain CEO until the search is complete, and he’ll also keep his board seat, Dynavax said. Investors didn’t take kindly to the CEO news or the offering, which was priced 17% below the previous day’s close of $5.09. Shares have continued to decline, closing May 17 at $3.76. But Dynavax needs the cash, as it owns full rights to Heplisav, for now at least, and says it intends to launch it independently in the US. Historically, biotechs that keep worldwide or at least US rights to their first commercial products fare better in the long term, but a successful launch is no guarantee. Dendreon’s prostate cancer treatment Provenge (sipuleucel-T) and Human Genome Sciences’ breakthrough lupus drug Benlysta (belimumab), both hailed as welcome additions in under-served indications, have faltered badly out of the gate. That's led to new management for Dendreon and, for HGS, a hostile takeover bid from marketing partner GSK. -- A.L.

Image courtesy of flickr user brain_blogger. How appropriate.

Deals of the Week: GSK Goes Hostile

2012-05-11T13:50:00.004-05:00

How easy it is to push friendship aside when money gets in the way. GlaxoSmithKline PLC has pushed its two-decades long friendly partnership with Human Genome Sciences Inc. aside and is taking its acquisition bid hostile. The company commenced a tender offer for HGS May 10, taking its $13 per share offer directly to shareholders after the company’s board of directors rejected it in April.

The offer represents an 81% premium over HGS’ closing share price of $7.17 April 18, the last trading day before the offer was publicly disclosed, but shareholders aren’t likely to see the value the same as GSK. Just a year ago, HGS closed trading at $27.82 on May 10, 2011. But the company’s stock has been under pressure as sales of the company’s first marketed drug, the lupus treatment Benlysta, have failed to take off the way some investors hoped.

The fiasco makes the timing right for GSK. The two companies are partnered on Benlysta, as well as on two late-stage pipeline drugs. The tie-ups leave HGS particularly vulnerable to a takeover by GSK since it is unlikely another suitor will step up for a company that is already so deeply engaged with a another big pharma.

Still, HGS is trying to pull what levers it can. The company retained Goldman Sachs and Credit Suisse to explore strategic alternatives. And shareholders have already pushed the stock over $14, suggesting they see a chance GSK will push its bid higher. But GSK is putting the pressure on HGS now, and says it has no interest in being part of the strategic review process.

The hostile turn has added fuel to speculation that GSK’s interest in the pipeline drug darapladib is greater than the company is letting on. For a Phase III drug in development for cardiovascular disease, darapladib has been flying under the radar. It is an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2), a first-in-class drug candidate, but its mechanism of action is largely unknown, and investors have thus been skeptical of the program. It’s high-risk, but it could also be high-reward.

GSK’s sudden decision to acquire HGS after such a lengthy partnership has sounded some alarms among HGS shareholders, who are wondering if GSK is looking to get full control of darapladib before Phase III data read out. HGS stands to receive a 10% royalty on worldwide sales, and has an option to co-promote the drug in North America and Europe with a 20% profit share. Management at HGS has been talking up the darapladib opportunity in the meantime, while GSK CEO Andrew Witty has done just the opposite. “It will be two years before anybody can really call a judgment of whether or not this molecule is actually capable of being developed into a drug,” he warned during an April conference call.

The drug is being studied in two large Phase III outcomes studies, but after conducting an interim analysis, an independent data monitoring committee recommended the studies continue. A positive sign in any event.

The other Phase III drug, albiglutide, is a once-weekly injectable GLP-1 agonist for type 2 diabetes that hardly seems worth fighting over given the number of entrenched rivals already on the market.

The question now is if HGS shareholders will be willing to settle for $13 per share and accept the offer with a sigh that includes some relief or hold out for a few dollars more in the hopes GSK is willing to bet higher on darapladib too. The offer is set to expire on June 7.

In other news, it was a ho-hum week on the deal-making front. But don't let that spoil your enjoyment of the next edition of ...

Daiichi Sankyo/Coherus: Daiichi Sankyo Co. Ltd., the latest in a long line of Japanese pharma to make some noise in the increasingly busy biosimilars space, has tapped a California virtual start-up to help it develop etanercept and rituximab biosimilars. Daiichi has partnered with Coherus BioSciences, which will retain rights to the molecules outside of Japan, Taiwan, and South Korea. Further terms weren’t disclosed. Although Coherus itself was only founded in 2010, “its founders are in fact an elite group of biotech pioneers who helped build America’s first-generation biotherapeutics industry, including companies like Amgen, Genentech, Roche and Immunex," Daiichi Sankyo told PharmAsia News. Coherus is lead by CEO Denny Lanfear, a long-time Amgen employee, and co-founder Stuart Builder, formerly of Genentech. Builder was the start-up director for the biotech Alnara Pharmaceuticals, which was sold to Eli Lilly & Co. for $180 million in cash plus up to $200 million in milestones. This isn’t Daiichi’s first foray into biosimilars. The company already has biosimilar capabilities through subsidiary Ranbaxy, which is developing versions of filgrastim and molgramostim, and through the $16.9 million acquisition of biosimilar firm Zenotech Laboratories in Aug. 2010. Coherus says to expect more deals in the not too distant future and that it has five oncology and inflammation focused biosimilars in development. – Dan Poppy

Pozen/Desitin: Pozen, which has built a business strategy around developing fixed-dose, combination drugs comprising low-cost generic compounds, has sold EU rights for MT 400, its Phase III migraine candidate, to Desitin Arzneimittel GMBH of Germany for a nominal upfront payment, modest milestone payments and potential sales royalties. In structure, the deal resembles a previous agreement the North Carolina-based firm reached last year with Johnson & Johnson unit Cilag AG for manufacturing and marketing rights to ‘400 in Brazil, Columbia, Ecuador and Peru. The pact with Desitin, which covers the 27 EU nations as well as Switzerland and Norway, calls for $3 million in pre-commercialization payments, including a $500,000 upfront. The agreement, which also stipulates double-digit royalties on net sales of ‘400 that will increase based on annual sales volume, will expire on a country-by-country basis on the 15^th anniversary of the product’s first commercial sale in each market licensed to Desitin. The Cilag deal, which included an undisclosed small upfront payment, provides for expiration at 15 years after the first product sale in each market, with royalties in the high single digits for the first 10 years, then in the lower single digits for the final five. MT 400 is a proprietary combination of sumatriptan and naproxen sodium – Pozen also licenses U.S. rights to a different dose of the combination, known as Treximet, to GlaxoSmithKline.—Joseph Haas

Evotec/4-Antibody: European drug discovery platform companies Evotec AG and 4-Antibody AG have teamed up to provide collaborative antibody discovery services to Evotec’s customers. The deal will allow Hamburg-based Evotec to offer an improved early-stage antibody selection service, along with its existing high-throughput and high-content screening offering. Evotec will use 4-Antibody’s proprietary Retrocyte Display technology, a platform which allows expression and screening of antibody libraries to identify antigen-specific antibodies. The two companies will share profits from services and discoveries made under the agreement. Evotec will also pay Basel, Switzerland-based 4-Antibody a €2 million ($2.56 million) up-front access fee, although the companies said that cost will be fully reimbursable from returns under the partnership. The deal is expected to give 4-Antibody access to a wider field of customers, while improving Evotec’s antibody selection capabilities. Evotec says the agreement will allow it to better differentiate between antagonist and agonist antibodies, while improving attrition rates. – Paul Bonanos

image from flickr user alebonvini

Deals Of The Week: Tolero Introduces Itself In "Double-Jointed" Deal With MannKind

2012-05-04T13:51:00.002-05:00

In a deal structure that perhaps could best be described as “double-jointed,” new company Tolero Pharmaceuticals has licensed exclusive worldwide rights to MannKind Corp.’s preclinical Bruton’s tyrosine kinase (BTK) inhibitor program, which Tolero believes could yield novel therapies for hematological cancers and inflammatory diseases.

MannKind, of course, is focused almost exclusively on its perennially troubled effort to develop a recombinant inhaled insulin product, Afrezza. The deal with Tolero puts development of the BTK compounds in the hands of the privately held, Utah-based biotech, but allows MannKind the ability to opt back in after Phase I if it likes what Tolero has uncovered. In the case that MannKind opts back, “bio-bucks” slated to go to MannKind under the deal would flow instead to Tolero.

“It’s a different model that we proposed and one that I think MannKind really liked,” Tolero Chairman and CEO Dallin Anderson said in an interview. “It aligned incentives and made our negotiation progress very smooth. I think us proposing a structure that de-risked the opportunity for MannKind and gave them a chance to still be involved down the road helped us with not only terms but also to get to an agreement that makes sense for both parties.”

Tolero will pay an upfront amount with the potential for development, approval and commercialization milestones going to MannKind, along with tiered royalties on any product sales. The parties did not disclose precise deal terms, but Tolero said the upfront and milestones could total $130 million. However, MannKind also retains the right to re-acquire the BTK assets at pre-specified terms up to 60 days after the conclusion of Tolero’s first Phase I study. If MannKind elects this option, it would assume all development and commercialization responsibilities and costs, with Tolero entitled to the potential earn-outs specified in the April 30 deal.

“BTK currently represents one of the most exciting therapeutic targets in oncology, and we feel that our collaborative approach to targeting BTK may uncover some novel utilities not yet fully realized,” Anderson said. Pressed for details on what those additional “utilities” might be, however, the CEO remained mum.

Much about Tolero remains unknown – founded in 2011 and based in Salt Lake City, the firm is not backed by venture capital or institutional investors. Anderson, who noted his background as having co-founded Montigen Pharmaceuticals in 2003 and then selling to SuperGen in 2006 at a significant multiple, would say only that his company is funded by a number of private investors. Its own programs, including two compounds – TP-0413 for cancer-related anemia and TP-0829 for B-cell malignancies – are slated to enter clinical development in the next year and derive from a discovery approach based upon single genetic alterations that drive cellular signaling pathway abnormalities.

Tolero also is not disclosing the specific source of its technology, although Anderson alluded to some research relationships with the academic community in Utah, specifically the University of Utah and Brigham Young University. The company’s website says it “seeks to target diseases from a pathway-centric approach by identifying and developing pathway-specific inhibitors and then identifying specific diseases (i.e., cancer subtype) and genetic backgrounds where these pathway inhibitors exhibit enhanced efficacy.”

TP-0413, which targets signaling involved in the regulation of serum iron levels, a pathway implicated in rheumatoid arthritis as well as cancer, is in advanced preclinical and IND-enabling studies, with a goal of beginning clinical development in the second half of this year. Tolero also hopes TP-0829 will move into the clinic early next year, with potential activity in non-Hodgkin lymphoma, chronic lymphocytic leukemia and multiple myeloma.

Elsewhere, it was a typically busy week on the biopharma deal-making front – let’s get caught up with the latest round-up of:

Sandoz/Fougera: Novartis' generics unit, Sandoz, announced May 2 that it will be acquiring Melville, N.Y.-based Fougera Pharmaceuticals in an all-cash transaction worth $1.53 billion that is expected to close some time in the second half of 2012. Fougera, which produced sales of about $430 million in 2011 and has about 700 employees, will make Sandoz the largest manufacturer of generic dermatology products in the world. For Sandoz, the acquisition was “a strategic bolt-on with synergy potential,” said Jeff George, global group head, in an interview. According to Sandoz, once the acquisition is complete, the generic dermatology unit will take in about $620 million in sales globally, with most of that coming from the U.S. On the worldwide market, the company will compete with the likes of Watson Pharmaceuticals, Mylan, Sanofi and Teva Pharmaceutical Industries. Fougera, previously Nycomed US Inc., was the dermatology business of Swiss-based Nycomed Pharma AS before it was acquired by Takeda Pharmaceutical for $13.6 billion in 2011. Takeda decided to pass on the U.S.-based part of the business because it lacked expertise in dermatology and was uninterested in building out the assets. Since the Takeda takeover, Fougera has remained the asset of private investors – Nordic Capital, DLJ Merchant Banking (a Credit Suisse Group affiliate) and Avista Capital Partners. The acquisition by Sandoz gives those investors a good return with a multiple of about 8.8 times the company’s 2011 earnings before interest, taxes, depreciation and amortization (EBITDA) of $173 million. – Lisa LaMotta

Abbott/Action Pharma/Zealand: Abbott Laboratories boosted the renal pipeline of its soon-to-be-separate pharma division AbbVie by acquiring worldwide rights to Action Pharma’s AP214, a Phase IIb drug designed to treat acute kidney injury that can occur during cardiac surgery. Unlike most licensing deals for pipeline assets, Abbott obtained rights to the drug for a single payment, a $110 million cash transaction that won’t be followed by milestone or royalty payments. (Abbott has made this type of bet at least once before, paying PanGenetics $170 million upfront for a Phase II anti-NGF asset in 2009. Yet there’s one complicating factor: Denmark-based Action had developed the drug using structural peptide technology licensed from Zealand Pharma, another Danish company. In the new arrangement, Action rather than Abbott will pay Zealand DKK 62 million ($11 million), and Zealand is due a royalty in the low single digits if Abbott commercializes the drug. The old agreement between Action and Zealand has been terminated. Abbott will begin a second Phase IIb study on the drug this fall. No treatment has yet been approved for acute kidney injury in patients who have undergone cardiac surgery. Abbott already holds ex-U.S. rights to Phase III chronic kidney disease candidate bardoxolone, licensed in September 2010 from Reata Pharmaceuticals, as well as atrasentan, an internally developed Phase II endothelin-receptor antagonist in diabetic kidney disease. – Paul Bonanos

AstraZeneca/Axerion: AstraZeneca’s new virtual neuroscience drug discovery and development unit reached its first partnership agreement May 1, with a licensing and co-development pact centered on preclinical antibodies for Alzheimer’s disease discovered by Axerion Therapeutics. No financial terms were revealed, but Axerion will receive an upfront payment and research and development funding and be eligible to earn milestones and sales royalties if any compound reaches market. The New Haven, Conn., biotech will work with MedImmune, the biologics subsidiary of AstraZeneca, to optimize and develop antibodies that block the binding of amyloid-beta oligomer to cellular prion protein (PrP-C) in the brain. MedImmune has bought into Axerion’s program, in-licensed from Yale, in the hope that this approach could yield a disease-modifying therapy for one of the most challenging indications currently targeted in drug development. The Axerion partnership is AstraZeneca’s first since it announced plans during a quarterly earnings call Feb. 2 to streamline much of its R&D function, including going to a virtual model in neuroscience. At the time, R&D President Martin Mackay said the pharma’s goal was a “leaner, simpler, more innovative organization with a lower and more flexible cost base.” – Joseph Haas

Merck/Trevena: Pennsylvania-based Trevena announced May 2 that Merck & Co. will be the latest company to utilize its G-protein coupled receptor (GPCR) biased ligand platform. The company hopes to identify ligands that turn on only some biological responses, instead of a whole variety of biological responses, by using what it terms "biased ligands.” The company said that Merck, through a subsidiary, has signed on to use the technology to research biased ligands against an undisclosed receptor. Financial details of the transaction were not disclosed. Trevena, which raised a $35 million Series B round in 2010, has other research under way, including its mid-stage lead compound, a drug meant to treat acute heart failure called TRV120027. GPCRs are protein structures that wind across the cell wall, crossing the cell membrane seven times, and common drug targets. When a ligand binds to a GPCR's extracellular part, it triggers a response inside the cell. – LL

Gilead/AnaptysBio: On the heels of inking a partnership with Celgene in April, AnaptysBio has signed a fifth major pharma partner for its antibody discovery platform. This time, it is Gilead Sciences that wants access to AnaptysBio’s SHM-XEL platform for antibody discovery. The companies announced a partnership to develop novel antibody therapeutics May 1. Gilead will pay an undisclosed upfront fee and pay development milestones and royalties on sales of any drugs that emerge from the partnership. AnaptysBio’s technology platform uses the natural biological process by which antibodies are generated, somatic hypermutation (SHM); the company claims its technology can create antibodies with different antigen-binding regions and better binding affinities. Its other pharma partners include Merck, Roche and Novartis. – Jessica Merrill

Hologic/Gen-Probe: Women’s health-focused Hologic, a developer and supplier of diagnostics, imaging and surgical products, is buying molecular diagnostics provider Gen-Probe for $3.7 billion in cash, to be paid for largely by taking on debt. Adding Gen-Probe’s automated instrument platforms gives Hologic critical mass in the molecular diagnostics market. Hologic already owns a molecular diagnostics platform: the Invader technology it acquired when it bought Third Wave Technologies for $580 million in 2008. That gave Hologic an entrée into the molecular testing space, including its own HPV test – a broadening of Hologic’s core focus in women’s health, which includes mammography and, via its merger with Cytyc Corp. in 2007, cervical and breast cancer diagnostics. Gen-Probe gives the company the automation and menu to grow the diagnostics market more quickly – by implication, something that the Third Wave acquisition failed to do. A buyout of Gen-Probe has been in the air since April 2011, when the company reportedly retained Morgan Stanley seeking a buyer. What’s unclear is why Hologic made its move now. There’s speculation that the deal foreshadows a weakness in Hologic’s business. “Based on their forward-looking diligence [statements], that does not appear to be the case,” says Piper Jaffray analyst Bill Quirk. Clinical adoption of new Hologic’s tomosynthesis breast-imaging platform appears to be keeping pace with expectations. It brought on the Gen-Probe business as “one of the elements in building diagnostics so that it performs like [the] breast health [business], not so that it makes up for [it],” Hologic CEO Robert Cascella told investors. Post-acquisition, 50% of Hologic’s revenues will be in diagnostics, 38% in women’s imaging and 12% in surgical. – Mark Ratner

Royalty Pharma/Fumapharm – Royalty Pharma announced May 2 that it acquired an interest in the earn-outs payable to former shareholders of Fumapharm, which includes an interest in Biogen Idec’s multiple sclerosis candidate BG-12, for $761 million in cash. Based in New York, Royalty Pharma says it is the industry leader in acquiring royalty interests in approved and late-stage pharmaceuticals, including interests in Abbott’s Humira (adalimumab), Pfizer’s Lyrica (pregabalin) and Genentech’s Rituxan (rituximab). Biogen bought out Fumapharm in 2006 for $215.5 million and with it the German company’s lead product, psoriasis drug Fumaderm (fumaric acid esters) as well as BG-12. In April, Biogen announced positive data from the Phase III CONFIRM trial, its second pivotal study in relapsing-remitting MS. The compound was filed for approval in RRMS at FDA in February and with the European Medicines Agency in March. – JAH

Image courtesy of Wikimedia Commons

Financings of the Fortnight Says If It Floats Like A Duck...

2012-05-04T07:41:00.001-05:00

The biotech IPO trickle continues, with Supernus Pharmaceuticals debuting its shares May 1 and raising $50 million for its drug reformulation programs. It was a third less than the company had hoped for when it freshened up its nearly forgotten S-1 and decided last month to make a lunge for the window. It’s the seventh biopharma to debut this year – five in the US, two in France (France? Mais oui) – and folks are wondering if the opening will expand.

We would never suggest that one deal, especially one as delayed and discounted, should stand for larger trends without putting it in context. Supernus raised $49 million from private investors (with well over $100 million more raised through non-dilutive royalty deals) and a $50 million IPO. Its immediate post-IPO valuation of $120 million translates into a 1.4x step-up, about in line with the typical biopharma IPO in the post-crash era – starting in 2009, that is.

In the same time period, we found pre-IPO terms for 44 US and foreign biopharmas that eventually went public. They wanted on average to sell shares at $14.50 each (we’ve used the midpoint of initial proposed price ranges, and we’ve converted foreign currencies to dollars). Their actual average IPO price: $11.69, or a 20% discount. (Supernus: A 62% discount, from $13 to $5.)

We found the proposed number of shares to sell for 39 companies. On average they wanted to sell 6.7 million. They actually sold an average of 8.2 million, or 22% more shares than first expected. (Supernus: twice as many shares sold than expected, from 5 million to 10 million.)

In other words, with a big haircut and dilution, Supernus is a lot like its post-recession peers, but more so. There’s another resemblance: It had to sell a good chunk of its IPO shares to existing shareholders. Lead VCs New Enterprise Associates, Abingworth, and OrbiMed Advisors ponied up $33 million – a whopping two thirds of the issue. (With insiders like that, who needs outsiders?) We noted it a couple months ago: insider participation isn’t necessarily a bad omen for post-IPO stock performance. And VCs taking companies public these days know the extra outlay is likely, even necessary to get the deal done. As Clovis Oncology CEO Pat Mahaffy, who has now taken three biotechs public, said at a conference this week of Clovis’s late 2011 successful IPO, “It would have been hard to pull off without insider participation.” It’s now the new normal, says Mahaffy.

