The IN VIVO Blog

Deals of the Week Looks At How Amgen’s Global Expansion Affects Partnering

2013-06-14T14:00:00.000-05:00

why yes, these are Japanese flip-flops, why do you ask?

Amgen Inc. has made a big deal about expanding into Japan and eventually building a standalone subsidiary there. Now, the biotech’s Japanese expansion strategy is paying off for at least one of its partners: Cytokinetics Inc.

The two companies announced June 12 that they have expanded an existing collaboration for the heart failure drug omecamtiv mecarbil and other related compounds to include Japan. Cytokinetics will receive $25 million from Amgen in the form of a $15 million upfront fee and a $10 million stock purchase, sold at a 36% premium. The company is also eligible to receive up to $50 million in pre-commercialization milestone payments for the development of omecamtiv in Japan, as well as royalties on sales of the drug in the country. Amgen will also reimburse Cytokinetics for the cost of a Phase I study that will support the inclusion of Japanese patients in a potential Phase III program for the drug.

For investors, the deal represented a vote of confidence in omecamtiv, and Cytokinetics stock opened June 12 up 15% over the prior day’s closing price. The $25 million in cash is also important to Cytokinetics, which ended the first quarter of 2013 with $61.6 million.

Omecamtiv, a novel cardiac myosin activator, is one of Cytokinetics’ two lead programs. A Phase IIb trial evaluating an intravenous form of the drug in acute heart failure patients has completed enrollment, and a Phase II trial evaluating an oral formulation in outpatients with heart failure started in the first quarter. Amgen is conducting the trials.

Under the original 2006 collaboration, which excluded Japan, Amgen paid Cytokinetics $42 million upfront and paid $33 million to buy stock in exchange for an option to license omecamtiv. Amgen exercised that option in 2009 after positive Phase IIa data read out, and paid Cytokinetics another $50 million upfront and agreed to pay $600 million in milestones.

It looks as though the Cytokinetics deal expansion may be a one-off case, however. A review of Elsevier’s Strategic Transactions database revealed Amgen doesn’t have many other licenses that specifically exclude Japan. One example is KAI Pharmaceuticals Inc., which Amgen acquired in 2012 for $315 million. That acquisition excluded Japan, where Ono Pharmaceutical Co. Ltd. had previously bought the license.

But Japan remains the world’s second largest pharma market, and Amgen’s efforts to rebuild in the region could help future partners, both in terms of deal value and in that signing a single global partner can sometimes speed up the drug development process. Amgen announced plans earlier this year to aggressively expand in Japan and build a Japanese subsidiary by 2020. That reversal comes only five years after the company left the market in 2008, when it out-licensed 13 compounds to Takeda Pharmaceutical Co. Ltd. for $200 million upfront and $702 million in R&D funding and milestones. As part of that deal, Takeda acquired Amgen’s Japanese subsidiary Amgen KK for an undisclosed price.

In May, Amgen unveiled more details about how it will execute on its re-entry plan, namely through a partnership with Astellas Pharma Inc. with which it will form a joint venture to bring Amgen products to market in Japan. The Tokyo-based JV will be 51% owned by Amgen and 49% owned by Astellas and operate as Amgen Astellas BioPharma KK. The deal is structured to allow Amgen to turn the operations into a wholly-owned Japanese affiliate as early as 2020.

Amgen declined to provide any valuable insights on what might be next in terms of partnering in the region. But one thing is certain, we can expect more. CFO Jonathan Peacock specifically commented on Japan and China during the Goldman Sachs Global Healthcare conference June 11. “We’ll continue to branch out and make targeted investments in the markets that are important to our future growth,” he said. -- Jessica Merrill

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AstraZeneca/Pearl Therapeutics: British pharma AstraZeneca PLC has made a big play in respiratory disease with the $1.15 billion acquisition of Pearl Therapeutics Inc. AstraZeneca will pay $560 million upfront, as well as $450 million in development and regulatory milestones related to early-stage pipeline assets to acquire all shares of privately-held Pearl. Pearl shareholders are also eligible to receive $140 million in milestones related to sales of its lead pipeline candidate. The deal puts AstraZeneca in the midst of the fiercely competitive and changing treatment space for chronic obstructive pulmonary disease. The company gains PT003, a fixed-dose combination of glycopyrrolate, a long-acting muscarinic antagonist (LAMA), and formoterol, a long-acting beta-2-agonist (LABA), in Phase III development. It also gets an earlier-stage triple combination that includes a LAMA, LABA and inhaled corticosteroid (ICS). The drug is only in preclinical development, but AstraZeneca plans to move it into Phase II testing immediately. Triple combinations are expected to eventually play a major role in the market. Respiratory disease is one of three key therapeutic areas AstraZeneca is focusing on as part of its turnaround strategy, and the company has increased the pace of development of several projects. The acquisition of Pearl comes just a week after AstraZeneca announced it was pulling out of one of its other late-stage programs with partner Rigel Pharmaceuticals Inc. after the Phase III rheumatoid arthritis drug fostamatinib produced disappointing results. --Lisa LaMotta

Xenon/Isis: In a reversal of its usual out-licensing strategy, Xenon Pharmaceuticals Inc. has exercised an option to in-license a potential treatment for anemia developed under a 2010 alliance with RNA technology specialist Isis Pharmaceuticals Inc. The firms announced June 10 that Xenon will pay $2 million to Isis to license XEN701, a molecule in preclinical development that is designed to inhibit the production of hepcidin, a protein produced in the liver. By inhibiting hepcidin, XEN701 could offer a non-erythropoietin receptor-based mechanism for the treatment of anemia. It is the first drug to enter development from Isis’ collaboration with Xenon. Under the original deal, Xenon paid Isis an undisclosed fee in the form of a convertible promissory note in exchange for using the latter’s antisense technology to discover and develop drugs against hepcidin and hemojuvelin for anemia. Xenon also gained an option to license worldwide development and commercialization rights to candidates produced from the partnership. Isis also is eligible for milestones and royalties. Vancouver-based Xenon has been more active out-licensing its human clinical genetics platform out to larger pharma partners, including Merck & Co. Inc., Teva Pharmaceutical Industries Ltd. and Roche. --JM

Questcor/Novartis: Questcor Pharmaceuticals Inc. announced June 11 that it has acquired rights to develop Synacthen (tetracosactide) and Synacthen Depot from Novartis AG in the U.S. and plans to acquire rights in certain other countries subject to closing conditions. The deal is another example of big pharma’s increased willingness to sell-off non-priority assets, and Questcor appears intent on breathing new life into a mature brand, similar to how it has revitalized its existing Athcar Gel (repository corticotropin injection). The Synacthen products are already approved in 40 countries for certain autoimmune and inflammatory conditions, including rheumatoid arthritis and multiple sclerosis, and are also approved as a diagnostic test for adrenal insufficiency, but they have never been approved in the U.S. Questcor plans to develop the products for the U.S. market and use the drugs as an opportunity to build an international presence. Synacthen is a synthetic 24 amino acid melanocortin receptor agonist, an area of research Questcor specializes in with Athcar. Questcor has successfully built Athcar into a high-growth brand with sales of more than $500 million in 2012 by broadening its use from a niche indication in infantile spasm to larger patient populations like multiple sclerosis and nephrotic syndrome. But the company has also drawn criticism from insurers and some in the health care community for aggressively raising the price from $2,000 per vial to $28,000 per vial as part of its repositioning of the drug to fit in the rare disease business model. --JM

AstraZeneca/Cancer Research UK: Building on existing collaborations with Cancer Research UK, AstraZeneca is providing scientists funded by the world’s biggest cancer charity with compounds for use in developing potential new oncology drugs. One new project, announced June 14, will involve scientists at the University of Manchester testing compounds targeting a key protein involved in DNA damage response. AstraZeneca has first rights to any molecules discovered through the agreement and can choose to continue further development. In return, Cancer Research Technology Ltd, the UK charity’s commercial arm, will receive royalty payments when the project reaches certain milestones. CRT also has the option to develop the molecules further if AstraZeneca decides to pass. Britain’s second-biggest drug maker has also invited Cancer Research UK scientists from the Paterson Institute to test AstraZeneca’s compound collection against a potential oncology target at its UK research center in Alderley Park. It is the first time AstraZeneca has invited an external party to screen such an extensive set of compounds within its screening facility. AstraZeneca will have first rights of negotiation on any resulting projects. CRT has a growing, 90-strong in-house drug discovery effort which has expanded with the help of funding from Cancer Research UK – and has access to clinical development capabilities in conjunction with Cancer Research UK's drug development office. This includes CRUK’s Clinical Development Partnerships initiative, designed to move de-prioritized pharma assets into the clinic. This wide-ranging R&D capability and close linkage with academia has attracted in AstraZeneca to CRT, with the two first partnering in 2010 [W#201020370]. --Sten Stovall

BioLineRx/Jiangsu Chia-Tai Tianging Pharmaceutical: Israeli biotech BioLineRx Ltd. lined up a rare early-stage out-licensing partner for one of its two candidates for hepatitis C this week. Liver disease-focused Jiangsu Chia-Tai Tianqing Pharmaceutical (CTTQ) licensed development, manufacturing and commercial rights in China and Hong Kong to BL-8030, a preclinical second-generation protease inhibitor for HCV. BioLineRx receives an undisclosed upfront payment plus potential development, regulatory and commercialization milestones that could total $30 million for the compound. The Israeli company also could earn high-single-digit royalties on sales if ‘8030 reaches market. BioLineRx also will have access to CTTQ’s clinical data for the compound and can use the data for regulatory purposes outside the territories licensed by the Chinese firm. BL-8030 is one of two HCV candidates being developed by BioLineRx, along with Phase I/II BL-8020, an inhibitor of HCV-induced autophagy. Both compounds were in-licensed from France’s GenoScience Pharma in early 2012[W#201220060]. In a release, CTTQ President Jian Sun Emba noted that HCV prevalence is high in China, with about 3.2% of the population, or roughly 43 million individuals, infected with the virus. –-Joseph Haas

BMS/Simcere: In their third deal in three years, Bristol-Myers Squibb Co. and Simcere Pharmaceutical Group will collaborate in China to co-develop and commercialize a subcutaneous formulation of Bristol’s rheumatoid arthritis treatment Orencia (abatacept), the companies announced June 14. Simcere, based in Nanjing, will perform and fund all development and regulatory activities required to obtain marketing approval in China based on a pre-agreed development plan. The companies will share responsibility for commercializing Orencia SC in China, and will share profits and losses related to Orencia SC there. Financial terms were not disclosed. If approved, Orencia would become Bristol’s first biologic to enter the Chinese market. The novel T-cell co-stimulation modulator is approved already in the U.S., Europe and Japan, and booked global sales of $1.2 billion in 2012. It would theoretically launch into a very competitive RA market in China, which includes novel biologics, biosimilars, and is dominated by NSAIDs. Although Simcere would not comment on development timelines for China, the company confirmed to PharmAsia News that it would need to conduct certain clinical studies in China to obtain regulatory approval for Orencia. BMS and Simcere first tied up in 2010 to co-develop BMS-817378, a small molecule c-Met inhibitor in preclinical development. Under that deal, Simcere is funding and taking the lead for clinical trials in China through proof-of-concept in return for exclusive China marketing rights for the oncologic, while BMS retains marketing rights in the rest of world. In a second deal, announced in 2011, BMS and Simcere are co-developing a preclinical CETP (cholesteryl ester transfer protein) inhibitor, BMS-795311, in China. --Josh Berlin

photo from flickrer nb360 used under creative commons license

Once You Start Up Financings of the Fortnight, It'll Never Stop

2013-06-14T12:22:00.000-05:00

Your faithful FOTF correspondent is in San Diego this week for the CalBIO conference, specifically to wax journalistic on a panel trying to look into the future – 2030! -- and opine sagely upon what we see. Some call this prediction; others call this pulling objects out of one’s nether regions, which thankfully doesn't require the Jagger-like calisthenics seen at the start of this week's video flashback.

What we can predict with near certainty is that the upcoming issue of Start-Up, arriving soon in print or electronic edition according to your subscription preference, will be full of timely topics. We’ll go inside Third Rock Ventures, which has raised more than $1 billion since 2007 to invest solely in early stage biotech. And not just invest; Third Rock creates many of its own companies, then puts its own partners into temporary executive roles in those companies once they launch.

Is it working? Hard to say yes, definitively, until they start truly reaping what they’ve sown. (Only two exits so far.) But Third Rock has a 28% stake in one of the companies in the IPO queue, bluebird bio, and a 24% stake in Agios Pharmaceuticals, which filed its S-1 a few days ago. More might be coming this year. LPs have enthusiastically bought into the Third Rock promise, that's for sure. But that’s not to say the group hasn’t hit snags or that there aren't adjustments to make. (You'll have to read Start-Up to find out what those are.)

Third Rock’s not the only VC growing their own. Flagship Ventures has been at it twice as long, in fact, and about five years ago – right around the time Third Rock rolled into town – it decided to put a brand on its in-house start-up brewery: VentureLabs. They’ve been busy lately, with big – dare we say “Third Rock-like”? – Series A rounds to launch two high-concept start-ups, Moderna Therapeutics and Syros Pharmaceuticals. The new Start-Up will also look at the early days of Moderna, and how the Flagship/VentureLabs folks helped push what was at first an advancement in the induced pluripotency of stem cells toward a new therapeutic modality that, despite many question marks, almost immediately attracted a major Pharma partnership and nearly a quarter of a billion dollars guaranteed.

If bluebird or Agios goes public, it will be Third Rock’s first IPO, but Flagship’s been around the block many times. In the current window, it’s already notched two IPOs since the start of 2012 – Receptos and Tetraphase Pharmaceuticals – and it owns 16% of Agios. Others have ushered even more biotechs public in the same time frame: As we note in the next Start-Up, New Enterprise Associates and funds associated with Fidelity top the charts with five IPOs apiece.

But as our colleague Stacy Lawrence reports, there’s been no rush to exit: Among all major shareholders (those with 5% stakes or higher) that went through IPOs in 2012, less than one third have reduced their holdings. Thirty of 43 have held tight or increased their shares, often in the IPO as part of an agreement to get the deal done.

Just published in "The Pink Sheet" DAILY, Stacy also talks to several VCs about what seems to be a reinvigorated IPO appetite for early-stage biotechs – a good sign indeed for the likes of Third Rock and Flagship. And what of the growing number of early-stage biotechs with corporate investors providing the backbone of support? Once quite rare, we’re now seeing new companies out of the gate mainly backed by corporates, such as Protagonist Therapeutics, whose JJDC-led Series B we describe below. Another, ArmaGen Technologies, caught our attention when it made Start-Up’s 2012 A-List for its intriguing receptor-mediated technology that draws therapeutics through the blood brain barrier, and for its unusual Series A syndicate: Four corporate investors splitting evenly a $17 million round. Our colleague Paul Bonanos was even more curious, and in the story he’s penned for -- you guessed it -- the new Start-Up, he noted this telling quote from one of ArmaGen’s backers: “When you take away the worry about losing your money, great opportunities arise.”

In essence, at least a couple of ArmaGen’s investors consider exposure to the company’s technology just as important, if not more, than their financial return. Outlooks like that among corporate investors should make for very interesting strategy discussions when it comes time to ready a company for sale or for a public debut. Then again, not all corporate VCs embrace strategic return more than financial return. (For a rather brusque counterpoint, see this story about Novartis Venture Funds and chief Reinhard Ambros' decision to drop its strategy-oriented option fund: "Strategic means you pay money for something intangible, and you waste money.")

If we don’t get to the blurbs soon, this column will go past the point of no return. So let’s sum up: If you like the topics of conversation here at FOTF, you should love Start-Up, perhaps even enough to subscribe. That ends our shameless plug; now back to our shameless prose, often referred to as...

Avaxia Biologics: The therapeutic antibody firm topped off its Series B round with an undisclosed amount of cash from the venture arm of AbbVie, bringing the round to $11.4 million. It’s a fascinating case for several reasons. First, Avaxia’s lead product, an oral TNF inhibitor currently in a Phase Ib study in irritable bowel syndrome patients, goes after the same target as AbbVie’s superblockbuster Humira (adilimumab). That might lead one to believe AbbVie wants a closer look at what could make a potential replacement for Humira. But that outcome would be a rare occurrence, indeed. According to our Strategic Transactions data, from 2006 to 2011 only two private companies backed by corporate venture funds were eventually bought by the funds’ parents: Avid Radiopharmaceuticals (bought by Eli Lilly) and Avidia (Amgen). AbbVie does not gain any rights to Avaxia’s lead, AVX-470, or other products, but it does take a board seat. Another reason this is one to watch is Avaxia’s antibodies. They’re not monoclonal, like Humira and so many other key biotech products. They’re polyclonal, essentially a gemisch of antibodies strained from cow’s milk, and therefore quite capable of surviving a trip into the gut. Avaxia comes along just as a few companies, led by Symphogen, are dipping a toe into the possibility of antibody combinations. But those combinations are made from monoclonals, not polyclonals. Other than serum products, it’s hard to find precedent to what Avaxia is aiming for. Just as notable is how far Avaxia has gotten with its platform, funded to this point by angel investors. Its A and B rounds, totaling nearly $10 million before the AbbVie add-on, were led by angel groups. – Lisa LaMotta and Alex Lash

Clovis Oncology: Clovis took advantage of a strong clinical data release with a public offering that brought in $240 million, the third largest secondary offering of the year behind Onyx Pharmaceuticals and Ariad Pharmaceuticals. The firm is the best performer from the biotech IPO class of 2011, with a 445% gain as of June 13, thanks in large part to a mighty ASCO bump – that is, data it presented at the recent American Society of Clinical Oncology conference that took Clovis’ share price from $36.56 to $74.59 in one weekend. The company reported Phase I/II efficacy data for its non-small cell lung cancer drug CO-1686 in patients with the T790M mutation, which confers resistance to current treatments. Clovis has done well with its strategy of in-licensing candidates and companion diagnostics; it brought in CO-1686 from Avila Therapeutics in 2010, then partnered with Roche to develop a test for the T790M mutation a year later. Clovis’ recent run-up also benefited from positive initial data at ASCO for its drug rucaparib in ovarian cancer. Rucaparib is an oral poly (ADP-ribose) polymerase (PARP) inhibitor that Clovis licensed from Pfizer in 2011, and subsequently partnered with Foundation Medicine to create a companion test to find patients most likely to respond to the compound. -- A.L.

Protagonist Therapeutics: The peptide development firm said June 4 it has raised a $14 million Series B round, led by Johnson & Johnson Development Corp. JJDC joined Series A investors Lilly Ventures and Australian firm Starfish Ventures. Protagonist spun out of the University of Queensland’s Institute of Molecular Biosciences and, while headquartered in the San Francisco suburb of Menlo Park, Calif., it maintains discovery operations in the Queensland capital of Brisbane. It’s the latest example of early-stage biotechs drawing most or all of their venture funding from corporate-affiliated funds, which are helping fill the gap left by traditional venture moving their limited resources toward the later stages. Protagonist says it has developed a platform to identify disulfide rich peptides, a more stable version of a molecule that has limited therapeutic availability. Also called constrained or stapled peptides, the area is looking to Aileron Therapeutics, which recently completed the first clinical trial of a stapled peptide and answered some questions about the compound’s ability to remain stable in vivo and avoid safety concerns. The preclinical Protagonist has signed deals with Zealand Pharma and Ironwood Pharmaceuticals; one of the firm’s pursuits is the development of orally-active therapeutics for inflammatory bowel diseases. -- A.L.

Dermira: The firm developing treatments for acne and other skin disorders said June 11 it has raised a $35 million Series B financing to move into a Phase I/II trial its lead program, lemuteprofin, a photodynamic acne therapy, and two preclinical programs. Dermira’s Series A investors Canaan Partners, New Enterprise Associates and Bay City Capital all re-upped and were joined in the round by Maruho, a 100-year-old Japanese firm that specializes in dermatology and typically keeps a low deal profile. Dermira has now raised more than $70 million in venture funding; its $42 million A round helped it purchase Valocor Therapeutics, at the time the owner of lemuteprofin after its spinout from failed Canadian biotech QLT. -- A.L.

All The Rest: To fund work on Phase II AKB6548 for anemia associated with CKD, Akebia Therapeutics raised $41M in Series C financing…ResearchGate, which is developing a platform to share and search for scientific data online, closed a $35M Series C…Edge Therapeutics collected $18M in Series C funds to support Phase II of EG1962 in preventing delayed cerebral ischemia…Prism Pharma, which has a lead compound for fibrosis, completed a $15M Series C…GSK spin-off Autifony Therapeutics topped up its Series A with an additional £5.5M from Pfizer Venture Investments and International Biotechnology Trust…in addition to adding Janssen as a new partner, Second Genome completed a second tranche on its Series A, which now totals $11.5M…concurrent with a $2.3M grant from the Norwegian Research Council's BIA-Program, Targovax raised $1.4M in equity…Arcturus Therapeutics, focusing on RNAi for rare diseases, closed a $1.3M seed round…Baxter Ventures came in as a new backer for Ocular Therapeutix…ARCA biopharma publicly sold $20M in Series A convertible preferred shares…StemCells received the right to sell Lincoln Park Capital Fund up to $30M in common shares…Oncothyreon raised $10M in an RDO to fund up-front payment in Array BioPharma co-promote…an undisclosed health care fund bought $9.8M in Celsion’s common stock…BioTime grossed $9.1M through a PIPE…epigenetics company Epizyme grossed $77M in its IPO…PeptiDream floated on the Tokyo Stock Exchange, raising $52M…Israeli firm Kamada completed a $52M IPO in the US…Kadimastem, which commercializes pluripotent stem cell-derived products, raised $5.5M in an IPO on TASE…Heat Biologics, PTC Therapeutics, bluebird bio, and Esperion all set terms for their IPOs…stem cell producer Cellular Dynamics International and Agios Pharmaceuticals, which is targeting inborn errors of metabolism, filed for their IPOs…Array BioPharma offered $115M in convertible senior notes…and Anacor Pharmaceuticals received a $45M three-tranche loan facility from Hercules Technology. -- Amanda Micklus

Deals Of The Week Tracks Obamacare

2013-06-07T17:17:00.001-05:00

The pharmaceutical community, like much of the country remains divided about the Affordable Care Act and its impact on healthcare and the industry, perhaps even more so than when the original law passed in 2010. The industry, of course, supported the initial legislation, and many people continue to believe it made the right decision.

