DotW: The Hype Machine

It's J.P. Morgan time. And as the immortal James Brown sang (or did he shout): "Get on up, Get on up. Stay on the scene, like a hype machine."

Okay, so the lyrics were a tad different. But you get the point. The impending JPM meeting is THE industry confab, and if ever our industry needed a little boost of hype--kind of like Botox--it's now.

A report in Friday's VentureWire confirms what START-UP readers already knew: venture capital needs a plan B. Meanwhile, companies such as Wyeth and Merck are ramping up their diversification spin, in part because of the continued troubles associated with bringing traditional pharmaceuticals to market.

Perhaps it was the holiday break...or perhaps companies felt the need to generate their own buzz ahead of JPM, but IVB couldn't help but notice a torrent of deal-making news this week. (Maybe folks want to get an early start on IVB's 2009 Deal of the Year Award.) Not to toot our own horn, but we weren't just ahead of the news, we made news with the signing of Pharmalot blogger, Ed Silverman. Consider this your official welcome, Ed.

Moving on... at least four companies emerged from stealth mode this week: Anaphore, FORMA Therapeutics, Kolltan Therapeutics, and Satori, and its likely these companies and their backers will find their dance cards full in San Francisco.

We suspect the JPM presentations of Wyeth, Genentech and Roche will also be packed. Genentech and Roche because people are still itching to know if the biggest potential deal of 2008 will actually come to fruition in 2009. Wyeth because of news leaked earlier this week indicating its interest in vaccine maker Crucell.

But until the full assault on your liver begins--we know you really go to JPM for the presentations (wink wink)--we bring you this interlude. Our own analysis of the week's hype, pulled together by an able team of writers from "The Pink Sheet" DAILY, PharmAsia News, and the greater IN VIVO Blog team.

UCB/Wilex: In a deal structure that might best be described as double-jointed, Belgian pharma UCB and German oncology-focused biotech Wilex have entered a risk-sharing partnership in which Wilex will develop UCB’s preclinical oncology pipeline with UCB holding repurchase rights for each program. Under the terms, UCB has granted the rights to five preclinical oncology programs to a new legal entity wholly owned by UCB and funded with €10 million. Wilex, in turn, will acquire the entity in a process that involves issuing about 1.8 million new shares. As a result of the deal, UCB will own 13 percent of Wilex. UCB can buy back the programs after first clinical feasibility studies finish, and take over development and commercialization, in which case Wilex would get milestone payments and royalties. If UCB opts not to re-purchase, Wilex keeps rights and pays milestones plus royalties to UCB.
The shrewd risk-and-cost-sharing arrangement helps UCB handle its delay of the rheumatoid arthritis drug Cimzia, stalled earlier this month by a complete response letter from FDA. UCB said the collaboration will enable it to focus on its own R&D priorities, especially central nervous system and immunology therapies. Reminiscent of prior deals between Genentech and Xoma and Lilly’s risk- and reward-sharing deal with India’s Nicholas Piramal, the UCB/Wilex tie-up may provide a template for future deal-making in the industry--Joseph Haas.

Johnson & Johnson/Vanderbilt: Dealing with last year’s loss of exclusivity for its schizophrenia drug Risperdal, Johnson & Johnson is turning to an academic partner in an effort to develop novel therapies for that disease. What’s unique, though, is that Vanderbilt University’s Program in Drug Discovery will advance the collaboration’s compounds to the IND stage before J&J affiliate Janssen will step in to continue development. As reported by Reuters and the Wall Street Journal, Vanderbilt gets $10 million upfront from J&J in exchange for exclusive worldwide license to compounds university researchers have developed to target a neurotransmitter receptor. J&J will fund research for three years, during which time it will have the option to license new discoveries produced by the effort. Per the agreement, Vanderbilt could realize up to $100 million in milestones through the collaboration. J&J, which has launched its own generic version of Risperdal along with a long-acting formulation of the drug, may be especially desperate to find new schizophrenia candidates, since its own candidate, paliperidone palmitate, has been stalled at FDA due to a “complete response” letter--Joseph Haas.