As of this writing Supernus is up $1.06 a few days past its debut, a 21% bump. Its backers, new and old, can only hope that over time it continues to resemble its 2012 peers in post-IPO performance. As a class, they’re up 15% post-IPO (as of the April 30 closing bell), and the class of 2011 is slightly better than that at 19%. For a lot more on IPO performance since 2009, look for START-UP Magazine’s next Valuation Watch. For the choicest biotech financing morsels, stick with…

Argos Therapeutics: Once a candidate for an IPO, Argos has turned to insiders for a $25 million Series D round to support Phase III trials on its treatment for metastatic renal cell carcinoma. It’s been an up-and-down year for Argos, which readied its story for retail investors last July but cancelled the offering in March, and instead returned to existing shareholders for cash. Like publicly traded Dendreon, Argos has a personalized cancer treatment in which tumor cells are modified and infused back into the patient to provoke a tumor-specific immune response. But Argos’ timing could hardly have been worse: Days after filing its prospectus, Dendreon shares lost almost two thirds of their value as questions about uptake, reimbursement and demand arose about Provenge (sipuleucel-T). With just $2 million in the bank at year’s end, Argos held hope for a $66 million listing until late winter before scuttling the offering eight weeks ago. “Public investors would like to put companies in boxes,” Argos CEO Jeff Abbey told our Pink Sheet colleagues. “It makes it hard to differentiate ourselves, although our technology is totally different.” Forbion Capital led the new round, and insiders TVM Capital, Lumira Capital, Intersouth Partners, Caisse de depot et placement du Quebec, Morningside Group and Aurora Funds contributed the balance, bringing Argos’ total funding to $114 million since 1997. With $75 million budgeted to spend through 2015, Argos will need more capital from a partnership, private round or IPO during the interim. -- Paul Bonanos

Telstar Pharma: Astellas Pharma has gotten into the asset-financing game with Telstar, a virtual company formed around an ulcerative colitis treatment spun out by Astellas. The compound, ASP3291, was actually outlicensed to Drais Pharmaceuticals, a New Jersey firm whose cofounders, Donna Tempel and Robert Desjardins, were US senior management at one of Astellas’ predecessors. Tempel and Desjardins went on to form AkaRx with backing from Astellas Venture Management, an investment that brought one of the most lucrative returns in recent biotech memory. Drais is paying an undisclosed upfront fee and royalties on future sales to Astellas for ASP3291. Astellas’ venture arm has contributed a minor stake, less than 20%, of Telstar’s $14 million initial financing round, and parent company Astellas has various rights to the compound: the right of first refusal for the Japanese market, the right of first exclusive negotiation for any future partnering for the compound, and non-exclusive negotiations for ex-Japan markets. By depositing ASP3291 in a corporate entity separate from Drais, it should prove a cleaner exit – and faster return – if the compound succeeds in an upcoming Phase IIa trial. Telstar’s lead investors, InterWest Partners and Sutter Hill Ventures, are also investors in Drais. Astellas said it was considering a similar deal with Drais for a compound in a different, undisclosed therapeutic area. -- Daniel Poppy

Castlight Health: In its second large venture funding in two years, health care shopping pioneer Castlight Health has raised a $100 million Series D round that it says it will use to grow its commercial team and add features to its product. Announced May 1, the round was led by T. Rowe Price, Redmile Group and two major unnamed mutual funds, as well as prior investors. Founded in 2008 as Ventana Health Services, Castlight is a Web-based service that enables customers’ employees to compare out-of-pocket costs for procedures such as colonoscopies, X-rays and MRIs. In 2010, the company raised a $60 million Series C, led by non-venture backers the Cleveland Clinic and Wellcome Trust, as well as VCs such as Venrock Associates, Oak Investment Partners and Maverick Capital. The D round more than doubles Castlight’s total cash raised to $181 million. Last year, Castlight announced a 250% increase in revenue over 2010. Chief marketing officer Peter Isaacson would not detail the company’s 2011 performance, but noted that its customer base and revenue are growing “very quickly,” with many new clients being Fortune 100-sized firms. With so many companies still offering employees health care coverage, one of Castlight’s biggest challenges is determining which potential customers to target, he added. -- Joseph Haas

Transcept Pharmaceuticals: Five months after the eye-opening FDA approval of its sleep aid Intermezzo (a reformulated zolpidem, a.k.a. generic Ambien) Transcept has sold 9 million shares at $4.50 a piece in a public offering to raise $37.6 million net of expenses, not including a possible overallotment sale. Many observers had written off Transcept after the FDA gave the company a second thumbs-down in mid-2011, nearly three years after the firm originally submitted its NDA to the feds for Intermezzo, which is designed to help people fall back asleep after waking in the middle of the night. Transcept is relying on sales by US marketing partner Purdue Pharma to bring in revenue, and the marketer launched the drug last month. Transcept has earned a $10 million fee from Purdue and can draw an additional $80 million, plus royalties. The company, which went public in early 2009 through a reverse merger with Novacea, will use the new proceeds to help develop TO-2061, a low-dose version of ondansetron for obsessive-compulsive disorder. The compound has been used for twenty years to combat the nausea and vomiting caused by chemotherapy, radiation and surgery. The 4.5 million shares offered increase the outstanding share pool by 32%, with 675,000 reserved for the underwriter over-allotment. -- Alex Lash

Photo courtesy of flickrer jamiejohndavies.

Deals of the Week Listens to The Rumor

2012-04-27T12:29:00.000-05:00

“Now when the rumor comes to your town, it grows and grows. Where it started, no one knows. Some of your neighbors will invite it right in. Or maybe it’s a lie; even if it’s a sin, they’ll repeat the rumor again.”

Who’s Bayer going to buy? If you believe the Reuters story that crossed the wire Wednesday, three unnamed sources seem confident that the German company is about to spend billions of euros on a healthcare company, possibly within the next few days. And while Reuters’ sources didn’t name any names, some investors seem to think they’ve divined the answer -- or answers.

First, shares in Onyx Pharmaceuticals gained value abruptly after Reuters’ story was published, indicating that many believe the longtime Bayer partner and sometime legal adversary would be a fine fit. It’s certainly in the right price range: At the close of Thursday’s trading, Onyx’s market cap sat just above $3 billion, up about 8 percent since the story appeared. Judging by other recent premiums, Bayer would likely have to bid closer to $5 billion to buy Onyx outright.

And then on Friday, The Times (UK) reported that it was Warner Chilcott that would be on the receiving end of a Bayer bid. With a market cap juiced to $4.7 billion on the rumor, the derm and women’s health specialist also fits within the reported deal size range. Most of the company’s heft comes from its $3.1 billion 2009 buyout of Procter & Gamble’s pharmaceuticals business, which tripled its size and added to the portfolio some nearly off-patent assets, like Actonel and Asacol. The success of that transformative deal is debatable, particularly since Actonel successor Atelvia has had difficulty capturing significant share of the genericized osteoporosis market. As Warner Chilcott's price spiked following publication of the Times story, Onyx shares lagged, losing about 2% of their value in early Friday trading.

Bayer and Onyx already have a deep history together. The companies forged a discovery partnership in 1994 that led to the development of renal and liver cancer treatment Nexavar (sorafenib), now a $1 billion drug. As mutually satisfying as the arrangement might have been, Bayer raised Onyx’s ire by developing a slightly modified version, regorafenib, that’s currently in Phase III. Onyx filed a lawsuit in 2009, accusing Bayer of developing the molecule in secret and violating an agreement to share research related to Nexavar. The companies settled last fall as Onyx dropped the suit, instead taking 20% of regorafenib sales and signing away rights to the drug in Japan for $160 million up-front in a revised co-promote agreement with Bayer.

Much of Onyx’s future value is tied to carfilzomib, a Phase III proteasome inhibitor being studied in relapsed and refractory multiple myeloma. The drug is under standard review from the FDA; Onyx said Thursday that the agency’s Oncology Drugs Advisory Committee will review the drug on June 20, prior to its PDUFA date of July 27.

Multiple bidders could also be lining up for Onyx. The company was said to be exploring a sale last fall, according to a Bloomberg report. (Again, the sources were unnamed. “Could there be someone, someone here among this crowd…?”) Bayer waived change-of-control provisions connected with Nexavar as part of the companies’ settlement, making Onyx a more valuable target. Now, it’s in the driver’s seat: If Bayer wants to regain full control of the sorafenib/regorafenib franchise as well as carfilzomib’s future potential, it will have to pay top dollar for its longtime partner.

For whether this rumor proves true or false, Deals of the Week will be celebrating the life of The Band’s late drummer, singer, mandolinist and spiritual anchor, Levon Helm. Take a load off, Levon, we’ll miss you. We hope that we’re writing about cancer treatments that could save people like you. And so, with that in mind, here’s…

AstraZeneca/Ardea and AstraZeneca/The Medicines Co.: It was an eventful week for AstraZeneca, whose two deals were overshadowed by the abrupt departure of chief executive David Brennan on April 26. As the company reported an 11% year-over-year decline in revenues in the first quarter of 2011, Brennan retired -- or, perhaps, was forced to resign. And although AZ has been cutting costs, it's still willing to spend: the company will pay $1.26 billion, or $1 billion net of cash, for gout treatment developer Ardea Biosciences. The British pharma said April 23 it would pay $32 per share for Ardea, representing a 54% premium over the previous session's closing price. The deal gives it Phase III candidate lesurinad, which is thought to harbor potential to improve on both Takeda's Uloric (febuxostat) and the generic drug allopurinol. Even on its tumultuous Thursday, AZ revealed yet another partnership: The company has a new four-year agreement with The Medicines Co. to co-promote coronary drug Brilinta (ticagrelor) in the U.S. TMC will market the drug to interventional coronary specialists, while AZ will continue selling it to hospitals. The arrangement will net $15 million annually for TMC. – Joe Haas and Paul Bonanos

Watson/Actavis - Watson Pharmaceuticals Inc. will become one of the world’s largest generics companies with its roughly $5.6 billion acquisition of Actavis Inc. The deal, announced late on April 25, gives Watson a broad international presence in a fragmented sector of the pharma industry that is gradually consolidating as market share and global operations become critical to success. Once it closes in the fourth quarter, 40% of the combined company’s revenues will come from outside of the U.S. – up from 16% currently. The companies have minimal geographic overlap, with both present only in six markets, including the U.S., UK, Australia, France, the Nordic countries, and China. As a result of this diversification, Watson will be one of the leading generics suppliers in the UK, where Actavis already is second in the market, with 13% share of the generics market. It also strengthens Watson’s foothold in the Middle East, Northern Africa and the Asia/Pacific, which generate 5% of Actavis current sales of $2.5 billion. Watson will be financing most of the transaction with a combination of different kinds of debt, in the process raising its debt load to $6.8 billion, up from the current $1.1 billion. Wall Street greeted the deal, which has been rumored for weeks, enthusiastically. Not least in their calculations has been the obviously heavy involvement of Watson’s EVP, global generics, Siggi Olafsson, who was previously CEO at Actavis. His insight into the privately held Actavis, which is backed by Deutsche Bank AG after the billionaire owner Bjorgolfur Thor Bjorgolfsson lost money in the financial crisis, likely helped with due diligence. – Lisa LaMotta

Pfizer/Nestlé: Pfizer’s price of $11.85 billion for selling its pediatric nutritionals business to Nestlé came in at the upper end of what most analysts expected, reflecting the fierce competition among global infant formula players for opportunities in emerging markets. Nestlé managed to keep Pfizer Nutrition out of the hands of its competitors with a deal announced April 23. Morningstar analysts projected a price tag in the $9 billion to $10 billion range and suggested Nestlé went high with its offer to fend off rival bidders Danone and Mead Johnson Nutrition. The sale is the second major divestiture for Pfizer since Ian Read assumed leadership of the New York-based drug company in December 2010 and, responding to investor discontent, vowed to remake the company. After a strategic review, Pfizer in July 2011 announced plans to shed its nutrition and animal health units, to devote more resources to biopharmaceuticals. The company also raised its dividend and vowed to be more proactive in buying back shares. These moves leave Pfizer more vulnerable to the high-risk high-reward nature of biopharma drug development. Still, in an era where Big Pharma divestitures and spinouts are greeted warmly on Wall Street, investors have met them with largely positive reactions, in some cases calling for a complete break up of the company to unlock its stagnant value. Even now, Pfizer could go further, argues Goldman Sachs analyst Jami Rubin, who wrote that Read said in a recent meeting that he would be open to more divestitures under the right circumstances. Presumably he would think about Pfizer’s relatively small generics business as one potential candidate. Pfizer likely will use the proceeds from Nestle to buy back stock – potentially 373 million shares, UBS analysts estimate. The repurchase could increase Pfizer’s 2013 earnings-per-share growth by three percentage points, the Morningstar analysts added. – Dan Schiff and Wendy Diller

Celgene/Epizyme: In a deal announced April 26 (pdf), Celgene has taken a three-year option for Epizyme's unpartnered pipeline of histone methyltransferase targets, granting Epizyme U.S. rights to any programs it selects while splitting development costs post-IND. Celgene can extend the option to a fourth year for an additional fee. The deal includes a $90 million upfront payment, of which part is a minority equity investment, plus more than $160 million in ex-U.S. milestones on any program Celgene selects, as well as double-digit tiered royalties on ex-U.S. sales. Celgene also purchased rights to Epizyme's lead program focused on DOT1L, an oncogenic HMT whose aberrant recruitment drives mixed lineage leukemia, a particularly lethal subtype of acute leukemias affecting as many as 5,000 patients annually in major markets. Celgene also has the right to appoint a voting member to Epizyme's board. It's the latest close collaboration between Celgene and a high science company, and caps a hectic 15 months of dealmaking for Cambridge, Mass.-based Epizyme that has included deals with GlaxoSmithKline and Eisai as well. It's also a sign of maturity in the epigenetics sector, as money and interest move away from the problematic histone deacetylase inhibitor drug class and toward HMTs, which are more biologically selective. HMTs also have applications in immune-inflammatory conditions, a primary therapeutic focus for Celgene. – Michael Goodman

Amgen/Mustafa Nevzat: On April 25, Amgen continued its push into emerging markets by spending $700 million for Turkish pharma and generics supplier Mustafa Nevzat Pharmaceuticals. Amgen acquired 95.6% of Mustafa Nevzat shares in the all-cash deal, giving it control of a company that had about $200 million in 2011 revenues. The California biotech already had established a Turkish affiliate in 2010. It currently markets two products there, and had stated a goal of selling more drugs from its pipeline in Turkey. Mustafa Nevzat was said to be entertaining proposals from multiple suitors over the past few months, although prior reports suggested that it was mulling the sale of a minority stake rather than a complete takeover. Though the deal is a rich one for Mustafa Nevzat, the price will have a relatively small impact on Amgen's balance sheet; the company had $19.4 million in cash and equivalents as of March 31. Amgen's sales in emerging markets were $250 million in 2010, and the company said it wants to reach $1 billion by 2015. – P.B.

Merck Says Goodbye to Independent Biosimilars Unit

2012-04-26T16:46:00.001-05:00

Merck BioVentures, the biosimilars endeavor set up by Merck & Co. in late 2008, is being subsumed into the biologics and vaccines division of Merck Research Laboratories. Mike Kamarck, who has led BioVentures since 2010, has left the company.

Merck tells In Vivo blog it has "established internal capabilities and external collaborations that create a strong foundation for future progress in the evolving biosimilars sector. As our pipeline of biosimilars and novel biologics continues to progress, we decided to combine development and align under one leader to facilitate decision making and prioritization of resources across the portfolio." That leader is Rich Murray, who is Merck's SVP biologics and vaccines research.

Kamarck's departure is either a blow for the company's biosimilar ambitions or a reflection of reduced expectations and investment for the business. Kamarck has been for the past few years probably the most visible Big Pharma executive on the biosimilars front, and Merck has been -- at least among large, brand-focused pharma companies -- the most bullish on biosimilars' regulatory and commercial prospects.

There have been several bumps in the road. The company's first big biosimilar hopeful was a version of Amgen's Aranesp. That project was discontinued in early 2010. The company also had big plans for its biosimilar version of Enbrel, which it licensed in Phase III from Korea's Hanwha in June 2011. Only a few months later Amgen laid waste to those plans, announcing a 'stealth patent' that could keep Enbrel biosimilars off the market for another 15 years.

Biosimilars may indeed be a new kind of innovation, one that brand-focused biologics companies would be foolish to discount and one they seem to be tripping over themselves to embrace (see Amgen/Watson, Baxter/Momenta, Biogen/Samsung).

Merck's move to reduce its BioVentures group at least in stature seems a step in the other direction and at odds with the bullish attitude of the newly converted and groups like Novartis' Sandoz unit, which just this week predicted incredible growth for its own biosimilars business. That said, it’s hard to say whether this retrenchment will be part of the long-term learning process or bigger strategic shift, as the whole field is in the midst of an evolution and successful business models have yet to fully materialize.

Deals of the Week Looks At Illumina’s Roche Rebuff: There Will Be Time To Revisit This Deal

2012-04-20T11:30:00.000-05:00

With the news this week that shareholders of Illumina had rebuffed Roche’s efforts to expand and stack its board of directors, the latter withdrew its hostile tender offer for the company.

No surprises there. Illumina’s management has been stalwart in its belief in the company’s positioning and prospects for rebounding from the dent in its earnings resulting from the global economic slowdown and cutbacks in government spending for its genome sequencing equipment. That view is obviously shared by the institutions that own its stock, who were unmoved by Roche’s most-recent $51 per share ($6.8 billion) offer. Roche, for its part, tried to use Illumina’s market-weakened position to highlight the risks of the business. As we wrote in IN VIVO in February, its interest in Illumina is strategic, but also opportunistic.

At one point during the parties’ back-and-forth letter writing to shareholders, Illumina alluded to its being called “the Apple of the genomics business.” But while Apple’s products appeal to a “seemingly endless consumer base,” Roche replied, Illumina’s sequencing tools serve a much smaller and highly regulated market. “Not even Illumina has projected any surge in revenues from its products in any specific foreseeable time period,” it said. “As a standalone company, Illumina’s future is far from certain… Roche has the infrastructure, expertise, sales force, and market share required to successfully bring Illumina’s products to the broader Life Science and Diagnostics market and the combined capabilities of our two companies will accelerate the transition of Sequencing into clinical and routine diagnostics.” Fair points.

As we’ve written, the how and when of applying sequencing to clinical diagnostics is debatable, especially when trying to show that complex patterns of genetic differences – the kind that rapid and inexpensive whole genome sequencing can uncover – can help guide therapy decisions (see here and here). But there’s no debating the research interest, nor that Illumina is the market leader and a continuing innovator in the field. And while competitors are selling and developing small, fast next-generation sequencing instrumentation for smaller sequence read lengths, including Roche through its own 454 Life Sciences unit, it’s fair to think that large research and clinical labs will continue to invest in the workhorse machines Illumina has placed so successfully, especially as the costs of whole genome sequencing continue to fall.

Roche has called its $51 per share offer a starting point for negotiations, suggesting it would go higher once it has access to Illumina’s internal documents. Illumina has resisted, presumably because it does not think Roche would pay what it would want as fair value – and that it will be in a much stronger negotiating position down the road.

That’s called being a true believer. We think Roche is, too – in both the technology and in Illumina itself. However the next year or so shakes out, Illumina should remain a good fit for Roche, to round out its genomics offerings and provide a channel for them to the clinical community. The question is only at what price. (The discussion could also revert to some form of equity investment plus collaboration, which is what Illumina thought Roche’s intention was when it first came calling last November.) The tender offer is set to go away at 6 pm tonight, but the two are still negotiating. – Mark Ratner

As one hostile saga wraps, another unfolds. Read all about it in this week's edition of ...