But as deadlines approach for the all-important next phase of the law, execution realities and uncertainty raise questions, many of which can’t be answered in the near term. Nonetheless, they have implications overall for the healthcare system and patients, and, more narrowly, for pharma commercial and business development strategy. This year, in particular, is important for the market access phase of the legislation, as the country prepares to get new health insurance exchanges running by the Jan. 1, 2014 deadline, and states decide whether and how to expand their Medicaid offerings to broader populations. As of Jan. 1, Americans must have individual insurance coverage or pay a penalty (modest at first); they can buy the coverage through insurance plans listed on health insurance exchanges which begin operations on that date.

Overall, pharma industry support, officially, at least, seems high, even as executives worry whether their companies will ever make up for the tradeoffs they agreed to three years ago in the form of bigger rebates (for Medicaid and other government programs) and taxes through numbers of newly covered lives. They are concerned about less high-profile provisions of the act, such as its dramatic expansion of the 340b program to new categories of hospitals, and a provision that limits reimbursement companies can get for minor improvements to their product, as well as the federal and state governments’ ability to execute their plans on time.

Many states are just now announcing which insurance companies are participating in the exchanges and those plans are identifying their basic options, but the industry in general does not yet have a good perception of what drug coverage will look like, how the new exchange plans or Medicaid expansion will be populated, or how the mandatory individual insurance provisions will be enforced.

Because no one really has the answers, many in the industry expect companies to monitor the ACA’s progress closely but continue to operate status quo. They are not so much keeping their heads in the sand as monitoring cautiously,” says an executive at a firm that advises companies on market access issues. “From a tactical perspective, no one knows what will happen, so they are taking the path of least resistance. Top execs are asking me to come up with projections, and I don’t know them, so they are proceeding as though there is no effect.”

The uncertainty hasn’t stopped Wall Street from predicting winners and losers in the healthcare sector in general, or entrepreneurs form seizing opportunity in the midst of change. At the Jefferies investment bank conference on June 4, a panel of experts opined about investor beneficiaries,and all agreed that whatever else, managed care –perhaps by another name—will be the name of the game going forward. Past efforts to move populations into managed care failed, but what’s different now is the government support for such programs, as well as massive databases that able to monitor how the system is performing.

Meanwhile, the industry’s relentless search for innovation continues – if for no other reason than because without it, there’s not much of an industry – witness the struggles of specialty pharma companies such as Elan PLC, Endo Health Solutions, and Forest Laboratories, all laboring to move beyond the enormous success of an innovative drug but finding it hard to come up with a repeat act.--Wendy Diller

MorphoSys/GSK: MorphoSys has struck a development and commercialization deal with GlaxoSmithKline for its mid-stage rheumatoid arthritis antibody, MOR103, which targets the GM-CSF pathway that stimulates production of immune cells such as macrophages. The deal, announced June 3, gives MorphoSys near-term cash in the form of a €22.5 million ($29.5 million) upfront, plus development, regulatory and commercialization milestones that could add up to €425 million. GSK also will pay a double-digit royalty on all sales of the product. MOR103 has completed a Phase I study in healthy individuals, as well as a Phase Ib/IIa trial in 96 patients with mild to moderate rheumatoid arthritis. Patients in the drug arm of the study showed a significant effect compared to placebo at just four weeks. GSK will take over all development, but did not specify when it will begin Phase II studies. MOR103 has also been tested in patients with multiple sclerosis.

MorphoSys has been shifting gears for the last few months as it tries to move away from the partnership model that has made it profitable to concentrate more on its wholly-owned pipeline. MorphoSys has two drugs in its proprietary pipeline: MOR208, a Phase I asset which targets CD19 for B-cell malignancies, and MOR202, a HuCAL antibody against CD38 for multiple myeloma. – Lisa LaMotta

Pfizer/CytomX Therapeutics: After obtaining preclinical proof-of-concept last year for its approach to tumor-specific delivery of specially engineered antibodies, CytomX has struck its first alliance with a big pharma. Under an agreement announced June 6, the company will collaborate with Pfizer to discover and develop a variation on antibody-drug conjugates (ADCs) for cancer. Pfizer will pay the South San Francisco, Calif.-based biotech $25 million in combined upfront cash and milestones pegged to research and preclinical achievements. In addition, privately held CytomX could earn up to $610 million in regulatory and sales milestones, as well as tiered royalties into double digits on sales of any product reaching market. Because of the selectivity of candidates generated via its Probody Platform, CytomX says it can target broadly expressed tissues that are difficult to reach with other therapeutic approaches because of worries about off-target toxicity. CytomX uses its technology to generate ADCs that it calls Probody Drug Conjugates (PDCs), specially engineered antibodies or other approaches to drug delivery for cancer, inflammation and other unmet medical needs. PDCs will be safer and differentiated from other ADCs, CEO Sean McCarthy said, because they are engineered to combine cytotoxic payloads with Probodies that are masked to become activated only in the tumor’s micro-environment. Pfizer and CytomX are not disclosing the indications or specific targets on which they will work together, nor any timelines for the work, other than that it is an exclusive, multi-target alliance focused on oncology. – Joseph Haas

Janssen Biotech/Second Genome: Janssen Biotech and Second Genome Inc.announced a landmark research alliance on May 5th in which the latter will apply its microbiome discovery platform to characterize the role of human bacterial populations in ulcerative colitis. The goal is to translate the knowledge into therapeutic programs. The deal marks big pharma’s first commercial collaboration in microbiome R&D and may stimulate further deals and investment in the space. Interest in the therapeutic potential of the microbiome has been building over the past three years with the founding of several venture-backed companies focused on microbiome biology. Second Genome gets an upfront payment and milestones, both undisclosed. The upfront does not include equity. Janssen will fund the collaborative research through its Johnson & Johnson Innovation Center and the immunology therapeutic area within Janssen R&D LLC. Second Genome has preclinical programs in inflammatory bowel disease and type 2 diabetes, each about a year and a half from IND. It also has several discovery programs. On the same day, the start-up announced a $6.5 million third tranche to its series A financing, bringing the total raised to $11.5 million.—Michael Goodman

The Medicines Co./ ProFibrix: The hospital marketer The Medicines Co. is expanding into the hemostasis market, and has negotiated an option deal with ProFibrix BVthat could improve its position there. The company announced June 4 it has agreed to pay $10 million upfront for an option to acquire ProFibrix later this year after Phase III clinical trial results read out on the company’s lead biologic, Fibrocaps. The dry powder topical formulation of fibrinogen and thrombin is being developed to stop bleeding during surgery. If the results of the single Phase III trial testing Fibrocaps are positive, The Medicines Company would pay $90 million to acquire ProFibrix outright. It also would be on the hook to pay $140 million in regulatory and sales milestones. ProFibrix’s ongoing Phase III trial, FINISH-3, has completed enrollment of 719 surgical patients with mild to moderate surgical bleeding, and the results are expected in the third quarter. The Medicines Company already markets the recombinant thrombin Recothrom, to which it recently gained rights through an earlier option arrangement with Bristol-Myers Squibb Co. The Medicines Company plans to combine the 60-person hemostasis group it gained from Bristol with the ProFibrix team. Both are based in Seattle, although ProFibrix’s leadership and headquarters are in The Netherlands. Plans call for CEO Jan Öhrström to stay on with The Medicines Company and head the company’s efforts in the hemostasis market. – Jessica Merrill

Novavax/Isconova: Eager to add adjuvant technology to its clinical and preclinical recombinant vaccine candidates, Novavax is making a $29.2 million bid to buy Swedish firm Isconova. Spun out of the Swedish University of Agricultural Science, Isconova produces saponin-based, immune-modulating adjuvants. In October 2012, Rockville, Md.-based Novavax, which has vaccines in clinical development for seasonal influenza, pandemic influenza, respiratory syncytial virus and rabies, reported successful Phase I data testing its pandemic flu vaccine boosted with a third-party saponin-based adjuvant. In a release, Novavax said based on those data plus Isconova’s own data, it believes the Swedish biotech’s technology can complement and strengthen its vaccine programs. Novavax announced a public offer June 4 under which it would issue 15.45 million new shares of common stock and swap 1.2388 shares of its stock for each Isconova share. The deal would represent a 26.7% premiumover Isconova’s share price at the close of trading June 3 and would result in Novavax shareholders owning 91.1% of the new combined company. Isconova shareholders would control the remaining 8.9%. Novavax said if the deal goes through, it will offer Isconova management “positions subject to their commitment to the combined company,” and it does not plan to seek changes regarding the Swedish firm’s headcount, employment terms or business location.--JAH

Arno/Veridex: Cancer-focused Arno Therapeutics signed an agreement June 3 with Veridex, a subsidiary of Johnson & Johnson, to develop a diagnostic test for seeking optimal patients for its oncology candidates. Based in Flemington, N.J., Arno is developing cancer therapeutics that target the PI3 kinase/Akt pathway, as well as HDAC inhibitors and camptothecins. The two firms will team up to use Veridex’s proprietary CELLSEARCH platform to develop a diagnostic to detect the presence of activated progesterone receptors as a biomarker of anti-progestin activity in circulating tumor cells, those that have detached from a solid tumor and are found in the bloodstream. Arno is developing onapristone, an oral, anti-progestin type 1 progestin receptor antagonist. Now in preclinical development, onapristone is slated to begin clinical study during the second half of 2013.--JAH

AstraZeneca/ Rigel: AstraZeneca pulled out of its three-year partnership with Rigel Pharmaceuticals on June 4 after the companies announced lackluster results of the Phase III program for rheumatoid arthritis drug fostamatinib, an oral spleen tyrosine kinase (SYK) inhibitor. The drug did not show the levels of efficacy that many other drugs in the category have in clinical trials, prompting AZ to pull the plug. Rigel intends to evaluate the data from the Phase III program, which AZ conducted, and make a decision by end of the summer regarding its next steps. Rigel executives believe that fostamatinib could still find a place in the crowded RA market, even if the indication is just for a small subset of patients. Rigel potentially will seek approval of the drug on its own, but said it will not commercialize the drug without a partner.

The failed program is just the most recent in a string of failures for the British pharma, which has ended programs in cardiovascular and oncology as well. It has also faced a slew of setbacks with its diabetes program, partnered with Bristol.--LL

Under One Roof: Roche Talks Up In-House Advantages In Cancer

2013-06-03T22:30:00.001-05:00

Roche had a number of pithy taglines to splash around its oncology business review at ASCO: "we take cancer personally," or with a slightly more ominous tone, "doing now what patients need next." But the more powerful refrain may have come from execs' repeated mention of how much Roche has "under one roof."

With so many companies targeting oncology and talking up their strategies to move up the leader board, the onus is on the market leader to maintain its position. That may not actually be a large internal priority at Roche, as their acquisition of Genentech gave them a comfortable lead. Roche oncology sales in 2012 were almost three times as much as its nearest competitor, Novartis--$19 billion, versus $6.6 billion, respectively for the full year, according to IMS Health.

Karl Mahler, Roche's head of investor relations, cited the HER2 franchise as the model of how Roche is differentiated from other companies, changing standard of care, building lines of therapy and moving towards combinations. That's what Roche is looking to do in hematology, moving from the rituximab base to new drugs like GA101. "We have a number of scenarios that can help us both extend the franchise and potentially replace and extend the franchise," Roche Pharma COO Daniel O'Day said.

There was an underlying theme in the firm's annual ASCO presentation: how well their model works, how they can repeat that success, and how big their position in oncology actually is. Part of the success is positioning and building off their existing business, where O'Day touted the firm's in-house capabilities - especially in the growing field of rational anti-cancer combinations.

The foundation for Roche's oncology business are the three pillars of the anti-HER2 franchise, the anti-CD20 franchise and the anti-angiogenesis franchise. "Obviously we want to continue to improve upon those," O'Day told the June 2 meeting in Chicago, "but we'll be adding that the many, many new targets that we have and new pathways, things like our MetMAb, PI3 kinase, Bcl-2, others." There's also the antibody-drug conjugate platform, which beyond the recently launched Kadcyla includes 20-25 new compounds. "Add to that the immunotherapy and I think it gives you the richness of the combination therapies being able to really come to play."

"Of course, you can do that across companies in different ways," O'Day added, "but we think there are significant strategic advantages to do that within one organization." And Roche has the "diversity and mass ... in each one of these areas" that can make that doable within one company.

There's a similar situation with companion diagnostics, he added, "because often the value on these combination therapies is obviously more obtained on the pharma side than on the diagnostic side, and that's one of the advantages of the Roche Group strategy that's allowed us to move diagnostics ahead very aggressively, as well."

O'Day returned to the pharma side in 2012 after a seven year stint heading the diagnostics division. He played up how his "good relationship" will help the company as it considers strategies to optimize the pharmaceutical pipeline in oncology.

An early test of these beliefs comes from the PD-1/PDL-1 inhibitor class, the promising immune checkpoint area that has been a hotbed at ASCO. Roche has its own version, but it remains to be seen if its or Merck's or Bristol's or anyone else's emerges as the optimal partner - though execs argued that Roche's PDL-1 is looking good. The company also has an assay that could have a pivotal place as the field takes off.

The shift to two or more agents combining in immune checkpoint "really does highlight how valuable it might be to have many of these reagents under one roof, because the collaborations across companies are always challenging," Hal Barron, Roche's head of global pharmaceutical development, said. "We would always pursue them if that's where the biology went, but we have an opportunity to define how the future looks by having these."

It also means not having to share the value. Companies can do that, "but I do think it gives us a tremendous competitive advantage to have as many products within one company as possible, because it allows us to look at a global pricing strategy where we have set out a certain range," O'Day said. (And with new combinations will come the need for an evolving pricing strategy, O'Day admitted. We'll have more to say on that in the next issue of "The Pink Sheet".)

Though Barron rebuffed a question about the company's wishlist for opportunities it doesn't have in its own pipeline - not wanting to tip its cards - the exec revealed part of its business development strategy: "Our approach is, oftentimes, to ask ourselves is there a way of improving on those within that pathway? I won't go into great detail about that, but we are constantly looking at drugs that are active and saying, not just do we wish we had those, but could we then take those and that pathway and make it better? I think our strategy is to really have as many things as we could."

Most companies looking to build their oncology presence talk up the importance of expertise. Roche spread that around the (very crowded) room -- during the Q&A, it became clear that many company experts were seeded throughout the space, ready to impress.

Mahler laid it out from the start of the meeting. Over half of Roche's R&D budget is dedicated to cancer care. "And we are not currently only in the lead, but we also intend to stay in the lead by spending appropriate money for this," he promised.

As long as Roche is willing to put money where its mouth is, it very well may wind up in the end just as it started -- in the lead.

Deals Of The Week Watches Crowdfunders Multiply Like Rabbits

2013-05-31T15:40:00.001-05:00

That giant sucking sound you hear is investors pulling their money out of early-stage drug and device research. As we’ve chronicled here and in our other publications, big pharma has valiantly stepped in to fill the breach, whether through corporate venture or academic tie-ups, but that won’t be enough to budge the gathering volume of biomedical discoveries stalled between lab and clinic.

Some investors, thinking the JOBS Act and its provisions governing general solicitation will usher in a sea change in how biomedical ideas get funded, have pointed to crowdfunding as a solution. We’ve written about a number of these entities, including MedStartr Inc., Poliwogg LLC, and most recently, HealthiosXchange.

On May 17, VentureHealth LLC threw its hat into the ring. VentureHealth is the creation of Mir Imran, who founded and manages its sibling companies InCube Ventures LLC and InCube Labs LLC, an incubator and collaborative research lab that spins out one or two companies each year. InCube Ventures typically invests in start-ups out of InCube Labs as well as in external companies. Mir himself holds more than 200 issued patents, is the inventor of numerous devices, and has founded more than 20 medical device companies, 15 of which have had successful exits via trade sale or IPO.

There is some debate about whether crowdfunding threatens VC by accessing a new and better idea flow and a broader base of investors. Greg Simon, CEO of Poliwogg, sees it as potentially disrupting the traditional investment supply chain, knocking out investment banks and venture, along with their bloated fees.

Simon told us that venture would probably not be interested in crowdfunding because the numbers are too small and, besides, venture’s business model is based on investing other people’s money.

Mir and his colleagues at InCube think otherwise. VentureHealth embodies the idea that the best of venture can be blended with the best of crowdfunding, to the benefit of venture investors, citizen LPs, entrepreneurs, and biomedical technology.

The potential of linking venture to crowdfunding was unwittingly demonstrated by an early pioneer. MedStartr, a crowdfunder of low-tech health and wellness products to non-accredited investors, operates on what amounts to a donation model. Investors see no return except for the warm glow that comes with contributing to a good cause. But an interesting thing about its crowdfunding model is that venture, angel, and other kinds of investors are on the sidelines watching. And every so often, when they see a good idea, they swoop in and fund it. MedStartr, sadly, is unable to participate in those exits.

But VentureHealth is.

For starters, VentureHealth takes a carried interest fee on what it earns in a sale or other liquidity event, much like a VC would. Mir’s partner, Andrew Farquharson, claims that this model aligns the interests of VentureHealth with its investors. Unlike some other crowdfunding portals, VentureHealth has no plan to become a registered broker-dealer.

VentureHealth’s plan is to only go out to accredited investors. In fact, it will be quite selective in the investors it brings in – physicians, researchers, individuals who understand the technology being offered and the market it’s targeting. As long as they meet those criteria, they can be experienced accredited investors or novice accredited investors who meet the minimum financial requirements set by the SEC but have traditionally been excluded from investing in private companies. Mir told us that VentureHealth is not interested in going out to non-accredited investors. It can raise all the money it needs from its accredited base, with additional support from InCube Ventures and, where warranted, from other venture co-investors.

It’s refreshing to find a crowdfunder who rejects the populist cant that many of its peers go in for. That’s not to say that VentureHealth isn’t opening up ground floor investment opportunities for investors who would otherwise be excluded. But it’s not exactly democratizing the process for all comers.

VentureHealth will focus on devices, drugs, diagnostics, and mobile health. In many cases, says Mir, InCube Ventures will co-invest alongside VentureHealth. The crowdfunding entity will likely have broader a remit for the deals it pursues than its venture sibling, but where they intersect, there will be co-investment. Venture health will be able to draw on the traditional venture strengths of screening deals, doing the diligence, managing companies, and providing follow-on funding.

The two exits listed on VentureHealth’s website illustrate the flexibility and potential of the venture/crowdfunding model especially when managed by industry insiders with extensive relationships and know-how.

Nfocus Neuromedical Inc. is a developer of a neurovascular device with an initial indication in brain aneurysms. The company was founded by Mir and co-inventor Martin Dieck. It was acquired in February by Covidien PLC in a structured acquisition for $51 million upfront and a $21 million earn-out payment. VentureHealth raised $1.49 million. Oxford Bioscience, DFJ e-Planet Ventures and others participated in financing rounds.

In the other exit, BodyMedia Inc., a developer and marketer of wearable body monitors that communicate with mobile devices, was acquired by Jawbone for $100 million in May 2013. VentureHealth raised $469,000. InCube Ventures, Comcast Ventures, and others participated in financing rounds.

Mir acknowledges that there’s an incestuous element to these early exits in which he wears the hats of company founder, venture co-investor, and crowdfunder. That might change over time. But he underscores another advantage of VentureHealth’s tight association with its VC sibling: “When Incube Ventures makes an investment from our fund, we keep a sizeable amount of dry powder on hand for follow-on rounds.” His point is that most angel investors – Mir says crowdfunding is organized angel investing – can’t look that far into the future and reserve capital for follow on fundings.

VentureHealth’s raises currently range between $500,000 and $1.5 million. Mir expects that number to rise as his accredited investor base gains experience. VentureHealth lists one “active investment” on its site: Channel Medsystems Inc. is developing an office-based, cryoablative technology to treat excessive menstrual bleeding. It raised $9.7 in an April B round led by Boston Scientific, toward which VentureHealth contributed $875,000.--Mike Goodman

While the crowdfunding space gets more crowded, deals and acquisitions this week continued their torrid pace.

Valeant/Bausch & Lomb: M&A-focused Valeant Pharmaceuticals International Inc. announced its biggest acquisition yet on May 27, agreeing to pay $8.7 billion to acquire privately held eye care company Bausch & Lomb Inc. The transaction will increase Valeant’s eye care portfolio substantially: B&L offers a suite of prescription and over-the-counter drugs, contact lenses and lens-care products, as well as ophthalmologic surgical devices and instruments.

CEO Michael Pearson said the deal would create a global eye care platform within Valeant, retaining the B&L brand name,that will provide pro forma net 2013 revenue of roughly $3.5 billion. Of the $8.7 billion price tag, $4.5 billion will go to B&L’s owners at Warburg Pincus, while the remainder will retire B&L’s outstanding debt. Valeant, which had $414 million cash on hand at the end of the first quarter, said it will finance the transaction mainly through debt, while also raising between $1.5 billion and $2 billion in new equity. The Canadian specialty pharma projects $800 million in cost synergies from the transaction by the end of 2014.

The deal, unanimously agreed upon by both companies’ boards and expected to close during the third quarter, follows Valeant’s recent and apparently unsuccessful courtship of Actavis Inc. Acquiring B&L will enable Valeant to balance its revenue mix from both a geographic and therapeutic perspective. After closing, about 50% of Valeant revenue will stem from the U.S., with Eastern and Central Europe comprising 15%, Western Europe and Japan 13%, and Latin America, Canada, Australia, Southeast Asia and South Africa rounding out sales. In terms of therapeutic areas, dermatology and aesthetics will contribute about 34%, eye health about 32%, neurology and “other” about 12%, and consumer and oral health about 11%.--Joe Haas

GlaxoSmithKline/Okairos: GlaxoSmithKline PLC has done the biggest takeout of a private, clinical-stage European biotech so far this year with the acquisition of Okairos SRL for that company’s Phase I RSV vaccine and T-cell stimulating technology. for the biotech’s VCs nabbed roughly a 10x return on their €23.2 million invested capital.

Vaccines are a core therapeutic area for GSK. With Okairos, it hopes to have the basis of a first-in-class blockbuster. RSV is a common virus that presents with cold-like symptoms. In infants under one year old in the U.S., the disease is the most common cause of bronchitis and pneumonia and can require hospitalization or occasionally be fatal. Okairos’ vaccine provided “complete protection” against RSV in preclinical testing on rats and calves; the biotech started a Phase I trial in 40 healthy volunteers in February. MedImmune Inc.’s Synagis (TK) is a monoclonal antibody used as a preventative in premature and other high risk infants, but there is no RSV vaccine or post-infection therapy on the market.

