Deals of the Week's Dead Presidents Edition

As many Americans prepare for their three-day weekend celebrating the birthdays of two great Presidents, Deals of the Week cynically notes that a lot of Americans don’t really love their Presidents until after they’re dead – specifically, the ones whose visages have been enshrined on legal tender. Little Walter sang an amusing blues number about a nation’s love for currency and the commanders-in-chief who adorn it, conveniently glossing over the presence of several non-Presidents, including Alexander Hamilton and Benjamin Franklin, on commonly circulated bills.

It takes far more than even a rarely-seen Salmon P. Chase to get a pharma deal done, but sometimes it also takes more than mere dollars – or euros, pounds, or whatever you like – to keep everyone satisfied. Witness Sanofi-Aventis SA’s bid for Genzyme Corp., a once-hostile overture sweetened with contingent value rights, or CVRs – in this case, options for further payments based on regulatory and manufacturing milestones on Genzyme drugs – that could account for nearly a sixth of the deal’s value. The CVRs primarily relate to pipeline considerations, and a new study shows just how crucial they are to Sanofi and its peers.

According to a report issued Thursday by Bernstein Research’s Tim Anderson, Sanofi’s pipeline was expected to contribute less than 3% of its overall revenues by 2015, the smallest share among nine Big Pharmas studied – at least, prior to the Genzyme deal, which includes a potential blockbuster in multiple sclerosis. Bristol-Myers Squibb, by contrast, can expect nearly 18% to come from its pipeline by 2015, thanks to R&D spending approaching $4 billion annually in the coming years as well as a relatively small revenue base, according to Bernstein’s report. Meanwhile, Eli Lilly & Co. is expected to be among the biggest R&D spenders relative to revenue, though it can expect the fewest returns in total Benjamins from drugs currently in its pipeline, and only a middle-of-the-pack performance as a percentage of overall 2015 sales.

Where do exciting pipeline drugs come from when they're not homegrown? Why of course, it's...


Sanofi/Genzyme: Preliminary conversations between Sanofi and Genzyme last summer gave way to a publicly announced bid to shareholders in August, then a hostile overture in October, protracted negotiations in the following months, and finally a deal in February. The French pharma will pay $74 per share for Cambridge, Mass.-based Genzyme, along with CVRs entitling each shareholder to payouts based on drug development milestones for pipeline drug Lemtrada (alemtuzumab) for multiple sclerosis and production volumes for approved orphan drugs Cerezyme (imiglucerase) and Fabrazyme (agalsidase). While the $74 per share bid exceeded Sanofi’s rejected bid by $5, the CVRs are thought to have been the key to completing the deal, potentially adding $14 per share – $13 from Lemtrada milestones – to its value. Sanofi, whose massive diabetes franchise is balanced by diverse offerings including vaccines and soon-to-be-off-patent anticoagulant Lovenox (enoxaparin), gets Genzyme’s expertise in rare diseases, as well as its manufacturing capabilities. Though some believe it may have overpaid, the aggressive milestone timeline will bear out the deal’s true value – suggesting that the real work, including a potentially tricky integration process, is yet to be done. – P.B.

Astellas/AVEO: In one of the richest oncology deals in the past few years, Japan’s second-largest pharma placed a big bet on AVEO Pharmaceuticals Inc.’s most advanced compound, the Phase III drug tivozanib. Astellas Pharma Inc. paid $125 million up front, while committing to a milestone schedule that could add more than $1.3 billion to the deal, to license tivozanib worldwide, save for Asian territories already licensed to Kyowa Hakko Kirin under an existing agreement. The deal includes $575 million for clinical and regulatory milestones and $780 million in commercial payments, and covers all indications of the drug, currently farthest along in studies for renal cell carcinoma. The two companies will split profits 50/50 in North America and Europe, where they will also share development costs and sales forces, although Astellas is expected to lead commercialization in Europe while AVEO does so domestically. Phase III results are due in mid-2011 for tivozanib, a blocker of vascular endothelial growth factor (VEGF), although an NDA isn’t expected until 2012, pending a favorable clinical outcome. The agreement extends Astellas’ ongoing commitment to oncology beyond its $4 billion acquisition of OSI Pharmaceuticals last year. – P.B.

AdventRx/SynthRx - About two years ago, AdventRx Pharmaceuticals had placed its lead clinical programs on hold and cut staff twice, to a headcount of five. Now, the San Diego-based firm has an FDA action date for its lead program, chemotherapy drug Exelbine (vinorelbine injectable emulsion), and is acquiring privately held SynthRx in an all-stock deal to move into the sickle cell disease (SCD) space. AdventRx, focused on a growth-by-acquisition strategy, will acquire Texas-based SynthRx through an equity deal in which more than 75% of merger consideration is based on NDA acceptance and approval of SynthRx’s lead program and more than 95% is based on milestone achievement. In exchange for an upfront consideration giving SynthRx’s shareholders a 4% interest in AdventRx, SynthRx becomes a wholly owned subsidiary of AdventRx, giving the latter firm ownership of the Phase III poloxamer 188 program. Initially advanced into Phase III in myocardial infarction by CytRx, 188 is a purified form of a rheologic and antithrombotic agent to be studied first in pediatric SCD and thought to have potential in other illnesses involving microvascular flow abnormalities, such as heart attack, stroke and hemorrhagic shock. During an investor call Feb. 14, CEO Brian Culley explained that if every milestone in the deal is paid out fully, SynthRx shareholders would end up with a 40% stake in AdventRx. “If the NDA is accepted and approved, [that is] something I think we would be happy to make these equity payments for,” he added. – Joseph Haas