Adimab/Gilead and Adimab/unnamed partner: Antibody specialist Adimab has built a business on drug discovery partnerships over the past three years, while avoiding drug development of its own. Numerous pharmas have struck discovery deals in which Adimab uses its yeast engineering platform to identify antibodies against specific targets, allowing Adimab to build a cash-flow-positive business without taking on any development risk. This week, the venture-backed company struck two new deals, although it released fairly few details about either. First, Adimab will discover antibodies against two targets selected by Gilead Sciences in exchange for an undisclosed up-front fee plus preclinical and development milestones and royalties, if either is commercialized. The companies did not identify a therapeutic area, nor did they release any further financial details. For its other deal, Adimab didn’t even name the partner, only saying that it will discover bi-specific antibodies against two distinct targets selected by the partner, which can commercialize one or more in exchange for technical milestone payments, licensing fees, clinical development payments and royalties. The arrangements with Gilead and the other stealthy partner join a long list of Adimab deals, including agreements with Merck, Roche, Novo Nordisk, Biogen Idec, Lilly, Genentech and Pfizer. Adimab’s backers include SV Life Sciences, Polaris Venture Partners, Google Ventures, OrbiMed Advisors and Borealis Ventures. – Paul Bonanos

GlaxoSmithKline/Human Genome Sciences: It's not quite a deal yet, but it looks like there might be a silver lining for GlaxoSmithKline from the weak sales of Benlysta (belimumab) for lupus. The big pharma now has the chance to buy its Benlysta commercial partner, Human Genome Sciences, and gain full ownership over Benlysta and two other drugs the two have in development. GSK disclosed an unsolicited bid for HGS April 19, offering $13-per-share, or roughly $2.6 billion. HGS’ board of directors promptly rejected the unsolicited bid, saying it does not reflect the inherent value of the company, and hired the investment banks Goldman Sachs & Co. and Credit Suisse Securities to explore strategic alternatives for the firm. The $13-per-share cash offer represents an 81% premium over the company’s closing share price of $7.17 April 18. It also represents a 66% premium over the 30-day trading average closing price of $7.83 and a 58% premium over the ninety-day trading average, according to GSK. Nonetheless, while HGS investors may be relieved to see an offer on the table that represents immediate and certain value, $13-per share is a far cry from where the stock was trading a year ago. Last April, the stock was trading close to $29, riding high on the FDA approval of Benlysta for systemic lupus erythematosus March 2011. But it’s not likely a white knight is going to step forward. GSK splits rights to Benlysta with HGS, and owns rights to two other pipeline assets: albiglutide, a once-weekly injectable GLP-1 agonist for type 2 diabetes, and daraplatib, an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2) in development for cardiovascular disease. That’s likely to deter a competing bidder and limit HGS’ negotiating power. The history between HGS and GSK is long, dating back to the SmithKline Beecham days. SmithKline Beecham partnered on with HGS in 1993 on rights to a gene sequencing technology. The companies expanded on that original alliance several times over. In 2006, GSK paid HGS $24 million for rights to belimumab. --Jessica Merrill

Cell Therapeutics/S*BIO: With an EU regulatory approval potentially on the horizon for Pixuvri (pixantrone) and Phase III trials ongoing for that drug as well as tosedostat, Cell Therapeutics might appear to have more than enough activity at the moment. But on April 19, it paid $30 million upfront to S*BIO Pte. Ltd. for global rights to JAK2 inhibitor pacritinib, giving the Seattle-based biotech three Phase III candidates in blood cancer. CTI will pay S*BIO $15 million in cash and issue $15 million in unregistered preferred stock convertible to common stock – giving the Singapore firm nearly a 5% interest in its partner – and could pay milestones up to $132 million and single-digit sales royalties in exchange for the Phase III-ready myelofibrosis (MF) candidate. S*BIO could realize approval milestones based on regulatory outcomes in the U.S., Europe and Asia, along with sales milestones pegged to reaching amounts such as $200 million, $400 million and $500 million in a calendar year. CTI is not the first company to partner with S*BIO on pacritinib. In 2009, Onyx Pharmaceuticals paid $25 million upfront to acquire an option to the compound, then known as SB1518, as well as another preclinical JAK2 inhibitor, SB1578. With the potential for up to $525 million in milestones, it was among the most lucrative biotech deals seen in Asia to that point. However, in 2011, Onyx declined its option on both compounds, returning all rights to S*BIO. CTI believes pacritinib, as a selective JAK inhibitor, should have a better safety profile than the only FDA-approved drug for myelofibrosis, Incyte Corp.’s Jakafi (ruxolitinib), a JAK1/JAK2 inhibitor launched in late 2011.—Joseph Haas

Eli Lilly/Vanda: In its first in-licensing transaction since 2004, Vanda Pharmaceuticals has acquired development and commercialization rights to a Phase I-ready neurokinin 1 receptor (NK-1R) antagonist from Eli Lilly & Co. for an upfront payment of $1 million and up to $99 million in milestones. The 2004 deal with Novartis gave Vanda worldwide rights to iloperidone, which FDA approved for schizophrenia in 2009; it is now on the market as Fanapt, though sales have been weak. Vanda, focused on central nervous system therapies, has only one other clinical candidate in its pipeline, tasimelteon (VEC-162), in Phase III study for circadian rhythm sleep disorders. In its deal with Lilly, announced April 16, Vanda acquires VLY-686, an NK-1R antagonist that demonstrated proof-of-concept for controlling alcohol dependence in an NIH study. The company said it will complete technology transfer related to ‘686 this year and examine the oral compound’s clinical profile, to determine potential indications for an early-development clinical program. In addition to the upfront fee, Lilly could earn up to low double-digit royalties on sales, up to $4 million in pre-NDA milestones and up to $95 million in regulatory and sales milestones under the deal.—JH

GSK/Aspen: GSK wraps up its final bulk OTC portfolio divestiture, selling 19 international brands to Aspen Pharmacare Holdings Ltd., leaving only the troubled weight-loss drug alli as GSK’s last non-core brand. For £164 million in cash ($263 million under the April 20 exchange rate), Durban, South Africa-based Aspen gets the rights to Dequadin sore throat lozenges, Phillips Milk of Magnesia, Solpadeine analgesics and Zantac antacids, among others, outside the U.S., Canada and Europe. Glaxo said April 20 the non-core OTCs divested to Aspen generated about $95 million in 2011 sales, or a little over 1% of GlaxoSmithKline Consumer Healthcare’s total business of $8.20 billion. GSK declined to provide a full list of the brands included in the Aspen deal. Aspen, Africa’s largest drug maker with a $145 million consumer products business, split the GSK transaction in two: its South African subsidiary acquired the products sold in Africa for about $32 million, while Aspen Global Inc. acquired the rest-of-the-world brands for about $231 million. Aspen CEO Stephen Saad praised the OTCs’ established brand equity and said they “will also provide impetus in territories where Aspen is seeking to grow critical mass, such as Latin America and Southeast Asia.”Full coverage of the deal is in "The Tan Sheet". -- Dan Schiff

Sanofi/Michael J. Fox Foundation: Sanofi has tapped the Michael J. Fox Foundation to run a Phase Ib clinical trial of a potential treatment for cognitive deficits in Parkinson’s disease. MJFF VP if Research Programs, Mark Frasier, said the situation was a unique one. “Sanofi approached us about this molecule that, for internal business reasons, they were not pursuing, but that they thought may have promise for Parkinson’s disease patients,” he added. MJFF will be responsible for costs associated with the trial, but Sanofi will provide the drug at no cost to the foundation, clinicians, or patients. The trial is expected to launch in the latter half of 2012 and data will likely be available in early 2013. MJFF will have all rights to the data and will be able to disseminate that information as they see fit. Sanofi will retain the intellectual property surrounding the molecule and will have the first right of refusal in further development of the compound, based on results of the study. Cognitive deficits like a shortened attention span, trouble multi-tasking, and problems with planning affect 60% to 80% of Parkinson’s disease patients. There are currently no treatments available to help patients with these symptoms. - Lisa LaMotta

Crucell/Royal DSM: Vaccine-maker Crucell N.V. and Netherlands-based Royal DSM have chosen to abandon biosimilar development through their joint venture, Percivia LLC. A spokesman for DSM tells us that "the Shareholders and Board of Managers decided on the restructuring following the lack of agreement on further joint investment in the Company." Crucell is part of Johnson & Johnson, and others have speculated that J&J was simply not interested in financing the JV, which was launched in 2006 and headquartered in Cambridge, Mass. The initial focus of Percivia was to combine DSM’s manufacturing technology with Crucell's PER.C6 cell line for the production of proteins and antibodies within the protein therapeutic and diagnostic field, but the company changed direction in early 2011 to pursue a PER.C6 technology-based biosimilars product development strategy for emerging markets. According to Crucell, all biosimilar work will be terminated. According to a report in BioSpace, thirty employees of Percivia have already been let go and another 10 will remain for the next 30 to 90 days while operations are wound down. Percivia will remain a legal entity for the purposes of continuing the existing PER.C6 technology licensing business, says DSM. –LL

Financings of the Fortnight Examines The Peter Thiel Principle

2012-04-20T07:00:00.000-05:00

Iconoclastic investor Peter Thiel has famously offered smart young people money not to go to college. (See video above.) Now his personal foundation, through a venture called Breakout Labs, wants to play a role usually left to the Federal government: providing seed money to life science companies too young to attract venture capital.

Foundations, charities, and angel investors have also picked up some of the slack to boost what some VCs refer to as “science projects,” but these days, if it doesn’t quack like a product, the duck isn’t likely to come down and give you $50 (or $500,000).

So into the breach, again, steps Thiel, the billionaire founder of online payments company PayPal and one of the first backers of Facebook. He later co-founded Founders Fund, a venture firm dedicated to backing only entrepreneurs with audacious goals. In February's START-UP we profiled the firm as it moves more aggressively into the life sciences and health care. Beyond social networking and digital media, Founders Fund is now aiming to cure diseases, use data to change the way medical care is understood, and take advantage of mobile and analytical technologies to solve what its partners see as enormous human problems, rather than just improve drugs or treatments incrementally.

Some of those audacious goals are also part of the Breakout Labs modus operandi, or so they say. Unveiled in the fall of 2011, Breakout is a revolving fund, not unlike an evergreen venture fund. Operated by the Thiel Foundation and seeded initially with $5 million, the philanthropic program accepts royalties and warrants for equity in the start-ups it supports, typically taking an option for a 1% stake in each start-up. Breakout will then funnel those returns back into itself to seed more companies, with grants between $50,000 and $350,000 apiece issued on a rolling basis.

Its first six grants are ticketed for six companies which have what the Labs calls “radical ideas” in the life sciences. (Some of Thiel’s stated personal aspirations are a bit radical, too – living forever, say, or colonizing the ocean on stateless floating platforms.) Although Breakout says it prefers ideas developed outside of traditional academic settings, science director Hemai Parthasarathy notes that some have connections to academia: 3Scan, which aims to map the connections within the brain in a three-dimensional digital reconstruction, is based on technology developed at Texas A&M, and Longevity Biotech, a developer of artificial proteins that it hopes to use in orally available versions of biotech drugs, uses technology spun out of the University of Wisconsin.

The other programs funded, which Parthasarathy says include a few garage-level projects recently incorporated as LLCs, have auspicious implications, if not necessarily truly radical science. Arigos Biomedical would preserve organs in a cooled storage bank over a long period of time for future transplants, using cryonics techniques Parthasarathy acknowledges do not have a “high academic consensus” of approval behind them. Immusoft is developing a novel way to turn immune cells into therapeutic compounds within the body, applying technology discovered in Nobel laureate and CalTech professor David Baltimore’s lab to re-engineer B-cells and infuse them back into a patient’s body. Inspirotec is creating hand-held devices that capture airborne toxins, potentially affecting both epidemiology and bioterrorism, while Positron Dynamics is conducting particle science with implications that include medical imaging. All are in the early stages of research and development, so it'll be many years before anyone knows how dramatic an impact their projects might have.

Founders Fund has been able to shake up the status quo on the tech side, but life sciences and health care -- areas with bedeviling development timelines, complex regulations, and hugely entrenched status-quo interests -- will be an interesting test of the firm's, and of Breakout Labs', outsized ambitions. Until then, look to Thiel, both through his foundation and through Founders Fund, to be an important source of capital in this corner of the world.

Whether radical, incremental, or somewhere in between, any new source of early-stage biomedical funding these days is newsworthy. You bet your life you’ll read about it in…

Alcresta: The founders of Alnara Pharmaceuticals, Alexey Margolin and Robert Gallotto, have teamed up with their former investors to launch two new companies based on their enzyme stability expertise. Alcresta is the latest, with a $10 million Series A round unveiled April 17. Third Rock Ventures, Frazier Healthcare Ventures, and Bessemer Venture Partners are the same investment group that backed Alcresta’s sister company, Allena Pharmaceuticals, with a $15 million Series A announced in November. “Sister company” isn’t quite the right phrase. Alcresta and Allena are more like Siamese twins: The two companies will be run by the same staff of eight people while producing completely different products. Alcresta is developing a nutritional supplement with omega-3 and omega-6 fatty acids that are more easily digested and absorbable. The fatty acids are an important part of cardiovascular and brain health, and most nutritional drinks and infant formula include the triglyceride form of the two acids, but certain patients – including premature infants, some elderly, and cancer patients – lack the proper enzymes to digest the nutrients in the triglyceride form. That’s where the Alcresta supplement would come in. The product would be used at point of care, including hospitals and in the home, and will join one of the fastest growing segments of the nutrional supplement market. The company expects to launch a product sometime next year and is already in talks with potential acquirers, Frazier partner Jamie Topper told our “Pink Sheet” colleagues. Meanwhile, Allena, which raised $15 million in Series A financing in November from the same investment group, will develop drug therapies with oral protein therapeutics aimed at treating nephrologic and urologic conditions. The founders expect the two companies to diverge at some point, but see the dynamic business model as a means of keeping costs down while products are in early development and can capitalize on the shared resources. -- Lisa LaMotta

Alder Biopharmaceuticals: Already richly funded by private investors and a lucrative partnership, antibody developer Alder has tapped into a new $38 million Series D round of funding, led by Novo Ventures. Since its previous venture round, a $40 million Series C in 2007, the eight-year-old start-up has received an additional $100 million in non-dilutive capital from a partnership with Bristol-Myers Squibb. BMS licensed Alder’s ALD518, a Phase II antibody that binds to interleukin-6, in autoimmune indications for $85 million up-front in 2009, then issued a $15 million milestone payment at the beginning of a Phase IIb study in rheumatoid arthritis in June 2011. While the licensing deal enriched Alder’s coffers, the company will need more cash to support several initiatives. For one, Alder still retains rights to ALD518 in cancer and is conducting a pair of Phase II trials in oral mucositis and acute graft-versus-host disease. The company had previously investigated the drug’s efficacy in combating cancer-related fatigue, cachexia and anemia, but Alder CEO Randall Schatzman said the regulatory path for those indications would be long and costly, and Alder has halted those programs for now. The D round brings Alder’s total private funding to $105 million. Prior investors Delphi Ventures, TPG Biotech, H.I.G. BioVentures, Sevin Rosen, Ventures West, and WRF Capital all followed on in the new round, but Novo’s participation was a factor in raising more private money instead of attempting an IPO. Novo is an evergreen fund backed solely by the Novo Nordisk Foundation, which often affords it more patience with its portfolio companies. Besides, said, Schatzman, “The public market is still a rocky place to play, with lots of down rounds in the public sphere. Early stage companies haven’t been trading well, so liquidity to investors has not been that great.” -- Paul Bonanos

H.I.G. Capital: One of Alder’s early backers, the investment firm H.I.G. Capital, announced the closing of its second life-sciences fund, H.I.G. BioVentures II, with $268 million committed. The firm says the fund, originally targeting $250 million target, was oversubscribed, and more than half the limited partners were not investors in the first BioVentures fund. Managing director Aaron Davidson told “The Pink Sheet” that the new fund will seek out companies with lead products that can be developed with $40 to $60 million. That ceiling likely precludes very early-stage technology or capital-intensive indications such as Alzheimer’s disease, although Davidson noted that breakthroughs can change the calculus within a specific field rather quickly. He cited the recent FDA approval of Eli Lilly’s Amyvid (florbetapir) imaging agent, which helps doctors and researchers map amyloid beta deposits in the brain and could help re-shape the risk of Alzheimer’s R&D. Notable investments from the first fund include Salmedix and Gemin X Pharmaceuticals, both of which were acquired by Cephalon, now part of Teva Pharmaceutical Industries; OncoGenex Pharmaceuticals, which went public in reverse merger with Sonus Pharmaceuticals; Novadaq Technologies, a Canadian device company that went public in 2005, and Tranzyme, a drug firm that went public in 2011. -- Michael Goodman

Supernus Pharmaceuticals: More than a year after first filing to go public, Supernus has dusted off its S-1 and decided to have another go at the public markets. A revised prospectus filed April 11 aims the company for an IPO of about $75 million, not including extra shares allotted to underwriters. It wants to sell 5.77 million shares in the range of $12 to $14 per share. The firm is based on formulation technology spun out of Shire in late 2005 and into the hands of a venture syndicate led by New Enterprise Associates (NEA). Its lead compounds are extended-release anti-epileptic drugs, reformulated with the Shire technology. SPN-538 (extended-release topiramate) is under review at FDA and has a PDUFA date in July. Epliga (extended-release oxcarbazepine) is also under review with a PDUFA date in October. Not only has Supernus built a pipeline from the Shire formulation technology, it has stretched its venture dollars by turning royalties attached to the technology into bulk cash payments. The technology has been used in several marketed products. The royalties for Sanctura XR (trospium chloride) and Oracea (doxycycline) were used to secure $75 million in debt raised in 2008. For Intuniv (guanfacine), an important product in Shire's portfolio, Supernus accepted in 2009 a one-time payment of $37 million to waive future royalty rights, as our START-UP colleagues explained when Supernus first filed to go public more than a year ago. Heading into the IPO, NEA holds 45% of Supernus, followed by OrbiMed Advisors (18%), Abingworth (18%), and Shire (7%). CEO and founder Jack Khattar, a former Shire executive who founded Supernus, owns 11% of the company. The latest filing notes that certain large shareholders could buy shares at the IPO, but it did not indicate which ones or how much they might buy. -- Alex Lash

- Paul Bonanos wrote this week's introduction on Breakout Labs.

Provigil Generics Saga Is Certainly Stimulating

2012-04-16T14:50:00.000-05:00

And we thought the launch of Lipitor generics involved some complicated issues…

When Teva Pharmaceutical Co. Ltd. announced on March 30 the launch of an authorized generic of its Cephalon subsidiary’s wakefulness drug Provigil (modafinil), we were surprised.

We, like most of the free world, believed that modafinil generics would not be primed to enter the U.S. market until April 6 – the entry date that several companies (including Teva USA, Mylan Pharmaceuticals, and Ranbaxy Laboratories) had agreed to under years-ago patent settlements with Cephalon. Plus, we knew Par Pharmaceutical would be a player as well, thanks to the Federal Trade Commission’s requirement that Teva supply Par with generic modafinil tablets for at least one year, with market entry no later than April 6.

Teva Ltd.’s authorized generic announcement seemed to be an attempt to capitalize on its new ownership of Cephalon, giving it a one-week jump on other modafinil generics. We figured that the other ANDA filers, who were expected to share in 180-day marketing exclusivity, were probably none too pleased with Teva’s move. Probably neither was the FTC, which already had concerns about Teva/Cephalon having too much control over the modafinil marketplace.

But our surprise then was nothing compared to the reaction when we heard that Teva USA alone had been awarded 180-day marketing exclusivity on modafinil.

Huh?

FDA’s determination that Teva, as the first ANDA filer to certify against each of two Cephalon patents, was the sole holder of 180-day rights left us befuddled. Others, apparently, were just mad.

Case in point: Mylan – which promptly sued FDA challenging the exclusivity decision.

Also hopping mad was FTC. In an amicus brief filed in Mylan’s lawsuit, FTC said that had it known at the time Teva Ltd. bought Cephalon last year that Teva USA would have sole exclusivity rights for modafinil, it would have sought stronger remedies beyond merely requiring the generic manufacturer to enter into a supply agreement with Par.

FTC was quick to say that it takes no position on FDA’s interpretation and application of the Hatch-Waxman Amendments and governing regulations. Nevertheless, FTC’s assertion that FDA’s exclusivity decision “eviscerates the competitive incentives” in Hatch-Waxman is a pretty clear indication of what the commission thinks about its sister agency’s decision.

We’re looking forward to some interesting oral arguments Wednesday in a D.C. federal court on Mylan’s request for a preliminary injunction. In the interim, however, we’ve been mulling the whole Provigil mess and have come up with more questions than answers (that is, after all, what we do best).

So, lump these into the category of “Things We’d Like To Know”:

1. When did Teva USA realize it was the first to file on both Cephalon patents?

In a filing in its own lawsuit against FDA (subsequently dismissed), Teva USA said it was unaware that it was the first filer against both patents “until recently, after Teva Limited acquired Cephalon and corporate affiliates Teva USA and Cephalon were able to share the relevant regulatory information.” So, then, does that mean this interesting little factoid didn’t come out during the due diligence process before the acquisition was completed? We would have thought it would, given the commercial importance of Provigil, a billion dollar product, to Cephalon.

Or was it, in fact, knowledge that was out there but not seized upon without the help of some clever Hatch-Waxman lawyering? After all, Teva USA already had to have known it filed on the first day possible against both patents. Did that not at least raise the possibility that maybe Mylan and Ranbaxy (who were in on the first day against the first patent) didn’t file immediately on the second patent?

The details about the timing of the Paragraph IV certification filings leads us to our next question…

2. What Did FTC Know And What Did It Think?

In announcing a proposed consent order clearing Teva Ltd.’s acquisition of Cephalon on Oct. 7, 2011, FTC said that Teva USA, Ranbaxy, Mylan and Barr Laboratories (bought by Teva in 2008) all filed ANDAs on the first day possible, “making them all eligible for the 180-day marketing exclusivity period under the Hatch-Waxman Act.”