In addition to RSV, Okairos has four clinical stage vaccine programs for malaria, HIV and hepatitis C (prophylactic and therapeutic). The Okairos platform and much of the management came out of Merck & Co. Inc. Okairos co-founder and CEO Riccardo Cortese was the founder and head of the Istituto di Ricerche di Biologia Molecolare (IRBM) in Rome, which later became a subsidiary of Merck. He departed Merck, taking much of his original IRBM team with him, and in-licensed the technology from the pharma in 2007.--Stacy Lawrence

AstraZeneca/Omthera: In its quest to reshape its cardiovascular pipeline, AstraZeneca PLC bypassed commercial-stage fish oil pill maker Amarin Pharmaceuticals Inc. announcing plans May 28 to acquire Amarin’s rival Omthera Pharmaceuticals Inc. instead. By acquiring Omthera, AstraZeneca accepts more risk, but gains an NDA-ready asset for dyslipidemia for considerably less than it would have cost to acquire Amarin ([A#14130528004]). AstraZeneca will pay Omthera $12.70 per share, or approximately $323 million, an 88% premium over Omthera’s closing price on May 24. The enterprise value of the deal is lower, about $260 million after incorporating Omthera’s cash balances of roughly $63 million, the company said.

In addition to the upfront cash from AstraZeneca, Omthera shareholders will receive contingent value rights of up to $4.70 per share, about $120 million, tied to milestones for Omthera’s lead product Epanova. The product, a mixture of polyunsaturated free fatty acids derived from fish oils, namely EHA and DHA, has demonstrated efficacy in Phase III studies for reducing triglyceride levels, as well as non-HDL cholesterol in combination with a statin, in patients with hypertriglyceridemia.

It is an indication for mixed dyslipidemia, a broader patient population, that both AstraZeneca and Amarin hope to pursue, and there, Amarin is ahead. Its product, Vascepa, is already on the market, and the company is awaiting action from FDA on an sNDA for mixed dyslipidemia. But, with a market capitalization of close to $1 billion, Amarin would have been a more expensive takeout.--Jess Merrill

ThromboGenics/Eleven Biotherapeutics: Following the recent U.S. and European launches of its first product, the macular adhesion therapy Jetrea (ocriplasmin), Belgian biotech ThromboGenics NV now wants to build on that success by developing a range of ophthalmic products. As part of that strategy, it has licensed technology from U.S. company Eleven Biotherapeutics to design a new protein therapeutic targeted at diabetic eye diseases such as diabetic macular edema.

ThromboGenics has identified a biologic target involved in diabetic eye diseases, and will use Eleven's AMP-Rx protein design technology to create a novel product, the companies announced May 28. Eleven has received an undisclosed upfront payment, and will receive development, regulatory and sales milestones plus royalties on any protein developed using the technology. Eleven argues it has already validated the technology by developing its own lead protein therapeutic, EBI-005. The product is being evaluated in a Phase Ib study for the treatment of dry eye disease.

ThromboGenics is a European biotech success story. In addition to launching Jetrea in the U.S. on its own at the beginning of 2013, it has also received a total of €90 million ($117 million) in milestone payments from ex-U.S. Jetrea licensee Alcon (a division of Novartis AG), after that company gained EU approval and subsequently launched the product in the U.K. and Germany. The biotech expects "significant" royalties from Alcon's net sales of Jetrea.--John Davis

Amgen/Astellas: Amgen Inc. took a second stab at the Japanese market with an alliance and joint venture with Astellas Pharma Inc., five years after selling off its Japanese affiliate and portfolio to Takeda Pharmaceutical Co. Ltd.

The alliance with Astellas, announced May 29, provides Amgen a co-development and co-commercialization partner for five products. The furthest in development are AMG 145, a PCSK9 monoclonal antibody in global Phase III trials and in Phase II in Japan with a lead indication of hyperlipidemia; and romosozumab, a sclerostin mAb in global Phase III and Phase II/III in Japan for osteoporosis. Anti-HGF mAB rilotumumab is in Phase I in Japan for gastric cancer, and MET inhibitor AMG 337 for gastric cancer and blinatumomab for hematological tumors are still in preclinical.
The alliance for the five products will last through 2032 at the latest. Astellas would pay undisclosed royalties to Amgen for any products that reach market, but the companies will otherwise share development costs and profits 50-50.

Astellas and Amgen also formed a joint venture, Amgen Astellas BioPharma KK, which is structured to allow Amgen to turn the operations into a wholly owned Japanese affiliate as soon as 2020. The JV, 51% owned by Amgen, 49% by Astellas, will open Oct. 1 in Tokyo and will comprise seconded employees from Astellas, transferred employees from Amgen and new hires. However, a source close to Amgen’s previous Japan operations said Amgen may have trouble with recruitment after exiting the country.

At a May 29 press conference in Tokyo, Amgen CEO Robert Bradway said, “This is the alliance we expect to create a platform for Amgen to have its own operations in Japan.”--Dan Poppy

Pfizer CTI/UCSF: Pfizer Inc.’s Centers for Therapeutic Innovation (CTI) has broadened its scope through a deal with the University of California San Francisco that will focus on small molecule research – a first for CTI. Until now, the Pfizer initiative had focused only on biologic projects. Under the new collaboration, CTI will provide UCSF with funding and scientific expertise to support preclinical and clinical development of the compounds. The therapeutic areas and number of compounds included in the collaboration were not disclosed, but UCSF is eligible for milestone payments and royalties should any of the compounds advance through commercialization. CTI is expected to engage some of its other partners in small molecule research.

CTI was set up by Pfizer in late 2010 to allow the Big Pharma to better engage scientists on medical campuses and in research institutions. Pfizer set up hubs in San Francisco, New York, and Boston and has committed hundreds of millions to the projects. CTI is expected to expand to as many as eight cities.
The first initiative under the CTI banner was a collaboration set up between CTI and UCSF in November 2010. At the time, Pfizer committed $85 million of funding over a five-year period.--Lisa Lamotta

Financings of the Fortnight Battles the Bull Run

2013-05-31T11:32:00.003-05:00

Since when did biotech’s epicenter move to Pamplona? The bull run has lasted quite a while now, after having gotten an extra goose, if you don’t mind mixing barnyard metaphors, around the time hepatitis C treatment developer Pharmasset became the $11 billion target of Gilead Sciences in November 2011.

Once they scraped their jaws off the floor, analysts decided the deal wasn’t really so shocking despite the price tag. We’ll soon find out how well it pays off for Gilead. The HIV leader has put the main compound it acquired in that deal, sofosbuvir, through a battery of Phase III tests and applied for a marketing license.

One could argue that the acquisition has already paid dividends not just to Gilead but to nearly every other biotech company with a pulse. Since the deal was announced in November 2011 the two major biotech indices from NASDAQ (NBI) and the NYSE (BTK) are up 97% and 93%, respectively. That's vastly outstripped the tech-heavy NASDAQ Index, which is up a tidy 35%. You could slice and dice the good times in other ways, too: In the last five years, the NBI is up 138% and the BTK 170%, compared to 37% for the Nasdaq writ large.

Or, microcosmically, you could point to this morning's Epizyme activity. The epigenetics company, which our In Vivo colleagues profiled a year ago, sold IPO shares at $15 each, raising $77 million, and the stock began trading this morning at $20. (As of this writing it's up to $21.02.) That's a lot of enthusiasm for a company in a cutting-edge area of biomedical R&D with just a few months of a Phase I trial as the sum of its clinical experience (and the drug in that trial, to boot, is partnered to Celgene).

The majority of the gains have come in the past year and a half. Whichever cut of the steak you prefer, it’s been an unusually long run for the sector, which tends to see run-ups for six months, perhaps a year, then lose much of the ground it has gained. Much of the fervor is driven by large-cap biotechs: Since November 2011, Biogen Idec, Vertex Pharmaceuticals, Celgene, Gilead Sciences, and Amgen have all outperformed the biotech indices (Gilead by a ton, the rest by a few percentage points). As ISI Group analyst Mark Schoenebaum pointed out recently, the NBI has soared (and even surpassed in March the high water mark that the genomics bubble left in March 2000), all while the median price-to-earnings ratio of large cap biotech has deflated like a forgotten balloon for years.

Many mid-cap biotechs are making hay, too. Onyx Pharmaceuticals is up 125%, Isis Pharmaceuticals 156%, Clovis 166%, Alnylam Pharmaceuticals 249% -- yeah, Alnylam, whose partners abandoned its RNAi platform a few years ago, and which made a sharp right turn as a slimmed-down clinical-stage company in 2010 – and speaking of rising from the ashes, Medivation, they of Dimebon infamy, are up 451%, all since November 2011.

There are others, and the list of billion-dollar market caps is getting a little heavy. We’re not saying that Sarepta Therapeutics, which has been grinding away at a novel approach to treating Duchenne’s muscular dystrophy for several years after shifts in focus, top management, and company name, is the life sciences equivalent to Pets.com; or that Acadia Pharmaceuticals, a 20-year-old firm working toward approval of its Parkinson’s psychosis treatment, is this year’s Webvan. But talk of a bubble is, well, bubbling up, and one wonders if it will pop in the summer heat. It’s conventional wisdom that the down time after the annual American Society for Clinical Oncology (ASCO) conference, gearing up right now in Chicago, is also profit-taking time.

Until now, though, it’s been a seller’s market. To date, biotech follow-on sales have raised $4 billion this year. That’s nearly two-thirds of last year’s $6.5 billion total in just under five months, according to Elsevier’s Strategic Transactions database.

Put another way, there have been 18 follow-on sales of $75 million or more so far in 2013. That nearly equals last year’s total of 21. And it’s not just the high flyers raising barrels-full. As we describe below in our round-up, Ironwood Pharmaceuticals ginned up a cool $136 million by selling 10.5 million shares. Shares of the constipation-relief developer have appreciated only modestly while the male bovines have cavorted. Starting at the November 2011 "goose" mark, Ironwood has only risen 7%. Or, if you prefer a somewhat less arbitrary start date, Ironwood is up 23% since its February 2010 IPO, while the Nasdaq has risen 63% and the biotech indices have more than doubled.

So with the likes of Ironwood raising more than $200 million in equity and another $175 million in debt since the market’s gone nuts, we’re going to speculate that companies below the large-cap range are having little problem getting the cash they need. (In Ironwood’s case, it’s to help with the launch of their first commercial product, Linzess, aka linaclotide, which the FDA approved last August.)

According to Strategic Transactions, since November 2011 biotechs with market caps of $1 billion or more have raised $3.89 billion over 24 sales, an average of $162 million. Companies with market caps between $500 million and $1 billion have raised $2.59 billion over 26 sales, an average just under $100 million. And sub-$500 million cap companies have raised $4.67 billion over 142 sales, an average of $34 million.

It all reinforces the urgency for private firms to get through the IPO window, because the grass really is greener on the other side of the fence. And for now, there's plenty of pasture to graze. The upcoming Start-Up will have fewer bovine puns and more on the current IPO landscape – who’s getting to exits might surprise you -- so stay tuned. And before you exit, make sure you profit from the rest of our column. Sharpen your horns, it’s time for…

Ophthotech: The legacy of Eyetech continues. Its successor Ophthotech has raised $175 million to fund a huge Phase III trial for its wet age-related macular degeneration (AMD) candidate, Fovista. Announced May 29, the transaction comprises a $50 million Series C round for the privately held biotech, plus $125 million from long-time investor Novo AS in exchange for royalty rights to Fovista. The financing is the latest in a web of transactions involving the now-defunct Eyetech, Novo AS and other players in the ophthalmology space, including venture firm SV Life Sciences. New York-based Ophthotech was created and is led by Eyetech co-founders David Guyer and Samir Patel. Following the sale of Eyetech to OSI Pharmaceuticals, Guyer was a principal at SV Life Sciences, which focuses much of its investment on eye care companies. The Series C investors were Novo AS and Ophthotech’s other prior investors: SV, Clarus Ventures and HBM BioVentures. The same four participated in Ophthotech’s $30 million Series B round in 2009, and Novo, SV and HBM were the investors in the biotech’s $36 million Series A in 2007. But Novo AS also is ponying up $125 million against future royalties on the sale of Fovista, an anti-platelet-derived growth factor (PDGF) drug slated to start a 1,900-patient, 200-site Phase III study during the third quarter. The company declined to provide specifics on the royalty agreement, such as percentage of sales or whether the royalties would be capped by dollar amount or a certain date. – Joseph Haas

Effector Therapeutics: Effector closed a $45 million Series A round of funding, announced May 20, with commitments from seven venture firms including three tied to Big Pharma. The backers are GlaxoSmithKline’s venture firm SR One, Novartis Venture Funds, and Astellas Venture Management, as well as Abingworth, Osage University Partners, U.S. Venture Partners and Mission Bay Capital. The company plans to develop and commercialize new drugs based on discoveries at the University of California, San Francisco, concerning the process of translation, or protein synthesis. Effector believes it can create compounds that affect multiple oncogenes simultaneously, halting a key mechanism that leads to tumor growth. The company will target so-called “effector mechanisms” selectively, aiming for an upstream process that can activate more than one cancer gene at the same time. San Diego-based Effector believes that newly-discovered methods of disrupting certain malfunctioning effector mechanisms can sever a key lifeline upon which cancer cells depend. For CEO Steve Worland, Effector is a chance to build a new company from the ground up. He was CEO of publicly traded hepatitis C specialist Anadys until its sale to Roche for $230 million in October 2011. Worland told our Pink Sheet colleagues that his involvement with Effector’s VCs “was like being an entrepreneur-in-residence at three or four firms simultaneously” as he built the syndicate. The corporate investors’ parent firms received no special rights, options, or ties to the programs Effector has underway. According to U.S. Venture Partners’ Larry Lasky, the four firms with board seats – USVP, Abingworth, SR One, and Novartis -- were the “main investors,” while the other firms contributed smaller amounts. – Paul Bonanos

Karyopharm Therapeutics: After raising more than $30 million in its initial financing, oncology biotech Karyopharm is adding to its cash runway with a $48 million Series B. The Natick, Mass. company will use the new funds to push its lead cancer asset forward in multiple indications. Karyopharm, which was founded in 2008, has been financed largely by a private investor until now. In November 2010, the biotech attracted the attention of deep-pocketed Chione, an investment vehicle that is backed by Polish oil and gas baron Slava Smolokowski, who has also put some of his considerable fortune into Broadway. With Smolokowski’s backing, Karyopharm raised $20 million in its initial round and then added another $10 million during a follow-up offering in 2011. Chione once again has contributed to the most recent round of financing and been joined by a group of private investors, as well as one venture capital firm. Delphi Ventures now has joined the company’s investment syndicate in the latest round of financing and Deepa Pakianathan will join its board to represent Delphi’s interests. Karyopharm also has received $1 million in funding from the Multiple Myeloma Research Foundation and the founders brought in $1 million from other angel investors prior to the Series A. CEO Michael Kauffman said the company largely has avoided including venture capital investors due to the constraints that often come with VC money – particularly more rigid timelines. He said the leeway afforded by private investors was a better fit for the company. – P.B.

Ironwood Pharmaceuticals: The developer of constipation treatment Linzess (linaclotide) netted nearly $130 million in a secondary sale of 10.5 million shares of its Class A common shares at $13 a piece, a 6% discount to the previous day’s closing price. The firm could boost its proceeds if underwriters led by JP Morgan and BofA Merrill Lynch sell an additional 1.575 million shares, cash that will help the company build the recent launch of Linzess, which FDA approved in August 2012 and the EU in November 2012. Ironwood shares US marketing duties with Forest Laboratories, a deal that was inked in 2007, and Laboratorios Almirall has exclusive European rights. It’s also brought on AstraZeneca to help sell Linzess in China and Astellas Pharma in Japan and other Asian countries. Using both debt and equity sales, the firm has raised nearly $400 million since the start of 2012. The secondary share sale is for Class A stock, notable because Ironwood long ago instituted a dual-class share structure to ensure that pre-IPO shareholders have a disproportionately large say in potential change-of-control scenarios. Holders of Class B stock get 10 votes per share in such matters. Class A holders get 1 vote per share. Starting in 2019, the dual-class structure could disappear if Class B shares total less than 25% of all outstanding Ironwood shares. According to the firm’s regulatory filings, the recent stock sales put the Class A share count at 92.9 million and Class B at 26.4 million. – Alex Lash

All The Rest: Cardeas Pharma raised $34M in Series B to fund work on inhaled antibiotics for hospital-acquired infections… Jennerex Biotherapeutics closed on $21.6M to support lead oncolytic immunotherapy Pexa-Vec…Trinity College spin-off Trino Therapeutics raised an €9M Series A…TheraCoat, focused on bladder infections, completed a $7M round led by Pontifax…neurodegenerative disease drug developer Oligomerix raised $2.6M in a Series B…concurrent with an $850k grant from Austria’s Research Promotion Agency FFG, antisense company ugichem raised €1.4M…Sofinnova led an undisclosed Series A for First Aid Shot Therapy (FAST), which is developing OTC single-serve liquid products…autoimmune and viral disease firm Kineta received funding from Hydra, an LP formed by retired oil traders…BTG completed a £106M private placement to help pay for acquisitions of interventional device companies Ekos and Nordion’s Targeted Therapies…for a total of $4.6M, Aeterna Zentaris may sell MLV & Co. up to 2.5M shares in an "at-the-market issuance"…in a convertible preferred stock and warrants offering, Guided Therapeutics raised $2.6M…Rare disease-focused NPS Pharmaceuticals closed on an $87M secondary offering…Stemline Therapeutics, which is investigating oncology therapeutics that target cancer stem cells and tumor bulk, publicly raised $60M…in a follow-on, Cyclacel Pharma grossed $20.5M to fund completion of the Phase III SEAMLESS trial for AML candidate sapacitabine…male and female sexual health company Apricus Biosciences closed a $17.1M FOPO…in the second-highest grossing IPO so far in 2012 behind Quintiles, Portola went public raising $140M... Israeli firm Alcobra completed a $25M US IPO…Regado set terms for their IPOs…PTC Therapeutics, Prosensa, and Evoke Pharma all joined the IPO queue and filed S-1s...Speranza Therapeutics raised $90M in funding and concurrently spun off from Elan to continue work on Phase II ELND005 for CNS indications… ElsaLys Biotech spun off from Transgene with a €2.1M Series A to support development of antibodies for cancer and infectious…Pfizer raised $4B in a five-tranche notes sale…to fund several acquisitions, Elan completed an $800M debt offering…ImmuPharma received a £50M loan from Darwin Strategic to support Phase III studies of lupus candidate Lupuzor…and VentureHealth set up an equity crowdfunding portal to improve clinical outcomes. -- Amanda Micklus

Many thanks to Stacy Lawrence for help with this week's column.

Photo courtesy of Flickr user Stephan Andrej Shambora.

Deals Of The Week Ponders When $2.1 Billion Is A Steal

2013-05-24T10:40:00.002-05:00

With the oncology high season upon us and just about everyone in the industry scrambling to decode the secrets hidden in ASCO’s abstracts, we couldn’t help but stop and reflect on how at least one company got where it is in oncology today through stellar deal-making. Bristol-Myers Squibb Co.’s $2.1 billion acquisition of Medarex in 2009, which seemed to some like a fortune at the time, catapulted Bristol into the leading position in the field of immune-oncology, an area of cancer drug development that some analysts are now calling a potential $10 billion to $20 billion market.

When the two companies, already partners, announced the acquisition in July 2009, “The Pink Sheet” called the offer “a coup for the biotech,” which got nearly double its stock price from Bristol. Fast forward four years later and it is Bristol that made out like a bandit.

There is still a lot to learn about how the immune system can be used to fight cancer, but it is increasingly evident that the immune system can indeed be directed to turn against tumors, potentially resulting in long, durable responses. Thanks to Medarex, Bristol has become one of the experts at the forefront of the research. Yervoy (ipilimumab), the immunotherapeutic targeting CTLA4 Bristol developed with Medarex, is already on the market for metastatic melanoma and could achieve blockbuster level sales this year. A second drug, nivolumab, which targets a different immune checkpoint, PD-1, has already moved into pivotal trials.

In about one week at ASCO, Bristol will release data on Yervoy and nivolumab used in combination, where the potential of immunotherapeutics is believed to be greatest. And those are just two of the immunotherapeutics Bristol has in development. The company is studying multiple immune system targets in earlier trials, some gained through Medarex and some gained through other deals. For example, the company gained a KIR receptor blocker through a licensing deal with Innate Pharma SA in 2011, and a monoclonal antibody against another target, CD-137, was developed internally. Bristol believes these drugs will ultimately be used together in different combinations to turn cancer into a potentially chronic disease.

It’s never easy to quantify the value of an acquisition years after a portfolio is integrated into big pharma, but it is safe to say Medarex turned out to be a smart buy. Investors and analysts have certainly taken note. Citi Research managing director for global pharmaceuticals Andrew Baum upgraded the company May 22 and raised the stock’s price target to $55 from $33 on the strength of the immunotherapeutics portfolio, which he said “will likely exceed $10 billion [in sales] by 2022.”

The company’s stock is up more than 11% since May 15, when the ASCO abstracts were released and Bristol’s data was highlighted in a press preview; it closed May 23 at $47. How is Wall Street valuing Medarex in the share price? “It’s at least $10. Perhaps as much as $15,” speculated ISI Group analyst Mark Schoenebaum.

All that’s not to say Bristol didn’t pay handsomely to be in the position it’s in. The company’s then-CEO James Cornelius took a big gamble on immuno-oncology when he put $2.1 billion down on Medarex as part of his “string of pearls” acquisition strategy before the Phase III data on ipilimumab read out.

The deal was one of the most expensive in oncology in the last five years, trumped only by mega acquisitions like Roche’s $43.7 billion buyout out of Genentech Inc. and Takeda Pharmaceutical Co. Ltd.’s $8.2 billion buyout of Millennium Pharmaceuticals, both in 2008, and by a couple of mid-sized acquisitions including Astellas Pharma Inc.’s acquisition of OSI Pharmaceuticals Ltd. for $3 billion and Celgene Corp.’s purchase of Abraxis BioScience Inc. for $2.9 billion.