Bayer/Philogen: The crumbling of one European deal led to the cancellation of a potential bellwether IPO. Swiss-Italian biotech Philogen SpA might be searching for an aspirin after its oncology deal with Bayer AG came apart, prompting Philogen to cancel its anticipated IPO. Bayer abruptly walked away from its licensing arrangement for Philogen’s L19 therapies, vascular-targeting immunocytokine drugs that are being investigated for several different cancers. The two companies’ association dates to 1999, when Schering AG took an option on Philogen’s research into antibodies that inhibit angiogenesis, leading to a formal worldwide license in 2003. Despite the extended relationship, Bayer gave no specific reason for unraveling the deal. Philogen, which says it has six clinical antibodies targeting cancer as well as a rheumatoid arthritis drug and a preclinical ophthalmology program for age-related macular degeneration, was expected to list on the Milan exchange February 18, but instead scuttled what was expected to be Europe’s first IPO of 2011. In the offering, thought to be a signal of a warming climate for biotech listings, Philogen had anticipated raising as much as €65.3 million ($89.3 million) by floating 23% of its shares. The failed listing is Philogen’s second IPO cancellation; it withdrew a planned offering in 2008 as well, citing unfavorable market conditions. – P.B.

Mt. Rushmore image courtesy of Flickr user dclamster, used under Creative Commons license.

While you were winning/losing some

This weekend saw two major sports upsets, though neither was as shocking as the deep six of the global financial markets just a week ago. At last, the US finally won back the Ryder Cup, ending nine years of European domination; meanwhile, NFL fans not rooted in the six New England states cheered as the Miami Dolphins absolutely obliterated the Patriots defense with an annoyingly-simple-yet-hard-to-beat "Wildcat play" that snapped the Patriots 21 straight regular season wins. (The last loss was Dec. 10, 2006, coincidentally against the Dolphins.)

No financial crisis will slow down the consolidation of the generics pharmaceutical companies, according to this report. Of course, we've been reporting on the rise of generics for some time. At the same time, we're seeing a slowdown of the overall M&A market for pharma companies. (Check out the extensive report here or in this month's Start-Up.) Nevertheless, the Royal Bank of Scotland recorded a level number of buyouts this year, valued at more than $25 billion, an 80 percent increase over last year. Teva Pharmaceuticals' $9 billion buyout of Barr Pharmaceuticals certainly helped drive up that number, and Teva's chief executive for North America, Bill Marth, says more deals may be following the Barr buy. "It doesn't leave us in a position where we won't do more acquisitions that are complementary, it will just change the focus of those acquisitions," Marth told reporters Friday.

Speaking of generics, Ranbaxy, Indian's largest drugmaker and a recipient of a smackdown by the FDA, has recruited one-time GOP presidential (and vice presidential?) candidate Rudy Guiliani to take on its fight. The former Hizzoner will push to lift the ban the FDA put on more than 30 Ranbaxy medicines after finding deficiencies in Ranbaxy's plants. The company says the FDA's concerns are baseless. The Economic Times says other Indian pharmaceutical companies aren't overly concerned about selling in the U.S.

It ain't Lehmans Brothers, but things aren't looking well for Atherogenics, according to Pharmagossip, which linked to an article from the Atlanta Business Chronicle. Noteholders in the company filed a petition to put the company into Chapter 7 bankrupty.

Happy Birthday to Bayer Corp. The U.S. subsidiary of Bayer AG marks its fiftieth year in the US, according to an article in the Pittsburgh Post-Gazette. The paper had a sit down with Gregory Babe, who is to become the first American-born executive to head the subsidiary.

Direct-to-Consumer advertising continues to draw fire. The Guardian reports that the British Medical Association and the Royal College of Physicians are among nine medical organization to opposed the introduction of direct-to-consumer medicine. The group's contend that the NHS's eleven billion pound annunal drug cost would skyrocket if pharma comapnies could pitch their product directly. Meanwhile, on this side of the Atlantic, the FDA heard from two physicians who want the FDA to expand its oversight of direct-to-consumer ads to include medical devices. The docs--an orthopedic surgeon and cardiologist--who say drugs and devices should stand on equal footing when it comes to DTC ads, therefore putting the devices under greater scrutiny.