(FTC’s documents about the consent order did not reference Watson Pharmaceuticals, which some analysts also expected to launch April 6 with a share of 180-day exclusivity because of its certification against Cephalon’s second patent on the day it was listed. The commission and Watson previously had tussled over requiring CEO Paul Bisaro to testify under subpoena about whether Watson’s settlement agreement with Cephalon restricted the former’s ability to relinquish any marketing exclusivity rights it may have with regard to modafinil).

Did FTC receive information about, and review, the specific dates on which Paragraph IV certifications were filed against the second Cephalon patent as part of its clearance process for the Teva/Cephalon acquisition? Did this information not raise a red flag, since it seemed to be common knowledge that a slew of companies would be able to enter the market on April 6?

Clearly, if the commission had any worries about the potential for Teva to win sole exclusivity for modafinil, it could have demanded relinquishment or selective waiver of exclusivity as part of the proposed consent order. (Expect this to be a consideration in any future consent order approving a generic firm’s acquisition of a branded company, or vice versa. Call it the “Provigil clause.”)

When we asked FTC whether it reviewed the timing of the Paragraph IV certifications and whether this information raised any concerns, the agency said it could not comment because the information was non-public.

However, it seems that such information would have been important to the commission’s review of the acquisition. Besides, the Cephalon acquisition was not the first time FTC had examined some of these issues. In 2008, the commission sued Cephalon, alleging that the branded company sought to maintain its monopoly on Provigil by paying four ANDA filers (Teva, Ranbaxy, Mylan and Barr) more than $200 million to keep their modafinil generics off the market. That lawsuit is pending in Pennsylvania federal court.

Given that FTC would already have been on high alert for any concerns related to modafinil generic entry, it seems all the more likely there was a fundamental disconnect between FTC’s assumption of what the market would look like come April 6, and FDA’s final decision. Which leads us to our next question:

3. Would FDA really be all that upset if a court overturned its exclusivity decision?

We suspect not. Reading various documents filed in connection with the court case, one can’t help but feel a sense of reluctance by FDA in reaching its final decision on modafinil exclusivity.

We note with interest the Office of Generic Drugs’ April 4 letter in which it delivered the happy news to Teva that the company received sole generic exclusivity. The letter feels the need to point out that “the parties familiar with modafinil ANDAs appear to have operated under the assumption that there are multiple ANDAs that qualify for the 180-day exclusivity for modafinil.” These “parties” included FTC, the letter said.

In deciding that Teva’s exclusivity was triggered by the March 30 authorized generic launch, OGD writes:

“With control of the marketing of PROVIGIL, and of an authorized generic, Teva has every reason not to pursue final approval of ANDA 076596 and not to market a ‘true’ generic under that application.”

In a footnote, OGD talks about how it considered a harsher penalty for Teva and what effect this novel situation (whereby an ANDA first-filer’s parent company bought, and now controls, the branded product sponsor) might have on FDA policy moving forward:

“We have considered finding that Teva’s marketing of PROVIGIL upon its acquisition of Cephalon triggered its 180-day exclusivity, and believe that there is a strong argument for finding so. We have refrained from adopting that interpretation in this case, however, because that exclusivity, if it were triggered by Teva’s acquisition of Cephalon, would expire on April 11, 2012 and, given the multiple uncertainties in this case, Teva had no notice that FDA considered it to be running. Because of the potential for collusion between NDA holders and captive first generics, and the subversion of the statutory scheme that could result, the agency may in the future provide guidance on the effect of such a relationship between NDA holder and first applicant upon any claim for 180-day exclusivity.”

In a brief opposing Mylan’s request for a preliminary injunction, FDA nevertheless offers sympathy for Mylan’s cause:

“FDA understands Mylan’s concerns. … Granting exclusivity to a generic manufacturer that is owned by the innovator manufacturer appears to thwart the Hatch-Waxman Amendments’ goal of bringing more generic drugs to market faster (i.e., because the generic manufacturer would have no incentive to compete against its related innovator manufacturer, or the generic could sit on its exclusivity indefinitely by not commencing commercial marketing of its product – which would trigger the start of the 180-day exclusivity period – thereby blocking any other generics from coming to market). … Nonetheless, final approval of Mylan’s ANDA hinges only on whether a previous ANDA was submitted containing a paragraph IV certification and the 180-day exclusivity period had run.”

Finally, we pose the question that we (naively?) thought would be the primary focus on the day modafinil generics entered the market:

4. What About Ranbaxy?

Under its recently finalized consent decree with FDA, Ranbaxy faced the loss, or potential loss, of exclusivity on up to eight ANDAs. The company has not publicly identified the ANDAs at issue. However, modafinil appeared to be the first product launch since the decree’s entry in January where Ranbaxy held a claim to 180-day exclusivity. With the generic Provigil story playing out the way it has, we may never know if modafinil was one of the eight.

Perhaps Wednesday’s oral arguments will shine some light on these and other questions we have. We anticipate having no trouble staying awake for that hearing.

-- Sue Sutter (s.sutter@elsevier.com)

image by flickr user oberazzi via creative commons

Deals Of The Week: Will Lightning Strike Twice At Shire?

2012-04-13T13:10:00.000-05:00

The old adage is that “lightning doesn’t strike the same place twice,” but as April showers approach, Shire PLC appears to be gambling that the cliché does not ring true. On April 12, it made a move to bolster its burgeoning Regenerative Medicine division, buying out privately held Pervasis Therapeutics in a deal that reportedly could total $200 million if all milestones pay out.

Pervasis adds a Phase II cell-based therapy Vascugel, for improving hemodialysis access for end-stage renal disease patients, and its endothelial cell technology platform, to Shire’s portfolio.

And Shire executives did not bury the subtext of the transaction – the specialty pharma is hoping that with targeted acquisitions, it can become the “partner of choice” in regenerative medicine, just as its 2005 acquisition of Transkaryotic Therapies enabled Shire to become Genzyme’s main competitor in enzyme replacement therapies.

The $1.5 billion purchase of TKT was leveraged into Shire’s ever-growing Human Genetic Therapies unit. Now, by pairing tiny, two-employee Pervasis with last year’s $750 million takeout of Advanced BioHealing, which brought in the skin-substitute Dermagraft, the company is trying to tell a similar story in regenerative medicine.

“That’s definitely our intent,” Kevin Rakin, president of Regenerative Medicine at Shire, told “The Pink Sheet”. “We want to do the same thing in regenerative medicine and I think there’s a template here: [acquire a] venture capital-backed company, get some technology into man and prove the applicability, and then ideally we can be ideally the partner of choice … for regenerative medicine product development and commercialization.”

ABH took a floundering product, Dermagraft, off the hands of a large medical devices company and built it into a successful franchise. The acquisition has brought Shire development, manufacturing and commercial expertise in regenerative medicines. The acquisition of Pervasis and the renal disease product candidate Vascugel offers a number of synergies, said Jeff Jonas, Shire’s head of R&D for regenerative medicine, in an interview with “The Pink Sheet” during EBI’s Pharmaceutical Strategic Outlook conference in New York on April 12.

“We know the renal space very well from our work with Fosrenol (lanthanum carbonate, Shire’s phosphate binder for a number of chronic kidney disease indications),” he said. “We are familiar with the dialysis suite. We are familiar with cell therapies as well. It is a marriage of a number of synergies that exist in the company.”

This deal should be seen as a harbinger of things to come from Shire, Jonas added, and not as simply an incremental transaction. In regenerative medicine in particular, the specialty pharma is seeking early- to mid-stage assets with upside that it can de-risk early in the development cycle. While HGT now comprises about one third of Shire’s total business, a fraction that is growing, Jonas would not put a number on regenerative medicine’s potential other than to predict that it represents an “area of real potential growth in the next 20 years.”

And now, get out your umbrellas, it's time for the latest roundup of:

Takeda/URL: In a bolt-on acquisition, Takeda’s U.S. division will pay $800 million upfront with the potential for sales-based earn-outs beginning in 2015 to take out privately held URL Pharma. With the buyout, announced April 11, Takeda acquires the gout treatment Colcrys (colchicine). Takeda hopes that the addition of Colcrys to its existing Uloric (febuxostat) could position the company as the provider of choice for gout therapy in the U.S. Takeda executives were not specific about how URL will be absorbed into Takeda Pharmaceuticals North America, but said the acquisition is expected to be accretive to earnings beginning in 2013. Venture capital-backed URL, headquartered in Philadelphia, markets Colcrys via a 350-person contract sales force. The firm markets three other products in addition: Qualaquin (quinine) for malaria, Fibricor (fenofibrate) for triglyceride management and the antibiotic Bactrim (trimethoprim and sulfamethoxazole). URL’s sales were roughly $600 million in 2011, led by Colcrys, an alkaloid indicated for prophylaxis and treatment of gout flares as well as familial Mediterranean fever in patients four and older, which generated $430 million in revenue. Uloric, which launched in 2009, is hardly on a blockbuster track. The drug posted net sales of $117 million in 2011. But Takeda executives said the two drugs should complement one another well, since Uloric is indicated to treat chronic gout, while Colcrys treats acute cases.--Joseph Haas

Amgen/KAI Pharmaceuticals: Amgen announced April 10 that it plans to acquire KAI Pharmaceuticals. The big biotech paid $315 million in cash for the South San Francisco, Calif., biotech with plans to move its lead compound into late-stage testing as soon as possible. KAI currently is developing KAI-4169, a peptide agonist of the calcium-sensing receptor being developed for treatment of secondary hyperparathyroidism (SHPT) in patients with chronic kidney disease (CKD) who are on dialysis. The company presented positive Phase IIa data last year that showed ‘4169 raised the levels of parathyroid hormone. A Phase IIb trial is currently ongoing and results are expected in “the near term,” Amgen said. Phase III planning is underway already and Amgen will provide the company with a loan in advance of the deal closing to support planning. Amgen will have full worldwide rights except in Japan. KAI licensed the Japanese rights to the drug to Ono Pharmaceutical in September 2011, nabbing a $13 million upfront. The drug is currently being tested in an intravenous formulation, and KAI has looked into a transdermal formulation as well. But, Amgen’s head of nephrology, Reshma Kewalramani said the company is specifically focused on the IV formulation for the moment. “The appeal of this molecule is that it can be administered in concurrence with dialysis,” she said.–-Lisa LaMotta

Celgene/AnaptysBio: Celgene and AnaptysBio announced an antibody-discovery partnership on April 9. No financial terms were disclosed. AnaptysBio will generate antibodies to oncology and inflammation targets using its proprietary SHM-XEL platform. Celgene will receive worldwide rights to develop and commercialize antibodies discovered by AnaptysBio under the terms of partnership. Privately held AnaptysBio is a leader in harnessing somatic hypermutation (SHM), the body’s natural process for generating antibodies, for antibody discovery and optimization. SHM-XEL is an in vitro platform that couples SHM with mammalian cell display to generate antibodies with desired binding and specificity properties. AnaptysBio will receive an upfront payment, potential preclinical and clinical milestone payments, and potential royalties on sales of each product derived from the partnership. The alliance is similar in structure to a pair of deals that the antibody specialist struck in January 2012: one with Novartis and another with an undisclosed company. It was Novartis’ second collaboration with AnaptysBio, the prior one having successfully delivered antibody candidates into the big pharma’s pipeline. AnaptysBio additionally has struck antibody discovery deals with Roche and Merck. This most recent partnership appears to be Celgene’s first foray into antibody therapeutics. The cancer biotech has focused its pipeline primarily on various flavors of small molecules – e.g., epigenetic, multi-mechanism IMiDs and kinases, and cytotoxic chemotherapeutics – and also on cellular therapies. As such, the deal represents a significant broadening of its early-stage portfolio.–-Mike Goodman

Arrowhead/Alvos Therapeutics: RNAi company Arrowhead Research Corp. announced April 11 that it acquired privately held Alvos Therapeutics, a developer of proprietary human-derived homing peptides, in an effort to gain delivery technology for its short interfering RNA (siRNA) compounds. Alvos shareholders will get an upfront payment of 315,467 shares in Arrowhead (about $2.13 million) and will be eligible to receive additional stock valued at up to $23.5 million if certain clinical and regulatory milestones are achieved. Alvos stockholders could receive additional stock if the first three drugs using the Alvos technology reach certain sales milestones. Targeted delivery of RNA interference candidates has been the field's premiere challenge. The Alvos technology platform, which originated at MD Anderson Cancer Center, is designed specifically to generate peptides that bind to and enter tumor cells, potentially solving the delivery problem for Arrowhead, which acquired Roche’s RNAi assets in October. Alvos, previously known as Mercator Therapeutics, will be integrated into the Arrowhead facility in Madison, Wis. Arrowhead CEO Christopher Anzalone said in a statement that the acquisition benefits the company by allowing “for the creation of new peptide-drug conjugates against cancer and other indications, thereby expanding our business and capabilities in a cost effective way." –-L.L.

Photo credit: Wikimedia Commons

Deals Of The Week: The Letter's In The Mail

2012-04-06T13:49:00.002-05:00

Pens were flying this week, tied up mainly writing letters, rather than signing dotted lines. Activist investor Carl Icahn put pen to paper (or fingers to keyboard) to scold Amylin Pharmaceuticals' board of directors April 4 for rejecting a reported $22 per share takeover offer from Bristol-Myers Squibb.

There hasn’t been any confirmation of Bristol’s offer or Amylin’s rejection, but Icahn was equally as irked by the lack of transparency. “I find it reprehensible that the board of directors has still not acknowledged or denied the media reports regarding its rejection of a $22 per share takeover offer,” he said in the letter. He made lots of other demands too, which you can read about in "The Pink Sheet" DAILY.

Then, Roche CEO Severin Schwan wrote to the shareholders of Illumina Inc., the next-generation sequencing company, urging them to accept a takeover offer rejected by the company’s board of directors. The offer of $51 per share represents an increase over the $44.50 per-share offer proposed in January. “Your decision will ultimately determine your ability to obtain certain value for your investment amid increasing headwinds for Illumina and the broader sequencing sector,” Schwan said.

Deals of the Week doesn’t know how much correspondence has been going back and forth between Watson Pharmaceuticals and its Swiss generic rival Actavis, but assumes it’s a lot. Media reports say the two are nearing a merger, with Watson offering roughly $7 billion and an announcement could come as early as next week.

We’ll have to wait and see how many jelly beans we eat before these or other takeover rumblings become a reality. In the meantime, here’s a look at some of the deals that did get done....

Spectrum Pharmaceuticals/Allos Therapeutics: Spectrum will buy specialty cancer drug developer Allos Therapeutics, Spectrum announced April 5. Spectrum will pay $1.82 per share, or $206 million, upfront to Allos shareholders, along with a contingent value right (CVR) that gives Allos shareholders another 11 cents per share if the biotech’s lead cancer drug, Folotyn (pralatrexate), is approved in Europe before the end of 2012 and gains reimbursement in three major markets before the close of 2013. Spectrum hopes to create synergies between its current cancer drugs and Folotyn. The news coincided with Spectrum’s announcement that its bladder cancer drug apaziquone failed two Phase III clinical trials. It also comes on the heels of a failed attempt by AMAG Pharmaceuticals last year to acquire Allos. AMAG paid a $2 million termination fee last fall after its shareholders killed the company's three-month long attempt to conduct an all-stock merger. The acquisition by Spectrum comes as no surprise. In a Sept. 15 regulatory filing, Allos revealed that management had turned down a buyout offer from an undisclosed company.--Lisa Lamotta

Amgen/AstraZeneca: AstraZeneca’s MedImmune biologics unit bolstered its pipeline, particularly in the inflammation and respiratory areas, while Amgen obtained some needed financial flexibility in a partnership the companies announced April 2. Under the deal, MedImmune and Amgen will co-develop and commercialize five monoclonal antibodies originally discovered and advanced into clinical development by Amgen. The lead compound included in the collaboration is brodalumab (AMG 827), an interleukin-17 receptor blocker that has produced impressive Phase II data in moderate to severe plaque psoriasis and also is being investigated in Phase II studies in psoriatic arthritis and asthma. The other four candidates all are in various stages of Phase I development for indications such as Crohn’s disease, ulcerative colitis, systemic lupus erythematosus (SLE) and asthma. Under the deal, MedImmune will pay Amgen $50 million upfront for development and commercial rights to the five antibodies, while the two firms will share development costs. MedImmune has pledged to cover 65% of such costs each year from 2012 to 2014, and costs will be split equally by the two firms starting in 2015. The rationale behind the deal seems fairly clear-cut on both ends. Amgen, which needs to reduce R&D spending that exceeded 20% of sales last year, gets financial flexibility, while MedImmune and its parent, hit hard by recent drug development failures and facing a deep patent cliff, need to boost their pipeline.--Joseph Haas

Forest Laboratories/Janssen: Forest Laboratorieshas paid $357 million in cash for all U.S. patents and other U.S. and Canadian intellectual property protecting Bystolic (nebivolol), its anti-hypertensive drug, from Janssen Pharmaceutica, a subsidiary of Johnson & Johnson, the companies said on April 2. The deal includes the nebivolol composition-of-matter patent and eliminates the need for Forest to pay royalties on sales of the drug. In addition, Forest and Janssen ended licenses in Canada for both Bystolic and Savella (milnacipran), Forest’s fibromyalgia drug. Forest’s Canadian subsidiary will assume responsibility for registering and commercializing the drugs. Bystolic, while not a blockbuster, has done surprisingly well as a late entrant into a heavily genericized market. As the only branded beta-blocker on the market, it has benefited from Forest’s promotional efforts and from a mild side effect profile, which gradually has won over doctors and patients. And the company points out it has good market access, with 85% of total beta blocker lives covered by managed care in the U.S. with no prior authorization or step edit restrictions. Overall, Bystolic has 4% share of the beta blocker class and continues to grow. Forest’s fiscal year 2012 ended March 31, so it hasn’t reported full-year sales of the drug yet, but says sales are annualizing at more than $400 million. That’s considerable, given the low expectations when Forest launched Bystolic roughly five years ago and the fierce generic competition.--Wendy Diller

Eisai/Valeant Pharmaceuticals: Eisai balanced the disappointment of seeing its new breast cancer therapy, Halaven (eribulin), turned down by the U.K.'s cost watchdog, NICE, April 2, by announcing the same day a tie-up with Valeant to market the product in eight countries in Central and Eastern Europe. Valeant's European division, PharmaSwiss SA, will promote and distribute Halaven in Bulgaria, Estonia, Latvia, Lithuania, Poland, Romania, Hungary and Slovenia, for patients with locally advanced or metastatic breast cancer whose disease has progressed after at least two chemotherapeutic regimens for advanced disease. Financial terms of the agreement were not revealed. PharmaSwiss, acquired by Valeant in 2011 for $480 million, is one of the largest medicines distributors in Central and Eastern Europe, with operations in more than 12 countries. Despite losing an appeal on the negative NICE final draft guidance, eribulin is still being reimbursed in the U.K. through the government's Cancer Drugs Fund (CDF); it also is available and reimbursed in a number of other European countries, Eisai said. Clinical data indicate that eribulin is associated with a statistically significant overall survival benefit in heavily pretreated patients, and Eisai reported it is in the top-12 most prescribed drugs in the CDF.--Jessica Merrill

Image courtesy of Wikimedia Commons

Financings of the Fortnight Hops Around

2012-04-06T13:02:00.003-05:00

We’ve got a short attention span this week, what with magazine deadlines, an overnight trip to Seattle to help interview participants at this lively Xconomy event on biotech business models, and preparations for a week of solo parenting.

So we’ll keep our intro brief while doing a bit of globe-hopping: New sources of biotech funding were unveiled this past fortnight on three different continents. In Europe, Cancer Research UK and the European Investment Fund joined forces for the $80 million CRT Pioneer Fund aimed at helping projects -- not companies -- bridge the valley of you-know-what between preclinical work and mid-stage clinical studies. Read more about its unusual asset-centricity here. (Our suggestion: If you must pass through the Valley of Death, do it in the spring after a wet rainy season.) In Asia, the Malaysian government revved up its second biotech fund, this time for $100 million, as our PharmAsia colleagues describe here.

In North America, Merck is getting granular, contributing $35 million to the Merck Lumira Biosciences Fund for early stage companies in Quebec, part of its Canadian division's promise to contribute $100 million to Quebec-based life science R&D after it closed its Montreal lab in 2010. The fund is targeting a $50 million final close and will be managed by Lumira Capital of Montreal.