Also, weighing in as more expensive is Eli Lilly & Co.’s $6.5 billion acquisition of ImClone Systems Inc. in 2008; ironically, Bristol was outbid by Lilly that time. Months later, Bristol turned around and acquired Medarex instead, a decision it probably doesn’t regret. Even though Medarex was expensive, the value it has brought to Bristol appears to be clear cut. Even a great deal can cost a fortune after all. -- Jessica Merrill

Which one of the deals below will pay dividends? Check back in a few years, but for now content yourself with the latest edition of ...

Pfizer/Zoetis: Pfizer said May 22 that it will shed its remaining 80% ownership of the Zoetis animal health business that it began spinning out via IPO in February. The timing was earlier than expected. Analysts had anticipated that Pfizer would wait at least 180 days before divesting the remaining portion of the company, partly to help Zoetis establish its footing and also due to a lock-out period by underwriters. Yet, that waiting period could be waived if Zoetis established itself as standalone company, and apparently it has. Pfizer’s former animal health business seems to be adjusting to independence well; Zoetis reported first quarter earnings per share on April 30 of $0.36 per share, up 20% from what the unit reported a year earlier and three cents ahead of analysts’ expectations. The Madison, NJ-based company brought in sales of $1.09 billion, up 4% from the year-prior period. News of the swap didn’t impair Zoetis’ market performance; shares added about 1.5% to $33.55 on the day of the announcement. The Zoetis IPO, which brought in $2.2 billion for Pfizer, was a success. The offer price was above the anticipated range of $22 to $25 per share; the company sold 86.1 million shares at $26 each on Jan. 31. The stock opened at $30.74 on Feb. 1 and was up 20% on the first day. Now, Pfizer shareholders will be given the option to exchange all, some or none of their shares of Pfizer stock for Class A shares of Zoetis stock, which will be issued at a 7% discount to market price, meaning $100 of Pfizer stock would be worth $107.52 of Zoetis shares, according to the company. Though this time Pfizer won’t see any cash, the tax free swap will reduce the Big Pharma’s share count and thus be accretive to earnings per share. – Lisa LaMotta

Elan/AOP Ophan/NewBridge/Speranza: In its continuing effort to spend its way to diversification, Elan Corp. PLC announced a trio of deals this week. It acquired profitable, Central and Eastern Europe-focused orphan disease company AOP Orphan Pharmaceuticals; it invested in Middle Eastern specialty pharma NewBridge Pharmaceuticals; and it spun out its only clinical candidate into Speranza Therapeutics.
These deals come on the heels of its royalty deal with respiratory company Theravance and Elan’s struggle to remain independent. Also this week, Royalty Pharma increased its hostile bid to acquire Elan to $12.50 per share for the company, which it said is the equivalent of $4.6 billion for Elan’s remaining half of its royalties for multiple sclerosis drug Tysabri (natalizumab). That’s a 42% premium to the $3.25 billion for which Elan sold the other half of its Tysabri royalty to partner Biogen Idec Inc. in March. Elan shareholders previously rejected an $11.25 per share offer from Royalty Pharma earlier this year. Elan is acquiring AOP for €263.5 million ($339.8 million) in cash and stock, plus a potential €270 million in regulatory milestones. The Austrian company markets orphan disease products in Central and Eastern Europe and the Middle East. Elan also made a $40 million investment in specialty pharma NewBridge. Elan received a 48% equity stake and has the option to buy the remainder by 2015 for $244 million. Finally, Elan is divesting ELND005 (scyllo-inositol), which did not meet the primary endpoints in a Phase II trial to treat Alzheimer’s disease, into newco Speranza. Elan will invest $70 million for an 18% position in the company, plus royalties or commercial rights in undisclosed markets. A second undisclosed investor will invest $20 million for a 62% equity position, with the remaining 20% distributed among the management. Elan has committed to an additional potential $8 million, while the other investor may invest another $2 million. Elan CMO Menghis Bairu takes the reins at the new biotech as CEO. – Stacy Lawrence

Actavis/Warner Chilcott: Following more than a week of speculation, generics giant Actavis Group agreed to purchase specialty pharma Warner Chilcott PLC on May 20 in an all-stock transaction under which Warner shareholders will end up with a 23% interest in the combined company, to be called Actavis PLC. The deal gains Actavis a favorable tax environment in Ireland and puts to rest for now further talk of a potential Actavis/Valeant Pharmaceuticals International Inc. merger. Valued at about $8.5 billion including the assumption of $3.4 billion in debt, the merger will require approval from 75% of Warner shareholders under Irish law and is likely to close in the fourth quarter, the two companies said. Warner shareholders will receive 0.16 shares in the new company for each full share they hold in Warner, equating to a valuation of $20.08 for each existing share. That’s a 34% premium over the stock’s closing price on May 9. Aside from its core generics business, Actavis PLC will have eight women’s health products including contraceptives, infertility treatments and hormone therapies; six urology drugs across indications such as overactive bladder, testosterone replacement, prostate cancer and benign prostatic hyperplasia; two gastrointestinal drugs, both for ulcerative colitis; and one marketed dermatology product with a second slated for launch this July. It also would boast a pipeline of 25 compounds, 15 of which in the women’s health area. Actavis CEO Paul Bisaro said the merger would result in Actavis deriving about 25% of revenues from specialty branded product sales, compared with about 7% currently.– Joseph Haas

Novo/Xellia: Novo AS added the business-to-business generic anti-infectives manufacturer Xellia Pharmaceuticals AS to its portfolio of health care companies on May 21, building up a life sciences cluster in Denmark that may well be the envy of larger countries. Novo, a life sciences investor and the holding company for the Novo Group, is already the majority shareholder of three Denmark-based companies, Novo Nordisk AS, Novozymes AS and Chr. Hansen Holding AS, and said it was pleased to bring Xellia ownership back to Scandinavia. Xellia specializes in difficult-to-manufacture generic antibiotics and anti-infectives like vancomycin and colistimethate sodium, with fermentation technology not routinely available to bulk manufacturers of other antibiotics like penicillins and cephalosporins. Novo is owned by the Novo Nordisk Foundation, and like the Wellcome Trust in the U.K., the foundation is a major supporter of academic research through grants and other funding. Novo paid the U.K. private equity company 3i and minority shareholders $700 million for Xellia, a company 3i and its management bought from U.S.-based Alpharma Inc. back in 2008. Alpharma was itself created through the merger of companies based in Norway, Denmark and the U.S. 3i made a 2.3 times return on its investment in Xellia, not bad during the past five years of slow economic growth. – John Davis

BTG/Ekos/Nordion: Britain's BTG PLC announced two planned acquisitions this week, one extending its abilities in liver cancer and the other an ultrasound treatment for dissolving severe blood clots, to create an interventional medicine business with potential sales of $1 billion. BTG agreed to pay $180 million in cash and up to $40 million in milestones for Seattle-based Ekos Corp., which will provide control of EkoSonic, a new technology approved in the U.S. and Europe for treating blood clots which is enjoying 29% annual compound growth rate over the past three years. The specialty pharmaceutical group also agreed to buy the targeted therapies division of Nordion Inc., for about $200 million in a deal that adds that company’s Therasphere radioactive glass beads treatment for liver cancer. BTG believes Therasphere will complement its existing chemotherapy beads unit and wants to expand the indications of use for that product and its geographic footprint beyond Europe and the U.S. to Asia, where the prevalence of Hepatitis B – a precursor for liver cancer – is very widespread compared with the West. For example, 5% of primary liver cancers occur in China. BTG thus sees a huge market opportunity there and aims to build on the chemo bead partnerships and regulatory track record it already has in China, Japan and South Korea for promoting Therasphere. Some of the cost of buying the Nordion unit will be met from a May 23 private placement that raised $160.7 million. BTG sold 32.2 million new shares, representing just below 10% of its share capital. -- Sten Stovall

GSK/BARDA: Biopharmaceutical business development executives are oft heard claiming that every deal is different – and so breathless PR claims of “first of its kind” and uniqueness usually tend to be simultaneously overheated and paradoxically unnecessary. But this week’s deal between GlaxoSmithKline PLC and the U.S. Biomedical Advanced Research and Development Authority might fit the bill. The collaboration is essentially a grant over which BARDA exercises an unusual amount of control and will focus on developing antibiotics against resistant bugs and potential bioterror agents. BARDA retains flexibility in which GSK projects it chooses to fund over the life of the deal; it will contribute $40 million over an initial 18 month period and up to $200 million if the deal gets renewed over five years. The only specific GSK asset cited in the award contract is GSK 2140944, an antibiotic against respiratory and skin and soft tissue infections currently in Phase I studies for conventional and biothreat applications. A joint BARDA-GSK committee will determine funding allocations and select or eliminate projects for the team’s portfolio. BARDA doesn’t receive any traditional ownership or return rights (no milestones or royalties to reward its risk taking). Nor will it acquire any rights to GSK’s pre-existing IP, according to a GSK spokesperson. For IP that comes out of the relationship, the spokesperson notes that “GSK may obtain title to any patents for inventions GSK makes as part of the contract, with BARDA reserving certain government rights to such inventions.” The deal underscores the need for new models to fund R&D in a space largely underfunded by traditional means thanks to scientific difficulties and poor return on investment. GSK isn’t alone in its pursuit of new antibiotics, but it’s an increasingly small club.--CM

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

2013-05-17T13:56:00.001-05:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2013-05-17T10:51:00.000-05:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thanks to Mike Goodman for his contributions this week.

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

2013-05-10T15:03:00.002-05:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Deals of the Week Looks at Ultra-Orphan Drug Pricing

2013-05-05T15:25:00.000-05:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2013-05-03T10:04:00.001-05:00

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

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

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

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

Those are just the ones in the public eye. There could be plenty a few steps behind, thanks to the US JOBS Act of 2012. It made IPO registration easier and stealthier at first, giving companies the chance to lay the groundwork of a possible debut without having to open up to public scrutiny. Not so fun for journalists, of course, but it gives executives and their advisors more data to consider and more time to schmooze public investors before declaring themselves in pursuit of the brass ring. And that breathing room, people say, is helping. “The ability to make initial registration statement filings confidential, plus the ‘testing the waters’ rules have made a meaningful difference in helping companies pursue an IPO,” says Fenwick & West partner Matt Rossiter, whose clients include life science companies and venture investors.

Kleanthis Xanthopoulos took his microRNA company Regulus Therapeutics public last year and is a big believer in a long, slow IPO process. “The roadshow should be where people make their minds up, finally, rather than where they learn about you,” he said during a discussion about the IPO landscape at the recent Allicense conference in San Francisco.

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

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

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

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

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

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

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

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

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

Intrexon: The synthetic biology company said May 1 it has reeled in a $150 million Series F round of funding to continue building operations in its four areas, health care, food, energy, and environment. Health care is where Intrexon CEO and chairman Randal Kirk amassed the fortune that he’s been plowing into Intrexon since his first investment eight years ago. Kirk was majority owner of New River Pharmaceuticals, which he sold to Shire in 2007, and Clinical Data, bought by Forest Laboratories in 2011. He became CEO of Intrexon in 2009 and much of the $509 million the firm has raised has come from him or his affiliated venture funds. A majority of the Series F round came from undisclosed new investors, according to the company. The news of the financing came on the heels of the firm’s latest biopharmaceutical deal, an agreement with Soligenix to co-produce monoclonal antibodies for the treatment of melioidosis, an infection caused by Burkholderia pseudomallei endemic to Southeast Asia and Northern Australia. Other recent health care deals include an agreement with AmpliPhi BioSciences to develop a range of anti-infectives and a license of its technology to Fibrocell Science for use in development of fibroblasts and dermal cells for aesthetic and therapeutic applications. Oragenics, Adeona Pharmaceuticals and Halozyme Therapeutics have also partnered with Intrexon. – A.L.

All The Rest: New investor Oracle joined in for a second closing of Proteus Digital Health's Series F round, now totalling $62.5M… Celator closed a $39.3M financing to fund a Phase III study of CPX351 in acute myeloid leukemia… HPV vaccine developer Genticel raised €18.2M in Series C funds… Synthetic biology company Gen9 received a $21M investment from Agilent… Acumen Pharma, developing the ACU193 antibody for Alzheimer’s, completed the first close in a $20M Series A… Becker Ventures led a $15M round for AltheRx, developer of overactive bladder candidate solabegron... To support technology to distill real-time patient insights from social media, Treato raised $14.5M… ActoBiotics developer ActoGeniX completed a €10.7M Series B… Anterios collected $8.5M in venture funding for its aesthetic and dermatological drug candidates… viDA Therapeutics’ $3.6M seed round will fund a granzyme B inhibitor for fibrotic, autoimmune, degenerative, and age-related chronic inflammatory diseases… US and European institutional investors put €54M into Belgian biotech Galapagos… Radius Health, which is working on the transdermal and IV candidate BA058 for osteoporosis, raised $43M… Arrowhead Research completed a $36M private offering of common and Series B convertible preferred shares…concurrent with closing its reverse merger with publicly traded Tranzyme, Ocera plans to raise $20M… Health care-dedicated institutional buyers invested $10M in Northwest Biotherapeutics… Lincoln Park Capital Fund provided Elite Pharma with $10M… As it prepares to launch its radiopharmaceutical agent Lymphoseek, Navidea privately raised $5.1M… To pay for the NDA for male hypogonadism treatment CompleoTRT, Trimel publicly sold $Cdn40M in stock… Boron chemistry platform company Anacor completed a $20M FOPO… Cell therapeutics developer NeoStem raised $10M through a public stock sale... Immunomodulating company Idera raised $8.75M in a secondary offering... Less than a year after closing a $51M Series E round, cardiovascular firm Regado Biosciences filed for its IPO… Receptos, Quintiles, and Ambit all set terms for their IPOs… Theravance is spinning off into two independent publicly traded companies, one focused on the Breo deal with GSK, and the other on small-molecule R&D… Supernus netted $72M in a convertible senior secured notes offering… Immunotherapy-focused TNI Biotech filed a Form 10 to become public reporting entity… GSK and Avalon are partnering to start up multiple drug discovery companies over the next three years with a total of $495M in potential funding… Harvard University received a $50M donation to support translational research… Atlas Venture closed its $265M ninth fund... Capital Royalty announced an $805M fund for nondilutive financing. -- Amanda Micklus

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

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

Deals Of The Week Ponders Project Financing

2013-04-26T13:20:00.000-05:00

GlaxoSmithKline has been out ahead of other big pharmas when it comes to investing in venture funds. Its deal with Avalon Ventures represents another flavor of the relationship – investing as a partner rather than as an LP and creating companies around a single drug. But in the rush to mint single-asset companies, are the stakeholders giving short shrift to innovation?

On April 22, GSK joined with Avalon Ventures to form up to 10 start-ups in one San Diego-area facility. Avalon will contribute up to $30 million from its Fund X, and GSK will provide up to $465 million in seed funding, based on development milestones, while retaining an option to swoop in and acquire a company if and when it produces a clinical candidate. Avalon will pick the early-stage prospects, and both companies jointly will approve the formation of new companies.

We’ve seen these deals before, motivated by the neediness of the two parties: big pharma needs low-risk access to external innovation as its own internal labs sputter; VCs need access to funding as their traditional sources dry up. GSK has been particularly active in teaming up with VCs, and seems to be trying out different flavors of collaboration. It invested last January in Sanderling Venture’s Fund VII; and in March 2012, it joined with Johnson & Johnson to invest in Index Ventures’ Index Life VI fund.

The Avalon deal is a new twist, however. GSK is not an LP in the venerable San Diego firm’s Fund X, which closed last year with $200 million in commitments. Rather, it is an investment partner, with the two sides forming syndicates of two for each company they create. They will not look to bring in more investors, officials from GSK and Avalon said this week. And although GSK’s relationship to Index is as a limited partner, not a roll-up-the-sleeves, company-creation partner, it’s similar to the Avalon deal in one respect: the focus is on single-asset companies.

That’s also DOTW’s focus this week: project financing. Not from the perspective of the VCs who popularized the model and are investing in it like lemmings, but rather from the perspective of the scientists who do the daily work of inventing drugs. From the scientists’ point of view, the asset-centric model isn’t about lower risk and better returns. (After all, it’s an ongoing experiment whose benefits we won’t know for some time yet.) Scientists are asking a different question: is it the best route to innovation?

A single-asset company refers to a virtual start-up formed around a single drug. All staff, funding, planning and operations are geared to advancing that drug to an exit, whether it be the sale of the asset or the company that houses it. The leanness of the operation, and the need to outsource R&D, is thought to lead to capital efficiency. The exclusive focus on a single project is thought to offer operational efficiency and speed to proof-of-concept. The single-asset vehicle can make a clean, attractive package for a buyer, unencumbered with staff, infrastructure and overhead.

Here’s where the contrarian view comes in. Everything is outsourced these days, including synthesis and chemistry, in vitro and in vivo tox, ADME, pharmacokinetics, etc. But not so much target selection or lead optimization. Also, the outsourcing of R&D requires staff to oversee the tasks and manage the relationship – initiating the work, measuring performance and assuring quality, reviewing interpreted data, etc. Depending on the amount and complexity of the work, this can add bloat and cost.

Opinions about the capabilities and quality of CROs vary among scientists. Hermann Mucke PhD, founder of HM Pharma Consultancy, says he “would not trust a CRO's claims of its ability to identify any target, or optimize any lead structure.” He allows that a platform company with a sideline business could do specific target-related tasks quite well, likely better than most companies. But he adds that it’s sometimes difficult to achieve that narrow match. And it also requires more teamwork between internal staff and service provider than classical outsourcing.

Mucke’s last point about teamwork raises another potential problem with the virtual model. In his 1974 book “Lives of a Cell,” Lewis Thomas described the phenomenon of groups of ants, bees, fish, termites or people behaving like a thinking organism. It happens, like magic, when the group reaches critical mass. But does it happen in a virtual company with a handful of employees working from home, sometimes at a considerable remove from the operations? Thomas, who died in 1993, was the former Dean of Yale School of Medicine and New York University School of Medicine, and President of Memorial Sloan-Kettering Cancer Center. He knew something about scientists working in teams.

The short horizon to an exit also could make it hard to attract top scientific talent. Scientists tend to like to dig deep into a project and are open to following leads thrown up by serendipity. Pfizer’s Xalkori (crizotinib) is a good example. The molecule was discovered at Sugen and came into Pfizer’s portfolio when it acquired Pharmacia, Sugen’s parent. Pfizer scientists at La Jolla, Calif., several of whom started at Sugen, spent seven years hitting crizotinib’s c-MET target before a chance publication in Nature magazine clued them into ALK and set them set them on the right path. Xalkori launched four years later.

Now, getting back to GSK – in siding with VCs, is the pharma seeking speed and cost-cutting advantages or is it hoping to get an innovative drug out of the investment? Are GSK’s interests aligned with its partners?

Beats us. We just thought the question needed to be aired. - Mike Goodman

We also think the following deals merit your patient attention:

Merck/Cerecor: In its second deal with Merck in the past month, on April 19 neuroscience specialist Cerecor acquired exclusive worldwide rights to develop and commercialize MK-0657, Merck’s NMDA (N-methyl-D-aspartate) receptor subunit 2B antagonist for all indications including depression. The molecule was originally developed by Merck for Parkinson’s disease, but failed to show efficacy in an early study. However it did show a promising signal of antidepressant activity. Dr. James Vornov, Cerecor’s SVP of clinical development, said his team was particularly interested in the oral drug’s “potential to rapidly reduce depressive symptoms, including suicidal ideation” in patients refractory to available therapies. Terms of the deal were not disclosed. Cerecor will immediately assume full development and commercialization responsibilities. The agreement includes milestone payments and royalties “consistent with clinical stage licenses in neuroscience.” Deals in the psychiatric space tend to feature low upfronts and moderate-large downstream payments, in keeping with the high-risk nature of neuropsychiatric drug development. In March, Cerecor received exclusive worldwide rights to develop and sell Merck’s catechol-O-methyltransferase (COMT) inhibitors, with potential applications in Parkinson’s disease, schizophrenia, and addictive behaviors. Financial terms were not disclosed. Founded in 2011, the start-up specializes in translating early stage neuroscience therapies into early human trials, and developing them for market. Merck’s mid and late-stage neuroscience pipeline shows no candidates for disorders of mood or behavior; but there are two for insomnia, two for neurodegenerative diseases, and one for neuromuscular blockade. - M.G.

AstraZeneca/Alchemia: In its ambition to transform the company through deal-making, AstraZeneca has signed yet another early-stage collaboration, this time a multi-target drug discovery deal with Australian oncology drug developer Alchemia. The agreement, announced April 23, gives AstraZeneca access to Alchemia’s Diversity Scanning Array (DSA) and associated Versatile Assembly on Stable Templates (VAST) chemistry platform to discover novel small-molecule drugs in a multitude of therapeutic areas, including oncology, respiratory and cardiovascular disease. Alchemia will receive an undisclosed upfront payment and is eligible for preclinical, clinical and commercial milestone payments of up to $240 million. The Alchemia’s DSA is a suite of 14,000 novel compounds that scan three dimensional molecular shapes and peptidomimetic functionality. It forms the basis of the VAST discovery platform which can identify the shape and binding elements required for target modulation. The deal is the fifth AstraZeneca has signed since unveiling its turnaround strategy to investors in March; the most recent was with Bind Therapeutics. - Jessica Merrill

Opko Health/Prolor Biotech: Opko Health announced April 24 that it will acquire Israel’s Prolor Biotech in an all-stock transaction valued at roughly $480 million. The stock-swap deal, expected to close during the second half of this year, is structured so that Prolor’s management and personnel will remain in place, serving as the biologics subsidiary of Opko, which already produces small-molecule drugs, vaccines and diagnostics. Prolor’s business focus is on developing longer-acting formulations of approved protein products, with a lead product for growth hormone deficiency, the Phase III human growth hormone hGH-CTP. Prolor intends to begin a Phase III trial in adults later this year, with a plan to position hGH-CTP as a weekly injectable more convenient for both adult and pediatric patients than the current daily-injection therapies. Opko Executive VP Steve Rubin said his firm placed a lot of value on acquiring the GHD product, which has orphan drug designation in both the U.S. and Europe in both adult and pediatric populations. The EU designation would protect the product, if approved, from direct competition for 10 years, he added. “This is the way we’re building Opko,” he said. “This gives us four products that will be in Phase III, which is very important to us. They’ll come on to the market at different times.” During an investor call, Prolor President Shai Novik spoke of how the deal structure – in which Prolor shareholders will receive 0.9951 shares of Opko stock for every full share in Prolor – will give his company’s investors the opportunity for lasting value by participating in Opko as long-term investors. The deal values shares in Opko at $7.03 a piece and Prolor shares at $7.00, a 20% premium over the Israeli firm’s closing price on April 23. - Joseph Haas

Bristol-Myers Squibb/Merck: Confident that its daclatasvir will prove the best-in-class NS5A replication complex inhibitor for hepatitis C, Bristol-Myers Squibb on April 22 signed its second non-exclusive partnership this month to test the compound in tandem with another company’s HCV candidate. The agreement to test Phase III daclatasvir in a Phase II combination trial with Merck’s MK-5172 follows on a similar arrangement signed with Vertex April 5 to test the NS5A inhibitor with nucleotide analog VX-135. The deal includes no financial considerations; Merck will fund the trial, with Bristol only contributing the volume of study drug needed, Doug Manion, Bristol’s senior VP of development, neuroscience, virology and Japan, said. The arrangement is open-ended, like other combo trial collaborations Bristol has entered – if the two companies want to move on to Phase III work with the combination being studied, they need to work out a new agreement. Manion said NS5A inhibition is a compelling pathway for treating HCV, in part because the exact function of the NS5A gene product in HCV is not fully understood. “It’s very complicated,” he said. “It does a large number of things and the virus can’t survive without it, we know that for sure. We were the first company to actually ‘crack the nut’ in terms of how to drug it.” Bristol plans to file the combination of daclatasvir and its proprietary Phase III protease inhibitor asunaprevir for Japanese approval later this year, specifically to treat genotype 1b of the virus, the version most prevalent in Japan. - J.A.H.