DotW: Bail Out

In a tumultous week that began with the bankruptcy of Lehman Brothers and the sale of Merrill Lynch, we end with the possible acquisition of yet another storied bank--Morgan Stanley--and the federal bail-out of insurance giant AIG. Investors are still scrambling to make sense of the news, but it should be clear that no entity--not even the supposedly safe port in the storm that we call pharma--is too big to fail.

Our industry weathered its own stormy seas this week. Schering-Plough, Memory Pharma, and Merck's Banyu site announced job cuts, a not too surprising defensive move given the difficulties all three companies have faced in recent months. Meanwhile, investors continue to bail on Ranbaxy after the U.S. banned dozens of its drugs, a move that could jeopardize revenues in one of its major markets and roil its impending acquisition by Daiichi-Sankyo. (The Japanese firm remains committed to the deal according to this report.) And Neose looks to be giving up the ghost after years struggling to find a niche. This week the company announced the sale of essentially all of its assets to partners Novo Nordisk and BioGeneriX in all-cash transactions worth roughly $43 million.

It's also just about time for ImClone's mysterious and apparently generous buyer (some would say overly so) to reveal itself. The question is: will this suitor still be as eager to spend on the company given the credit crunch and turbulent market? Or will it prove true that Icahn bailed on the one solid offer he was likely to get for his company? (News this week from London suggests that spurned BMS may be rethinking its offer.)

There were some silver linings amidst the dark clouds, however. Amgen announced positive news this week about its fully human monoclonal antibody denosumab at the American Society of Bone Mineral Research (held inexplicably in Montreal). In a trial of nearly 8000 post-menopausal women, twice yearly treatment with the drug reduced the risk of new vertebral fractures by 68% relative to those given the placebo. J&J also released positive news about its Phase III antibody for psoriasis, which could challenge Wyeth/Amgen's top-selling Enbrel. And ex-MedImmune CEO and wunderkind David Mott is sitting pretty in new digs at NEA's offices, where he'll look for specialty pharma and biotech outfits in which to invest.

In need of some comfort food? The intrepid IN VIVO Blog team is here to bail you out with a run-down of the week's news. Yes, it's time for another edition of....


Bayer/Direvo: Bayer's €210 million cash acquisition of German biotech Direvo is the latest in a long line of takeouts of biologics platforms--which as we point out here are much more likely to consistently provide VC backers with solid exits. Direvo, a protein engineering company that has for the past couple years been focused on modifying proteases and antibodies for therapeutic and industrial applications, had raised about €30 million in venture capital since 2000. Bayer is snapping up the therapeutics side of the business, while existing and new backers are spinning out the industrial applications of the platform into a newco with €8 million in Series A funding. Bayer's bounty includes Direvo's two early stage projects (hyperglycosylated Factor VIII and Factor IX for hemophilia A and B respectively) as well as inherited protease deals with Pfizer and MedImmune. The German conglomerate will maintain Direvo's Cologne site which will be integrated into Bayer-Schering's global drug discovery unit.

BTG/Protherics: When's a $400 million takeover not a $400 million takeover? When the currency isn't cash. BTG, a surprise suitor for compatriot Protherics, offered about ₤218 million ($397mm, a solid 45% premium to an already rumor-inflated share price) in stock for the biotech company, though trading after the announcement shaved more than 15% from BTG's value yesterday. (It has rebounded a smidgen today.) Ownership will be split roughly 58%/42% BTG/Protherics--see our Pink Sheet Daily coverage for the math. Protherics told the market earlier this summer that it was entertaining offers, and its partner AstraZeneca--the two companies are co-developing Cytofab, a Phase II polyclonal antibody to treat sepsis--was understandably analysts' favorite to pony up some cash. Not that we can't see BTG's logic. The IP licensor has been trying since at least 2002 to morph into a later-stage development company on the back of its Varisolve varicose vein treatment, which has struggled to reach the marketplace. For now, BTG rakes in significant revenues from others' products, including Campath and BeneFIX. Adding Protherics' marketed products to the mix jumpstarts that effort.(It will re-acquire US marketing rights to its snake venom antidote and digitoxin overdose antidote in 2010.) And bulking up should result in cost savings (including reducing the two firms combined R&D spend and operating costs to the tune of about ₤20mm total per year), better liquidity for investors (BTG predicts the combined entity could find itself in the FTSE 250 index) and a strong cash pile (just under ₤95mm) that can be used to establish a US commercial presence and add new products. The combination creates an unlikely UK biotech "champion" for a nation that prides itself in pulling for the underdog.

Valeant/Coria: Just a few weeks ago, Valeant licensed its first-in-class Phase III epilepsy drug retigabine to GSK in a co-commercialization deal worth $125 million up-front and more than $500 million in potential milestones. Now Valeant is shoring up its dermatology pipeline with a deal of its own. On Wednesday the company announced it was purchasing Coria Laboratories, a division of the privately held specialty pharma DFB Pharmaceuticals, for $95 million. The deal gives Valeant a number of already marketed products, including several acne medications, the CeraVe skin care line, and a cream for hand dermatitis called Tetrix that is expected to launch later this year. H. Paul Dorman, DFB's CEO, called the merger "an exciting milestone in the evolution of Coria". We wouldn't go that far, but we do agree that the combination of cash-rish Valeant with product-rich Coria results in a far stronger dermatological specialty pharma.