Then there’s Russia, which spans two continents. Its sovereign nanotech fund Rusnano is looking for cash from sources other than the Russian government to plow into more investments – many of which so far have been US-based biotech companies, as our START-UP colleagues explained in this profile. Investing in Rusnano is akin to investing in Russia, to an extent, because companies that receive direct investments from Rusnano must pledge to establish a footprint in Russia. Rusnano’s top executive in the US, Dmitry Akhanov, told VentureWire this week that Rusnano expects its first exits this year, “which is very important for valuation” as it goes out to fundraise. Rusnano wants to sell 10% of its $10 billion fund by the end of the year, says Akhanov: "The (Russian) government has decided that Rusnano is mature enough to become private and grow without direct government support."

Notice anything in common with all these funds? Exciting vacation destinations, perhaps – Montreal is certainly near the top of FOTF’s list in the summer months – but we were thinking more of who’s putting the money forth. With the exception of the Merck Lumira fund and the small slice of contributions from les VC, these funds are VC-free. They might, like Rusnano, partner with VCs, but the wellspring is located elsewhere. Could just be the way this fortnight rolled forth, but as serial entrepreneur John Mendlein put it at the Xconomy confab this week, it’s all about the cost of capital these days. For many corporations, foundations and sovereign states, cash is easy to come by, and a lot of those eggs are going into the baskets VCs are either unwilling or unable to fill. And with that, it's time to crack open another edition of...

Merrimack Pharmaceuticals: The cancer therapeutics firm raised $100 million in its initial public offering, selling 14.3 million shares at $7 a piece on Wednesday, March 28. The 20-year-old firm which began under the name Immtek was queued up to go public in January with loftier ambitions – 16.7 million shares in the $8 to $10 range – but postponed due to the ever-present “market conditions.” (Never mind that in the same fortnight, three other biotechs went public.) One big difference between Merrimack and its more successful peers at the time was insider participation; the other three, Cempra Pharmaceuticals, Chemocentryx and Verastem, had it, and Merrimack did not. (At least, it didn’t report it in its SEC filings.) Having previous investors cross over and take shares in the IPO is one of the inducements IPO buyers look for, as we reported in this START-UP story. (For those without a subscription, a shorter version is here.) Lo and behold, Merrimack’s filings this time around show that at least one existing investor (and its largest), Fidelity Investments, lined up to buy nearly $29 million of the offering. Fidelity was the largest purchaser of Merrimack’s most recent private fundraising, the $77 million Series G round (yes, G) it sold in April 2011. The round brought the company’s total private financing to $270 million. Its lead compound MM-398, a reformulated version of the chemotherapy irinotecan, is in Phase III to treat patients with metastatic pancreatic cancer who have failed gemcitabine. It has orphan drug designation in the US and EU. JPMorgan led the underwriting team with help from BofA Merrill Lynch, Cowen and Co. and Oppenheimer & Co. Underwriters have 30 days from the IPO date to buy up to 2.1 million additional shares. Merrimack shares closed at $6.01, down 14% from their IPO price, on April 4. -- Alex Lash

Promethera Biosciences: Belgian cell therapy company Promethera is the latest to join the crowd developing medicines for rare diseases. Promethera has raised $31.4 million in a Series B round, the largest venture financing this year in Europe, to support the start of clinical trials of its progenitor hepatocyte product, Promethera HepaStem, for orphan liver diseases like Crigler-Najjar syndrome, urea cycle disorder and phenylketonuria. Industry interest in its technology is evident from the presence among the new investors of two corporate VC funds, Shire and Boehringer Ingelheim. Japanese firm Mitsui Global Investment and US culture systems company ATMI Life Sciences also have re-upped for the B round. Shire has had a focus on regenerative medicines ever since it bought Advanced BioHealing in May 2011, and Boehringer Ingelheim is already a leading contract manufacturer of biopharmaceuticals using cell culture systems. Promethera's progenitor cells are isolated and cultured from one liver using its proprietary methods, and are expected to treat more than 100 patients without inducing rejection. Although cell therapy companies have disappointed in the past, the sector is starting to show greater promise, with better understanding and controls over cell culture and manufacture. Belgian and UK regulators already have cleared Promethera to begin Phase I/II studies of its hepatocyte product. -- John Davis

ADC Therapeutics: The new Swiss company is less an independent entity and more an extension of Spirogen, a UK developer of cytotoxic small molecules called pyrrolobenzodiazepines (PBDs) to be used in antibody-drug conjugate cancer drugs. Both are portfolio companies of Celtic Therapeutics Holdings, a private equity firm with a complicated past. Celtic has pledged up to $50 million to ADC Therapeutics, which will take the cytotoxins and linker chemistry from Spirogen and try to marry them with antibodies licensed from third parties to create ADCs that could treat several types of cancers. ADC hopes to have its first two candidates in the clinic within 18 months. It will develop the drugs only to Phase II proof of concept, then look for larger partners to help with expensive late-stage development and commercialization. Celtic general partners Peter Corr and Stephen Evans-Freke will sit on ADC Therapeutics’ board, along with the new company’s CEO Michael Forer, Spirogen CEO Christopher Martin, former National Cancer Institute Director Samuel Broder and Barrie Ward, the former CEO of KuDOS Pharmaceuticals. Forer also is a partner in Spirogen. Celtic currently is looking for a director of R&D for ADC Therapeutics, to be based at the London headquarters of Spirogen and travel between the two companies. The $50 million investment will be given to the company as needed for drug development over the next three to five years. -- Lisa LaMotta

Enterome Bioscience: The French firm said March 22 it has raised a 5 million Series A round led by Lundbeckfond Ventures and Seventure Partners. It is one of several companies exploring the human microbiome – the gene pool of the bacteria living within our bodies, particularly in our intestines. Enterome is developing biomarkers to measure abnormalities in the bacterial mix of the intestine, with the goal of eventually developing therapeutics to treat bowel and metabolic diseases mediated by the gut microbiota, such as non-alcoholic fatty liver disease, non-alcoholic steatohepatitis, obesity and type-2 diabetes. Enterome says changes in the bacterial composition that could signal disease include alterations in gut permeability that lead to insulin resistance, low-grade inflammation and metabolic endotoxemia (an increase in the level of bacterial lipopolysaccharides in the blood, often from a sustained high-fat diet). Founders include former executives at Fovea Pharmaceuticals, which was acquired by Sanofi in 2009. Enterome isn’t the only start-up betting that technological advances will release insights into the microbial universe and lead to drugs. Northern California firm Second Genome raised $5 million in 2011 to develop its discovery platform based on the PhyloChip, which analyzes the entire 16S ribosomal RNA gene sequence present in every bacterial genome to measure the relative abundance of the thousands of forms of bacteria in nature. -- A.L.

RIP Haley. Photo courtesy of flickrer Valeehill through a Creative Commons license.

Deals Of The Week: VCs Still Hoping To Cash Out But Growing Used To Earn-outs

2012-03-30T13:10:00.001-05:00

In 2012, private biotechs and their investors waiting to cash out via acquisition likely will find themselves waiting a bit more, even after the deal is done. As we have noted for some time, biotech investors almost certainly have to exit their portfolio companies through acquisition, and since 2009 more than two thirds of those acquisitions have come with cash doled out after the deal closes – sometimes years after, and sometimes a huge chunk of it.

But venture capital firms are wising up, as we detail in our latest Start-Up magazine feature.

Knowing they’ll have to take some percentage of their returns on a contingent basis, they are negotiating to tie those post-acquisition payments to near-term clinical and regulatory milestones, not to sales figures. They’re also paying attention to the nuances of the clinical milestones and trying to avoid vague triggers that can be re-interpreted by the acquirers. One VC has drawn a line in the sand mandating that no significant milestones can occur more than two years past the closing of the deal.

Shareholders also are turning to escrow-like services that not only keep track of post-acquisition payments but help do a little watchdogging to help make sure acquirers are meeting the terms of the deal. One such service, Shareholder Representative Services LLC, has worked on more than 30 life-science acquisitions with earn-outs since 2008. Executive director Donald Morrissey said that on deals SRS has worked on that are more than six months old: 1) at least one milestone has been paid on about 20% of deals; 2) at least one milestone has been missed on about 50% of deals; and 3) milestone-bearing programs have been terminated on about 20% of deals.

Morrissey also noted that the area is ripe for dispute, especially as the deal flow climbs and the pool of post-deal payments still in limbo grows deeper. He says disputes have occurred in almost 30% of the firm's life-science deals (although not necessarily arbitration or formal litigation, which is the nuclear option), and 20% of deals have been renegotiated (take the Onyx Pharmaceuticals-Proteolix deal, for example).

Is VC adaptation in the age of the earn-outs having an effect? These are early days, seeing how the “age” didn’t really start until 2009. But DOTW did find that in 2011, the average amount of total deal value began to shift back in the sellers’ favor. For deals with a total potential value (upfront and possible earn-outs combined) of $50 million or more, 58% of the cash came upfront, which collectively gave sellers a 4x step-up on the money invested in the acquired companies. The total potential step-up – the fantasy number sellers would hit if every post-buyout milestone came to fruition – has declined, but investors gladly would trade unreachable ceilings for higher, yet-realistic floors.

In 2009 and 2010, the upfront totals were 45% and 35% respectively, and the upfront step-ups were 3x and about 2.5x. (The upfront amount was much higher before 2009, but that was before earn-outs became practically the only game in town for private biotechs looking for acquirers.)

Are milestones actually paying out? Again, these are early days. With so many deals consummated only in the past year or two, many milestones, even near-term ones, haven’t yet been triggered. One deal with milestones that keep rolling in, though, is Cubist Pharmaceuticals’ late 2009 purchase of Calixa Therapeutics. In addition to $93 million upfront, Cubist has paid three milestones totaling $90 million. That adds up to roughly a 6x return on the $30 million invested in Calixa, and another $40 million could come from Cubist later this year.

For a running total of earn-outs that have paid out – and a reminder how opaque some deal details are – visit Atlas Venture partner Bruce Booth’s blog, where he is trying to crowd-source deal information.--Alex Lash

Allena/Althea – Newton, Mass.-based Allena Pharmaceuticals has gained an exclusive worldwide license to Althea Technologies’ hyperoxaluria portfolio, including patents, regulatory information and development data. Althea is a contract manufacturing organization based in San Diego. The deal will help Allena’s research into ALLN-177, an orally delivered enzyme therapy for hyperoxaluria, a disease that can cause kidney stones and eventually lead to full renal failure. “Currently there are no effective pharmacological treatments for hyperoxaluria or the nearly 2.6 million Americans who suffer from kidney stones annually,” said Alexey Margolin, co-founder, president and CEO of Allena. Allena is a privately held company with a focus on protein therapeutics, with a special focus on kidney and urologic diseases. Investors, including Third Rock Ventures, Frazier Healthcare and Bessemer Venture Partners, put $15 million into a Series A to bankroll the company's launch in November. The management team and investors were all involved with Alnara Pharmaceuticals Inc., a company purchased by Eli Lilly & Co. in 2010 for $380 million. Like Alnara, Allena focuses on enzyme-based therapies that can be delivered orally rather than injected and are designed to remain stable in the stomach instead of going into circulation.--Lisa LaMotta

Almirall/Menarini Group – Mid-sized pharmaceutical companies in Europe are turning to each other to achieve the scale and marketing muscle previously only found in the shrinking number of big pharma companies. Such a move is exemplified by Spain's Almirall SA, which has just turned to Italy's Menarini Group to help market its new chronic obstructive pulmonary disease therapy, aclidinium bromide, in Europe. Menarini has more than 5,000 sales reps poised to market the therapy in the countries covered by the commercial alliance: the majority of EU member states, Russia, Turkey and CIS countries. Almirall retains sole marketing rights in the U.K., the Netherlands and Nordic countries. The Italian company is particularly strong in Germany, Italy and France, as well as Central and Eastern Europe. Aclidinium is a long-acting inhaled muscarinic antagonist that has been jointly developed by Almirall and Forest Laboratories and is awaiting regulatory approval in the EU. However, there's been a regulatory hiccup in the U.S., where the product will be marketed by Forest; the companies reported March 29 that the FDA will require an extra three months to complete its review, although no new data were requested.--John Davis

Valeant/Natur Produkt – Valeant Pharmaceuticals International has continued its acquisition spree with further expansion into the Russian market. The Canadian company pledged on March 26 that it will pay $180 million plus the potential for $5 million in milestones for over-the-counter drug maker Natur Produkt International, which had revenues of $65 million in 2011. The company, which makes cough and cold medications, will be the second Russian asset that Valeant has purchased in recent months. Valeant said that it expects the Russian market to grow by 15% annually. A few weeks ago, Valeant acquired branded generic assets from Austrian pharmaceutical company Gerot Lannach Pharma, which generated 90% of its $55 million in revenues from Russia. Terms of the deal were not disclosed. The assets from both purchases will be immediately accretive to the Canadian company and will provide approximately $175 million in pro forma revenues by the end of 2012. The slew of acquisitions that Valeant has made over the last year have helped the company to double its top line, going from $1.18 billion in revenues in 2010 to more than $2.26 billion in 2011. Last August, Valeant acquired Lithuania-based specialty pharma AB Sanitas, giving it access to markets in Poland, Lithuania and Russia.--LL

Bausch & Lomb/Ista – Two months after Valeant failed with its proposed takeover of Ista Pharmaceuticals, Ista has again been targeted for acquisition. This time, fellow ophthalmic company Bausch & Lomb has offered $9.10 per share in cash (up from the $7.50 Valeant offered, and an 8% premium to the current 10-day average trading price and a substantially larger premium over the pre-Valeant-offer price), for a total of $380 million. Twenty-year-old Ista reported sales of $160 million last year and had $72 million in cash on hand as of the end of December 2011. In addition to four marketed products – Bromday (postoperative inflammation and pain), Bepreve (ocular itching due to cataract extraction), Istalol (glaucoma), and Vitrase (spreading agent) – Ista has a full pipeline. It is working on Phase III Prolensa (ocular inflammation and pain), T-Pred (ocular inflammation and infection), and several OTC dry eye medications; Phase II Bepomax and Beposone (both for allergic rhinitis); and Phase I bromfenac adjunct for age-related macular degeneration. The deal is a good match as not only do the firms have an overlapping customer base, but Bausch & Lomb has been manufacturing almost all of Ista's U.S. products for years.--Maureen Riordan

Bristol-Myers Squibb/Amylin – In our “No Deal” of the week, with Bydureon’s (long-acting exenatide) initial launch appearing to go better than expected, Amylin Pharmaceuticals has become a takeout target, reportedly drawing a $22-per-share buyout offer from partner Bristol-Myers Squibb. Amylin rejected the offer, prompting its share price to rise $8.38, or 54.5%, to $23.77 in same-day trading on March 28. That values Amylin at a market capitalization of $3.5 billion, amid speculation that it could yet obtain a better offer. Analysts agree, however, that Amylin is ripe to be acquired, potentially at a value higher than the bid reportedly made by Bristol. Bristol’s offer represented a 43% premium over Amylin’s previous day’s closing price of $15.39, but several analysts have revised their forecasts upward on the basis of strong early Bydureon sales and argue the stock could be valued in the high 20s to low 30s. If a bidder believes Bydureon sales could reach $1.5 billion in the U.S. by the end of the decade, with additional sales in Europe boosting global revenues well above $2 billion, the offer should be in the low $30s, wrote Leerink Swann’s Joshua Schimmer in a same-day research note. Meanwhile, reports also surfaced March 29 that Roche has increased its bid for gene-mapping tool specialist Illumina. Roche reportedly increased its hostile bid by 15% on March 28, causing another uptick in Illumina’s share price. The ~~Swedish~~ Swiss pharma, which could use Illumina’s expertise to better target its oncology drugs, said it is giving investors until April 20 to decide whether to accept the tender.--Paul Bonanos and Joseph Haas

Photo credit, Wikimedia Commons

Take the PharmAsia China Survey, Get a Discount to PharmAsia Summit-Shanghai

2012-03-29T15:01:00.000-05:00

Our colleagues at PharmAsia News are launching a survey on the China life sciences industry. We encourage all readers interested in China to participate. (Filling out the survey should take five minutes and in exchange you'll be eligible for a 15% discount on the PharmAsia Summit-Shanghai Sept. 24-26.)

The rise of emerging markets like China has provided life sciences companies with significant new growth opportunities, but also the challenge to achieve better health outcomes in regions struggling with affordability barriers and huge unmet medical needs.

China, in particular, is on the radar of most industry executives given its scale. China has risen to become the world’s third largest pharma market, according to data from IMS Health, and some analysts believe China is already the second largest market, trailing only the U.S.

To gain a better understanding of how industry is integrating China into their global strategies, Elsevier Business Intelligence (publisher of PAN, In Vivo, and "The Pink Sheet", among other titles) is teaming up with BayHelix, an organization of leaders of Chinese heritage in the global life sciences community, and the Monitor Group, a leading strategic consultancy, to launch a proprietary survey of PharmAsia News and EBI readers.

To start the survey, please click here.

Findings from the survey will be included in an exclusive report on innovation in China, to be released during the PharmAsia Summit-Shanghai (sponsored by EBI and BayHelix). In addition, selected findings will be covered in PharmAsia News during the weeks leading up to the Summit.

Please note that survey participants will remain anonymous. You will be issued a special code at the end of the survey to receive your 15% discount to the PharmAsia Summit-Shanghai.

Thank you for participating!

photo by Josh Berlin

Supremes' Prometheus Ruling Has Dire Consequences for Personalized Medicine

2012-03-26T08:17:00.001-05:00

by Michael Boss

It is astonishing when nine very smart people get it so wrong. I refer to the US Supreme Court decision in Mayo v. Prometheus.

The court’s decision was that Prometheus’ patents are not valid since they are attempting to cover a law of nature. The analogy to E=mc2 is made. All of biology follows the laws of nature!

Prometheus developed an assay to help identify the correct dose of thiopurine drugs in the treatment of autoimmune disease. If the drug is metabolized too fast the level will be too low and so not effective. Too slow a metabolism and the drug can be toxic.

Potentially lost in the supreme circus around arguments addressing the constitutionality of the Affordable Care Act, the court is going to announce today whether it will grant or deny the ACLU’s cert petition asking it to review its suit against Myriad and determine if genes are patentable. Lawyers anticipate the court will grant the petition, vacate the Federal Circuit’s decision in favor of Myriad and remand the case back to the Federal Circuit for reconsideration in light of its ruling in Prometheus.

While the specific circumstances of the Prometheus case revolve around analyte measurements, by simple analogy it seems to me that the argument can be extended to genes and any gene products. So the identification of genetic variants that, say, cause disease or resistance to treatment by a drug or potential toxic response to a drug would all fall under this Supreme Court ruling.

This is a devastating ruling at the dawn of the personalized medicine era. The Court has wiped out any incentive to figure out why certain individuals might do better on drug A rather than drug B and how much of drug B should be given. And what about all the technologies under development to define the optimal treatment of cancer? Again by analogy, finding out which drug kills the tumor cells to select the correct drug for the patient would seem remarkably similar to the Prometheus situation.

The patent laws were developed to foster innovation and development of commercial enterprises. This decision has set back a key field by as long as it takes to get the ruling reversed.

image of Jacob Jordaen's painting, Prometheus having his liver eaten by an eagle (in our version the eagle is apparently the Supreme Court), via wikimedia commons.

Michael Boss, a biotech executive with companies including Antisoma, Xanthus, Elan and Athena, is currently an independent consultant. He is also an inventor on a seminal biotech patent.

Financings of the Fortnight Starts Spring On the Right Foot

2012-03-23T08:48:00.001-05:00

Happy spring, everyone, though it’s a bit less delicious when in many parts of the Northern Hemisphere, it’s been spring for weeks, even all winter. I give you Texoma, ladies and gentlemen.

Here at FOTF HQ, we’ve got strawberries peeking forth already (pictured above), which is enough to put a spring in anyone’s step. Closer to this column’s topic at hand, however, a couple other trends cropped up this past fortnight with the unveiling of two new funds: European-denominated cash and non-traditional sources. For the former, any cash that increases the chances of funding in the UK and EU biotech sector is a welcome sight after European VCs set a record fundraising low in 2011. For the latter, the alternative sources are Big Pharma – GlaxoSmithKline and Johnson & Johnson are providing half the capital of a new €150 million Index Ventures fund – and the UK’s largest charity, The Wellcome Trust, which unveiled a £200 million fund to invest in diverse healthcare areas with the temporary name of "Project Sigma," which sounds a bit like something James Bond would be assigned to infiltrate and destroy.

The funds won’t necessarily be confined to Europe, and the Wellcome fund is aiming beyond life sciences, but it’s safe to say -- would you please pay attention, 007 -- that a good deal of the new cash from Index and Project Sigma will flow, much-needed, into the UK and EU biotech sectors.