Achaogen/BARDA: The private anti-infectives company Achaogen secured $60 million from the Biomedical Advanced Research and Development Authority, a division of the U.S. Department of Health and Human Services, to advance its lead program. Disclosed on April 24, the funding is an extension of a 2010 contract with BARDA that brings the total to $103 million. The latest funding will go to conduct a global Phase III superiority study of plazomicin (ACHN-490) to treat patients with serious gram-negative bacterial infections due to carbapenem-resistant Enterobacteriaceae (CRE) infections. The trial is slated to start in the fourth quarter. Plazomicin is a next-generation aminoglycoside antibiotic; it’s also being developed against biothreat agents such as Yersinia pestis, which causes plague, and Francisella tularensis, which causes tularemia. Plazomicin is engineered to overcome known aminoglycoside resistance mechanisms. - Stacy Lawrence

Deal Of The Week: Nyet!

2013-04-19T14:04:00.001-05:00

The Russian government’s announcement on April 19 that its ministry of foreign investment has rejected Abbott Laboratories Inc.’s plans to buy a domestic vaccine manufacturer, NGO Petrovax Pharm, highlights the nuances and complexities of deal making in emerging markets.

As required by Russian law, Abbott filed for permission to buy Petrovax in the fall of 2012. Published reports put the reported bid at $280 million, plus a $25 million future payment. The government’s motives for the kibosh remain unclear as of this writing, but Russia, as is the case in many countries, considers vaccines to be a strategic priority and might not want any foreign company, let alone Abbott, to own the company.

Abbott’s motives are more transparent. Many pharma companies see Russia as an attractive growth opportunity, especially since the government has embarked on a major initiative to build its life sciences ecosystem. And while the country’s operating environment is complicated, so are those of other emerging markets. Abbott is no longer a pharmaceutical company, since it spun out that portion of its business on Jan. 1 to create AbbVie Inc. But it did hang on to the company’s established products business unit focused on mature and off-patent branded drugs, which includes a seasonal flu vaccine, Influvac, and which would have been responsible for Petrovax.

Petrovax, founded in 1996 by a team of Russian flu-vaccine researchers, is one of a handful of domestic makers of innovative medicines and one of the few owners of GMP-approved production facilities in Russia. As such, it is an intriguing example of the kind of domestic company the Russian government hopes will flourish as the country modernizes its biopharmaceutical industry. A patented influenza vaccine Grippol, discovered by Petrovax, is a best seller in Russia, and the company also makes the immunomodulator polyoxidonium.

But Russia has woefully few companies focused on developing their own innovative drugs and relies heavily on imports from foreign drug manufacturers for the most modern medicines. In 2009, it implemented Pharma2020, a blueprint for reinvigorating the domestic biopharma industry and building a scientific ecosystem that will lead to discovery on its own soils of new drugs. The near-term goal of the program is to encourage tech-transfer among foreign and domestic companies, in order to strengthen the local industry.

While these, along with broader government initiatives to improve Russia’s healthcare system and standard of living, are spurring Western interest, they lead to questions about how Russia can best balance the goals of foreign biopharma companies with its desire to be self-sufficient and foster a thriving domestic industry. Now that Russia has entered the World Trade Organization, the questions gain in relevance.

All of this will be the topic of discussion at the “Spotlight On The BRICs: Russia Track,” one of several clusters of panels that open the biotech industry’s big annual convention on April 22 in Chicago. The author of this week’s DOTW column is slated to moderate one of the panels associated with this track, specifically on Russia’s Pharma2020/ modernization program.

“The Pink Sheet”/ EBI’s Chris Morrison will be moderating two panels: Battle of Biotech Wits, which he describes as “BIO’s only game show, where the audience gets to vote in real time on which panelists are giving the best answers to today’s most difficult and pressing questions.” A second he’s spearheading on “Adventures in Academic Partnering,” explores “what pharma wants from its increasingly large suite of academic partners, and how are industry’s leading companies structuring deals that gain them access to academia’s top technologies.” Other EBI correspondents will be in attendance, notably Start-Up biopharma editor Alex Lash and PharmAsia News India editor Vikas Dandekar.

PharmAsiaNews executive editor Josh Berlin’s panel “Finding Innovation In Emerging Markets” ties directly to a driver we’re seeing more of—tapping innovation in and bringing innovation specifically developed for emerging markets to those regions. It’s a phenomenon known as ‘reverse innovation,’ and you can expect to see more of it as big Western companies hungry for growth, and looking over their shoulders at rising savvy competitors in the East, are aware of, if not quite ready to adapt.

Specifically, reverse innovation is “the global uptake by a multinational company (MNC) of a novel technology or strategy originally designed to address a specific need in an emerging market. One of the deal-makers active this week, Ascletis Inc., as a hybrid U.S. –Chinese company, with aims to tap new drug discoveries in both the East and West to bring to China, epitomizes this trend. And although we can’t say that Abbott’s strategy for Petrovax amounted to reverse innovation – we have no way to know if it planned to export Grippol, for example—Russians themselves clearly want to build up their pharma exports. However early they are in the evolution, it’s something the industry is watching, even as it musters on through the daily grind of more traditional deals…Wendy Diller

Roche/Ascletis: Roche and Ascletis are collaborating to develop and commercialize Roche’s investigational hepatitis C drug danoprevir in China, under a deal announced on April 15. The deal calls for Ascletis to fund and oversee the regulatory process, development and manufacturing of the drug in greater China, including Taiwan, Hong Kong, and Macau and receive payments upon reaching certain development and commercial milestones. The partners will collaborate on clinical development and commercialization. No direct antiviral agents are available currently for HCV in China, where more than 10 million people are infected with the disease. The majority of these are genotype 1b, which is highly responsive to danoprevir. Roche has no plans to develop danoprevir, a protease inhibitor, which also is effective against genotype 4, for the West, where the drug would face intense competition.

Two-year-old Ascletis, with headquarters in Research Triangle Park, N.C., and Hangzhou, in the Zhejiang Province of China, in-licenses and develops clinical-stage assets developed elsewhere with a goal of commercializing them in China. It also works to discover new drugs in China and bring them through mid-stage trials before striking revenue-generating global partnerships. For now, the company is focused on oncology and infectious diseases. It has raised one of biotechnology’s largest Series A rounds, a two-tranche $100 million financing led by Chinese real estate billionaire Jinxing Qi, along with other unnamed private investors in China, the U.S. and elsewhere.--WD

GNS Healthcare/CMS: GNS Healthcare, a data analytics firm, is partnering with the Centers for Medicare & Medicaid Services to assess the Department of Health and Human Services’s quality measures. In an agreement announced April 18, GNS will apply its Reverse Engineering and Forward Simulation analytics and machine learning platform to determine the impact that CMS quality measures have on the quality of patient care.
Collected and reported in an effort to produce patient which is effective, safe, patient-centered, equitable and timely, the CMS quality measures now are being linked to valued-based incentive payments to health care providers. The GNS effort will help analyze causal relationships between measures and outcomes for a triennial report CMS produces on quality measures.-- Joseph Haas

Eli Lilly/Siemens: Eli Lilly & Co. continues to plunge ahead with its Alzheimer’s disease programs despite some high-profile setbacks. It announced on April 17 that it has bought two tau imaging tracers and related technologies from Siemens Medical Solutions U.S.. The tracers are used with positron emission tomography to create images of tau tangles in the brain, and could be useful in monitoring treatment response and progression of Alzheimer’s disease, said Daniel Skovronsky, who founded Avid Radiopharmaecuticals Inc., sold it to Lilly in 2011, and became the pharma’s vice president, Tailored Therapeutics. He also remains CEO of Avid, which operates as a stand-alone division.

The tracers’ precise utility is undetermined given that they have only undergone Phase I testing. Most likely, they will complement Lilly’s beta amyloid PET agent Amyvid (florbetapir), which FDA approved in April 2012. Avid developed that agent, a key driver of Lilly’s decision to buy the company for $300 million upfront and up to $500 million in earn outs. Terms of the Siemens deal were not disclosed, and regardless of the monetary value, it indicates that Alzheimer’s remains “a significant commitment” for the company, which now “leads” the industry with its “robust Alzheimer’s program targeting both beta amyloid and tau, through therapeutic and diagnostic programs,” Skovronsky said. Lilly has two Alzheimer’s drugs in development, one in Phase III and one in Phase II, and a third compound slated to enter the clinic by mid-year. Each represents a different approach to treatment, but all target amyloid-beta in some way. Lilly also has a tau program in preclinical trials, with the first compound expected to enter the clinic within the next two years.--WD

Pfenex/Agila Biotech: Strides Arcolab Ltd.'s U.S. unit, Agila Biotech, has agreed to a joint venture with U.S.-based Pfenex Inc. aimed at developing six biosimilar drugs to be marketed globally. Agila will be responsible for preclinical and Phase I testing as well manufacturing, while Pfenex will develop an optimized production strain, process and analytical package for each product. In the fourth quarter, the JV will start clinical testing of a biosimilar of Bayer's Betaseron (interferon beta-1B) to treat multiple sclerosis. Agila holds a 51% stake in the JV. The manufacturing of the biosimilars will be at a new Malaysian facility that Agila and Bio-XCell agreed last month to build. Pfenex is a 2009 spin-out from Dow Chemical Co.--Stacy Lawrence

Santaris/Bristol-Myers Squibb: In the third RNA partnership in the last month, Bristol-Myers Squibb Co. and Santaris Pharma AS have entered into a broad discovery and development deal. For the biotech, it brings a new partner into the string of deals that continue to be its main source of capital.

The deal disclosed on April 16 is to discover and develop candidates using the biotech’s Locked Nucleic Acid (LNA) platform. Santaris develops oligonucleotide therapeutics that target disease-related messenger RNAs (mRNAs) and microRNAs. Santaris will receive $10 million upfront and up to $90 million in potential milestones and research funding, in addition to undisclosed royalties on worldwide sales of any resulting products.
Santaris already has a partnership with Pfizer Inc., which expanded an existing deal in 2011. The original deal was made with Wyeth in 2009, prior to the latter’s acquisition by Pfizer. The biotech also secured deals with Shire PLC in 2009 and GlaxoSmithKline PLC in 2007. The biotech said last year it had raised more than $125 million in non-dilutive capital through its collaborations. Santaris isn’t planning any financing and that it expects to rely upon existing and new deals for cash. Isis Pharmaceuticals Inc. and Moderna Therapeutics Inc. each secured big pharma partnerships for RNA within the last month.--SL

Xencor/CSL: Australian drugmaker CSL Ltd. has licensed Xencor Inc.’s technology platform for use with its monoclonal antibodies. Financial details of the license were not disclosed, but the companies said that Xencor will receive an upfront payment plus preclinical, clinical, regulatory and sales milestone payments, as well as royalties on product sales. Xencor’s Xtend platform increases the half-life of proteins, allowing for a better pharmacokinetic drug profile by introducing subtle changes to the protein sequence.
CSL is best known for its work in blood plasma and vaccines. The company has products for hemophilia, immunodeficiency, and blood loss during surgery in their pipeline. The companies did not reveal what therapeutic areas would be pursued under the collaboration, but CSL will provide the targets.

CSL and Xencor first teamed up in 2009 when the Australian company paid an undisclosed upfront, development milestones and royalties for access to Xencor’s XmAb platform, a suite of engineered antibody Fc domains and tools that optimize antibody candidates. The first candidate from the collaboration was moved into clinical testing in early 2012.--Lisa Lamotta

Epizyme/Abbott: Epizyme, focused on personalized medicine approaches to cancer, announced a partnership with Abbott on April 18 to develop a molecular companion diagnostic test for one of its candidates. The test is to be paired with EPZ-5676, an inhibitor which targets the DOT1L histone methyltransferase for mixed-lineage (MLL-r) leukemia, an aggressive genetically defined subtype of acute myeloid and acute lymphoblastic leukemia. Deal terms were not disclosed.

Abbott will use its proprietary FISH (fluorescence in situ hybridization) technology to develop a test that can detect cancer-causing MLL genetic alterations that affect the function of DOT1L. Epizyme plans to use the test to find ideal leukemia patients for ‘5676, its most advanced clinical candidate. Currently in Phase I, the small-molecule compound is licensed ex-U.S. to Celgene.--JAH

Financings of the Fortnight Keeps Its Dauber Up

2013-04-18T15:19:00.001-05:00

Baseball fanatics out there might remember Roger Craig, a pitcher for the hapless expansion 1962 New York Metropolitans, then much later the manager of several memorable San Francisco Giants teams in the 1980s. As the San Fran skipper, Craig was a spinner of many homespun threads. The one that sticks with most Giants fans of a certain age was Craig’s catch-all pick-me-up: Don’t get your dauber down.

No one has yet to spot a dauber, much less one that’s down, but we all got the message. Baseball’s a long play, as you financial types might say. Don’t let the small sample sizes harsh your mellow. Case in point: DowJones VentureSource just released its first-quarter venture data, and everything, at first glance, is down: Money in (fundraising), money out (investment), and money recouped (IPOs and M&A activity). It was the lowest amount of venture investment in three years, and the fewest acquisitions since 2009.

That’s for all venture sectors; but there were bright spots in our little corner of the world. For example, a life-science specific VC survey from law firm Fenwick & West says in 2012 up rounds outnumbered down rounds 52% to 17%, an uptick from a 47%-25% ratio in 2011.

And despite increasing reluctance of life-science VCs to invest in new companies, the quarter’s second-largest fund raised was Third Rock Ventures’ new $516 million vehicle, its third (might we suggest T-shirts that say “III ROCK III”?). The folks at Fenwick have crunched fundraising data from DowJones and other sources and estimate that those earmarked for life-science investment are in decline, from $3 billion in 2011 to $2.5 billion in 2012. With Third Rock III – a pure life sciences play -- by Fenwick’s measure we’re already 20% of the way to last year’s total.

According to DowJones, biopharmaceuticals accounted for $938 million, about half the health care total, and right in the middle of the 13 quarterly totals rung up since the start of 2010. So take the overall venture drop with a spoonful of sugar: there have been far worse quarters in the past few years, such as the $583 million invested in Q1 2012. In fact, have a little more sugar: Broken down by industry subsector, “biotechnology therapeutics” beat out “online communities” as the biggest breadwinner with $476 million invested. (The gap between that and the $938 million attributed to “biopharmaceuticals” goes to show how much extra stuff, like diagnostics and specialty pharma, VentureSource lumps into the biopharmaceuticals category.)

With all the bustle in the IPO hedgerow the past two weeks, we think the VentureSource first-quarter overview seems prematurely grim. VentureSource tallied nine IPOs total, but that seems low. By our own count, there were seven through March 31 in health care alone, four of which were biopharmaceuticals. (Enanta, TetraPhase, KaloBios, and Stemline Therapeutics). Add to that this fortnight’s issues, Omthera Pharmaceuticals and Chimerix (see below), plus a burgeoning backlog of companies (Portola Pharmaceuticals, Epizyme, Receptos, and more) looking to break through to the public markets, and the outlook has begun to brighten. It’s not just the queue; it’s the fact that Chimerix broke the $100 million mark, a rare feat for a biotech IPO. Granted, it had help from existing investors, as did Omthera, but that’s been par for the course since the Great Recession receded. Nine digits is nine digits.

For all the venture capital that flowed into biotech this quarter, perhaps our favorite slice was the mere $15,000 that helped launch Cortera, the brain-child of students at the University of California, San Francisco. (Team leader Connie Cheung, whose winning presentation can be seen here, tells the IN VIVO Blog the name will soon change to Spiria.) They won a competition tied to the school’s entrepreneurship course, and the seed funding was provided by Burrill & Co., whose chief Steve Burrill is one of the course’s directors. The Spiria team says it has a brain-mapping system for neurosurgeons that’s faster and safer than established methods. If that holds true, they’ve got excellent timing; the National Institutes of Health is coordinating a brain-mapping effort, and GlaxoSmithKline has pledged to seed up to 20 academic labs doing early work that could lead to ‘electroceutical’ therapies, or the alteration of biological function through electrical pulses instead of chemicals or biologics. The latest edition of Start-Up will have a fuller explanation.

While you’re in a Start-Up mood, check out our colleague Stacy Lawrence's coverage of VCs doing rather un-venture-like things: funding late-stage drug trials on behalf of Big Pharma. The drug stays with the Pharma owner while the fees, milestone payments and (if all goes well) sales royalties flow to the VCs and their LPs. If the model grows beyond the handful of venture firms giving it a go, the metrics of venture exits might need re-thinking, because the entities the VCs set up to run the trial aren’t necessarily meant to go public or be acquired.

Finally, we send our thoughts and respect to the folks in Boston and West, Texas, each dealing with tragedy this week. Boston is home to much of our readership, and one effort to fundraise on behalf of the bombing’s victims and their families is getting a big push from the local tech and venture crowd, with an assist from the writers of Fortune’s Term Sheet. Thanks to all who refuse to get their daubers down.

And who knows, perhaps we’ll figure out what a dauber is by the time we get to the end of the latest installment of…

Cleave Biosciences: The early-stage oncology company has reeled in New Enterprise Associates to join its Series A syndicate, bumping the round that started in 2011 to $54 million without a clinical candidate in sight. NEA joins US Venture Partners, 5AM Ventures, Clarus Ventures, OrbiMed and Astellas Venture Management, as well as Osage University Partners, which joined later with a $2 million investment tied to its relationship with UNIV TK. (For more on the unique Osage strategy, click here.) Cleave was formed around three novel targets discovered in the Cal Tech lab of Raymond Deshaies, who co-founded Proteolix with USVP partner and Cleave board member Larry Lasky. Cleave’s initial Series A draw of $44 million and its exploration of protein homeostasis landed it a spot on START-UP’s 2011 A-List. It expects the Series A cash to last two or three more years and push a first drug candidate – not yet identified -- into the clinic. Other compounds addressing protein homeostasis have gained commercial approval for multiple myeloma, Millennium Pharmaceuticals’ Velcade (bortezomib) and Onyx Pharmaceuticals’ Kyprolis (carfilzomib), which came to Onyx when it bought Proteolix in 2009. Cleave will first pursue a proof-of-concept trial in multiple myeloma. Armed with its novel targets, however, the firm believes it can apply its compounds to solid tumors. NEA’s Robert Garland will take a seat on the board.– Lisa LaMotta

Anacor Pharmaceuticals: The Palo Alto, Calif. firm has had enough success discovering drugs with its boron chemistry platform that the Bill & Melinda Gates Foundation will fund new programs to discover treatments for two worm diseases and tuberculosis. The foundation will pay Anacor $17.7 million and take a $5 million equity stake, the latest biotech investment the world’s largest charitable group has made as part of a recent initiative. (Our Start-Up colleagues wrote about it here.) Beyond the programs for river blindness and elephantiasis, both caused by parasitic worms, and tuberculosis, Anacor will also use the Gates money to expand its library of boron compounds to screen for more neglected-disease treatments and open the library to the Gates Foundation and other nonprofit, governmental and academic researchers. Anacor’s lead compound is tavaborole to treat onychomychosis, a type of toenail fungus, and preliminary Phase III data were released earlier this year. The firm plans to file an NDA for tavaborole in mid-2013. The $22.7 million infusion from Gates nearly matches the largest fundraisings Anacor has managed since its 2010 IPO. In 2012 it raised secondary financings of $20 million and $23 million, and it has also brought in smaller amounts via private placement and alliance. – Alex Lash

Chimerix: No wonder the IPO pipeline keeps filling up. Conditions for new issues are improving, which allowed antiviral drug developer Chimerix to boost the number of shares in its offering while maintaining a strong price. Chimerix raised $107.4 million in its April 11 offering, selling 8.4 million shares at $14 apiece. The company had previously said it would aim to sell 6.1 million shares between $13 and $15 each, but it responded to high demand and fulfilled its underwriters’ greenshoe option by selling more shares within the same price range. The company will conduct Phase III trials on lead candidate CMX001, a broad-spectrum oral lipid conjugate of antiviral drug cidofovir (sold by Gilead as Vistide) to treat cytomegalovirus in patients who have undergone hematopoietic stem cell transplants. Chimerix is also investigating the drug to combat other double-stranded DNA viruses such as adenovirus, herpes simplex virus and BK virus, as well as smallpox. The company has a partnership with Merck around CMX157, another lipid conjugate targeting HIV. Chimerix shares rose 34% in their first day of trading to close at $18.79, and spent most of the week between $18 and $19.50. – Paul Bonanos