Alnylam/Cubist: We can only assume that having won our 2008 Deal of the Year award for their tie-up with Takeda, execs at Alnylam are addicted to the rush. The RNAi licensor extraordinaire starts the year with more news: a co-development and profit-sharing collaboration for its respiratory syncytial virus program, including Phase II candidate ALN-RSV01. In a Jan. 9 note, Rodman & Renshaw lauded the deal, noting its similarity to the Alnylam/Takeda deal. Cubist, which has launched its once-daily anti-bacterial Cubicin with seven commercialization partners worldwide, will pay Alnylam $20 million upfront for worldwide commercialization rights to the RSV program, excluding Asia, where Kyowa Hakko Kirin holds rights. Alnylam also could receive development and sales milestones up to $82.5 million along with double-digit royalties. Alnylam is currentlyinvestigating ‘RSV01 in adult lung-transplant patients, but the larger opportunity is children and high-risk adults. AstraZeneca’s Synagis, an RSV prophylactic, is nearing blockbuster status--Joseph Haas.

Merck/Galapagos: Belgium’s Galapagos, already partnered with Lilly in osteoporosis and Boehringer-Ingelheim in autoimmune disease has struck a target discovery platform deal with Merck to seek novel therapies for obesity and diabetes. Merck, which has been aggressive in lifecycle management efforts for top diabetes products Januvia and Janumet, will pay Galapagos €1.5 million upfront ($2.01 million) along with discovery, development and regulatory milestones that could pass €170 million ($228.3 million) for multiple products. For any product that reaches market, Galapagos will also be eligible for unspecified sales milestones and royalties. Using its proprietary SilenceSelect platform, Galapagos will perform preclinical research on targets selected by a joint screening committee. Merck then will have the option to take candidates produced by this process into development, although Galapagos may perform some Phase I clinical studies and will retain development and commercialization rights to any compounds Merck does not pick up. The back-end loaded nature of the deal shows the power Big Pharma partners have to set deal terms in the current environment. However, we aren't surprised to see Galapagos in the news since it's one of Europe's star biotech companies--Joseph Haas.

Endo/Indevus: Endo’s $370 million acquisition of Indevus will enable the former to move into new therapeutic areas while helping the latter get its hypogonadism injectable, Nebido, to the finish line at FDA. Nebido, a long-acting testosterone product, has been held up at FDA due to safety concerns about injection-related cough. Endo's purchase involves more than half of the $632.9 million it had on hand as of Sept. 30, and also calls for $267 million in milestones. The goal of the combined company is to create a specialty powerhouse, with sales force teams dominating in three areas: urology, enodcrinology, and pain. Currently Endo markets overactive bladder therapies Sanctura and Sanctura XM, advanced prostate cancer drug Vantas, central precocious puberty drug Supprelin LA, and hypogonadism product Delatestryl. Indevus plans to resubmit its NDA for Nebido by the end of this quarter and says FDA ultimately will be comfortable with the drug’s risk-reward profile--Randall Osborne.

Roche/Plexxikon: In its second major deal with Roche, Plexxikon gets $60 million upfront and the opportunity for $275 million in milestones plus double-digit royalties in exchange for worldwide exclusive rights to PLX5568, an Raf kinase inhibitor in Phase I for polycystic kidney disease. Plexxikon expects to begin Phase II study of ‘5568 this year and notes about $100 million in milestones is tied to development markers. The biotech also gets U.S. co-promotion rights for the compound in indications other than PKD. The high-value deal shows that Big Pharma remain willing to pay handsomely for early-stage assets--a phenomenon we first discussed in this 2006 feature. As "The Pink Sheet" DAILY noted, privately-held Plexxikon, which was founded in 2001, has done an amazing job of raising non-dilutive financing. Still, we can't help but wonder if the firm's venture backers, which include Pappas Ventures, Alta Partners, and Advanced Technology Ventures, are hankering for an exit. If so, it will be interesting to see if the most recent tie-up with Roche limits the biotech's options. In a better financial climate, Plexxikon would have been a perfect IPO candidate. But with the IPO window firmly shut, exit by acquisition is the only game in town. Roche has a history of trying before it buys--GlycArt, anyone--but if it doesn't bite, other Big Pharma might be hesitant to pay big bucks for a company whose major programs are already off the table--Emily Hayes.