Biovail/Prestwick/Ovation: This transaction--or more accurately, series of transactions--wins IN VIVO Blog's award for deal of the week masquerading as a baseball trade (we have many awards). On Wednesday, the Canadian pharma Biovail acquired privately held Prestwick Pharmaceuticals for, nominally, $100 million (but hold on -- the shareholders got more, but it's complicated). The deal gives Biovail rights to Prestwick's Xenazine, which recently became the first drug approved in the US for Huntington's Disease. Biovail won't get the whole caboodle for such a small sum: Deerfield, Illionois-based Ovation Pharmaceuticals purchased US rights to the drug for an additional $50 million in a separate transaction -- with that cash getting distributed to Prestwick's shareholders, not to Biovail. Biovail, which lacks a US sales force, had no desire to market the drug in the states at this time. But it will market Xenazine in Canada, where it has been approved for at least a decade. In addition, the deal gives Biovail the option to co-promote the dopamine depleter in the US in the future, as well as the right to jointly develop Xenazine and follow-on products in other indications. Earlier this year, Biovail undertook a strategic review of its options with the help of Morgan Stanley. The purchase of Prestwick seems to mark a turning point for Biovail away from the drug delivery and reformulation technology it has focused on for the past two decades to a more product development centered approach. For 5-year-old Prestwick, meanwhile, the deals mean that its backers, which include Sofinnova, Atlas Venture, and Vivo Ventures, got their money out, with a small profit. The returns weren't exactly those VCs want to see ($110 million in, over three rounds; $150 million out in the two transactions), but it's better than the current average. As we noted in this recent START-UP feature, returns from M&A exits are trending downward, and more often than not, acquisitions result in limited exits or write-offs for their private investors.

Tethys Bioscience/Lipomics: The closely held Tethys Bioscience, chose the June ADA meeting for its big reveal, announcing the launch of its PreDx diabetes risk test, which calculates via a complicated algorithm a person's risk of developing diabetes based on a series of protein biomarkers. Unlike many new diagnostic companies, which have focused on cancer and other specialty markets, Tethys is determined to play in the primary care space and has plans to develop tests that predict a person's likelihood of developing a range of chronic diseases, from osteoporosis to a major cardiac event. It's captain, Mickey Urdea, is no stranger to the vagaries of the diagnostic business thanks to his years at Chiron, where he developed the hugely successful viral load testing franchise. But to be profitable, Tethys faces several hurdles. First, it must convince doctors and payers of the utility of the merits of its PreDx diagnostic, which at $775 a pop is far more expensive than the already widely used fasting glucose test. In addition, the firm, which has already raised more than $50 million from its venture backers, will need to develop and launch new tests in quick succession. The company took its first steps toward that end this week, announcing a tie-up with privately held Lipomics Technologies, another privately-held, Northern California-based diagnostic player. "We believe that the best solutions for predicting and thereby preventing a range of chronic conditions will come from the thoughtful integration of multiple types of biomarkers," said Urdea in a press release announcing the deal. Lipomics co-founder and CSO Steve Watkins will remain with his team as CTO of the newly bulked up Tethys.

Astellas/Maxygen: Quite a week for protein engineering companies. This week's late breaker is courtesy of Astellas Pharma, which said this morning it had bought worldwide rights to MAXY-4, Maxygen's preclinical autoimmune and transplant rejection program. Maxygen will receive $10 million up-front and the companies will co-develop the next generation CTLA4-Ig protein for rheumatoid arthritis and other autoimmune diseases while Astellas will pursue transplant rejection on its own. Maxygen has opt-in rights to co-promote in North America any autoimmune products and will receive tiered, double-digit royalties on non-co-promoted products. Astellas will chip in an additional $10 million in preclinical development costs after which the companies will split the tab.


Merck/SurModics: Merck & Co. has decided to end its R&D/licensing deal with SurModics, triggering a $9 million payment to the Minnesota drug and device coatings company and a 23% drop in the firm's shares. The companies were careful to point out that there were no safety concerns associated with SurModics' I-vation drug delivery platform or the specific back-of-the-eye program under development. Merck paid $20 million up-front to access I-vation just last year.

(Photo courtesty of flickr user amirjina via a creative commons license.)

Bayer/Direvo: Platforms Trump When It Comes to Exits

Yesterday, Bayer HealthCare announced its intent to spend €210 million to acquire Direvo Biotech, a privately held start-up with a promising next-generation protein-engineering platform.

Bayer is the latest in a string of pharmas to bolster its large molecule capabilities via the acquisition route. Other privately held companies with novel technology platforms snapped up by Big Pharma in recent years include GlycArt (Roche), GlycoFi (Merck), Domantis (GlaxoSmithKline), Adnexus (Bristol-Myers Squibb), Agensys (Astellas), Morphotek (Eisai), and CovX (Pfizer). (Are you beginning to see a trend here?)