Auris Medical: The Swiss firm said April 16 it has attracted a chunky $50.4 million in a Series C financing, the most raised by a private biotech in Europe so far this year. With two Phase III-ready candidates for tinnitus and acute hearing loss, Auris has a pioneering position in new drugs for hearing disorders. The cash will be used to move them through to registration, the firm said. AM-101 is being developed for the treatment of acute tinnitus, and AM-111 for the treatment of inner ear hearing loss, and both have completed Phase IIb proof-of-concept studies. The compounds are formulated in a biocompatible gel and given by intratympanic injection, through the eardrum, and they then rely on passive diffusion to reach their site of action in the cochlea. Developing new otologic drugs hasn't attracted the same amount of attention as new ophthalmic drugs, even though hearing loss is more common than declining sight. The cochlea, or inner ear, is tiny and difficult to get at, and there are a plethora of hearing aids and implants already available to address the commonest hearing disorder, the age-related loss of hearing associated with a lifetime of loud noises and other adverse events. When Auris CEO and founder Thomas Meyer started out in 2003, he funded the company himself, and found it difficult to convince others of his seriousness. The new round shows his persistence has paid off, and other efforts have also recently emerged. The funds come from Paris-based Sofinnova Partners and US-based Sofinnova Ventures, two firms with common ancestry but which are otherwise independent of each other. – John Davis

All The Rest: GenSight Biologics closed a $40M Series A to support ophthalmic gene therapies… Syros Pharma raised $30M in a Series A for its work on novel gene control medicines… Allecra Therapeutics, a 2013 start-up collaborating with Orchid on overcoming bacterial resistance to antibiotics, completed a €15M Series A co-led by Edmond de Rothschild and Forbion... Dievini Hopp Bio Tech Holding provided a €13.9M Series E for topical drug delivery company Novaliq… Orphan drug accelerator Cydan raised $16M… InnoBio and Sofinnova Partners were the investors on neuro-metabolic-focused MedDay’s €8M Series A… Merck Serono Ventures led a £2.1M round for Canbex Therapeutics… Beat BioTherapeutics was seeded with $2.5M to fund a gene therapeutic for heart failure…Seraxis, working on cell therapies for Type I diabetes, raised an undisclosed amount in Series A financing… Boehringer Ingelheim Venture Fund reportedly provided Series B financing for Eyevensys… University of Copenhagen spin-off Avilex received seed funding from Novo Seeds… GI therapeutics company Synergy publicly sold $90M worth of common stock… Omthera grossed $64M in its IPO... Chemokine-targeting ChemoCentryx closed a $60M FOPO… Less than a year after completing an IPO, Durata Therapeutics raised $50M in a secondary offering… Oncology tests and services firm Cancer Genetics raised $6.9M in its IPO after postponing and refilling multiple times… ADMA Biologics, which reverse merged and became a public reporting entity via the Form 10 process, amended its IPO terms… Harvard Apparatus Regenerative Technology postponed its IPO… VistaGen raised $36M from a subsidiary of Bergamo Acquisition Corp. … RNAi platform company Silence Therapeutics completed a £19M PIPE… To support Phase IIb trials of diabetes candidate GFT505, Genfit raised €14.3M… Lincoln Park Capital Fund might invest up to $18.5M in Anthera, which also signed a $20M debt financing with MidCap Financial… MEI Pharma will use $15.2M in PIPE proceeds for lead candidate pracinostat for advanced hematologic malignancies… Jennison Associates invested $10.1M in Coronado Biosciences… OxiGene sold $5M in zero coupon convertible preferred stock… Resverlogix is spinning off RVX Therapeutics to focus on an epigenetics platform in autoimmune disease and cancer… StemCells got a $10M loan from Silicon Valley Bank. -- Amanda Micklus

Deals of the Week: Ante Up For Antisense, Pharma Places Another Isis Bet

2013-04-12T13:40:00.000-05:00

Isis Pharmaceuticals has been on a roll of late. The antisense platform play is busy highlighting its incredibly deep line-up of candidates and partners, now that it secured an FDA approval for Kynamro (mipomersen) to treat homozygous familial hypercholesterolemia (HoFH). And investors seem to like what they see; Isis shares are up 84% this year and may be poised to exceed an all-time high price set in 2001. But any long-term success the company hopes to enjoy depends on eventually ramping up commercial revenue.

The biotech has 28 clinical and preclinical candidates; nine of which will have Phase III or “important” Phase II data by early 2014. To develop this embarrassment of pipeline riches, Isis has a large roster of partners. This week it added a new one, Roche, bringing the number of major biopharma partners to seven. The others are AstraZeneca, Biogen Idec, Bristol-Myers Squibb, Eli Lilly, Sanofi’s Genzyme and GlaxoSmithKline.

Isis has raised about $2 billion through partnerships, much more than its $834 million in net proceeds from equity sales or $784 million borrowed in long-term debt deals. The biotech expects to finish this year with $325 million in cash. Last year, Isis did four major biopharma deals, three with Biogen Idec and one with AstraZeneca.

From those four deals alone, in 2012 Isis received $96 million in up-front payments with the potential to earn more than $2 billion in milestone payments and licensing fees. At year-end, all told, Isis had the potential to earn as much as $5.1 billion in future milestone payments.

Its latest option deal with Roche is for Huntington’s disease treatments; it brings to the table Isis’ antisense oligonucleotide technology (ASO), as well as Roche’s brain shuttle technology, a method to deliver oligos into the central nervous system. The initial research will focus on blocking all forms of huntingtin (HTT) protein. In addition, the partners will also work to block production of disease-causing forms of HTT protein and to treat asymptomatic patients.

Roche will pay Isis $30 million upfront, as well as tiered double-digit royalties on any products that result. Isis is eligible for $252 million in development milestones, including a large payment at the end of Phase I. Roche will also pay $80 million in commercial milestones. Isis will be responsible for discovery and development through Phase I, at which time Roche has an option to license all compounds that result from the collaboration and take over global development and commercialization. Products under the collaboration are expected to be IND-ready by the end of 2014.

“Isis now has a stronger balance sheet where it can be much more selective in choosing partners, and can choose when to partner,” noted Dallas Webb of BB Biotech, a major Isis investor that held 7.9% of its shares at Dec. 31. “Additionally, the company has a clear focus on rare diseases, where its technology can be used to target previously un-addressable disease mechanisms.”

Isis plans to put about three to five candidates into the clinic annually. It’s defined five major research areas as its primary territory: cardiovascular disease, severe and rare diseases, metabolic diseases, cancer and inflammation.

While early stage research partnerships continue to pay the bills, to make it on its own Isis needs to start banking some serious product revenue. Wall Street isn’t particularly optimistic that will materialize in the near-term. The consensus estimate for 2013 Isis revenues is just $110 million, with $116 million expected for 2014. Even without Kynamro, in 2012 Isis had $102 million in revenues and a $68.9 million operating loss. Still, Isis says it has five products it could bring to market within the next five years.

These include ISIS-TTR to treat transthyretin (TTR) amyloidosis, a severe and rare genetic disease in which the patient produces a misfolded form of TTR that progressively accumulates in tissues, and ISIS-SMN to treat spinal muscular atrophy (SMA), a severe motor-neuron disease that is a leading genetic cause of infant mortality. The former is partnered with GSK and is in a Phase III trial, while Biogen Idec has an option to the latter, which is slated to start a Phase II/III trial in infants before year-end with another Phase II/III trial in children scheduled for the first quarter of 2014.

Isis also has two ongoing Phase II trials for ISIS-APOCIII, to treat severe hypertriglyceridemia. The unpartnered candidate will have data from one trial in the next few months and the other by year end. A Phase III trial is expected to start late this year or early next year.

Webb said investors are currently focused on SMN and will follow the asset closely in the next 12-18 months. He noted the upcoming APOCIII data and he expects TTR will move more into the spotlight in the next year or so. “These compounds on top of the Kynamro approval should lead to an increased focus on the pipeline, where we believe a lot of value remains to be unlocked,” he said.

In addition, Isis is hoping to bulk up its Kynamro label. Isis and partner Genzyme have an ongoing Phase III/IV trial in severe heterozygous familial hypercholesterolemia (HeFH) patients with data due late next year. Not only is the patient population much larger for HeFH, but the subcutaneous drug is dosed 3x weekly rather than the 1x a week with HoFH patients. However, Webb sees the true value of Kynamro as the validation of Isis’ technology and an establishment of FDA’s willingness to approve an antisense compound.

Other Isis investors as of Dec. 31, 2012 include top-flight mutual fund groups Fidelity Management (14.9% of shares outstanding) and T. Rowe Price (2.2%), as well as hedge fund BlackRock (3%). In the fourth quarter, only two of its top 10 holders trimmed positions and each only by single-digit percentages. But another seven added to positions, four of them by double- or triple-digits. Fidelity held pat in the fourth quarter as the largest Isis holder.

Isis/Roche wasn't the only deal of the week, of course. In fact, it wasn't even the only antisense deal. Keep reading for the rest of the week's deal-making highlights in this week's edition of . . .

Sarepta/University of Western Australia: Another company developing new antisense drugs deepened its commitment to commercializing academic research in this area on April 11, when Sarepta Therapeutics. agreed to license a portfolio of patented technologies addressing Duchenne muscular dystrophy from the University of Western Australia. For $7.1 million in up-front and milestone payments, as well as a low single-digit royalty on sales of any approved products that come from the collaboration, Sarepta will receive intellectual property concerning exon-skipping technology, which is used to excise a key piece of dystrophin RNA during the transcription process, resulting in functional dystrophin that gives strength to muscle fibers. The Cambridge, Mass.-based company already uses the technique in its lead candidate eteplirsen, a Phase II drug for DMD, which repairs exon 51; Sarepta obtained the exon-skipping technology for that drug from Perth-based UWA under a 2008 agreement. The company also has three other preclinical drugs that address exons 45, 50 and 53. Sarepta says that by combining the newly obtained patents with its own phosphorodiamidate morpholino oligomer technology, it can create exon-skipping drugs capable of treating the majority of DMD patients worldwide. One in 3,500 boys is born with the muscle-wasting disorder, which usually leads to death by age 30. -- Paul Bonanos

GlaxoSmithKline/A*STAR: GlaxoSmithKline and Singapore’s Institute of Chemical and Engineering Sciences Agency for Science, Technology and Research are working together to develop new formulations of existing medicines specifically for emerging markets. The collaboration, which the organizations announced on April 9, will continue for five years and focus on development of “evidence-based formulations,” or EBFs, of GSK’s off-patent drugs, in order to improve patient outcomes in emerging markets. ICES is part of Singapore’s A*STAR network, which is charged with helping to grow Singapore’s economy by building and maintaining a world-class scientific research infrastructure. A*STAR oversees 14 biomedical, physical and engineering sciences institutes and six consortia in Singapore. ICES and GSK have been working together since 2003, and GSK also works with other divisions of A*STAR. ICES is contributing expertise in synthesis, formulation and process development, while GSK will provide drug candidates, and optimization and product development skills. Through the alliance, ICES will be able to enhance its knowledge of drug formulation, analytical capabilities, and scale up and will develop a pool of local expertise in specialized formulations. The aim, from GSK’s perspective is to bring affordable medicine to more people. Terms were not disclosed, but the deal enhances Singapore’s position as a regional hub for drug development. Singapore is the regional headquarters for a number of multinational pharma companies, including GSK, Abbott Laboratories (now AbbVie), Roche, Merck & Co., Bayer, Pfizer, and Novartis. -- Wendy Diller

Resverlogix/RVX Therapeutics: Unlike Isis, which is embracing its platform, Resverlogix is spinning out its platform into a separate private company, temporarily named RVX Therapeutics. The publicly listed Canadian biotech said it wants to make the move in anticipation of its own potential takeout following June Phase IIb data for lead candidate RVX-208, a BET bromodomains inhibitor. RVX-208 is designed to treat atherosclerosis by increasing serum levels of apolipoprotein A-1, a building block that makes up 70 percent of HDL cholesterol. RVX-208 is also in Phase II testing to treat diabetes and will soon be in a Phase II trial for Alzheimer’s disease. In the spin-out, RVX Therapeutics will get the epigenetics platform, excluding any ApoA-1 and RVX-208 technology. The platform is based on targeting BET (Bromodomain and ExtraTerminal Domain) proteins. Resverlogix compounds bind to BET bromodomains and prevent them from engaging proteins associated with DNA called histones. The newco would either be supported by a royalty from a potential Resverlogix acquirer or it would perhaps IPO. The spinout is subject to a shareholder vote, which will likely be at the end of May. Shareholders would receive one share in the new company for each Resverlogix share they hold at a date of record in late April. Investors haven’t exactly embraced the deal, sending shares down about 12% since the April 8 announcement. -- Stacy Lawrence

Aeterna Zentaris/Ergomed Clinical Research: The Canadian biotech and the European contract research organization partnered to conduct a Phase III trial for AEZS-108 in endometrial cancer. Structured to share risk with Ergomed Clinical Research, the deal calls for the CRO to assume 30%, or up to $10 million, of the clinical and regulatory costs associated with the trial that are estimated to total about $30 million. In return, Ergomed stands to receive a single-digit percentage of any net income to Aeterna Zentaris for AEZS-108 in this indication, up to a pre-specified maximum amount. The trial for the doxorubicin peptide conjugate will be of 500 patients and have a primary endpoint of overall survival.
Aeterna Zentaris had a major disappointment in March, when an independent Data Safety Monitoring Board recommended the discontinuation of a Phase III trial for perifosine to treat multiple myeloma since it was deemed highly unlikely the study would achieve a significant difference on progression-free survival, the study’s primary endpoint. Aeterna Zentaris shares are down 22% this year, giving it a market cap below $50 million. -- S.L.

GlaxoSmithKline/Academic Institutions: GlaxoSmithKline will dedicate $1 million in prize money and research funding of an undisclosed amount for up to 40 researchers across 20 academic and other nonprofit institutions to answer early questions about the possibility of using extremely focused electrical impulses to modulate the neural signals that control vital organs. With so-called “electroceuticals,” the aim is to do with electrical information what drug makers currently try to do with biologics and small molecules: control blood pressure, cytokine production, glucose function, or any number of biological functions that lead to disease when out of whack. “Correcting disorders with treatment in their own electrical language” is how Kristoffer Famm, the vice president in charge of GSK’s new bioelectronics group, and his co-authors describe their goal in the latest issue of Nature. Before treatments come to light, there are years of work ahead in mapping the neural activity associated with various diseases. Famm says the funding, to be parceled out to two researchers per lab, is aimed at jump-starting the mapping projects or building upon works in progress.
The field is gaining momentum with the new U.S. brain-mapping initiative and a Stanford University breakthrough that creates see-through brains that allow researchers to highlight and study networks of neurons as they fire. At the end of 2013, GSK expects to convene a meeting where researchers will zero in on a key hurdle the field needs to overcome; GSK will then put up $1 million as a prize to the group that solves the problem. -- Alex Lash

Photo Credit: Ramberto Cumagun

Versant Looks For "Off-The-Beaten-Path" Deals In Canada, Europe

2013-04-05T13:20:00.000-05:00

Versant Ventures has been deepening its commitment to international expansion lately. The firm is replicating its San Diego-based discovery engine, Inception Sciences, in Vancouver, tightening its ties with the Canadian research community and spinning out new companies as its predecessor has been doing for almost two years. And with new partners in its Basel, Switzerland office, the firm expects to forge new deals in Europe -- especially in off-the-beaten-path areas -- while enjoying closer proximity to both academic scientists and European acquirers.

Operating principal Jerel Davis says the firm has had some presence in Europe dating back to 2008, when venture partner Thomas Woiwode established a beachhead. But new partners Guido Magni and Gianni Gromo, both former Roche colleagues of Versant partner Brad Bolzon, have arrived in recent months to flesh out the Basel office. The firm backed genetic vaccine start-up Okairos in September 2010, but more deals are expected soon. Stay tuned – the “Pink Sheet DAILY” expects to have full coverage of what’s on the way, and the next issue of START-UP will feature a deeper look at Versant’s international strategy.

The European office hopes to extend its reach throughout the continent and into Israel, while the Vancouver office will be in close touch with the Montreal research community while remaining “a short flight away from San Francisco and San Diego,” Davis says. He adds that the Canadian arm of Inception will likely spin out new companies in a fashion similar to Inception’s third project, which included an option for Roche to acquire it as it files an IND.

Deals Of The Week Wonders Whether Heated Competition To Buy Ache Laboratorios Will Muddy The Brazilian Waters

2013-04-05T13:07:00.000-05:00

Could a bidding war for Brazil’s privately held Ache Laboratorios do for Latin America what Abbott Laboratories’ gargantuan purchase of part of India’s Piramal Healthcare did for biopharma M&A in India?

Call it the “Piramal effect,” if you will. Abbott reset expectations among India’s domestic pharma world with its $3.72 billion purchase in 2010 of Piramal’s branded generics business. Brazil hasn’t yet seen the kind of blockbuster deal that would raise prices across the board; the highest value deal in that market to date is Sanofi’s $662 million buyout of Brazilian generics firm Medley Pharmaceuticals in 2009.

Sanofi got in early – staking its claim before big pharma’s buying spree in emerging markets generated significant deal inflation – but the deal hardly lifted the value of Brazilian companies across the board. That transaction was followed by smaller deals, such as Takeda’s $251.5 million (BRL 500 million) buyout of Brazilian branded generics specialist Multilab Indústria e Comércio de Produtos Farma about one year ago, which also included potential for up to BRL 40 million in earn-outs.

But, now comes word that could blow all previous Brazilian deals out of the water – Abbott and two of its big pharma competitors, Pfizer and Novartis, are preparing a second round of bids to buy Ache, Brazil’s leader in the sale of prescription drugs. The rumored price tag for Ache, fourth overall domestically in drug sales when over-the-counter products are included, ranges between $4 billion and $5 billion, a matter complicated by talk that at least one of three ownership families does not wish to sell. Ache’s public stance is that it is not up for acquisition.

Ache reported net earnings of $270 million for the 12 months ending Sept. 30, 2012. Nonetheless, a source familiar with the company told Deals of the Week that Ache remains an appealing investment for big pharma due to higher gross margins than its domestic competition, high top-line growth and strong relationships with distributors. In an emerging-markets competition where it is difficult to acquire worthy assets without overpaying, the three pharmas are facing a reality that a price tag above $5 billion – about 20 times EBITDA (earnings before interest, taxes, depreciation and amortization) – may be required just to get a foot in the door.

One pharma executive who asked not to be named told DOTW that his company is so discouraged by prices for assets in the primary emerging markets that it already is looking to next-generation possibilities such as Nigeria and Colombia.

As an article in The Atlantic notes, for overall business climate, Brazil recently has been viewed as the shining jewel of the so-called BRICS nations (Brazil, Russia, India, China, South Africa), with an average real gross domestic product growth rate of 4% between 2004 and 2010, including an eye-opening 7.5% in 2010. Add in low unemployment and a fairly industry-friendly regulatory environment, and Brazil perhaps was positioned to join China as the top emerging market for biopharma.

An early 2013 Business Monitor International report states that total pharmaceutical expenditure in Brazil in 2011 was more than $28.7 billion, and that total was expected to grow by 7.6% in local currency terms in 2012 (while declining in U.S. dollar spending due to exchange-rate fluctuations.) However, the biopharma opportunity in Brazil is being diminished by drug rebates, which are increasing both in total numbers and in size.

Meanwhile, GDP declined 0.9% in Brazil last year, combining with a 6% inflation rate to tarnish the South American giant’s emergence. Outside investment hoping to tap Brazil’s huge population, highlighted by a rising consumer class, faces what is known as “the Brazil cost” – a combination of high tariffs, poor infrastructure and red tape that increase the cost of doing business, the Atlantic reported.

But industry interest in tapping the Brazilian market cannot be denied. A review of Elsevier Business Intelligence’s Strategic Transactions database reveals six major equity investments in Brazilian biopharma holdings this decade. Beside last May’s Takeda/Multilab transaction, these include:

Valeant Pharmaceuticals paying $28 million in May 2010 for Instituto Terapeutico Delta, a private branded generics and OTC company focused largely on dermatology;
Pfizer anteing $240 million plus performance-based earn-outs to acquire 40% of generics firm Laboratorio Teuto Brasileiro in October 2010;
Amgen ponying up $215 million in cash for Bergamo, a hospital-focused company with an emphasis on oncology, in April 2011;
Merck investing an undisclosed amount in February 2012 to create and own a 51% stake in a Brazilian joint venture with Supera Farma Laboratorios, Cristalia Produtos Quimicos Farmaceuticos and Eurofarma Laboratorios; and
UCB Group paying an undisclosed sum with potential for performance-based earn-outs to acquire 51% of specialty pharma Meizler Biopharma. The May 2012 deal included an option for UCB to buy out the remainder of the company.