Onyx/S*BIO: This week Onyx Pharmaceuticals inked a potential $550 million deal with Singapore’s S*BIO to co-develop two Janus kinase inhibitors. S*BIO gets $25 million upfront and can receive up to $525 million in equity purchase, options and license fees over the life of the deal, which covers Phase I candidate SB1518 and preclinical SB1578. Onyx gets rights to develop and commercialize the JAK inhibitors for any indication in the U.S., EU and Canada, while S*BIO, which would receive double-digit royalties on Onyx’s product sales from the partnership, is still free to develop and partner the compounds elsewhere. SB1518 is in Phase I for myelofibrosis, with data expected mid-year, and Phase II expected to begin later in 2009. SB1578 is expected to reach the clinic in 2010--Tamra Sami.

Boston Scientific/Labcoat: UPDATED. Information was missing from the previous edition due to an editing error. Bonus device deal of the week! (Who says we only cover biopharma?) If you are impressed with the sharp color images or photo resolution you get from your printer, imagine using the same technology to paint coronary stents with a thin coating--think less than one micron--of a biodegradable polymer and drug formulation. That's the technology Boston Scientific acquired when it bought Galway-based Labcoat this week. With this deal, BSC is looking to maintain its current market leadership position in drug-eluting stents by employing Labcoat's novel coating technology for its next-generation devices. Boston currently has more than 50% of the US DES market through its unique two-drug strategy that employs both paclitaxel and everolimus on its current Taxus and Promus stents. Concerns raised in recent years regarding the risk of late stent thrombosis from DES have caused companies to look back to the good old days of bare-metal stents. Efforts are now underway to minimize the amounts of drug and polymer necessary to prevent restenosis in such stents. The Labcoat deal represents Boston's first efforts with a bioerodable polymer, which the company plans to employ on its next generation Element stent platform. Labcoat's approach applies the polymer and drug--and only small quantities of both--to the outside of the stent, thereby minimizing the amount of both substances on the stent's inner surface where endothelial cell growth is required for healing. Moreover, as the polymer degrades, the end result is a bare-metal stent--Steve Levin.

And Now, A Word from the DOTY Winners

"You really like who?"

We promise this is the last DOTY post for at least eleven months but no awards ceremony would be complete without a word from the winners. We now turn the mic over to Jason Rhodes, vice president of business development at Alnylam.

Well, we barely know where to begin, but before the music starts and the hook appears from the edge of the stage…

There are many daunting steps along the path of building a successful innovation-based biopharmaceutical company – harnessing revolutionary science, hiring great people, accessing needed IP, raising capital, filing INDs, achieving human PoC in clinical trials and then successful Phase III results, filing NDAs and obtaining FDA approval, achieving successful product launches, growing earnings, and… you guessed it, winning the DOTY award!

We are truly grateful to have received it (actually amazed given the outstanding competition!) and for the recognition (cough, cough) it represents for Alnylam’s partnering strategy. Our business development team would like to take all (repeat, all!) the credit, but we must admit that the real credit goes to our scientists’ efforts, the strength of our IP, and the broad potential of our technology. Of course, we’d also like to thank small molecules and antibodies for giving us undruggable targets and the FDA and payors for making drug incrementalism a thing of the past. So, as you can see, our BD team played the key role.

Of course, none of this would have been possible without Takeda and their commitment to innovation, their deep understanding of RNAi technology and IP, and the confidence that they have in Alnylam. We are at the beginning of a long and fruitful partnership with them and look forward to our continued mutual success. We’ve already enjoyed many visits with our colleagues and friends in Japan and have become big fans of Asahi Super Dry.