START-UP recently undertook a comprehensive review of private biotech M&A, analyzing 184 deals that took place from January 1, 2005 to August 31, 2008 to identify possible trends, including age at acquisition, as well as the clinical status and therapeutic focus of a start-up's most advanced program. (You can read the whole article here.) Interestingly, fewer than half of the acquisitions reviewed resulted in a reliable exit for investors, and those numbers appear to be trending downward.

But if M&A has become not so much an exit opportunity as a chance to revamp one's business card, there's one group that has continued to hold value in the eyes of acquirers: the platform biotechs, especially those capable of generating multiple therapeutic products of the large molecule variety. In all, 56% of the private companies acquired during the 2005-2008 time period were platform-based. And of those companies that made healthy exits, nearly 60% were platforms. (See chart above--click to enlarge.)

And that's been very good news for the private investors who've ponied up the cash for these start-ups. For instance, HBM Bioventures, Atlas Venture, Polaris Ventures, Flagship Ventures, and Venrock poured $54.5 million into Adnexus from 2002 until its acquisition by BMS in 2007. But they netted an almost 8-fold return in the process. (And if the company realizes certain developmental milestones, earn-outs could drive the return up nearly 10-fold.) Meanwhile, CoGenesys's backers, which include New Enterprise Associates and OrbiMed Advisors, invested $55 million into the Human Genome Science's spin-out and earned a 7.3x return on their investment when Teva purchased the company earlier this year.

Direvo, too, netted quite a nice return for its backers, which include TVM Ventures, Danisco Ventures AS, S-Equity Partner, and Mulligan BioCapital. (A full list is here.) The company, which spun off from Evotec, has raised more than €30 million over three private rounds since its 2000 founding; by our calculations that's an ROI of 7x.

One reason the return for TVM and others was so high: the sale of Direvo was apparently a competitive process. "There were several parties in the race," Direvo President and CEO Dr. Thomas von Rüden told the IN VIVO Blog.

Late in 2007 and early in 2008, Direvo also inked research agreements with both Pfizer and MedImmune. Financial terms of those deals weren't disclosed--and probably didn't generate a tremendous amount of money for Direvo. But it's clear those deals served their purpose, helping validate the technology in the marketplace. "It put us on the landscape," admits von Rüden.

Certainly Bayer, which has been somewhat late to the biologics party, didn't have the capabilities Direvo was offering. "We can optimize antibodies, proteases, other proteins, and do glyco-engineering. Nobody else offers all this together," notes von Rüden, who will be staying on until year's end to aid the start-up's integration into Bayer Schering.

It's true the pace of acquisitions of these monoclonal- or protein-centric outfits has slowed somewhat. Direvo is only the second such company to be acquired in 2008; back in May, Daiichi-Sankyo purchased another German stand-out, U3 Pharma AG, for €150 million. Still, Big Pharma's desperation to quickly add biologics expertise means we're likely to see out-sized returns for platform start-ups of this type.

And despite a worsening M&A climate, that's definitely good news for the VC community.

image from flickr user bk-robat used under a creative commons license

While You Were Liquidating

A crisis in the US banking sector pushed Hurricane Ike and politics to page 2 this weekend. A selection of headlines from the NYT pretty much says it all for Wall Street: "After Frantic Day, Wall St. Banks Falter," "Jittery Road Ahead," "Stunning Fall for Main St.'s Brokerage Firm," "Banks Fear Next Move By Shorts," "Nation's Financial Industry Gripped By Fear." Lehman Bros. has filed for bankruptcy, Merrill Lynch sold out to Bank of America. Insurance giant AIG teeters on the brink. The Wall Street Journal's special coverage is here. While you were waiting for the sky to fall ...

• Prostrakan received FDA approval for Sancuso, its transdermal 5HT3 receptor antagonist for chemotherapy induced nausea and vomiting. Prostrakan will market the patch--its first drug approved for the US market--with NovaQuest (more on that innovative collaboration--and others like it--here in our 'Royalty Flush' feature from June's IN VIVO). Sancuso also won IN VIVO Blog's award for a drug name that sounds most like a CBS procedural about a disgruntled and tough (but fair) police detective. Bonus FDA News: UCB's Keppra XR also received approval, the pharma said today.
  
• Sanofi this morning extended its offer to buy the shares of Czech generics maker Zentiva that it does not already own. Nothing says 'please!' like an entire web site dedicated to the cause.
  