While we await the outcome of the multi-company pursuit of Ache – GlaxoSmithKline reportedly dropped out of the bidding a while back – other biopharma deal-making was completed in the past week as we tally up …

AstraZeneca/AlphaCore: Following through on CEO Pascal Soriot’s promise to rebuild the company’s cardiovascular pipeline, AstraZeneca announced its third cardiovascular deal in two weeks. In the latest tie up, announced April 3, AstraZeneca’s biologics unit MedImmune acquired private biotech AlphaCore Pharma for an undisclosed sum. The big pharma gains ACP-501, a recombinant human lecithin-cholesterol acyltransferase (LCAT) enzyme that is believed to play a major role in removing cholesterol from the body and also may increase levels of high-density lipoprotein (HDL) cholesterol, better known as “good cholesterol.” A Phase I trial testing the drug met its primary safety and tolerability endpoint and also showed that ACP-501 raised HDL cholesterol in patients taking it. The cholesterol space is a high-risk, high-reward area of drug development, given the growing regulatory and commercial hurdles. But Soriot vowed AstraZeneca would embrace risk as a key to unlocking success in the drug-development process during an overview March 21 in which he unveiled his turnaround plan for the company. Cardiovascular disease is one of three core therapeutic areas the company has committed to. In March, the company signed two deals in the field: an option agreement with messenger RNA developer Moderna Therapeutics for up to 40 programs in exchange for $240 million upfront and a research partnership with Sweden’s Karolinska Institute. - Jessica Merrill

Bind Therapeutics/Pfizer: Nanotech company Bind Therapeutics has inked its second deal with a major player this year, signing a collaboration with Pfizer on April 3. Pfizer will pay Bind to combine its Accurins technology with small molecules provided by the big pharma. Pfizer will pay $50 million in upfront and near-term development expenses per molecule and Bind is eligible for $160 million in regulatory and commercial milestones for each product that reaches the market. Bind did not retain any commercialization rights, but will receive tiered royalties on worldwide sales. The company would not reveal the number or kinds of molecules covered by the deal or the therapeutic area of focus, but did say the agreement covers more than one molecule. The Accurins technology has been explored in the areas of oncology, inflammatory diseases like arthritis and cardiovascular indications. In January, Bind announced a similarly sized agreement with Amgen to develop and commercialize kinase inhibitor nanomedicines to treat solid tumors. - Lisa LaMotta

Ra Pharma/Merck: Less than a year after exiting stealth mode, Ra Pharmaceuticals has landed its first partnership, aligning with Merck to help the pharma discover and develop drugs for difficult-to-hit protein targets. Under the agreement announced April 1, Ra will use its proprietary Extreme Diversity platform to find and develop cyclomimetic candidates that can address intracellular protein-protein reactions in multiple undisclosed therapeutic areas. Ra will receive an undisclosed upfront payment and research funding; discovery, development, regulatory and commercialization milestones could bring its full remuneration to $200 million. While the deal stemmed from early conversations between Ra executives and Reid Leonard, head of Merck Research Ventures Fund, it does not include an equity component for the pharma, Ra President and CEO Doug Treco said. It also includes no risk-sharing, such as a co-promotion option down the road. Ra is developing what it terms a new class of drugs, peptide-like molecules offering the diversity and specificity of antibodies along with the attributes of small molecules, such as oral bioavailability. Cyclomimetics, the cyclic polymer drug candidates produced with Ra’s technology, are characterized by their cyclic structure and backbone as well as side-chain modifications that can provide beneficial properties not offered by natural peptides, the company says. It claims that Ra’s platform produces molecules that are highly specific and stable, offering improved cell permeability and potential for increased bioavailability as well as longer half-lives. - Joseph Haas

Astellas/Ambrx: In its latest tie-up with a major pharmaceutical player, Ambrx announced April 5 that it will collaborate with Japanese pharma Astellas Pharma on a series of antibody-drug conjugates (ADCs) in the oncology setting. Astellas will pay the biotech $15 million upfront, as well as $285 million in potential development, regulatory and sales-based milestones to discover and develop an undisclosed number of molecules that use its site-specific ADC technology. Last June, Ambrx inked a deal with almost identical financials with Merck. While details of the targets the companies intended to focus on were not disclosed, it was revealed that they would focus on areas “beyond oncology.” Ambrx also has tie-ups with Eli Lilly and Bristol-Myers Squibb. Previously it had arrangements with Wyeth, Roche and Merck Serono. ADC technology, which allows drugs to be targeted to a specific site carrying a therapeutic payload, have become a hot space since Seattle Genetics got approval of its ADC lymphoma drug Adcetris (brentuximab vedotin) in August 2011. - L.L.

Agios/Foundation Medicine: Agios Pharmaceuticals and Foundation Medicine signed a pact April 4 to use the latter’s clinical assay, FoundationOne, to create diagnostics which could identify ideal patients for Agios’ compounds aimed at cancer metabolism. No financial terms were disclosed. The diagnostic-discovery collaboration will focus on Agios candidates intended to inhibit tumors that carry mutations in the IDH1 and IDH2 metabolic enzymes. The work will seek to identify tumor genomic alterations that would be most likely to respond to Agios’ candidates, and to potentially develop and commercialize companion diagnostics for Agios compounds. Foundation, which developed the FoundationOne genome analysis profiling system for personalized cancer treatment decision-making, raised a $42.5 million Series B financing in 2012 with a syndicate of venture capital and corporate venture outfits. The round was topped off with an additional $13.5 million this past January from individual investors including Bill Gates, Yuri Millner and new board member Evan Jones. Agios, partnered since 2010 with Celgene on cancer metabolism R&D efforts, raised a $78 million Series C round in 2011 and announced plans to branch out therapeutically into rare genetic disorders. - J.A.H.

Novartis/ImmunoGen: ImmunoGen on April 4 updated the status of its 2010 licensing agreement with Novartis to apply the biotech’s Targeted Antibody Payload (TAP) technology platform to create cancer-fighting antibodies for undisclosed targets chosen by the multinational pharma. Under an amendment to the agreement, Novartis has exclusively licensed one compound against a still-undisclosed target, while taking a non-exclusive license to a second compound which can be converted later to an exclusive license. ImmunoGen will receive $4.5 million upfront under the amendment and could earn between $200 million and $238 million in milestones pegged to the two compounds, plus potential sales royalties. Of the upfront money, $1 million is an option exercise fee, while the remaining $3.5 million, which could be credited against future milestone payments, will be paid if Novartis terminates development of one or both compounds. In a same-day note, Cowen & Company analyst Simos Simeonidis called the developments “an incremental positive for ImmunoGen” that helps to validate the TAP platform. In October 2010, Novartis paid $45 million upfront for the license, intended to help it create antibody-drug conjugate (ADC) therapeutics for cancer. The deal offered the potential for up to $200.5 million in milestones for each target leading to development of an ADC, as well as sales royalties on any products reaching market. - J.A.H.

ArQule/Daiichi Sankyo: In our “No-Deal” of the week, collaborators ArQule and Daiichi Sankyo have decided to terminate an early-stage collaboration around Phase I oncology compound ARQ-092. The news comes just months after a Phase III setback of the companies’ later-stage oncology compound tivantinib, which the two companies will continue developing together. Daiichi opted to license ARQ-092 in November 2011 and paid $10 million upfront at the time, as well as Phase I development expenses. ArQule stood to gain $255 million in milestone payments and the deal included development of multiple compounds; the program now has been returned to the Woburn, Mass.-based company. Meanwhile, tivantinib failed to show overall survival in a late-stage trial in non-small cell lung cancer. The drug’s development focus now has been shifted to liver cancer. The partners signed their initial agreement for tivantinib (known then as ARQ-197) in November 2008. Daiichi agreed to pay $60 million upfront, as well as $560 million in milestones to license the c-Met receptor tyrosine kinase inhibitor. - L.L.

Photo Credit: Muddy Amazonia

Uneasy Lies The Head That Wears a Financings of the Fortnight Crown

2013-04-05T10:41:00.000-05:00

Compared to other types of financing, royalty-based deals in the biopharma world are rare. That’s because a company needs products with future revenue to parlay into a near-term lump sum, and the relative few companies that have such products often don’t need the immediate cash or can get it other ways.

So when a royalty deal – or a debt deal using product royalties as collateral – crops up, we take notice. And they seem to be cropping up more often. Just our imaginations? Not according to Elsevier’s Strategic Transactions database, which offered up ten deals in 2012, the most in any of the past ten years. 2011 was a close second with 9 deals, and with three more this year, 22 of the 47 we found in the past ten years are of recent vintage. (These numbers reflect only the publicly disclosed deals; there are certainly more, as investors in this space often keep activities out of the spotlight.)

In dollar terms, the total since the start of 2003 is $5.7 billion. The last two years and change have seen $2.7 billion worth of deals, a proportion akin to the deal flow.

The richest deal in recent years is Royalty Pharma’s $761 million purchase of the earn-out rights from the shareholders of Fumapharm, the German firm that sold to Biogen Idec in 2006. The deal could end up extra sweet for Royalty, now that the Food and Drug Administration has approved the main product in the Fumapharm dossier, the oral multiple sclerosis treatment BG-12, renamed Tecfidera.

Another near-blockbuster was Royalty’s $609 million purchase of DPP-IV rights from Astellas Pharma’s Prosidion division. A bit farther down the pay scale, but still significant, were Dendreon’s sale of Victrelis royalties to CPPIB Credit Investments for $125 million, and Nektar Therapeutics’ $124 million deal with an offshoot of Royalty Pharma for its royalties to Mircera and Cimzia, both of which were formulated with Nektar’s pegylation technology.

Now add one more to the list. This fortnight, weight-loss drug maker Vivus used royalties of its Qsymia, weighed down so far by slow sales, as collateral to borrow up to $110 million. (We describe the deal below in our roundup.) And of course, in what could be the ne plus ultra of all royalty deals, Royalty Pharma (who else?) is dangling $6.6 billion to buy Elan, which after its major divestments is basically a holding company for royalties from multiple sclerosis treatment Tysabri. Elan has resisted so far, instead promising shareholders it will pay out a dividend based on the Tysabri stream. This week an Irish regulatory panel gave Royalty a May deadline to firm up its offer.

The dance began in late February soon after Biogen Idec bought out Elan’s share of the drug, paying Elan $3.2 billion plus the promise of tiered sales royalties. Whether Royalty Pharma succeeds in its hostile buyout is more a matter for our Deals of the Week compatriots, but it’s our duty to note that Royalty and its brethren have plenty more to spend. Royalty raised $600 million in debt in 2012 to put toward investments. Its previous debt raise included $850 million to give back to shareholders. Healthcare Royalty Partners, which dropped the "Cowen" from its name in December, raised a $1 billion fund in early 2012.

Royalty funds are to venture capital what bonds are to stocks: a lower-risk, lower-return investment, and often built with complex structures that purposely limit both parties' risk. They're certainly not going to replace a big chunk of venture capital, because they can't fund companies without current or near-future revenue streams. But as the numbers show, they're providing billions of dollars of capital to an industry that can always use a few extra pennies.

It's no jest. Whether you’re biotech royalty or an indentured serf, you’re always welcome in the biweekly court of…

Vivus: Initial sales of the Vivus weight-loss drug Qsymia (phentermine/topiramate) have been slow, so the company fortified its balance sheet with $50 million in new debt. The "synthetic capped royalty financing" from Pharmakon Advisors, announced March 26, allows Vivus to raise another $60 million in debt before the end of 2013, at a time of Vivus’ choosing. Under the terms of the arrangement, Vivus is obligated to repay the Pharmakon fund according to a schedule of pre-set payments between 2014 and 2018, or 25% of Qsymia royalties, whichever is valued lower. Analysts expect that Vivus would make quarterly payments between $7 million and $10.3 million during most of the four-year schedule, if it opts to raise the other $60 million later this year. The total repaid is likely to be about $162 million, according to analysts. Sales of Qsymia were just $2 million during the fourth quarter of 2012, its first full quarter on the market since FDA approved the drug in July 2012. Vivus had $213 million in cash and equivalents on Dec. 31, and spent $58 million on its operations during the fourth quarter. The company is seeking to modify its current Risk Evaluation & Mitigation Strategy for Qsymia, which limits sales of the drug to mail-order pharmacies; an FDA decision allowing it to sell via traditional pharmacies could come in late April or early May. – Paul Bonanos

Novira Therapeutics: The antiviral startup said March 26 it has topped off last year’s Series A with $7.5 million from Versant Ventures, matching the earlier co-lead investors and bringing the round’s total to $25 million. Novira is one of the few startups around working on treatments for Hepatitis B, its lead program, and for HIV. That, plus its pursuit of a relatively new mechanism of action – capsid assembly inhibition -- was enough to put Novira on our sister publication Start-Up’s annual A-List, which highlights the year’s most intriguing recipients of Series A money. 5am Ventures and Canaan Partners led the initial Series A investment, which came after the company spent years subsisting on angel and nonprofit funding and casting about for a way forward. The angels who nurtured the firm through its pre-Series A years also participated in the A round. Only after Lalo Flores, former head of antiviral research at Merck & Co. took over did Novira steer toward capsid assembly. It aims to file an IND for its lead HBV program by year’s end. The company's oral therapeutic candidates could potentially be used as both a monotherapy or in combination with currently used drugs. The company says the Series A money should be enough to move that initial program into Phase Ib or Phase IIa. For Versant’s contribution, the firm will place one of its new European team members, Gianni Gromo, in a board seat. Gromo is one of three Versant partners based in Basel, Switzerland and has ties to Versant’s top biopharma managing director Brad Bolzon from their days at Roche. – Alex Lash

Theraclone Sciences: Another antiviral add-on this week, with Seattle-based Theraclone bringing its Series B total to $50 million with contributions from a host of existing investors including Arch Venture Partners, Canaan Partners, MPM Capital, and Healthcare Ventures. In addition to the extra $8 million from investors, the antibody platform company also secured $6 million in debt from MidCap Financial and Silicon Valley Bank. The firm’s lead programs in the clinic are aimed at pandemic and seasonal flu, partnered with Zenyaku Kogyo, and human cytomegalovirus (HCMV). It has a discovery-phase antibody partnership with Pfizer, as well, and it has worked with Scripps scientists and the International AIDS Vaccine Institute on research to identify more than a dozen “broadly neutralizing” antibodies that might eventually lead to a vaccine for HIV. Theraclone’s platform screens for antibodies from the B cells of the lucky humans who demonstrate natural resistance to particular diseases. Once called Spaltudaq, Theraclone is one of a handful of biotechs to emerge from the Seattle incubator Accelerator and has had its share of tribulations, the worst of which was the sudden death of its CEO David Fanning in 2010. – A.L.

Receptos: The San Diego biotech filed April 4 its intent to go public, joining the growing queue of life science firms with hopes of breaking through to public markets. The firm is farther along in the IPO process than it might have been in previous times, as it actually filed its S-1 confidentially in February under new securities rules ushered in by last year's JOBS Act. Its lead compound is in Phase II testing against relapsing multiple sclerosis and inflammatory bowel disease. Its top four shareholders, each with slightly more than 15% ownership, are Flagship Ventures, Lilly Ventures, ARCH Venture Partners, and Venrock. An IPO would also benefit a much newer venture fund, Osage University Partners, which is trying to prove the worth of a new model based on schools’ participation rights that we describe in the March issue of Start-Up. Based on work that elucidates the structures of G-coupled protein receptors, Receptos spun out of the Scripps Research Institute, which has a partnership with Osage, which would send a slice of its carried interest back to Scripps if the fund succeeds. A Receptos IPO would certainly help. It has not yet set terms of the offer. Credit Suisse and Leerink Swann are leading the underwriting team. Other health care firms on file to go public include Bausch & Lomb, Chimerix, Omthera Pharmaceuticals, Harvard Apparatus Regenerative Technology, Ambit Biosciences, and Sophiris Bio. – A.L.

All The Rest: Raising $38mm from Invesco Asset Management in the biggest venture financing of the fortnight was infirst Healthcare, founded less than a year ago to launch new consumer cough and cold and pain medicines…Through a $33mm Series E financing (concurrent with the conversion of $71mm in debt into Series E preferred stock), Revance Therapeutics aims to complete Phase III trials for RT001, a topical botulinum toxin type A for crow’s feet wrinkles…Led by two China-focused venture funds, research and diagnostics MAb firm OriGene Technologies brought in $21.3mm in its Series D round…With participation from J&J Development and Pfizer Venture, Aquinox Pharma secured $18mm in Series C financing to help advance its Phase II AQX-1125 for COPD… To support development of spec pharma Taris Biomedical’s LiRIS (Lidocaine-Releasing Intravesical System) Phase II interstitial cystitis candidate, return backers added $12.5mm to the $37.3mm the company had previously raised…Schizophrenia drug firm Reviva Pharmaceuticals received $12mm in early-stage debt and equity funding from undisclosed investors… In a Series A round, Hurel Corp. (artificial tissue constructs and microfluidic cell-based assay platforms) snagged $9.2mm from Spring Mountain Capital… Genomic data analysis start-up Bina Technologies brought in $6.25mm of a planned $8mm Series B round…In the second close of initial financing secured in November 2012 when it spun-off from InDevR, rapid virus quantification firm ViroCyt has brought the total funding to $5mm…Undisclosed equity financing secured from the Innovation & Investment Fund Gelderland (managed by PPM Oost) along with several angel backers will enable InteRNA Technologies to progress its lead candidate miR-3157 for melanoma through preclinical studies…In a private placement, public Australian company Prana Biotech issued 35.9mm new fully paid ordinary shares at a price of A$0.195, for $7.3mm in proceeds to fund further development of PBT2, now in two concurrent Phase II trials in Huntington disease and Alzheimer's disease… Through a follow-on offering of up to 165.7mm new Hong Kong-listed shares at HK$24.60, Chinese CRO Sinopharm Group could reap $515.3mm in proceeds to expand its sales network and complete additional M&As… Arca Biopharma hopes to bring in $20mm in a FOPO to fund a Phase IIb trial of Gencaro (bucindolol hydrochloride) for atrial fibrillation… With proceeds from a public offering of units, public Toronto spec pharma Trimel Pharmaceuticals hopes to fund costs related to an NDA filing and further clinical trials for its CompleoTRT bioadhesive intranasal gel technology for male hypogonadism… Eye care giant Bausch & Lomb – owned by PE firm Warburg Pincus, which acquired it and took it private in a $3.67bn 2007 buy-out – filed for an initial public offering that could raise as much as $1.5bn… Two biotechs sent ranges for IPOS, but have yet to price: Chimerix (oral antivirals) plans to sell 6.1mm shares at $13-15, while dyslipidemia therapeutics company Omthera Pharmaceuticals said it hopes to get between $12-14 through the sale of 5.8mm shares… Cell Therapeutics, using proceeds from a $15mm senior secured term loan with Hercules Technology Growth Capital, hopes to advance Phase III pacritinib (for myelofibrosis) and promote recently EMA-approved non-Hodgkin lymphoma treatment Pixuvri (pixantrone) in Europe…In a second debt financing by Hercules, CNS stem cell therapeutics developer Neuralstem issued the finance company 649k warrants to purchase Neuralstem stock at an exercise price of $1.08…In exchange for up to $16mm, ophthalmologic drug developer InSite Vision will sell its future royalties on bacterial eye infection medicine Besivance (besifloxacin ophthalmic suspension) to SWK Funding LLC…Cancer-focused public Australian biotech Prima Biomed hopes to raise $15.6mm in a rights offering of up to 150mm new fully paid ordinary shares. - Maureen Riordan

Royally weird photo courtesy of flickrer simononly.

Deals of the Week: An Update On A Potential Pfizer Split-Up

2013-03-29T14:43:00.001-05:00

Pfizer's Chairman and CEO Ian Read doesn’t make himself available for interviews readily, so a March 26^th note from Sanford Bernstein’s esteemed pharma analyst Tim Anderson caught our attention pronto. The note describes a teleconference call Anderson held with Pfizer’s top management team, including Read and R&D chief Mikael Dolsten. Also on the call were Geno Germano, president and general manager of specialty care and oncology; John Young, president and general manager of the primary care business unit; and Amy Shulman, EVP and general counsel and business unit leader for consumer health.

Much of the call revolved around management’s perspectives on splitting up the company. The topic is by no means new, but the strategy continues to fascinate, particularly given the implications it has going forward for the bigger is better argument that dominated the industry for decades, and Pfizer’s leading role in embracing the pro-scale argument, not to mention its gargantuan 2009 acquisition of Wyeth.

The shifting commercial landscape and concerns about the difficulties of managing massive global R&D units are two key factors underlying the motivation for a split, Read told Anderson. No news there, as Read has said this before, but Anderson’s conversation illuminates how management’s thinking is evolving and what its choice points are likely to be. Anderson believes Pfizer is very much still considering a split, although it has not yet made a firm decision. One possibly telling note about the timing: It has not hired consultants to help the process along. Such a move would seem a logical step, given the complexity of the undertaking. Moreover, it is closely following whether investors sustain their positive reaction to the Abbott Laboratories/AbbVie split.

To do so, Pfizer is taking several steps, including installing different management structures for its two core businesses: one for the innovative medicines and the other for the ‘value’ or established products businesses. These structures are largely in place already, although not yet in emerging markets, Pfizer management told Anderson.

Still, dividing up various aspects of Pfizer’s businesses would be complicated. Pfizer’s manufacturing plants serve multiple purposes, for example, separating them operationally “so they can be managed by two divisions would be a long and difficult process,” management told Anderson. Manufacturing also ties into how profits from individual products are taxed, he noted.

The company is also still considering a compromise as a draw for investors. Anderson calls it a ‘virtual split,’ in which Pfizer retains both businesses, but provides more transparency around each, including separating their P&Ls. This is likely to happen in 2013, Anderson speculates; management has not defined a deadline, but said it would likely take this step ‘soon’. A full break up, should that be the ultimate choice, could take three years to completebecause of SEC requirements for three years of audited financial data and the operational complexities.

The pros and cons of a split are already well known to Pfizer followers. On the plus side, each business has very different growth drivers, with different cultures required, time lines for getting products to market, and regulatory and commercial strategies. The cons are: loss of scale for back office operations and added costs of two standalone companies, and the complexities of sorting out how to divide up manufacturing operations.

The company has been evaluating a split for at least two years — almost as long as Read has been at the helm. It has already spun out or sold its animal health, drug formulation and delivery, and international pediatric nutritionals businesses, adding tens of billions of dollars to its coffers. It is now the most cash-rich company of a cash-rich industry, a position investors laud. (Statistically-minded investors might note that two of these deals took place in consecutive Aprils — 2011 for Capsugel, and 2012 for the $11.9 billion sale of the pediatric nutritionals business to Nestle. However, divesting consumer health, one of Pfizer’s growth drivers, is not on the table, management told Anderson and has previously told the Street. Wall Street seems favorably inclined toward current management, a sharp turnaround from the dissatisfaction that helped drive previous CEO Jeff Kindler from his post in December 2010 and paved the way for Read’s ascent. But, given the success of other pharma spin outs and divestitures, it’s itching for this split to occur.

Other nuggets from Anderson’s call: Pfizer’s goal for its newly launched anti-coagulant Eliquis is to reach equivalent formulary positioning to earlier entrants, Boehringer Ingelheim’s Pradaxa and Johnson & Johnson/Bayer AG’s Xarelto by year end. The company’s other new specialty drug, Xeljanz, an oral medication for rheumatoid arthritis, is ”getting consistent uptake in the post anti-TNF portion of the market.” Direct-to-consumer advertising is expected to begin in mid-2013. Breast cancer pipeline drug palbociclib, a CDK 4/6 kinase inhibitor, is on investors’ radar following release of strong clinical data in December 2012.--Wendy Diller

Who's splitting up, buying, selling, licensing, or partnering? It's all in this week's installment of...