We’d also like to non-exclusively thank our parents, spouses, the local Boston internet cafes and Apple stores for access to their computers, the entire 8th grade class at Brown middle school, the local citizens from the Ibaraki Prefecture, the many others who voted for Alnylam among many strong candidates, and the good readership and sage editorial board of the In Vivo blog for their unwavering support.

We have big plans for 2009 (just like Philly these days, we’re insatiable and aiming for a “two-fer” with “DOTY-2009”) and wish everyone a very very successful year!

And the DOTY Goes To ... Alnylam/Takeda

The illustrious academy of IN VIVO Blog readers has spoken. And the Deal Of The Year bragging rights goes to ... Alnylam Pharmaceuticals' RNA interference alliance with Takeda Pharmaceuticals!

More than 2500 votes were cast in our inaugural competition and Alnylam/Takeda led the polling from start to finish. To be sure, there was rationale to vote for any of the nominees--that is, after all, why we chose the wide variety of deals we did: each was impressive, groundbreaking, interesting in its own way, and almost always illustrating an important trend in business development, regulation, or corporate strategy.

Before we say a few words about the winning Alnylam/Takeda deal, let us say a few words about some deals that weren't recognized with a nomination in this year's DOTY (the Dotties?).

First: Roche/Genentech. We struggled with this deal, which surely would have been competitive had it been nominated. Why wasn't it? Well, it's not quite a deal yet, is it? Good luck in 2009, R/G. You've inspired so many other deals through the years--including Infinity/Purdue/Mundipharma, which we were sure would have done better in the polling--and you may yet get your chance to shine in a future Dotties competition.

Others have quibbled with the omission of Lilly's acquisition of Imclone, to which we say that all the drama doesn't catapult it over what we felt was a better example of the big-oncology-acquisition-trend: Takeda/Millennium. Lilly/Imclone had the added twist of a successful shareholder activist calling the shots, and the third party billion-dollar winner in BMS, but we went with Tak/Millennium and believe that the results of the poll support that decision. (click the image below for full results)


On to the award. We've discussed the case for this alliance already: In these cash-constrained times, the deal allows Alnylam to end the year with approximately $500 million in cash and sets the RNAi pioneer up for pipeline building down the road. It makes Takeda the sole big RNAi player in Japan and cements the Japanese pharma's place among the most active and creative dealmakers of 2008. The full pitch is here.

Unlike this deal, the 2008 DOTY award isn't non-exclusive. We can't award it again next week or next month. Congratulations to Takeda (surely the Deal-Maker of the year by our poll results) for having a hand in more than 50% of the votes. And congratulations to Alnylam, who we're hoping will now share some of its beer. We've invited Alnylam to represent this deal and provide an acceptance speech of sorts, which will appear on the blog later this week.

And now, back to your regularly scheduled programming!

Deals of the Week: Kicking Off ASCO

This weekend marks the kick-off of that other highly anticipated biotech event: the big ASCO meeting in Chicago. Appropriately, this week's deal activity in biopharmaland involved several oncology-driven pacts, which we highlight below.

Elsewhere during a short week, the US lost to England 0-2 in a football soccer 'friendly' (the corner kick captured above was among several easily cleared by the English defense) which after a spirited first thirty minutes or so seemed like a foregone conclusion. A lot like if ASCO had released all the abstracts waaaay before the meeting. Wait, they did?

Nevermind, it's time for ...


Takeda/Alnylam: Those groggy from a long Memorial Day weekend woke up to Alnylam's latest non-exclusive technology deal, a $100 million up-front alliance with Takeda Pharmaceuticals in oncology and metabolic disease. Alnylam will also get $50 million in near-term technology transfer payments. Takeda once again illustrates its willingness to spend on new technologies--we took a closer look at the deal and Takeda's recent spate of business development activity, here--and Alnylam once again manages to pull down massive upfront payments for technology it can turn around and license again tomorrow. Takeda also gets first right of negotiation on Alnylam RNAi programs in Asia (excluding ALN-RSV01) should Alnylam look for a partner there. Alnylam gets a reciprocal first right of negotiation on any project Takeda decides to shop in the US and more importantly, gets opt-in rights for 50/50 co-dev/co-commercialization deals in the US on up to four Takeda programs of its choosing (exercisable all the way through the start of Phase III), plus the usual gajillion biobucks in development and commercial milestone payments.