Note we say “sectors,” not “biotech companies,” because the Index fund will focus on developing assets, not building companies. It won’t let a thousand, let alone a dozen, traditional biotech firms bloom. But that’s not the direction the industry is going, anyway. Slowly but surely, venture-type resources are shaking loose to move products forward without traditional infrastructure and into the hands of pharma buyers that increasingly emphasize late-clinical development and marketing. Letting, instead, a thousand freelance project consultants bloom, we suppose.

Other asset-financing schemes of late include CMEA’s Velocity Pharmaceutical Development and the Atlas Venture Development Corp., which combined have publicly disclosed just one project, and Eli Lilly’s Mirror fund program, originally destined to partner with three venture firms but has made little noise since its inception a couple years ago. So we’re under no illusion that the direction is a permanent one.

Permanence is not a question for the massive Wellcome Trust, and with its new fund it has another investment outlet; it’s already been backing startups for years, such as Kymab, which made our 2010 A-List.

We’re highlighting another trend this fortnight: prostate cancer companies raising cash. The disease has seen a groundswell of treatment options in recent years, including several new drugs such as Dendreon’s Provenge (sipuleucel-T). Two more companies vying to bring drugs to market announced new cash raises to help push late-stage programs forward, although not with equal amounts of momentum, as we describe below (see Medivation and OncoGenex Pharmaceuticals).

And at first blush, three stem-cell companies announcing fundraisings in the same two weeks seemed to be another trend, but upon further review it was coincidence. Still, while two of the events were for peanuts -- $9 million for Athersys and $5 million for International Stem Cell – Aastrom Biosciences ended up with a rather convoluted and unusual situation, which we detail below.

When it comes to cell-based therapy, it's best to keep it simple -- like the vitamin D from the spring sunshine on our skin. We also highly recommend an extended dose of acute brain-cell stimulation, courtesy of....

Aastrom Biosciences: The Ann Arbor, Michigan firm said March 9 it has sold $40 million of convertible preferred stock in a private placement to Eastern Capital. The publicly traded firm, with a stock price that hasn’t cracked $3 since last June, says Eastern’s non-voting shares will convert to voting shares upon shareholder approval, required by Nasdaq because the voting shares will give Eastern more than 19.9% ownership. With accrual of shares over five years thanks to an 11.5% annual dividend (payable in stock, not cash), Eastern will eventually own about 25% of the company. Eastern is the investment arm of food packaging mogul Kenneth Dart, a US billionaire who relocated many years ago to the Cayman Islands (read: renounced US citizenship to dodge taxes). The $40 million -- which at the equivalent of $3.25 a share is an 80% premium to the pre-announcement $1.81 per share price -- is Aastrom’s largest single fund-raise ever, according to a blog post from its CEO Tim Mayleben. It gives the firm cash to push ahead with two late-stage trials, including the Phase III pivotal trial of its Ixmyelocel-T autologous adult stem cell therapy in critical limb ischemia. Mayleben also points out that the funding doesn’t have “dilutive warrants or expensive discounts,” which he describes as “expensive inducements [that] often have long-term negative consequences for existing investors.” What Mayleben didn’t mention, however, were Aastrom’s own outstanding warrants, 15 million of them, that could come due in the next few years. Those warrants are baked into analysts’ models, so Aastrom is happy to highlight the fact that the Eastern private placement doesn’t include warrants. Unless, of course, you figure that Eastern’s $40 million worth of preferred shares will eventually turn into 20 or 21 million common shares. “You could say it’s implied dilution,” Aastrom vice president of finance Brian Gibson told FOTF. “But it’s five years away, and most investors don’t have a five-year horizon.” Eastern negotiated other perks, too: The Aastrom board is waiving the shareholder rights plan – the poison pill – that would otherwise kick in, and Eastern also has participation rights for future fundraisings to prevent its own dilution. -- Alex Lash

Tarsa Therapeutics: Tarsa said March 16 it has raised a $28 million Series B round as it heads toward US and European regulatory filings for its oral recombinant calcitonin Ostora by the end of 2012. It would be the first oral formulation on the market of calcitonin, used to treat osteoporosis in post-menopausal women. Tarsa in-licensed rights to the Phase III compound from Unigene Laboratories in 2009. Novartis markets Miacalcin and Upsher-Smith sells Fortical, both nasal-spray formulations. New investor Foresite Capital led the round and was joined by existing A round backers Novo AS, MVM Life Science Partners and Quaker BioVentures. Tarsa raised a $24 million Series A round in 2009, led by MVM. Tarsa is bullish about Ostora’s market potential because Novartis announced earlier this year that as part of a restructuring it was abandoning its own effort to develop an oral version of calcitonin. Recently conducted follow-on market research indicated that Tarsa can hope to pick up about 20% of new and existing post-menopausal osteoporosis patients when Ostora reaches the market, thanks also to diminishing use of bisphosphonate therapies caused by safety concerns, Tarsa CEO David Brand said. Last year, Tarsa announced that Ostora had demonstrated statistically significant superiority and similar safety in a Phase II trial using Fortical as a comparator. -- Joseph Haas

OncoGenex Pharmaceuticals: The 12-year-old Seattle-area firm said March 16 it has raised nearly $50 million in a public stock offering as it revamps its late-stage clinical program for the prostate cancer treatment custirsen, which is partnered with Teva Pharmaceutical Industries. The increasingly crowded prostate cancer field has been shaken up recently by positive data from Johnson & Johnson’s Zytiga (abiraterone) and Medivation’s MDV-3100, prompting Medivation to raise cash through a debt offering (see below). OncoGenex had $65 million in cash and equivalents at the start of the year, which it expected to last only until 2014. Teva is largely responsible for the increased cost of custirsen development and OncoGenex’s $30 million allotment is already set aside. Instead, the new cash will help develop OGX-427 beyond its indications of prostate and bladder cancer, where it’s currently in Phase II testing, CEO Scott Cormack told our Pink Sheet colleagues. Cormack said earlier this month the big shifts in thecustirsen program – cancellation of a trial in second-line castration resistant prostate cancer (CRPC); a new combination trial with Sanofi’s Jevtana (cabazitaxel); and expansion of a currently enrolling trial in a first-line chemotherapy CRPC setting. Custirsen is an antisense agent meant to boost the effects of chemo. Leerink Swann and Stifel Nicolaus Weisel led the offering, with help from Lazard Capital Markets and William Blair & Co. Underwriters have a 30-day option to buy up to 624,750 additional shares. -- Lisa LaMotta

Medivation: The once-high-profile Alzheimer’s company is now a prostate cancer developer, and on the strength of recent data from its new focus the San Francisco biotech raised nearly $260 million in convertible debt in an offering that closed March 19. The firm could join newly approved prostate cancer sponsors J&J, Dendreon and Sanofi, thanks to Phase III data from the AFFIRM trial of MDV3100, its androgen signaling receptor inhibitor, that showed side effect rates tracking those of placebo. MDV3100 also showed an overall survival (OS) benefit of nearly 5 months beyond placebo (18.4 months vs. 13.6 months), and 8.3 months of progression-free survival vs. 3 months for placebo, based on PSA tests. The OS benefit was large enough to spur discontinuation of the trial so all enrollees could go on the drug. It could have other advantages over the recent approvals: unlike Zytiga, it does not have to be administered with prednisone, it’s less complicated to prescribe and administer than Provenge, and it appears much safer than Jevtana. Medivation has partnered MDV3100 worldwide with Astellas Pharma. The notes, due in April 2017, pay 2.625% interest until April 2015, at which point Medivation can redeem them based on certain parameters of its stock price at that time. Citigroup ran the debt sale with help from Credit Suisse Securities Jefferies & Co. William Blair & Co. and Leerink Swann. – Staff reports

Photo "Sympathy for the Strawberry" courtesy of the FOTF Art Collective.

Deals of the Week Seeks the Luck of the Irish

2012-03-16T13:25:00.000-05:00

Perhaps you’ll feast on corned beef, cabbage, potatoes and an adult beverage or two this weekend, in honor of St. Patrick’s Day. If your waistline should fluctuate a bit from the indulgence, think of Dublin, Ireland-headquartered Shire plc, a company that fattened up with one deal while trimming down its efforts in another area this week.

Shire’s recent growth has been tied to specialty business areas in which the company believes it can introduce successful drugs supported by small sales forces. Among its strong performers are two orphan drugs for lysosomal disorders, including Elaprase (idursulfase) for Hunter syndrome and Replagal (agalsidase alfa) for Fabry disease. The latter, long marketed in Europe, seemed poised for U.S. approval, thanks in part to a treatment IND that allowed its distribution in the wake of Genzyme’s manufacturing issues around Fabrazyme (agalsidase beta). But Shire’s dialogue with FDA soured as the agency requested a more arduous series of trials than Shire expected, leading the company to withdraw its BLA filing for Replagal on the afternoon of Mar. 14.

Rather than drown its sorrows, though, the company bounced back with an acquisition the following morning. Shire hopes it’s found a four-leaf clover in FerroKin Biosciences, a hematology specialist for which it paid $100 million up-front, in a deal that features an additional $225 million earn-out. FerroKin’s key asset is FBS0701, a Phase II candidate that helps rid excess buildup of iron in the blood and organs, typically found in patients who undergo frequent blood transfusions. Lawson Macartney, senior VP of Shire’s emerging business unit, told The Pink Sheet DAILY that the acquisition is part of Shire’s plan to move deeper into hematology; it already has Xagrid (anagrelide) for essential thrombocythaemia, which generated $90.6 million in revenue last year.

Shire hopes the oral capsule FBS0701 will compete with Novartis’ Exjade (deferasirox), another iron chelator delivered as an oral solution. That drug carries a black-box warning for renal and hepatic impairment and gastrointestinal hemorrhage; Shire thinks its compound can improve on Exjade's safety profile. The luckiest parties in the deal – or maybe they were just good – are FerroKin’s venture investors. They include Burrill & Co., Clarus Ventures, MP Healthcare Venture Management, and HealthCap, all of whom enjoyed a healthy exit two years after FerroKin’s $12 million Series B round.

Whether you indulge yourself or not, we hope you’ll enjoy the holiday responsibly. A-rovin’, a-rovin’, a-rovin’ we go, with the latest installment of…

Merck/Calibr: Merck renewed its commitment to academic research, and to San Diego, making a $90 million investment to create the California Institute of Biomedical Research, or Calibr. The funding, announced Mar. 15, will span seven years, and Calibr will be run by prominent Scripps chemist and entrepreneur Peter Schultz. Schultz has had his share of experience with biotechs, founding eight himself: Affymax Research Institute, Syrrx, Kalypsys, Phenomix, Symyx Therapeutics, Ilypsa, Ambrx and Wildcat Technologies. He also founded and was the institute director of the Genomics Institute of the Novartis Research Foundation in San Diego from 1999 to 2010. Backing Schultz’s leadership will be a scientific advisory board led by Harvard's Christopher Walsh, and will include Merck Research Laboratories president Peter Kim. A board of directors led by 5AM Ventures founder and managing partner John Diekman will also help run the show. The staff at Calibr, which will eventually include 100 to 150 people, as well as the board of directors and the scientific advisory board will collaborate to choose the projects that the institute will take on. Schultz estimates that once everything is up and running, the institute will handle 15 to 20 ongoing projects at any given time. Projects will be chosen from academic institutions and will be based on “novel biology.” Merck is one of many Big Pharmas trying to bridge the gap between industry and academia, including Pfizer and Bayer, which have also established similarly structured institutes in scientific hotspots around the country. – Lisa LaMotta

GlaxoSmithKline/Epistem: GlaxoSmithKline and U.K. biotech Epistem PLC announced a three-year collaboration March 9 around using Epistem’s proprietary RNA-Amp technology platform to identify biomarkers useful in development treatments for and/or treating fibrotic disease. Financial terms were not disclosed. Several companies, including Bristol-Myers Squibb and Gilead Sciences, are competing to bring the first drug therapy for idiopathic pulmonary fibrosis to market in the U.S. – worldwide, IPF is thought to offer a potential blockbuster market. As of March 2012, GSK’s pipeline lists 15 compounds in clinical development for respiratory and immuno-inflammation indications, most of them targeted at asthma or chronic obstructive pulmonary disease, but none specifically cited as a candidate for fibrotic disease. The collaboration with Epistem will focus on identifying key characteristics of diseased fibrotic tissue – RNA-Amp is a highly sensitive amplification technology that can derive gene-expression data from minimal tissue samples and/or numbers of cells. Previously, the biotech partnered in 2009 with Novartis to collaborate on development of new therapeutic candidates for epithelial conditions, including cancer and gastrointestinal disorders.—Joseph Haas

Biogen Idec/MAKScientific: Discovery firm MAKScientific LLC has signed a big partner, Biogen Idec , in a small deal that gives Biogen an option to select discovery-stage drug candidates for the treatment of multiple sclerosis and other neurodegenerative diseases. The privately-held, Boston-based drug discovery firm works in cannabinoid pathways. In the partnership, announced March 14, Biogen gains an exclusive worldwide option to select discovery-stage drug candidates for all indications worldwide. The company will pay up to $3 million if it chooses to exercise the option and an additional $31 million in milestone payments for clinical development. – Jessica Merrill

Sanofi/Pluromed: Sanofi has today announced the acquisition of Mass.-based surgical goo maker Pluromed for undisclosed terms. The deal brings Sanofi's biosurgery division Pluromed's proprietary polymer technology Rapid Transition Polymers and the FDA-approved LeGoo, a gel used during surgeries to temporarily plug blood vessels. (Conveniently for Sanofi and for our half-grasp of the language, LeGoo probably means The Goo in French.) The LeGoo goo was approved by FDA in September and in today's release Pluromed CEO Jean-Marie Vogel gives Sanofi a vote of confidence for its ability to launch the goo and drive adoption. Formerly Genzyme Biosurgery, Sanofi's biosurgery unit markets a suite of products focused on cartilage repair and osteoarthritis treatment. The deal underscores Sanofi's willingness to further diversify away from its core drugs business. -- Chris Morrison

GSK/Omega Pharma: European consumer health care products firm Omega Pharma bolstered its already broad OTC portfolio with six brands from GlaxoSmithKline, but GSK’s sluggish consumer business remains saddled with the once-prized weight-loss drug Alli. Omega Pharma will pay €470 million ($619 million) for six brands – Lactacyd feminine wash products, Abtei supplements, Solpadeine analgesics, Zantac antacid, Nytol sleep aids and the allergy drug Beconase, the firms said March 15. The combined sales of the Glaxo brands exceeded €200 million in 2011, and “will significantly strengthen Omega Pharma’s product portfolio and will create critical mass for the company in key markets including Germany, the U.K., Poland and Italy,” the Belgian firm said. Included in the deal, part of GSK’s plan to simplify its consumer business by selling 19 OTC brands worth about 10% of the firm’s total consumer business, Omega will also acquire the Big Pharma’s Herrenberg manufacturing site in Germany. GSK originally wanted to sell the brands to a single global buyer, but parceled out 17 North American OTC lines to Prestige Brands Holdings in December. GSK says it “remains in active discussions” about the sale of the few lingering brands it wants to sell outside of Europe and North America – including the beleaguered Alli, the lower-dose version of Roche’s prescription weight-loss drug Xenical that has seen sales fall steadily and sharply since its much-anticipated and briefly successful launch in 2007.—Elizabeth Crawford

Alcon/ThromboGenics: Having previously planned to market its lead compound itself, Belgian biotech ThromboGenics has now taken a different tack, and licensed ex-U.S. commercialization rights to its vitreomacular adhesion therapy, ocriplasmin, to the Novartis eye care unit, Alcon. ThromboGenics says it still wants to build up a marketing organization in the U.S., and will work closely with Alcon on ocriplasmin's marketing in the top five European markets. However, Alcon will market the product in more than 40 countries when approved – it is awaiting approval in Europe, and is expected to be resubmitted for priority review in the U.S. shortly. The agreement between ThromboGenics and Alcon is valued at $500 million in total, with ThromboGenics receiving a hefty upfront payment of $100 million, and just over a similar amount in milestone payments, which will probably push the company into profitability this year. Ocriplasmin stops the vitreous humor from sticking and pulling on the retinal membrane at the back of the eye, which causes blurred vision and, in severe cases, macular holes and central blindness. The product also has potential in the treatment of age-related macular generation, and could be combined with a VEGF inhibitor such as Novartis's Lucentis (ranibizumab). The deal is the first in the biopharmaceuticals area to be concluded by Alcon since it was acquired by Novartis last year. - John Davis

Pfizer/Biocon: In our "No Deal" of the week, Pfizer walked away from a $100 million-plus investment on March 12, terminating its biosimilars partnership with Biocon Ltd., India's largest biotechnology firm, under which it would have commercialized generic versions of four diabetes drugs worldwide. Both parties said the split reflects a desire by each company to focus on "individual priorities for their respective biosimilars businesses." Pfizer said it remains committed to biosimilars development, particularly in the areas of monoclonal antibodies and recombinant proteins. Biocon will continue its effort to develop and market biosimilar versions of recombinant insulin as well as of Sanofi's Lantus, Novo Nordik's Novolog and Eli Lilly's Humalog. At the time the agreement was signed in October 2010, Pfizer, not a traditional player in the diabetes space, projected a growing diabetes market that would reach $40 billion a year for drugs and devices, with insulin products controlling about 35% of that business, or $14 billion. Pfizer was to pay Biocon $200 million up-front, with the potential for up to $150 million in development and regulatory milestones, along with potential sales royalties on the four products. As of the split, Pfizer had paid Biocon $100 million, with the other $100 million kept in escro, tied to progress on building a biosimilars manufacturing and R&D facility in Malaysia. Biocon will continue building that facility, with the funds from Pfizer. - J.H.

Thanks to Jessica Merrill, who reported on the Shire/FerroKin deal for Pink Sheet DAILY. Magically delicious leprechaun cake image courtesy of Flickr user Signature SugarArt, reproduced under Creative Commons license.

Financings of the Fortnight Puts On The Weight

2012-03-09T11:40:00.000-05:00

Was FOTF the only one to notice that anti-obesity drug maker Vivus aced its FDA advisory committee review on Feb. 22, one day after Mardi Gras?

It didn't take long for the company to digest the impact: one week later, it went to the public markets for a stock sale, which we describe below. And Vivus' two main competitors, both of whom have had the FDA send their dishes back to the kitchen at one time or another, saw action as well. Arena Therapeutics spiked briefly to $2.11 a share on Feb. 23 with about 8 times its typical trading volume, only to drop back down under $2. The firm also triggered a sale of 14.4 million shares to Azimuth Opportunity that netted nearly $25 million; not exactly selling high. It's part of a $50 million line of credit opened last November that lets Arena put a sale of stock to Azimuth at a pre-arranged discount.

Arena is next up at FDA, with an advisory committee hearing scheduled in the second quarter, but by then Vivus could know its fate, with a PDUFA date of April 17. Orexigen Therapeutics' shares have traded as high as $4.37 a piece since the good Vivus news, their highest in about a year. So far Orexigen hasn't made any related financing moves, but it did announce Thursday that it would slim down at its San Diego-area headquarters.

Meanwhile, the prospect of a new fat-fighting drug finally reaching the market has generated takeover talk as breathless as Dom DeLuise trying to run up a flight of stairs. Potential buyers might want to wait to see if FDA requires a pre-marketing cardiovascular outcome study. Our Pink Sheet colleagues noted recently that the advisory committee seemed satisfied with the prospect of a post-marketing study, but as we all know, it's not unusual to see a gap between the ad-com opinions and final FDA rulings. An overview of cardiovascular assessments by the Endocrinologic and Metabolics Drugs Advisory Committee in late March could shine more light on what extra clinical hoops the three drugs -- Vivus' Qnexa, Arena's Lorquess and Orexigen's Contrave -- will have to pass through.

If any of those drugs actually work, perhaps we'll pay more attention to what Shakespeare called the food of love than the love of food. Which brings us to our off-topic financing of the fortnight: our favorite pending IPO is Fender Musical Instruments Corp., which wants to go public after 65 years of shredding, twanging, picking and reverberating. We wouldn't care if those shares were a good investment as long as owning them made us sound, at least in our mind, just a little bit like this guy. Or perhaps more appropriately, The Ventures. This is, after all...