Lundbeck/Otsuka: Just weeks after partners Lundbeck and Otsuka launched their first joint product in the U.S. derived from a 2011 collaboration, they expanded their 2011 alliance for yet the second time in a month, focusing on Lundbeck’s novel Phase II compound for Alzheimer’s disease, LuAE58054. In March 2013, the companies launched the once-monthly injectable anti-psychotic Abilify Maintena, a long-acting formulation of Otsuka’s blockbuster Abilify, which is set to lose patent protection in 2015. Just days after the launch, the partners expanded the original agreement to include co-promotion of all Abilify formulations (including tablets and oral solutions) in certain European countries. The companies are also jointly developing Otsuka’s brexpiprazole, now in Phase III for multiple psychiatric disorders. The latest expansion adds $150 million from Otsuka to Lundbeck’s coffers upfront, and could result in regulatory and sales milestone payments of up to $675 million. In exchange, Otsuka gets co-development and commercialization rights to Lu AE58054 in the U.S., Canada, East Asia (including Japan), major European countries, and Nordic countries. Phase II studies of the asset recently completed, and three Phase III trials are expected to begin later in 2013. The compound, a selective 5HT 6 receptor antagonist, is in development as an adjunct to donepezil for Alzheimer’s disease. The drug is expected to begin three Phase III trials later this year involving 2,500 patients. – Lisa LaMotta

Shire/SARcode: Shire's CEO-designate Flemming Ornskov hasn’t officially taken over the reins at the specialty pharma but he is already pulling the strings when it comes to business development. The company announced its second acquisition within two weeks in ophthalmology – a therapeutic area Ornskov knows well, but one that is new to the company. The Irish specialty pharma announced on March 25 that it acquired SARcode Bioscience Inc. and its lead asset lifitegrast for dry eye disease for $160 million upfront and undisclosed milestones. That announcement follows the March 12 acquisition of Premacure AB, the developer of a rare neonatal eye disease treatment, for an undisclosed amount. Ornskov called ophthalmology a 'very attractive' therapeutic area in an interview with “The Pink Sheet” DAILY. Prior to Bayer, Ornskov worked at the eye specialist Bausch & Lomb as global president of pharmaceuticals and OTC, and previously headed Novartis's ophthalmology business. For SARcode investors the deal is an attractive exit. The process was competitive, with multiple potential acquirers coming forward after the first Phase III trial read out last year, according to Sofinnova Ventures partner Garheng Kong, who also sits on SARcode’s board of directors. Sofinnova led SARcode’s $44 million Series B financing, completed in July 2011 to fund the Phase III program.–Jessica Merrill

Edison/Dainippon: Mountain View, Calif.-based biotech Edison Pharmaceuticals has scored a regional partnership with Japan’s Dainippon Sumitomo. On March 28. Edison announced that Dainippon is providing it with $15 million upfront, as well as $35 million in research funding for the Japanese development and commercialization rights to EPI-743 and EPI-589. The Japanese pharma will pay up to $35 million in development milestones for each indication, as well as another $460 million in commercialization milestones and royalties. Edison will use the funds from the deal to conduct late-stage development and commercialization of EPI-743, its lead product candidate, which it intends to commercialize itself in the U.S. and possibly Europe during the 2015 timeframe. Edison has been raising small sums of money since its inception in 2005, but had been considering the best possible way to transition from a pure development company to one with a commercial orientation as well. “We’ve been in private board discussions on how to capitalize Edison through commercialization,” said Edison CEO Guy Miller in an interview. “We had been considering different options including a regional deal or even an IPO.” – L.L.

AstraZeneca/Actavis: Actavis gained the right to launch its generic version of AstraZeneca PLC’s blockbuster Crestor on May 2, 2016 – 67 days before Crestor’s patent protection expires – in a deal announced March 25. In return, the generics maker agreed to pay a fee of 39% of its net sales during this early marketing period. The terms were part of a settlement agreement to resolve patent litigation. Actavis (formerly Watson Laboratories Inc.) will also be able to launch its zinc salt formulation of the cholesterol-lowering drug, which it developed under an NDA as a way to circumvent the Crestor patent, at the same time ([A#00130218011]). The companies noted in separate March 25 releases that the entry date may be earlier and the fee eliminated under certain circumstances, which they did not specify. In December 2012, the U.S. Court of Appeals for the Federal Circuit affirmed a district court decision that the substance patent covering Crestor is valid and enforceable. The patent expires following pediatric exclusivity on July 8, 2016. Crestor is AstraZeneca’s top-selling drug with 2012 revenue of $6.25 billion, of which $3.16 billion was in the U.S. The companies announced the settlement agreement on the same day the Supreme Court heard oral arguments in Federal Trade Commission v. Actavis, which addresses whether patent settlements in which the brand pays the generic to delay launching its product are anticompetitive. It is unclear whether the AstraZeneca-Actavis deal would spark opposition by the FTC as it did not involve a “reverse” payment from defendant to plaintiff. —Brenda Sandburg

Sanofi/Transgene: French biopharma companies Sanofi and Transgene will collaborate on the development of a new industrial platform for the production of clinical and commercial batches of Transgene’s immunotherapy products, including its modified vaccinia Ankara (MVA vaccine), a reengineered virus used as a vector for the production of recombinant proteins. Genzyme’s polyclonals facility in Lyon-Gerland will serve as the site for the platform, and is targeted for an investment of €10 million ($13 million), to be equally shared by Sanofi and Transgene. The platform will remain Sanofi’s exclusive property. Under the agreement, Sanofi will essentially serve as Transgene’s contract manufacturing organization, and Transgene will be a preferred customer for 15 years. The Genzyme site is already manufacturing polyclonal antibodies and has the necessary capabilities to support the registration of immunotherapy products for the EU and U.S. markets. Construction will start in the third quarter of 2013, with completion scheduled for 2015. Transgene expects to file its first BLA in 2016. In 2010, Novartis AG licensed an exclusive option for global rights to Transgene’s TG4010 vaccine (MVA-MUC1-IL2) against MUC1-positive NSCLC and other types of cancer. The decision to option will be based on Phase IIB results, which should be available in the second half of 2013. The biotech is also advancing JX594, an oncolytic virus candidate licensed from Jennerex Biotherapeutics Inc. for hepatocellular carcinoma and other tumors; Phase II data will be presented in the first half of this year.—Michael Goodman

Novartis/Clinigen: British specialty pharma Clinigen Group is building a portfolio of hospital-only drugs it believes will thrive in its hands. In its latest deal, the Burton-on-Trent, U.K., company said March 26 it had acquired from Novartis rights to Cardioxane, a cardioprotective agent used to combat complications of anthracycline chemotherapy in advanced breast cancer patients. The Swiss pharma agreed to sell its rights to the drug for $33 million in cash, which Clinigen will pay in two installments. Novartis had owned rights to dexrazoxane since its 2006 acquisition of Chiron, but the drug has been approved since 1992. It’s been marketed by several companies under a variety of names, but since 2011, its usage has been restricted to the breast cancer indication in the EU and U.S. Clinigen plans to market the drug with emphasis on certain European, Asian and Latin American markets where it believes it can stimulate sales. Last week, Clinigen licensed antiviral drug Vibativ (telavancin) from Theravance Inc. to treat nosocomial pneumonia infections stemming from methicillin-resistant staphylococcus aureus infections. The company licensed Foscavir (foscarnet sodium) from AstraZeneca PLC, an anti-bacterial drug combatting cytomegalovirus in bone marrow transplant patients, in 2010. Clinigen went public in September 2012.—Paul Bonanos

Lilly/Galapagos: Eli Lilly has returned the rights to an osteoporosis program to Galapagos NV, the smaller company announced during an R&D update on March 27. The alliance was initiated in December 2007, when Lilly agreed to pay an upfront of €3 million ($4.32 million) in exchange for an option to take over worldwide development and commercialization for up to 12 proprietary osteoporosis targets and drug-discovery programs. The goal of the program was to develop oral, bone-building drugs that could serve as follow-ons to Lilly’s osteoporosis franchise, which includes Evista and Forteo. Under the original terms of the deal, Galapagos was tasked with developing the drug candidates through Phase IIa proof of concept in exchange for the upfront and €88 million ($126.6 million) in milestones. It was also eligible for €130 million ($187.1 million) in commercial milestones. Galapagos said in a statement that the “alliance did not yield the expected results within an acceptable timeframe, and therefore Galapagos decided to end the alliance.” The smaller company had received €11 million in milestones from Lilly as of the end of the collaboration.—L.L.

Deals of the Week Wants Cash on the Barrelhead

2013-03-22T12:36:00.001-05:00

For pharmas making all but the largest acquisitions, cash is king. From speculative buyouts of preclinical start-ups all the way through bolt-on deals worth a few billion dollars, pharmas typically spend cash rather than swap stock to make their acquisitions. Except in the cases of mega-mergers, a pharma’s purchasing power lies on its balance sheet, not in its share price.

So when Moody’s Investor Service issued a March 18 study of the U.S. companies whose cash coffers were the richest, Deals of the Week couldn’t help but turn an eye to the seven health care companies named in the report. None of them has disclosed a pharma acquisition yet in 2013, but rumors are swirling that one will strike soon.

Pfizer was the wealthiest in the bunch, with $46.9 billion in the till at the end of 2012. That’s enough to place it fourth across all industries, behind only Apple, Microsoft and Google. And although Pfizer had the world’s best-selling drug for several years running until Lipitor (atorvastatin) lost patent protection in 2011, not all of its bounty came from product sales. It did, after all, pare off its nutrition business in an $11.85 billion sale to Nestle SA last year, not to mention its Capsugel unit to private equity firm Kohlberg Kravis Roberts in 2011. Pfizer hasn’t done a pharma acquisition since its (all-cash) takeout of NextWave Pharmaceuticals Inc. in November.

Ninth-place Amgen made four large cash buys in 2012, including deals for Micromet Inc., deCODE genetics EHF, KAI Pharmaceuticals Inc., and Mustafa Nevzat Pharmaceuticals that totaled more than $2.5 billion. But those made a small dent on Amgen’s balance sheet; Moody’s said the big biotech had $24.1 billion at year’s end. The report also noted that 78% of Amgen’s liquidity is located overseas; two of its four large 2012 deals were for non-U.S. companies.

Beyond Amgen, Johnson & Johnson wasn’t far behind at 13th place with $21.1 billion, while Merck was 15th with $16.1 billion. (J&J-owned Cordis made one device acquisition this month, buying Flexible Stenting Solutions Inc. for an undisclosed sum.)

Moody’s reported that Abbott had $15.2 billion in cash on Dec. 31, enough for 17th on the overall list, but a day later, the company split in two. Its pharma descendant, AbbVie, had $7.98 billion upon launch, according to a March 15 regulatory filing. Rounding out the top pharmas were Lilly at 23rd with $12 billion and Bristol-Myers Squibb at 40th with $6.4 billion.

More broadly, the pharma industry holds about 14% of the $1.45 trillion corporate cash pile, a share which has remained roughly the same for several years. It’s the second largest sector behind technology, which gained share to 38%, while energy is among the industries losing share.

If Big Pharma isn't yet striking, some companies are still buying, licensing, and partnering. You won't get thirty days in the jailhouse, but you won't be abreast of this week's dealmaking news without...

Valeant/Obagi: Canada’s Valeant Pharmaceuticals is again strengthening its dermatology business through acquisition, this time by buying Obagi Medical Products, the maker of several proprietary aesthetic and prescription skin-care lines sold through physician offices. The companies announced Valeant’s plans to acquire the Long Beach, Calif., company March 20 for $19.75 per share in cash, or about $360 million. Valeant’s offer represents a 42% premium to Obagi’s closing share price March 14, the last trading day prior to the disclosure of its fourth quarter and full-year 2012 earnings. The company generated sales of $120.7 million in 2012. Obagi’s portfolio includes a range of skin-care lines, including Obagi Nu-Derm, Obagi-C Rx, Obagi Condition & Enhance and ObagiCLENZIderm M.D. acne therapeutic system. Valeant has built itself into one of the world’s leading dermatology players through acquisitions. Last year, Valeant announced plans to buy Medicis Pharmaceutical for $2.6 billion, positioning it as the largest dermatology player in the U.S. and second in the world behind only Galderma. - Jessica Merrill

AstraZeneca/Moderna: Along with its new R&D strategy and organizational restructuring, AstraZeneca unveiled a massive bet on an early-stage biotech platform March 21 that suggests the big pharma has taken to heart its new CEO’s directive to be more willing to embrace risk. The deal, an option agreement for up to 40 programs across several therapeutic areas with privately held Moderna Therapeutics, carries an eye-catching price tag: $240 million up front, plus potential earn-outs. All told, Moderna, which aims to use messenger RNA (mRNA) as therapeutics, could earn more than $1 billion under the deal with AstraZeneca, announced March 21. That same day, AstraZeneca also unveiled a research partnership in cardiovascular, metabolic and regenerative disease with Sweden’s Karolinska Institute, one of several collaborations between those two groups in recent years. Beyond the $240 million upfront payment – the largest this year in a biotech/pharma collaboration and one of the biggest ever for a deal built around preclinical assets – Moderna also can earn up to $180 million in “technical milestones,” an arrangement Moderna CEO Stephane Bancel described as almost a secondary, contingent upfront payment. Moderna also could bring home development, regulatory and commercial milestones for each drug candidate licensed by AstraZeneca, as well as sales royalties ranging from the high single digits to low double digits. - Joseph Haas

Merck/Cerecor: Well-funded Baltimore start-up Cerecor has licensed a portfolio of neurology drugs from Merck that have shown potential in treating Parkinson’s disease. The program includes more than 2,000 molecules that inhibit catechol-O-methyltransferase, or COMT, a compound that breaks down dopamine in the brain and is linked to improving brain functions such as cognition, motivation and emotion. In a March 20 statement announcing the deal, Cerecor said Merck’s research has improved toxicity issues related to other COMT inhibitors. Marketed drugs in the class include Novartis’s Comtan (entacapone) and Valeant’s Tasmar (tolcapone), which typically are prescribed with levodopa, a synthetic form of the natural dopamine-producing chemical L-dopa. Terms of the Merck-Cerecor arrangement weren’t released, although Cerecor said it will pay milestones and royalties “consistent with other preclinical licenses in neuroscience.” The start-up has a Phase I anti-tussive drug, as well as a group of preclinical D-amino acid oxidase inhibitors obtained from Johns Hopkins University’s Brain Science Institute, in its pipeline. Last April, Cerecor raised $22 million in a Series A round using placement agent Maxim Group; the specific investors weren’t named. Former Celgene CEO Sol Barer is Cerecor’s chairman. - Paul Bonanos

Celgene/bluebird bio: Speaking of Celgene, the Summit, N.J., gene- and protein-regulation specialist has teamed up with 2012 Deals of the Year nominee bluebird bio in a gene-therapy deal (pdf) that will target oncology. Specifically, the two companies will collaborate to develop therapies that modify a patient’s own chimeric antigen receptor T-cells, then re-introduce them to target cancer cells. Although bluebird bio will foot the bill for Phase I trials on clinical products, Celgene will have the option to obtain a global license for each for an unspecified fee; bluebird bio retains the right to share U.S. rights in exchange for reduced milestone payments. Celgene’s upfront payment wasn’t revealed, but total fees including milestones for each product could total $225 million plus royalties. Celgene also agreed to collaborate on CAR T-cell research with scientists at the Center for Cell and Gene Therapy at Baylor College of Medicine, Texas Children’s Hospital and The Methodist Hospital, Houston. The team at bluebird bio also will have access to the scientists, led by Baylor professor Malcolm Brenner. - P.B.

NPS/Takeda: Two assets came full-circle March 19 as NPS Pharmaceuticals re-acquired ex-U.S. rights to a pair of rare disease drugs in a deal that will increase the equity position of Japanese pharma Takeda Pharmaceutical. NPS previously out-licensed the rights to teduglutide and PTH 1-84 in separate deals with Nycomed Pharma, which then was acquired by Takeda. In an unusual deal structure, NPS, which is marketing teduglutide in the U.S. as Gattex and hopes to file PTH 1-84 under the brand name Natpara later this year as a biologic therapy for hypoparathyroidism, brought the ex-U.S. rights to those two compounds in-house in exchange for $50 million in common stock. Down the road, Takeda can earn an additional $30 million, which will be either cash or additional equity at NPS’ discretion, when the two drugs achieve combined worldwide, single-year net sales of $750 million. Takeda holds an equity position of about 7% following this deal, NPS President and CEO Francois Nader said. Both the licensing fee and the sales-based milestone were structured as equity (although the milestone can be paid out as cash if NPS opts) partly to preserve cash, Nader said. An ex-U.S. license to both drugs is just the start of what NPS gains under the deal. The transaction also transfers an inventory of active pharmaceutical ingredients for both drugs to NPS, a less-expensive method for making teduglutide, a glucagon-like peptide 2 (GLP-2) analog, and a pen delivery system that could be used with PTH 1-84. - J.A.H.

CRT/Janssen: Cancer Research Technology, the technology transfer arm of world’s largest charity Cancer Research UK, and Janssen Biotech have joined in the search to find potential new multiple myeloma drugs. The duo hope they can identify molecules and develop potential medicines that block a key protein on a cell-signaling route called the unfolded protein response (UPR) pathway. Teams at The Institute of Cancer Research (ICR), led by Ian Collins in the Cancer Research UK Cancer Therapeutics Unit and Faith Davies in the Division of Molecular Pathology, will work alongside a team at Janssen. Together, Cancer Research UK and Janssen will fund up to 25 scientists, with Janssen providing some of the funding to support the research at the ICR in London. Janssen also will pay future milestones and royalties and take the lead on the clinical development of any potential drugs. The two sides announced their deal on March 21 but gave no financial details. CRT long ago moved beyond simply commercializing and managing the intellectual property generated by the £500 million in research funding provided by Cancer Research UK to five core research institutes across the U.K., as well as to researchers at dozens of other universities and organizations. The breadth of CRT’s academic network – it has sourced and managed IP from more than a dozen global charities and institutes, as well as that of Cancer Research UK-funded research and drug discovery – positions it as an important gateway to cancer-focused research in the U.K. It has a strong in-house drug-discovery capability and access to clinical development capabilities in conjunction with Cancer Research UK’s drug development office. Janssen Biotech is part of the Janssen Pharmaceutical Companies of Johnson & Johnson. J&J earlier this month opened an innovation center in London but a spokesperson for the U.S. drug company said Janssen’s alliance with CRT was not the result of that center’s establishment. - Sten Stovall

Merck Serono/Nordic Bioscience and Merck KGaA/BMS: Merck Serono, a unit of Merck KGaA, said on March 18 it formed a strategic alliance with Denmark-based Nordic Bioscience AS around the German drug maker’s investigational therapy sprifermin, or recombinant human FGF-18, in osteoarthritis of the knee. Under the terms of the agreement, Nordic Bioscience will provide Merck with clinical development services on a shared-risk basis in exchange for a payment structure that includes service fees and potential milestone and royalty payments on the program. Financial terms of the collaboration were not disclosed; however. Merck retains full responsibility for the development and commercialization of the investigational drug. According to the World Health Organization, more than 5% of adults over 40 in developed countries, or more than 30 million people, suffer from osteoarthritis of the knee. A multi-national Phase IIb trial, dubbed the FORWARD study, is expected to begin enrolment in the second half of 2013 to evaluate further sprifermin for inhibition of the progression of structural damage, reduction in pain and improvement of physical function in patients with osteoarthritis of the knee. Sprifermin is a protein thought to induce chondrocyte stimulation leading to matrix synthesis and chondrocyte renewal. It is delivered by intra-articular injection. Two phase I trials in moderate/severe osteoarthritis of the knee previously were completed; a Phase II trial to evaluate the efficacy and safety in patients with cartilage injury of the knee is ongoing. The program was originally was in-licensed in 2004 from ZymoGenetics, a Bristol-Myers subsidiary. The next day, on March 19, Merck KGaA said it inked a deal with Bristol to promote type 2 diabetes drug Glucophage (metformin hydrochloride) under different formulations in China. Under terms of the agreement, Merck Serono and Bristol will co-promote Glucophage in China through a profit-sharing arrangement. Glucophage has been marketed by Bristol-Myers Squibb-SASS in China since 1999. The two companies will tap existing resources and complementary strengths, with Bristol-Myers Squibb-SASS continuing to manufacture Glucophage’s IR (immediate release) formulation. The collaboration will seek to expand the geographic distribution of Glucophage and provide diabetes-related health and medical information including education for health professionals. In addition, the co-promotion will significantly increase outreach to hospitals. Other terms of the agreement were not disclosed. -- S.S.

Thanks to YouTube user cweiandnd for uploading the Louvin Brothers clip. Keep clicking, there's more where that came from.

Financings Of the Fortnight Sees Drug Companies Making It Rain

2013-03-22T10:41:00.000-05:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2013-03-15T13:24:00.001-05:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CMEA 8 Is "Dissolved"

2013-03-14T10:01:00.000-05:00

Hark back to the golden days of JP Morgan, all of two months ago. The sun was shining, the cable cars were whirring, and CMEA Capital was touting its long-awaited CMEA 8 fund. It even had posted Web pages for two new partners, who were bellying up to the table with a lot of optimism about the new fund and a string of early-stage biotech successes on their resumés. We wrote about it here.

Two months later, the fund's plug has been pulled, according to all three partners involved. In response to inquiries, Troy Wilson, the cofounder of PI3 kinase developer Intellikine, Kent Hawryluk, an Indianapolis-based VC, and CMEA life sciences managing director Karl Handelsman issued a joint statement to our sister publication START-UP: “CMEA 8 is dissolved. The decision was mutual and we have amicably parted ways.”

CMEA has had on-again, off-again plans for this fund, going back to 2010 when it was pitching prospective investors on an asset-centric biotech fund, backed in part by Eli Lilly and code-named "Velocity." START-UP wrote about those plans here.

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

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

After the suit became public (you can find more details and the full text of it here), Wilson, Hawryluk and Handelsman would make no comment except for the statement previously noted.

So what's next? Handelsman referred all inquiries about the lawsuit to CMEA’s lawyer, Lara Villareal-Hutner, who responded with a prepared statement that other media outlets have also received in recent days. It read, in part: “CMEA acted at all times professionally and with integrity, underscored by the fact that for the last eight months the administrative assistants continued working for the Firm, and resigned only after retaining an attorney and filing this lawsuit. While the statements asserted in this lawsuit are salacious, CMEA is confident that the true facts supported by evidence - not others' self-interested mudslinging - will determine the outcome of this case. As such, CMEA is fully prepared to vigorously defend itself and its reputation, and is supremely confident in its ability to prevail.”

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

We'll have a full report on all these doings in the upcoming START-UP.

Photo courtesy of flickr user Eschipul.

Deals Of The Week Untangles The String of Pearls

2013-03-08T13:16:00.000-05:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Entangled string and pearls photo courtesy of Flickr user bhollar.