BMS/Kosan: Not all observers were overwhelmed by the 230% premium BMS shelled out to acquire Kosan yesterday. After all, the biotech boasted a handful of clinical-stage compounds, including the Phase III Hsp90 inhibitor tanespimycin. As we argued here, however, Bristol probably didn't attach much value to Kosan's lead project--and we should note that Kosan itself had put partnering efforts for tanespimycin on the back burner while it looked for a deal for its Phase II epothilone program, not exactly a vote of confidence. The acquisition values Kosan at $190 million, net of its cash pile, not a bad result for a company trading at a valuation on par with the value of its liquid assets. BMS is more likely interested in Kosan's epothilone programs, which also have potential in neurodegenerative disease and were the subject of an insurance policy in the event the acquisition doesn't close. If the deal falls through BMS will license Kosan's epothilone programs and IP for $25 million upfront plus milestones and royalties. BMS has pioneered this class of drug, with its Ixempra franchise, approved last October for monotherapy and combination therapy in cancer settings.

OncoGenex/Sonus: After a seven month struggle to find strategic alternatives, Bothell, WA-based Sonus Pharmaceuticals announced it had found a solution: it would merge with the Canadian drug developer OncoGenex Technologies. The combined company will be called OncoGenex Pharmaceuticals and will be run by OncoGenex CEO Scott McCormack, with bases of operations in Vancouver and Bothell. The combined entity will have have three products in clinical trials, including Sonus’ only remaining clinical candidate SN-2310. Sonus’s share price had been in a tailspin since September 2007, when it became apparent that its lead candidate, the Phase III breast cancer drug Tocosol Paclitaxel, was associated with a greater number of side-effects than the existing breast cancer regimen it was supposed to improve upon. Partner Bayer Schering promptly cut ties with Sonus, and the biotech was forced to lay-off half of its workforce in the aftermath. But the company did have two valuable bargaining chips: its Nasdaq listing and a $29 million cash reserve. Those certainly captured OncoGenex’s interest. The Canadian company had hoped to go public last year, but axed those plans due to poor market conditions. And with just $4 million in cash to support its lead product, OGX-011, currently in Phase II clinical trials for refractory prostate cancer, OncoGenex certainly needed a cash infusion.

Boston Scientific/Cryocor: Well, we’ve been down this path before haven’t we? We go on to suggest that Boston Scientific won’t be acquiring any new companies and then—just to spite us—Boston Scientific goes ahead and makes a deal. So we’re not going to point to the closing of BSX’s acquisition of CyroCor Inc. as anything more significant than it is: a $17.6 million bet on the potentially large atrial fibrillation ablation market. To be sure, Boston Scientific’s recent weight loss efforts have garnered nearly as much attention as Oprah’s. Over the past year, it’s sold off divisions, products or sizable equity stakes related to aortic aneurysm, brain monitoring, cardiac, vascular, drug pump, and hearing loss businesses. But the acquisition of CryoCor pits it against others—including St. Jude Medical—in the atrial fibrillation market. Read more on the area here. A group of CryoCor shareholders were resisting the deal and threatening a law suit, but the deal closed officially this week. Boston Scientific had entered into a collaboration with CyroCor last year to work jointly on cryoablation products. Boston Scientific already had a cryo-therapy balloon catheter while Crycor had the means to deliver the freezing agent, nitrous oxide. Together, the product would ablate or kill tissue near the pulmonary vein, which is seen as a likely initiation site of the electrical misfires that bring on atrial fibrillation. In April, St. Jude paid $92 million to acquire publicly traded EP Medsystems Inc., maker of workstations used in atrial fibrillation procedures.

blurry picture by invivoblogger chris morrison used under a creative commons license

Takeda's Millions Buy a Lot of Beer

In the 1902 novel Brewster's Millions (updated famously in 1985 in a film starring the great Richard Pryor), a man must spend every penny of a $1 million inheritance within a short span in order to receive a second $7 million inheritance. As you might imagine (particularly in the film version), hilarity ensues.