• Are you a French biotech? Are you lonely? Are you tired of sitting at home watching 'Allo 'Allo reruns while all the other biotechs are out with the VCs? Well, worry no more: your industry association has this friend, it's a brother of a friend really, and well, nevermind, just get started with France Biotech's Bioweb Seed Dating (remember, on the Internet, nobody knows you're une chienne).
• Bayer CEO Werner Wenning to German paper Tagesspiegel: we are not vulnerable to takeover (but of course you can't rule it out ...).
• Good news for NicOx: a second pivotal trial (study 302) for naproxcinod met its three co-primary efficacy endpoints (and its secondary endpoints as well) in patients with osteoarthritis of the knee (a third study, in osteoarthritis of the hip is due to read out later this year). Pooling results from studies 301 and 302 demonstrated a statistically significant decrease in blood pressure at the higher (750mg bid) dose as well, though the blood pressure data for 302 alone were apparently inconclusive, though "non detrimental". NicOx shares were up 13% in Paris this morning. Our 2007 story on naproxcinod and NicOx's R&D and business development plan for the drug is here.
• Biovitrum said this morning that it was acquiring the marketed biologic therapeutic products Kepivance (palifermin) and Stemgen (ancestim) and licensing exclusive worldwide rights to Kineret (anakinra) from Amgen for $110 million in cash and $20 million in Biovitrum shares plus milestones and royalties. The products generated a combined $70 million in 2007 sales.
  
• RIP David Foster Wallace.
  

image from flickr user puzzlemepuzzle used under a creative commons license.

Wacky World of Generics: Timing Is Everything Edition

The best fighters learn from their opponents, and whatever else you may think about generic drug firms, there is no denying they are accomplished bruisers.

So it should come as little surprise that after years of being in the crosshairs of citizen petitions filed by brand firms, generic companies are starting to pull the trigger on some petitions themselves.

Some things haven’t changed, though: the targets of petitions are still generic companies and the beneficiaries are still brand firms, since delays always help them.

The most recent example of generic-on-generic petitioning resolved by FDA is Cobalt’s failed attempt to become the only generic of acarbose (Bayer’s diabetes treatment Precose). Cobalt had made regulatory arguments that it deserved 180-day exclusivity and scientific arguments that other ANDAs needed additional tests. FDA rejected them both, and Cobalt has now launched alongside a generic from Roxane.


Cobalt was the first-to-file ANDA applicant and so had the inside track to get generic exclusivity, but it forfeited the prize in part because it failed to gain approval within 30 months. First-to-file exclusivity is critical to the profit stream for generic firms and it is no small penalty for an applicant to lose it. In this case, Cobalt did not get approval in time, perhaps due to shortcomings in its application, which FDA had initially refused to accept.

Any instance where a first filer loses the all-important exclusivity is big news for the generic industry, so the Precose fight is an important precedent for other applicants. Given the negative outcome for Cobalt, the incident raises the question of how much haste firms should use in submitting their ANDAs to FDA. Usually there is an all-out race to be first-to-file to claim exclusivity. In this case, second-to-file turned out to be good enough. (Subscribers to the Pink Sheet can read the full story here.)


The episode also shows how a generic firm – in this case Roxane – can use knowledge of FDA’s regulatory clock to get to market as soon as possible.

Among the provisions of the massive FDA bill passed last year is one designed to curb abusive citizen petitions. The new law says petitions cannot delay approvals unless FDA determines there’s a public health justification, and even then, the agency only has 180 days to decide the issue in question.

Roxane correctly predicted how FDA would apply the law in this case at least. Roxane’s lawyer, Zuckerman Spaeder partner Bill Schultz, explains that, “because there was a very good chance that” six months after Cobalt filed its petition would be “exactly when FDA was going to approve the product … Roxane, anyway, was completely ready to go on the day the 180 day deadline expired.”

Schultz clearly doesn’t think much of Cobalt’s bioequivalency arguments. The case, he says, “raises issues about...how the citizen’s petition provisions can work." The question, Schultz says, is "whether FDA is implementing this public health provision" of the new law "responsibly, or whether they’re just invoking it every time.”

But that is a fight for another day.

M. Nielsen Hobbs

While You Were BBQing (on Mars)

In the event your Memorial Day / Bank Holiday weekend didn't involve a glance at the news, let us inform you that NASA landed another probe on Mars, to scoop up some Martian ice and cook it up to 1800 degrees Fahrenheit to sniff out trace chemicals in the vapor, in an attempt to find signs of previous life there. With luck your own barbeques were less costly, not as burnt, involved fresher food and were at least a little tastier. It's tough to beat Phoenix's view, however, and we can't be the only ones who want a grill that looks like that (so long as it's made by Weber, naturally).

The budget for Phoenix's 422 million mile trip was about $420 million, most of which came from NASA aside from a $37 million weather instrument supplied by Canada (presumably already paid for, because now that Canada's mad at FDA--see below--checks could start bouncing).

With yet another big-upfront technology licensing deal (this time with Japan's big dealmaker Takeda), Alnylam Pharmaceuticals can probably afford to foot the bill for NASA's next mission, providing the destination may provide them access to new companies eager to spend a ton of money to non-exclusively license Alnylam's RNAi platform.

This time they didn't have to go as far afield, though for the first time they've branched out into Japan. We'll have more to say on the deal later today so watch this space. For now we give you the basics: $100 million in up-front cash and $50 million in near-term technology transfer payments for non-exclusive license to Alny's platform in oncology and metabolic disease, first right of negotiation on Alny's RNAi programs in Asia (excluding ALN-RSV01). Alnylam also gets opt-in rights for 50/50 co-dev/co-commercialization deals on Takeda programs in the US market, plus the usual gajillion biobucks in development and commercial milestone payments.