Vivus: Following the old adage to strike while the FDA is hot, Vivus parlayed the green light an FDA advisory committee gave its Qnexa (topiramate/phentermine) weight-loss drug into a $202 million public offering on Feb. 29. The San Francisco Bay Area company sold 9 million shares at $22.50 a piece, and underwriters led by J.P. Morgan could sell up to 1.35 million more. The funds will go in part to build a sales force for Qnexa, which has navigated a tortured path to date. It received strong backing last month from the FDA's Endocrinologic and Metabolic Drugs Advisory Committee, a 20-2 vote, in part because panelists were assured that Vivus would be held accountable if it didn't conduct a post-marketing cardiovascular outcomes study. The near-unanimous vote more than doubled the price of Vivus shares, from $10.55 on Feb. 22 to a high of $25.14 on Feb. 27. It closed March 6 at $21.52. Rejected by the FDA in 2010, Vivus resubmitted its marketing application last October with a curtailed patient population, excluding women under 55 to eliminate the chance of the topiramate component of the drug causing birth defects. If approved, Qnexa initially will be indicated for obese patients with a body mass index (BMI) over 30 or overweight patients with a BMI over 27 who do not have child-bearing potential, and who have at least one comorbidity such as high blood pressure, type 2 diabetes, or abdominal obesity. Qnexa's PDUFA date is April 17. -- Staff reports

Aragon Pharmaceuticals: After mulling an IPO and a partnership, cancer drug maker Aragon Pharmaceuticals opted for door number three: a $42 million Series C round that CEO Richard Heyman said strengthens the company if it eventually chooses to pursue either of the first two. The Topspin Fund, the personal investment vehicle of a small group of high-net-worth individuals including billionaire hedge fund manager Jim Simons, led the round, investing alongside existing backers Aisling Capital, OrbiMed Advisors and The Column Group. Along with former Honeywell executives Leo Guthart and Steve Winick, Simons also manages $213 million fund Topspin Partners, but the three chose to invest in their sidecar fund instead; Guthart said the primary fund is “fully invested.” There are personal connections behind the scenes: Simons also is an investor in OrbiMed's funds and Guthart is treasurer of Cold Spring Harbor Laboratory, where Aragon co-founder Charles Sawyers is on the board of trustees. Aragon intends to complete Phase II work on ARN-509, a candidate for castration-resistant prostate cancer that eventually could compete with Johnson & Johnson’s Zytiga (abiraterone) for the sub-market of men in whom prior treatments have failed. It also intends to bring a selective estrogen receptor degrader into Phase I for breast cancer. If Aragon aims for an IPO, it hopes Topspin's experience investing in public companies could lead the firm to cross over and take a piece. Having insiders take part in an IPO has practically become a prerequisite for going public these days. -- Paul Bonanos

4s3 Bioscience: An investment firm connected to one of the world’s wealthiest families has supplied a $20 million Series A round to 4s3 Bioscience, a start-up investigating new treatments for rare muscular disorders. KLP Enterprises, a trust managed by the family office of Karen Pritzker and Michael Vlock, made the investment. The Pritzker family’s legacy includes ownership of the Hyatt hotel chain, electric and industrial equipment holding company Marmon Group, and credit bureau TransUnion. KLP’s investment builds on a seed round from Genzyme Ventures in 2008, as well as grant funding from Massachusetts Life Science Center, the Muscular Dystrophy Association, National Institute of Health and the HHS Therapeutic Discovery Project. 4s3 is developing drugs that use an antibody technology to deliver muscle-building proteins and enzymes into cells, which could yield treatments for muscular dystrophy and other disorders affecting skeletal muscle. The start-up is housed at the University of Massachusetts-Boston’s Venture Development Center, and its founders are working closely with KLP drug development subsidiary Alopexx Enterprises as they build the company. -- P.B.

Amicus Therapeutics: The developer of treatments for lysosomal storage disorders and other rare diseases topped off its public stock offering March 7 with underwriters taking their full over-allotment, making a total of 11.5 million shares sold at $5.70 a share for net proceeds of $62 million. The firm, whose tale was told in the film Extraordinary Measures (with Brendan Fraser playing CEO John Crowley), last raised cash when it sold worldwide rights to its lead drug Amigal (migalastat HCI), for Fabry disease, to GlaxoSmithKline for $60 million upfront in October 2010. Part of that payment bought GSK a 19.9% equity stake in Amicus at $4.56 a share, at the time a 15% premium. Announcing the GSK deal, Crowley said it would sustain Amicus at least until U.S. approval of Amigal, which has not proved out. The drug is currently in Phase III in a monotherapy trial co-sponsored by Amicus and GSK and in a separate combination therapy trial that is still recruiting patients. -- A.L.

This fortnight's column powered by Mavis Staples.

Deals Of The Week: U.S./Russia Biotech Joint Venture Driven By An All-Too-Familiar Catalyst

2012-03-09T10:34:00.001-05:00

Finding creative ways to fund the lifecycle of biotech companies is not a new issue, but turned out to be the catalyst behind an intriguing joint venture unveiled this past week between U.S. venture capital firm Domain Associates and the sovereign Russian nanotechnology investment fund Rusnano. On March 6, the pair announced the expansion of a previous working agreement that now will include investments of up to $330 million apiece in biotechs under the Domain portfolio and up to $190 million total to build a GMP-compliant manufacturing facility in Russia.

Rusnano, Domain and its syndicate of investors will back roughly 20 new and existing portfolio companies working in the life sciences field – biopharmaceuticals, medical devices and diagnostic products – creating a multinational medical products company in Russia that will make and market innovative products in Russia, Eastern Europe and the Commonwealth of Independent States. Last year, Rusnano and Domain had announced a $300 million effort to build from scratch a Russia-based pharmaceutical company from Domain’s portfolio companies. This latest announcement expands each partner’s proposed investment. The investments will lean more heavily to biopharmaceuticals than devices or diagnostics, said Domain Partner Brian Dovey, but there are no pre-set ratios.

“The initial aim is to build a kind of consortium of intellectual property from Domain’s portfolio companies and on that basis establish a recognized regional pharmaceutical company which will develop, conduct clinical trials, manufacture and sell a spectrum of innovative products,” in the specified markets, Rusnano USA CEO Dmitry Akhanov explained.

The Russia-headquartered company and facility that will result from the joint venture will leverage innovations created by the Domain portfolio firms and will obtain exclusive rights to manufacture and market products based on these innovations. The JV also will manage late-stage Russian clinical trials, which will support regulatory approval in Russia, the U.S. and other nations.

“The idea would be to do some clinical trials there – it is less expensive to do them there but that’s not the driving force,” said Domain Partner Brian Dovey. “The driving force is really to include the Russians in the worldwide clinical program, so the products would be [approvable] in Russia. We do have experience with some of our companies doing clinical trials in Russia, and by and large, it’s been a good experience. It’s a pretty well established industry there.”

New streams of cash for Domain’s portfolio companies also drove the deal, he added. Domain and other VCs are discovering that even when they can find an exit for a portfolio company, all too often the transactions are structured exits involving milestones and other earn-outs.

"That’s pretty much the benefit – getting our and [syndicate investors’] companies financed,” Dovey explained. “I think the concept of selling our companies at the end of Phase II leads to a lot of these structured deals, which are less than optimal. If you take your companies further, I’ve been told by big pharma, they’ll pay a lot for more data.”

Much is yet to be determined about the Domain/Rusnano JV – the amount of equity Rusnano will take in a specific company will be determined deal-by-deal, Dovey said, and earn-outs certainly may come into play in those agreements, as well. “[Rusnano will be] just like any other equity owner – there will be a Series C, E or G, [and] all of the investors in that round will be under the exact same terms and conditions as the insiders and new investors,” he added.

Dovey and his team sounded out the other investors in their portfolio companies before making the deal with Rusnano – “Clearly a situation I didn’t want to have occur was to get this whole thing done and then nobody comes to the party.” he said. “It’s been pretty clear to the co-investors as to what I am doing and why … and I think there’s a consensus that it’s a good idea – it’s a whole new source of capital.”

There was some initial pushback when syndicate investors heard the word “Russia,” Dovey added, but as they learned the particulars, they weren’t very difficult to sign on. Speaking of which, there has been a lot of signing on during the past week – more than a dozen deals, from which we offer highlights in our latest edition of …

Mersana/Endo – Mersana Therapeutics and Endo Pharmaceuticals Holdings are teaming up to challenge Seattle Genetics and other players in the burgeoning antibody-drug conjugate (ADC) space. In a deal announced March 7, the two firms will combine Mersana’s proprietary Fleximer conjugation technology with anti-cancer antibodies discovered by Endo to produce novel ADC candidates against a single, undisclosed oncology target. Most deal terms were not disclosed – Mersana will receive an upfront payment and can earn greater than $270 million in “progress-dependent” milestones, although the extent of the earn-outs will be contingent on whether the duo expands the arrangement to two additional targets. In an interview, Mersana Executive VP and Chief Operating Officer Michael Metzger indicated that expansion of the partnership to additional targets might result in additional up-front money to his firm, but would not specify. “You can make the assumption that the terms replicate deal to deal,” he said. Under the collaboration, Mersana will conduct research and create the ADCs combining cytotoxic payloads with Endo’s antibodies. Endo then will be responsible for product development, manufacturing and commercialization. In addition to milestones, Mersana can earn royalties on worldwide sales of any product reaching market from the collaboration.--Joseph Haas

Nuron/Akshaya – Exton, Pa.-based specialty biologic drug and immunotherapy developer Nuron Biotech said March 5 that it had acquired license to a platform to develop multi-antigen vaccines for the hepatitis B virus from Akshaya Bio of Edmonton. Financial terms weren’t released. Nuron acquired technology and rights to Chimigen, a chimeric vaccine platform with which it says it can discover both therapeutic and prophylactic vaccines that provoke T-cell and B-cell immune responses. The platform could yield its first clinical candidate by next year, Nuron said. The company also acquired an option to license Akshaya’s hepatitis C virus immunotherapies, which also include therapeutic and preventative vaccines. The deal diversifies Nuron’s offerings, such as the Phase III candidate NU100 (interferon beta-1b) for multiple sclerosis; it also is working on a re-launch strategy for the HibTITER vaccine, marketed in the 1990s by Wyeth to prevent Haemophilus Influenza Type B infections in infants and children. Nuron licensed Japanese rights to the HibTITER product to Mitsubishi Tanabe Pharma Corp. last month.--Paul Bonanos

Foundation Medicine/Array BioPharma – Array BioPharma and Foundation Medicine announced a partnership March 6 in which Array will use Foundation’s next-generation sequencing technology to analyze tumors and identify patients who may best respond to its targeted therapies. FMI, which emerged from stealth mode in 2010 advised by a team of experts in next-generation sequencing, has already has signed five other pharma partners, including Sanofi and Johnson & Johnson. In February, Foundation received Clinical Laboratory Improvement Amendments (CLIA) certification from CMS for its genomic sequencing lab, allowing the company to receive clinical samples from most U.S. states. The company is developing a test that will transition next-generation sequencing from research to routine clinical practice.--Jessica Merrill

Apexigen/GDBP – Shanghai’s Gansu Duyiwei Biological Pharmaceutical (GDBP) has negotiated a licensing agreement with privately held Apexigen to develop its VEGF2-targeting humanized monoclonal antibody APX004, for the treatment of certain cancers and angiogenic diseases. Under the March 6 agreement, GDBP receives exclusive rights to research, develop and commercialize the drug in China. Apexigen will retain all rights to APX004 outside of China. While financial terms were not disclosed, Apexigen did receive an upfront payment and is eligible for milestone payments based on the progress of the drug and royalties. Spun out from Epitomics in July 2010, Burlingame, Calif.-based Apexigen also has a partnership with Simcere, a Chinese drug manufacturer. Simcere filed an IND in China in March 2011 for APX003, another monoclonal antibody from Apexigen’s pipeline. Apexigen is focused on developing biobetters for inflammation, cancer and metabolic and immune disorders, and has rights to Epitomics' high-affinity rabbit monoclonal antibody technology, RabMab, and mutational lineage-guided humanization technologies.--Lisa LaMotta

Medicago/Mitsubishi Tanabe – Mitsubishi Tanabe Pharma Corp., which claims to be the top domestic vaccine company in Japan, is attempting to stave off ambitious vaccine plans from competitors via partnerships. The company signed a deal with Medicago Inc. for next-generation vaccines, starting with a rotavirus vaccine that would take on Rotarix, Japan's first and only rotavirus vaccine. Mitsubishi Tanabe signed the deal with Medicago, based in Quebec City, Canada, March 7, disclosing only that the companies will collaborate on several vaccines using Medicago's virus-like particles (VLPs), starting in the spring on a rotavirus vaccine project. Since VLPs mimic native viruses but cannot replicate in the body, Mitsubishi Tanabe says it aims to "create a new rotavirus VLP vaccine that overcomes challenges associated with existing live virus vaccines." If Mitsubishi Tanabe and Medicago do manage to develop a rotavirus vaccine, it would compete with GlaxoSmithKline's Rotarix, a live virus vaccine that entered the Japanese market in 2011. GSK co-promotes Rotarix in Japan with Daiichi Sankyo, and the two companies formed a joint venture last week to collaborate on development and commercialization of vaccines in Japan. That JV was announced just a few days after Japan’s largest pharma, Takeda Pharmaceutical, outlined an ambitious plan to join the top-tier of global vaccine manufacturers – such as GSK – within just a few years’ time.--Daniel Poppy

Photo Credit: The Catalyst Museum, courtesy of Wikimedia Commons and the publication Chemical Engineer

Deals of the Week Sets Sail For The Galapagos

2012-03-02T11:00:00.000-05:00

Abbott is readying for two major steps in its evolution. Most prominently, it’s preparing to split its pharma division from its diversified medical products business this year, creating two public companies from one. But it’s also preparing for December 2016, when its best-selling drug loses patent protection. Abbott’s injectable Humira (adalimumab) for rheumatoid arthritis and other autoimmune diseases is currently among the world’s top sellers, with $7.9 billion in 2011 sales, representing more than 46% of Abbott’s global sales of proprietary drugs. With less than five years’ time left on the clock, not to mention a looming threat of competition from oral drugs or lower-priced alternatives, Abbott is already looking for a successor.

With that evolution in mind, Abbott made like the HMS Beagle and set sail for the Galapagos this week – specificially Galapagos NV of Belgium, where among the tortoises and finches lay the crown jewel GLPG0634, a selective JAK1 inhibitor that’s already shown promising data in a Phase IIa study in rheumatoid arthritis, and is expected to enter a Phase IIb dose-range-finding study soon. In an extremely rich deal for a mid-stage candidate, Abbott paid $150 million up-front to claim worldwide rights to the drug, and will pay a second $200 million licensing fee if the Phase IIb study yields data that satisfy a set of pre-determined but undisclosed criteria. Additional milestone payments could add $1 billion more to the deal, while Abbott remains on the hook for double-digit royalty payments if GLPG0634 is ever commercialized.

For Abbott, it’s a way to make doubly sure that its autoimmune franchise is extended. Last summer, the company paid $85 million up-front to license German biotech Biotest’s BT-061, a Phase II antibody that binds to the CD4 protein and slows overreactions of the immune system. That gives it two potential successors to the same blockbuster drug, providing insurance that its sales force will have something else to sell once Humira begins to fade. And it gives Abbott another promising molecule to talk up on its current road shows, in anticipation of the looming split and the public offering that will accompany it.

It’s also just the latest in a series of deals in which Abbott has outbid and outspent its peers for assets that still carry plenty of risk. The company has twice paid Reata Pharmaceuticals top dollar for its compounds, buying ex-U.S. rights to chronic kidney disease treatment bardoxolone for $450 million in 2010 and nabbing a group of pre-clinical antioxidant inflammation modulators for $400 million late last year. If it’s going to be an independent company, Abbott’s pharma division would do well to be better-balanced, with a diverse group of revenue-generating products. Without the diversified medical products business to balance things out, its weaker quarters on the pharma side may be all the more obvious – and damaging.

That’s one reason why Galapagos’s drug seemed like a natural selection for Abbott and why we hope you’ll join us on another pun-filled voyage of…

GlaxoSmithKline/Angiochem: In the latest of a series of rare disease deals, GlaxoSmithKline has forged a collaboration with Montreal, Canada-based Angiochem to develop drugs that cross the blood-brain barrier (BBB) to treat patients with lysosomal storage diseases like Tay-Sachs disease and Fabry disease. Currently marketed enzyme replacement therapies for lysosomal storage diseases do not cross the BBB, and so do not ameliorate neurological symptoms. Angiochem is able to engineer enzymes so that they bind to the LRP (lipoprotein-receptor-related protein-1) receptor in brain tissue and are transported into the CNS. Angiochem is eligible to receive up to $31.5 million in upfront cash, research funding and other fees for one undisclosed enzyme product, although it could receive more than $300 million if GSK exercises certain rights to other compounds and pays sales-related royalties. GSK set up a rare diseases business unit in 2010, and has since then forged deals with the likes of U.S. biotech Amicus Therapeutics for its Phase III Fabry disease therapy, Amigal (migalastat), and with Dutch company Prosensa for PRO-051, its Phase III potential Duchenne muscular dystrophy therapy. – John Davis

Dainippon Sumitomo/Boston Biomedical: Japanese pharma Dainippon Sumitomo is bolstering its U.S. presence, with a focus on oncology through the acquisition of private U.S. biotech Boston Biomedical, announced Feb. 29. In a back-end loaded deal, Dainippon will buy Boston Biomedical for $200 million upfront and an additional $540 million in development milestones and $1.89 billion in sales milestones if net sales reach $4 billion. In exchange, Dainippon will gain two potential first-in-class drugs targeting cancer stem cells and a drug discovery platform. BBI608 is expected to begin Phase III clinical testing later this year for colorectal cancer and BBI503 is in Phase I/II testing in multiple solid tumors. But Dainippon also gains a new oncology research center; the company said it plans to maintain the BBI headquarters in Norwood, Mass. as an oncology R&D base in the U.S. Its North American business, which operates under the subsidiary Sunovion Pharmaceuticals Inc., sells Latuda (lurasidone) for schizophrenia and drugs it gained through the 2009 acquisition of Sepracor: the sleep aid Lunesta (eszlopiclone), Xopenex (levalbuterol) for asthma, Brovana (arformoterol) for chronic obstructive pulmonary disease and Omnaris for allergies.The company’s primary focus in North America has been on the atypical antipsychotic Latuda, which launched in the U.S. about a year ago. Dainippon formed a global oncology business development office in June 2011 to spearhead efforts to enter the oncology drug development space. The company was already familiar with BBI, however; the two have been partners since March 2011 when Dainippon acquired Japanese rights to BBI608 for $15 million upfront. – Jessica Merrill

Avanir/Concert: Avanir, which brought a light-selling dextromethorphan formulation to market in 2010, is making a deeper plunge into developing drugs based on that active ingredient, as the Aliso Viejo, Calif.-based biotech in-licensed multiple deuterium-modified dextromethorphan (d-DM) compounds from Concert Pharmaceuticals on Feb. 29. The deal included an undisclosed up-front payment to Concert, which also can earn research, development and commercialization milestones of up to $200 million and sales royalties starting in the single digits and potentially increasing to the low double-digits if one or more of the compounds reaches market. Concert uses its DCE Platform (Deuterated Chemical Entity Platform) to alter existing therapeutic compounds to improve their plasma exposure, among other benefits. Avanir plans to develop the d-DM molecules in undisclosed neurological and psychiatric indications – it will assume all development responsibilities, while Concert will provide manufacturing support for IND-enabling studies. Previously, Concert brought in an $18.3 million upfront payment and a $16.7 million equity investment from GlaxoSmithKline in a 2009 deal giving GSK options to several DCE-modified compounds. In 2011, the companies chose CTP298, a deuterium-modified version of HIV drug atanazir, for further development. To date, Concert has earned at least $16 million in milestones under the GSK collaboration. Avanir obtained FDA approval of Neudexta (dextromethorphan hydrobromide 20 mg/quinidine sulfate 10 mg) for pseudobulbar effect in 2010 – the company thinks d-DM compounds could be therapeutically effective without the addition of an enzyme inhibitor like quinidine.—Joseph Haas

Nektar/Royalty Pharma: Risk-free cash now, or potential for risk-bearing cash later? Nektar Therapeutics opted to take the lump sum this week when it sold two royalty streams for previously out-licensed drugs to Royalty Pharma, a firm designed for such transactions. The deals netted Nektar $124 million in cash, which it will use primarily to pay down the $215 million in convertible debt it has accumulated. Nektar gives up its share of future sales of UCB Pharma's rheumatoid arthritis and Crohn's disease drug Cimzia (certulizumab pegol) and renal anemia treatment Mircera (methoxy polyethelene glycol-epoetin beta), which it had partnered away in 2000. If the drugs don't meet certain undisclosed sales thresholds during the next two years, Nektar would have to pay a Royalty Pharma affiliate $3 million next year and $7 million during 2014. Nektar's top unpartnered assets include NKTR-102, a Phase III metastatic breast cancer candidate also studied in several other cancers, and NKTR-181, a mu-opioid analgesic drug soon to enter Phase II that's designed to cross the blood brain barrier slowly and thus thwart abuse. It also has NKTR-118 for opioid-induced constipation and NKTR-119 for pain, both being developed under a partnership with AstraZeneca. - P.B.