The Monty Brewster of the biopharmaceutical world these days is clearly Takeda Pharmaceuticals. We're not saying that Takeda is throwing its money around unwisely--in the pharma world, only time will tell. But it's certainly true that in recent months Japan's number one pharma sure hasn't been afraid to spend it, and seems prepared to provide its partners with some very generous deal terms.

In February Takeda took on Japanese rights to a substantial bit of Amgen's pipeline--$200 million up-front--plus an additional late-stage deal with Amgen on the Phase III Phase III motesanib (another $100 million u/f). Last month it was $8.8 billion to acquire Millennium Pharmaceuticals and $50 million up-front for Cell Genesys' GVAX immunotherapy program.

And today the Japanese pharma signed a deal with Alnylam Pharmaceuticals to non-exclusively license the RNA interference pioneer's technology under terms that were certainly not small beer.

In fact, on a conference call today to discuss the companies' new alliance Alnylam CEO John Maraganore remarked that if the innovation gap in the biopharmaceutical world was a thirst, that RNAi was both "the beer and the tap" to quench that thirst. Or something. Really, he had us at beer. Because if his analogy is apt, Takeda just spent enough money to throw one hell of a party.

The terms, as we noted earlier this morning, were generous and along the lines of Alnylam's similarly non-exclusive platform deal with Roche last year, if a bit scaled down to fit the number of therapeutic areas in which Takeda can operate. Alnylam gets $100 million in up-front cash and $50 million in near-term technology transfer payments for a non-exclusive license to its RNAi platform in oncology and metabolic disease, and first right of negotiation on its RNAi programs in Asia (excluding ALN-RSV01) should Alnylam look for a partner there. Alnylam also gets first right of negotiation on any project Takeda decides to shop in the US and more importantly, gets opt-in rights for 50/50 co-dev/co-commercialization deals in the US on up to four Takeda programs of its choosing (exercisable all the way through the start of Phase III), plus the usual gajillion biobucks in development and commercial milestone payments.

It bears repeating that Alnylam has once again struck a Non-Exclusive deal--and can go out and re-license those same therapeutic areas again at any point. That said, on today's call Maraganore essentially laid down some ground rules. "We wouldn't do a platform license for a double-digit upfront payment," he said. "Given the opportunity cost of enabling a partner we have to and will be very discriminate in how we value these kinds of partnership alliances."

In other words, pony up $100 million or it's not worth our time and effort. How many triple-digit deals it can do before its proposition is diluted below the $100 million low-water mark remains to be seen, though we wouldn't bet that they're done yet.

And if you're worried that Takeda is running out of dry powder, don't. The company has plenty of money left to expand the Alnylam deal into additional therapeutic areas (the deal terms allow for bolting on new therapeutic areas at $50 million per) or do the late-stage deal that its analysts are jonesing for.

Still, any deal is more likely to come with a price tag in the range of the Alnylam upfront than the Millennium acquisition. Takeda's CEO Yasuchika Hasegawa told IN VIVO last week that he doesn't "see the necessity of an acquisition of similar magnitude [to Millennium] in the near future." Hasegawa's preference: fill the yawning gaps left by the pending Prevacid and Actos patent expiries via organic growth.

For our in-depth look at Takeda's strategy you'll have to wait for Ellen Licking's IN VIVO feature in June. But it seems Takeda realizes that it was slow to catch on in large molecules--not an uncommon mistake among its pharma ilk--and making a splash in oligonucleotides was high on its list of priorities.

photo from flickr user bob the lomond used under a creative commons license