UPDATE: We've written a post on the Alnylam/Takeda deal, here.

And what else went on over the long weekend?

• On Monday Novartis said the EU had greenlit Extavia, its brand of interferon beta-1b for multiple sclerosis. Extavia is the same as Bayer-Schering's Betaferon/Betaseron; Novartis gained the right to market its version in a 2007 settlement with Bayer after it bought Chiron (which manufactured the drug for Schering) in 2006. Launch of the interferon in the US and Europe in 2009 should allow the company to secure a beachhead in the MS market before introducing its novel oral therapy fingolimod (FTY720), which is currently in Phase III.
  
• HHS Sec. Michael Leavitt says red tape is slowing FDA's push to get boots on the ground in China. (AP, at WSJ.)
  
• Health care stocks are no longer a port in an economic storm, reminds the Wall Street Journal on Sunday. The paper quizzes a few fund managers on why, and looks for exceptions to the rule.
  
• The Sunday Times is reporting that Elan is mulling a spin-off of its drug delivery business (Elan Drug Technology), but that any move will likely wait until later this summer when it has a better handle on the success or otherwise of its Alzheimer's disease program. (via reuters.) Wait. Haven't we heard this before?


• And finally ... look out FDA! You've gone and pissed off Canada ...

image: NASA

Spheramine: Conservatism in Cell Therapy for Parkinson's

Last month’s “Science Matters” column in START-UP highlighted some newly reported cell therapy work in Parkinson’s disease, but suggested that there may be fundamental limitations to any therapy strategy based on restoring dopamine—be it through implanting dopamine neurons or via existing drugs. The good news is that cell replacement therapy at least offers a new experimental model for studying Parkinson’s. And unlike the early days of cardiac cell therapy, where early human studies led to an inappropriate rush into large Phase II trials that disappointed and soured the field, for lots of reasons, clinical progress in PD has been gradual.

So what to make of the Bayer-Titan Pharmaceuticals Spheramine program to deliver human retinal pigment epithelial cells locally into the brain? The cells, which produce dopamine (apparently at a fairly constant concentration), live on little microcapsules, stay where they are put, and don’t require use of immunosuppressants to prevent rejection. All good things. And yesterday’s presentation at the American Association of Neurological Surgeons (AANS) Meeting in Chicago of four-year data from a six-patient pilot study showed motor score improvement in patients of 48% at one year and 44% at four years. "Not much in the way of loss there," noted investigator Roy Bakay of Rush University Medical Center, who presented the data.

Because it is delivered locally, Bayer and Titan see Spheramine as an improvement over oral dopamine drugs, which have systemic long-term effects linked to movement disorders. Undoubtedly, the opportunity is part of what attracted Titan’s CEO, Marc Rubin, formerly head of global R&D for Bayer Schering Pharma, who joined Titan last fall.

But many propose that to be effective, cells have to do more than produce or process dopamine: No matter how local or efficient the delivery of dopamine may be, they may also need to integrate into the neural circuitry to be effective. Indeed, the ability to restore the natural biology of a system is one of the rationales – and challenges – of cell replacement therapy.

Because of the cell type, Spheramine can’t do this. So we wonder, from a business perspective, how the added regulatory risk of a cell therapy – and in the case of Parkinson’s trials, the long development time – can be worth the effort when it does not also maximize the benefits of the technology. It’s a lot to go through to prove a decades-old delivery system.

Bayer expects to have data from a 71-patient Phase IIb trial of Spheramine sometime in the third quarter this year. The AANS abstract discussing the Phase IIb trial design noted that 71 patients were randomized and underwent surgery with “tolerable adverse effects.” At least those data should give Bayer and its Berlex subsidiary more leverage in settlement negotiations with the family of a patient from the Phase IIb program, which sued when the patient developed immediate and serious symptoms after receiving a Spheramine implant.

While You Were Taking a Breather

Nothing like a long weekend to kick back and recharge. And it was a nice, quiet long weekend from where we sit. No primaries, not a lot of interesting sports (the cupcake dunk at NBA all-star weekend notwithstanding), only a small handful of multi-billion dollar bank write-downs. Oh, and apparently enjoying the time off so much, Fidel Castro decided to retire. What are the odds he moves to Florida? Elsewhere ...

• '60 Minutes' goes after Bayer's Trasylol and FDA (hat tip Pharmagossip)
  
• GSK licensed a preclinical antibody targeting interleukin-6 from Eusa Pharma, for a total consideration of up to $44 million in upfronts and milestones (half of which will go to Eusa partner Vaccinex).
  
• Bayer abandoned a late-stage Nexavar/chemotherapy combo trial after a monitoring board suggested the cocktail wasn't prolonging survival in patients with non-small cell lung cancer.
  
• For Sale: yet another UK biotech company. Two marketed products. Endocrine specialist. $50mm ONO.
  