GlaxoSmithKline/ Daiichi Sankyo: Just two days after Takeda Pharmaceutical Co. Ltd. unveiled more details about the global expansion of its new vaccine business – which it expects to become the top vaccine supplier in Japan - Daiichi Sankyo announced March 2 a vaccines joint venture with GSK that would create the number one vaccines business in Japan. The 50-50 joint venture Japan Vaccine Co., Ltd. will be led by co-CEO representatives from each company. The JV’s stated goal is to join GSK's extensive vaccine pipeline with Daiichi Sankyo's domestic manufacturing, sales and development presence. Keeping all things equal, the companies will sell their prophylactic vaccines into the JV, and will earn for 50-50 profits. Daiichi Sankyo and GSK will also split the ¥100 million start-up capital for the venture, and each will send three executives to sit on the six-member board. Each company will be responsible for their own research, preclinical and pre-proof-of-concept and ultimately manufacturing of their own products. Japan Vaccine will step in for development after proof-of-concept. GSK has been vocal about growth opportunities in Japan. The firm's Japan business grew 30% from 2010 to 2011, largely on the back of the human papillomavirus vaccine Cervarix (human papillomavirus types 16,18), which was added to a government reimbursement program for vaccines in 2010. Since then, Japan has leapfrogged to become Cervarix' largest market. The joint venture will begin operations July 2.—Dan Poppy

Image of Conrad Martens' painting of the HMS Beagle reproduced courtesy of the Wikimedia Commons.

Financings of the Fortnight Thinks You're Hot.... Or Not

2012-02-24T12:31:00.001-05:00

A mother-in-law who's also a day trader sounds like the start of a "walks into a bar" joke. But trust us, such people exist. And they sometimes ask their sons-in-law for biotech trading advice, at which point their sons-in-law laugh out loud and say, "Here's the best biotech trading advice: Don't."

Obviously a lot of people do, and (we assume) most of them understand just how risky the sector is. There are all kinds of bets to place on all kinds of companies and assets and perhaps, just perhaps, those with appetite for risk are starting to peek out from under the tarp (and we're assuming they don't duck again for cover in fear of the Gilead Sciences Hepatitis C results spreading end-of-bubble contagion over the sector). We say so because this past fortnight brought a fascinating group of financings in areas that, we can say charitably, are about as hot as a first date with Rick Santorum.

For example, Alnylam Pharmaceuticals, once flying high on the therapeutic promise of RNA interference -- a discovery that won the Nobel Prize six years ago -- has seen much of the interest in the platform dry up and legal headaches crop up. But the firm, while cutting a third of its staff, is pressing on with its own clinical program for transthyretin-mediated amyloidosis, one of only a few RNAi-based drugs in the clinic, and last week it raised $87 million through a public offering of 8.6 million shares at $10.75 a piece.

Another notable and counter-intuitive bet was the $100 million private placement issued by Vernalis, bought in large part by a major shareholder. Vernalis is a long-in-the-tooth UK biotech that slowly, steadily has built itself back up from a near-bankruptcy late last decade. Resilient, yes. En vogue? Mais non. As we explain below, most of the cash is being plowed into the firm's new guise as a cold-and-cough-drug marketer, a sharp and, to be frank, rather weird right turn for the long-time discovery firm.

Staying across the pond, we note the French diabetes firm Adocia raised €25 million ($33 million) in the first European biopharma IPO of the year -- and the first one in nine months. In other words, paying newly public companies for their equity is something European public investors simply don't do these days, so when it happens, please take note. (It's also worth a mention that French orthopedic imaging firm EOS imaging went public on the NYSE Euronext February 15 and raised €38 million.)

But the most interesting deal for us this past fortnight is in Alzheimer's disease, where a lot of smart people are wondering how to treat a malady that, by the time symptoms start to appear, might be too late to treat. With huge clinical programs burning hundreds of millions of dollars to little effect, it's not a great time for start-ups to convince investors to back their early-stage work, especially when they've already had significant delays in getting to the clinic.

But Satori Pharmaceuticals said this week that three existing investors would put up $15 million in convertible debt as a bridge to the clinic -- and ideally to an exit. It could be the start-up's last chance to make a big impression in a field that, to some extent, is in retrenchment mode, with a growing realization of how vast the problem is, and even the federal government pondering how to step in. In the grand scheme of things, $15 million is chicken feed weighed against the chance of Satori bucking current conventional wisdom and having a disease-modifying effect with a drug that keeps nasty plaques from forming in the brain.

See our roundup below for a more detailed account, and let's all give a hip-hip-hooray for those with an appetite for risk, as long as they don't give our mothers-in-law any bad advice. Meanwhile, you can never go wrong hanging on every word of...

Satori Pharmaceuticals: The preclinical Alzheimer's startup said February 23 that its current venture backers have extended the firm $15 million in convertible debt to help push its lead compound into the clinic, with Phase I now slated to start in early 2013. When the firm sewed up its previous financing, a $22 million Series B round in 2008, officials were optimistic they could reach clinical studies by 2011, but the horizon retreated with the need to rework the unnamed compound, a gamma secretase modulator, into a once-a-day dosing formulation, executives say. The new cash is not equity, although officials said they contemplated raising a Series C. Instead, as the company races to file an IND, the debt option allowed faster turnaround because there was no need to negotiate a new company valuation or bring in new investors. The debt will convert to Series C shares if the company raises a new round, but Satori prefers that the $15 million bridge loan would attract Big Pharma partners -- and ultimately an acquirer -- by proving its lead drug's hypothesis in two Phase I trials. The first trial aims to show safety, without the side effects that have dogged gamma secretase inhibitors. Satori says its drug is more "selective," in that it allows the enzyme gamma secretase to do its beneficial work in some molecular pathways, while preventing it from creating the toxic amyloid beta-42 fragment that aggregates into the tell-tale plaques that foul the brains of Alzheimer's patients. In the second Phase I trial, Satori aims to show by measuring cerebrospinal fluid (via spinal taps) that the drug indeed suppresses production of Aβ-42 without suppressing production of other amyloid beta fragments that don't appear to be harmful. Existing investors InterWest Partners, New Enterprise Associates, and Prospect Venture Partners bought the debt financing. Other Satori investors including PureTech Ventures could buy an additional $4.2 million of the debt as part of their pro-rata rights, but have not yet done so, according to Satori officials. -- Alex Lash

Ceptaris Therapeutics: Wait a second. Is venture debt hot? After changing its name from Yaupon Therapeutics to Ceptaris Therapeutics in January, Ceptaris has raised $15 million in a venture debt financing to help fund its transition from a clinical-stage company to one that anticipates commercializing its first product later this year. The product, formerly known as Clearazide, a topical gel formulation of the generic cytotoxin mechlorethamine, has a PDUFA date of May 27 for an indication of early-stage cutaneous T-cell lymphoma (CTCL). The company received $7.5 million at closing of the debt financing February 21, and is eligible to draw down the other $7.5 million upon FDA approval of the drug. The debt financing was backed by Silicon Valley Bank and Oxford Finance. Ceptaris, founded in 2002, had raised more than $33 million over four rounds of financing, most recently bringing in a $14.4 million Series D last August. Chairman and CEO Stephen Tullman explained that the non-convertible debt financing offered Ceptaris several advantages over another VC round, not the least of which was preventing further dilution of the company’s stock. "At this time venture debt offers us the lowest cost of capital,” he said. -- Joseph Haas

Vernalis: British biotech Vernalis joined the follow-on fiesta of the fortnight with a $104 million private placement of its stock to fuel its transformation into a marketer of prescription cold and cough medicines. The cash helps pay for a new development deal struck with privately held Tris Pharma, which has spent more than seven years developing 12-hour extended release liquid formulations. Vernalis will pay development milestones on up to six new cold drugs that Tris funds, develops and submits for approval to the FDA. The active ingredients are already marketed in the US, so the products could be ready for filing in 12 to 24 months, Vernalis CEO Ian Garland said in a February 10 conference call. Vernalis has exclusive marketing rights to the products, and their core patents on extended-release liquids expires in 2029, Garland said. It's a remarkable pivot and the latest incarnation for Vernalis, with roots going back two decades, although not a complete surprise that it would aim for a nearer-term product to in-license. In 2010 Garland said Vernalis was on the hunt for something in neurology or oncology. Also, Garland has experience marketing cough and cold medicine when he ran the US business of Celltech (now UCB Pharma) in the 1990s. That Vernalis could raise $100 million is also remarkable, considering it was nearly bankrupted by the US rejection of its migraine drug Frova (frovatriptan) in the expanded indication of menstrual migraine. It sold US rights and restructured in 2008, and soon after Garland took over with the plan to rebuild through licensing deals backed by its discovery platform, such as this 2009 tie-up with GlaxoSmithKline. The recent placement totals 342 million shares at £0.20 a piece, a 7% premium. It was sold to existing backers, including Invesco Asset Management, and new buyers. Invesco already owns 42.9% of Vernalis; its purchase would have triggered an obligation to buy Vernalis outright, but Vernalis is waiving the condition to let the sale go through. Shareholders must approve the sale February 28. -- John Davis

Exelixis: As Exelixis continues to push top candidate cabozantinib through a Phase III trial for medullary thyroid cancer, the oncology drug developer has again turned to the public markets for financing. Exelixis netted $65 million in its latest follow-on offering, selling 11 million shares to the public at $5.50 apiece, plus an additional 1.65 million to its underwriters. Goldman Sachs was the sole book-running manager in the offering, while Cowen & Co. was co-manager. Exelixis said earlier this month that it aimed to sell 10 million shares, but it raised its target upon pricing the offering Feb. 10. In a Feb. 22 regulatory filing, the company said it had $284 million in cash, cash equivalents, marketable securities and long-term investments as of Dec. 31. With anticipated payments from partners and the newly-raised cash, Exelixis said it has enough capital to cover its next 12 months’ worth of expenses. The company expects to pursue a more lucrative prostate cancer indication for cabozantinib if the drug is approved for MTC. Exelixis last raised money in March 2011, when it netted $180 million by selling shares at $11 apiece. The company raised about $285 million in four other secondary offerings between 2003 and 2007. -- Paul Bonanos

Photo courtesy of XcBiker via a Creative Commons license. Soooooo hot.

Deals of the Week Takes Out The Last One Standing

2012-02-17T11:00:00.000-05:00

Fifteen months ago, three well-funded startups were racing alongside a couple of more established companies to develop the first approved drug for idiopathic pulmonary fibrosis. Two, Arresto Biosciences and Amira Pharmaceuticals, were taken out in rich deals. That left Stromedix as the last one standing.

Biogen Idec knocked down the final pin in a Feb. 14 deal to acquire Stromedix, bringing the last of the three promising drugs into the hands of a publicly traded behemoth. Gilead acquired the Arresto asset for $225 million plus unspecified milestone payments in a December 2010 deal; Bristol-Myers Squibb paid $325 million for Amira in a relatively complex transactionlast summer.

While the deal’s upfront payment of $75 million was modest compared to the others, the contingency payments actually exceed the Amira deal’s. If Stromedix’s drugs meet all the milestones built into the arrangement, its shareholders would receive a total of $562.5 million; the Amira deal was worth $475 million including milestones. Both Amira and Stromedix were planning to begin Phase II trials on their IPF drugs at the time of their acquisitions, while Arresto’s was in Phase I.

For Biogen, the acquisition brings back a compound the company licensed to Stromedix in 2007. Stromedix's primary asset was the antibody STX-100, a selective inhibitor of the TGF-beta pathway which Biogen originated but eventually de-prioritized. Former Biogen executive vice president of research Michael Gilman left the company in 2005 to join Atlas Venture, started Stromedix and acquired STX-100 with Atlas’ backing. Now, Biogen has them both back.

Effectively, Biogen offloaded the risk in developing STX-100 through Phase I to a VC syndicate that included Atlas, Bessemer Venture Partners, Red Abbey Venture Partners, New Leaf Venture Partners and Frazier Healthcare Ventures. Those firms stand to receive a healthy return after pouring $29.4 million into the company; the up-front payment alone represents a step-up valuation of more than 2.5 times their initial investment.

What's more, this is a validation of what one might call an 'if you love it, set it free' strategy that large pharmaceutical companies are increasingly pursuing with shelved assets. Biogen had no claw-back on the Stromedix crown jewel, a more palatable opportunity for any biotech's venture investors, and was still able to keep tabs on the compound via a 5-6% stake in Stromedix and a board-observer position.

Gilman describes the acquisition as "bittersweet,' noting that "getting acquired was always the end game," and of all places Biogen is a great place to land. He and the rest of the Stromedix team will function independently as a fibrosis project team within the bigger biotech, helping to build a broader pipeline of fibrosis drugs there.

As we settle into President’s Day weekend in the U.S., we at Deals of the Week hope you all get to enjoy a bit of leisure. Maybe you’ll even hit the lanes like Nixon did. Enjoy your beer frame with…

Valeant/Eyetech: Rebuffed last fall in its effort to buy ISTA Pharmaceuticals, acquisition-hungry Valeant Pharmaceuticals International beefed up its ophthalmics holdings Feb. 13 by taking out privately held Eyetech for an undisclosed amount up-front plus milestone payments. The deal gives Valeant U.S. rights to Eyetech’s Macugen (pegaptanib), which in 2004 became the first inhibitor of vascular endothelial growth factor to treat the “wet” form of age-related macular degeneration by slowing angiogenesis around the retina. The injectable drug has since lost ground to Genentech’s Lucentis (ranibizumab), as well as off-label prescriptions of Genentech’s Avastin(bevacizumab). Pfizer markets Macugen outside the U.S. Palm Beach Gardens, Fla.-based Eyetech has been privately owned since a 2008 management buyout; it was publicly traded until OSI Pharmaceuticals acquired it in 2005. Valeant acquired ophthalmics products Lacrisert(hydroxyproyl cellulose) for dry eye and the Ocudose formulation of glaucoma treatment Timoptic (timolol maleate) when it bought Aton Pharma for $318 million in 2010. Even if all the milestones in the Eyetech acquisition are reached, the deal’s value will be less than twice Eyetech’s 2011 sales; Valeant vice president of investor relations Laurie Little said the deal is “small in the scheme of things” for the Canadian specialty pharma. – P.B.

NYGC/Illumina/Feinstein Institute: The recently opened New York Genome Center announced Feb. 16 that it has entered into a large-scale whole genome sequencing project with the Feinstein Institute for Medical Research, part of the North Shore-LIJ Health System, which is one of the founding members of the NYGC. The project, which is set to begin in March and estimated to last about four years, will sequence the genomes of 1,000 Alzheimer’s disease patients in hopes of finding a clear genetic link to the disease. NYGC will begin with samples from 130 patients this year. The project will leverage the collaboration already established between Illumina and the NYGC, with Illumina supplying the sequencing equipment. The data that results from the project will be made available to the public a year after the sequencing is completed. The NYGC, led by attorney Nancy Kelley, is an effort that comprises 11 of the city’s academic medical centers, as well as two industry partners – Roche and Illumina. Backed by more than $125 million in fees from sponsors, the NYGC is one of New York’s efforts to compete with the strong biopharma initiatives going on elsewhere in the country, particularly San Francisco and Boston. – Lisa LaMotta

Merck/Supera Farma: As it develops into one of the most fertile emerging markets for biopharmaceutical products, Merck is establishing a joint venture in Brazil with two local companies – Cristalia Labs and Eurofarma Laboratorios – to market roughly 30 drugs in that country, both innovative products and branded generics across a range of therapeutic areas. Merck announced Feb. 15 that it will team up in Brazil with Supera Farma Laboratorios, jointly owned by Cristalia, which specializes in psychiatry, anesthesia and pain relief, and Eurofarma, which boasts a broader therapeutic focus and the largest medical sales force in Brazil. Merck will own 51% of the joint venture, with the two Brazilian firms controlling the other 49%. The new entity will have its own dedicated sales force, while the parent firms’ infrastructures will be leveraged for tasks such as training. Merck’s investment in Brazil is just the latest in a string of such plays by other biopharmaceutical companies. Last April, Amgen bought out Brazil’s Bergamo for $215 million, while Sanofi paid about $662 million in 2009 to acquire Medley Pharmaceuticals and Pfizer spent $240 million upfront in 2010 to obtain 40% of Laboratorio Teuto Brasileiro.—Joseph Haas

Merck/Zhifei: Merck struck a second deal in an emerging market when it expanded an existing partnership with Chinese vaccine developer Chongqing Zhifei Biological Products. The two companies will jointly seek approval of vaccines for rotavirus and respiratory syncytial virus in China, building on an April 2011 agreement under which Zhifei markets Merck’s measles-mumps-rubella combo vaccine and a 23-valent pneumococcal prophylaxis in China. Merck’s RotaTeq for rotavirus is currently approved and available in 87 countries, and has been sold in the U.S. since 2006, but approval in China will require the completion of a Phase III trial. Only one other vaccine has been approved for rotavirus in the country, a single-valent therapy marketed by Sinopharm subsidiary Lanzhou Institute of Biological Products; there is no approved vaccine for RSV in China. Zhifei is now the sole distributor of Merck vaccines in China; the two companies are said to be aiming to further expand their partnership. – P.B.

Invaluable reporting on the Biogen/Stromedix deal was provided by Joe Haas. Image from Flickr user Andrew Ressa, reproduced under Creative Commons license.

First-in-human Implantable Drug Delivery Data Airing at AAAS

2012-02-16T14:01:00.002-05:00

As this post goes live, a 2pm press briefing is starting at the AAAS Annual Meeting in Vancouver to discuss data from Waltham, MA-based microCHIPS’ inaugural human clinical study of its implantable drug delivery chip, to be published in Science Translational Medicine. The briefing is expected to include company president & COO Robert Farra live on site, as well as founding inventors Michael Cima and Robert Langer of MIT dialing in. Given the venue and the potentially disruptive nature of the technology, we would not be surprised if it receives wide popular coverage.

The thumbnail-sized chip can be implanted and removed in a doctor’s office using local anesthetic. In the trial, it delivered the parathyroid hormone (PTH) drug Forteo daily for 19 days (20 doses), starting at day 57 post-implant. (The lag was to determine that the formation of fibrous tissue around the implant did not interfere with pharmacokintetics – apparently, it did not.)

The device functioned in seven of the eight patients, delivering a total of 132 doses. Although there were some mechanical glitches, the study validated several critical design features including hermetic sealing of each drug reservoir at or near room temperature, to prevent drug degradation, and on-command delivery. Importantly, according to Farra, the patients “found it acceptable:” they could not feel the device and were willing to repeat the procedure for another round of dosing.

An accompanying editorial to the paper, titled "Re-Engineering Device Translational Timelines," dishearteningly calls the road to commercialization of a novel therapeutic implant “a long, meandering pathway to clinical introduction,” fraught with warning signs of “many hairpin curves ahead.” In an interview, Farra sidestepped any discussion of that analogy: “There have been challenges,” he says, but “this technology is paradigm shifting…I think microCHIPS actually did this relatively quickly given the capability of this microchip,” and the need for safety and reliability for use in humans.

Farra may balk at the characterization of expectation versus reality with respect to his company’s timelines. But microCHIPS was founded in 1999 and has been on the popular science radar screen for the past 4-5 years. Literally; in 2008, co-founder and then CEO John Santini was named one of Popular Science’s “Annual Brilliant 10.” Santini later departed, as has successor Ajit Gill. Farra, who joined as head of R&D in 2007, became president in September 2011. Turnover in top management is not unusual for a start-up, but the editorialist’s general point about expectations is valid, irrespective of whether those expectations are being ginned up internally (which we are not saying is the case here) or by the media.

Successful adoption of this implant will probably also require medical infrastructure changes to take effect, such as real-time monitoring capability. The microCHIPS device has built-in diagnostics that can tell whether a dose has been delivered correctly, but it’s done retrospectively, after that information has been uploaded by a physician or caregiver. Farra envisions that in the future, the device will be linked to a cellular network so the information would be flowing to a trending database system that would automatically flag a problem in minutes or less. How quickly such an infrastructure is put in place remains to be seen.

That said, the trial results are heartening. “We needed this milestone to ensure we are spending our money wisely in developing this product,” says Farra. Having validated the 20-dose chip, the next step is to test a same-sized, higher density chip containing 365 wells, which could handle delivery for 1-2 years depending on the drug. The company has developed continuous glucose sensors and could combine sensing and drug delivery within the same microchip -- for delivering glucagon, for example, if a patient was to start going hypoglycemic (insulin delivery is not on the table as dosing is just too high to accommodate in a microchip).

The size of the microchip and its unique mechanism for releasing drug from a preprogrammed set of wells may distinguish it from other diabetes-related drug delivery technologies, such as Intarcia Therapeutics' mini-pump for delivering a years' worth of GLP-1 therapy, soon to enter Phase III testing.

Generally, the drugs best suited for use in the microchip are potent injectibles – proteins, peptides, or nucleic acids that can’t be taken orally and are delivered at low doses.

image via microCHIPS