• A shake-up at Edwards Life Sciences sees some long-standing executives leaving the device firm.


• Time for consolidation in the pharmaceutical supply sector? The Boston Globe finds a few people who think so.

photo from flickr user chadh used under a creative commons license

Who's Sorry Now? Big Pharma Edition

Sparked by today's apology by Bayer at its Trasylol FDA committee meeting, we thought it would be fun to round up a few recent mea culpae out there in pharmaland. I'm sure we've missed some, so let us know in the comments.

• Bayer to FDA Panel: Sorry we didn't let you in on the bad news in that big Trasylol study last year, but what's a little death, kidney damage, congestive heart failure, and stroke among friends? We hope you'll leave Trasylol on the market.


• Novartis to Shareholders: Sorry we haven't been buying back a ton of shares like every other Big Pharma company. We promise to do better in the future!


• Lilly Leaker to Lilly: Sorry I sent the New York Times all those juicy Zyprexa documents last year. I hope $100k covers the damage? PS I'm not really sorry.


• JAMA to GSK: Sorry we're piling on.
  

[Ed. note: As any of you out there who are sports and pharma blog readers may already know, we freely admit to stealing this gimmick from the sports blog par excellence Deadspin. Sorry.]

Bayer-Schering Biz Dev: Reorganized and Ready to Deal

We wondered aloud last autumn, in the wake of four multi-billion euro deals, about the impact that Europe's mid-sized pharma mergers could have on Big Pharma. Could the invigorated middle class of pharma, with its specialist bent and flexible dealmaking, eat Big Pharma's lunch?

Some of them certainly think so. Less than six months after joining Bayer-Schering Pharma as the newly-merged group’s SVP global business development and licensing, Michael Yeomans already has a clear message for the rest of the industry: look out, we’re coming—and we’re coming with aggressive deal terms (read: $$$$), an reorganized, 40-strong business development team across corporate and therapeutic-area-focused units, a love of specialist products and ambitions in biologics, too.

Bayer Pharma and Schering have pretty much sat out of the deal-making pool party since Bayer bought Schering in the middle of last year, distracted by re-structuring and spring-cleaning; just as other Euro mid-caps including UCB Group and Nycomed and Merck KGAA have done, too, as they digest Schwarz Pharma and Altana Pharma and Serono, respectively.

Now the slimmed-down, not-so-mid-cap Bayer-Schering reckons it's ready to dive in. Bayer-Schering isn’t just going to be supplementing internal R&D efforts with deals, it’s going to be replacing R&D efforts with deals, at least in some business units. “There are several areas where we'll emphasize in-licensing and acquisition rather than internal R&D", Yeomans told IN VIVO blog. The R&D budget won’t decrease in absolute terms, but Schering’s historical 18-19% of sales R&D spend will look more like 15-17% in the new group, albeit of a bigger revenue pot.

Sounds like it’s turning into spec pharma, right? Right. But that acquire-and-market model’s a bit out of date, given the cost and rarity of late-stage assets, and given that most niche drugs really aren’t that niche anymore. (Interested in discussing whether the spec pharma model is broken? Wait for September's IN VIVO.)

Still, Yeomans claims the company will have a competitive edge, in part thanks to the new BD structure he has spent the summer building. Each of Bayer-Schering’s six business units will have a team of licensing guys that decide in the first instance what to pursue; a corporate group will get involved only for selected deals “to add expertise, not as a hand-off,” Yeomans clarifies.

In other words, Bayer-Schering is creating a business development answer to GlaxoSmithKline’s R&D-focused CEDDs--centers of excellence for drug acquisition (CEDAs: our label, not theirs). They’re small, nimble, TA-focused, autonomous teams, although they don’t, apparently, have budgetary independence like GSK’s CEDDs. (Need a refresher? Recap on GSK’s CEDDs here, and indeed on GSK’s own attempt to extend the concept to business development here and in a previous blog-post).

Bayer-Schering says it has a winning combo of small-company advantages encouraged by the new structure—focus, flexibility, speed—and the financial clout of Bayer’s corporate coffers. “For the right projects, we can certainly be competitive,” he asserts.

That competitiveness may include something that most Big Pharma lack: a willingness to out-license. We hear that there are a few assets in the discovery and development pipeline that Bayer-Schering may like to part with.

Sometimes the Bayer Gets You

It has been on the cards for some time--and some cuts have already been implemented, for sure--but Bayer has made its restructuring official: 6100 jobs have been eliminated at the German specialty pharma company, which ought to go a long way towards its goal of €700 million in savings by 2009.

Most of the jobs lost come from Europe (3150) and the majority of which will be administrative redundancies in Germany, the direct result of Bayer's €17 billion takeover of Schering AG last year.

And surely it all makes sense. But what's more important in the long run is where is Bayer going from here. The company has more boldly than most larger pharmaceutical companies embraced specialist medicines as the way forward--it didn't have much of a choice, really. The move seems to be paying off; progress may or may not be confirmed when Bayer talks up its R&D strategy at the end of the second quarter.