Deals Of The Week: The Sushi Edition

The biggest deal of the week, Daiichi’s purchase of the California biotech Plexxikon for $805 million upfront, prompted headlines elsewhere about the rise of Japanese dealmakers. Faithful readers of IN VIVO Blog won't be surprised by such pronouncements. It’s a trend that has been gathering steam since Eisai’s take-out of MGI Pharma and Takeda’s land-grab of Millennium Pharmaceuticals. (And yes, that's about 3.5 years longer than Kyowa Hakko's bid for ProStrakan.)

Indeed, as we wrote in a May 2010 IN VIVO feature, Japanese pharmas are now serious contenders for partnerships outside their home country as domestic factors –including consolidation in the home market, slowing growth, and a strong yen – have become powerful forces of change.

And as the Plexxikon deal shows (see below) that’s very good news for biotechs of a certain profile –especially neurology and oncology players close to commercialization. Given the merger mania of the past several years, the pool of potential acquirers for biotech assets has diminished, meaning any new buyers willing to pay top dollar are welcome news. In addition, Japanese players like Takeda( or Astellas or Daiichi) seem amenable to terms that allow the smaller party a great deal of autonomy, whether it’s running a biotech as a stand-alone within the parent pharma or establishing co-promotion/co-development options as part of an alliance.

The continued activity of players like Daiichi means biotech execs should brush up on their Japanese and learn to love sushi. (What’s not to love about sushi?) As always, domo arigato for reading…

Daiichi Sankyo/Plexxikon: Kaaa-ching! Bidding by multiple companies and strong data for a late-stage, targeted melanoma drug helped drive Daiichi Sankyo’s eye-popping acquisition of privately-held Plexxikon this week. The deal is one of the priciest acquisitions of a private biotech since 2006, according to Elsevier's Strategic Transactions and in-line with J&J's take-out of abiraterone developer Cougar Biotechnology. Equally notable is Daiichi's down-payment. At a time when bigger and smaller pharmaceutical players are trying to hedge their risk by structuring earn-out heavy deals, the Japanese pharma is shelling out $805 million, a deposit that approximates 86% of the deal's potential value. Even without the additional milestones, this sum provides an impressive return for the nine venture capital firms who have staked 10-year-old Plexxikon, which has made a name for itself with its targeted melanoma drug PLX4032. But the deal's price tag is only a piece of the story; the advent of a dark horse buyer is another important consideration. Back in 2006, Plexxikon partnered the drug to Roche for $40 million upfront, retaining an option to co-promote the product in the U.S. market. In early January 2011, Plexxikon exercised this option, agreeing to reimburse Genentech, which is responsible for ongoing development of the medicine, for certain marketing and promotion costs. With the planned acquisition, this option - and the resulting enhanced royalties on product sales owed to Plexxikon - now transfers to Daiichi. That the Japanese pharma would spend so much to obtain only a piece of a potentially lucrative molecule illustrates both the scarcity of late-stage oncology assets and just how much Big Pharmas are willing to pay to get drugs with validated mechanisms of action in this competitive therapeutic area. (For more, see our 2006 feature "The $100 Million IND.") It also brings Daiichi in line with the other big three Japanese pharmas - Astellas, Takeda Pharmaceutical and Eisai - all of whom have used acquisition to bolster their U.S. oncology offerings. --EFL

Takeda/Intra-Cellular Therapies: Daiichi wasn’t the only Japanese pharma wheeling and dealing this week. Takeda also announced its decision to license Intra-Cellular Therapies’ preclinical, orally available phosphodiesterase type 1 (PDE1) inhibitors for treatment of the cognitive impairment associated with schizophrenia in what appears to be a heavily back-end loaded deal. Disclosed terms were pretty vanilla: Takeda makes an undisclosed upfront in exchange for exclusive worldwide rights, and will pay development milestones of up to $500 million, with another $250 million owed if the product(s) hit certain sales objectives. Takeda will be solely responsible for the development, manufacturing, and commercialization of the compounds. In addition to schizophrenia, Takeda also has rights to develop the inhibitors for other neurological indications, potentially including dementia, Parkinson’s disease, and Alzheimer’s disease. Privately-held ITI is built around scientific findings discovered in the lab of Rockefeller University’s Paul Greengard; in 2005 it also inlicensed a basket of preclinical compounds from Bristol-Myers Squibb. According to sister publication “The Pink Sheet” Daily, ITI hadn’t planned on partnering its PDE1 program quite so soon, but pharma’s level of interest in the compounds, which are very selective for the PDE1 subfamily and thus, presumably, won’t cause off target side-effects, was so high the company changed its mind. Neither company would discuss timelines or details on the clinical development program, but ITI's CEO Sharon Mates did say there were clearly defined endpoints for positive symptoms associated with schizophrenia, as well as standard cognition measurements. –EFL

Merck/Lycera: Privately held, autoimmune-focused Lycera signed a collaboration with Merck March 3 under which the two companies will discover, develop and commercialize small molecule candidates that orchestrate the differentiation of T-helper 17 cells. Diseases targeted by the partnership may include rheumatoid arthritis, psoriasis, inflammatory bowel disease and multiple sclerosis. The deal calls for Merck to pay Michigan-based Lycera a $12 million upfront payment, undisclosed research funding, as well as research, development and regulatory milestones of up to $295 million. (There are also potential low-double-digit tiered royalties on any products that reach the market.) The companies will collaborate on discovery and preclinical work, with Merck responsible for clinical development of any resulting candidates. The pharma also will hold worldwide marketing and commercialization rights to such candidates. Lycera, profiled in this 2009 Start-Up article, is backed by InterWest Partners, ARCH Venture Partners, Clarus Ventures and EDF Ventures. It brought in $11 million last April in the second tranche of a Series A financing announced in April 2009.—Joseph Haas

GlaxoSmithKline/Targacept: In a “No-Deal” that was not unexpected, GlaxoSmithKline, which announced plans to exit the central nervous system arena a year ago, terminated its partnership with Targacept March 3 to co-develop neuronal nicotinic receptor modulators in five therapeutic areas – pain, smoking cessation, addiction, obesity and Parkinson’s disease. GSK paid $35 million upfront to initiate the partnership in 2007, including a $15 million equity investment in the North Carolina biotech. Its resulting exit leaves Targacept in full control of all programs subject to the alliance, each of which is still in preclinical stages. Targacept, which still has a potential $1.2 billion, multi-program collaboration in place with AstraZeneca, said it made $45 million over the life of its deal with GSK. In a March 4 note, analyst Robyn Karnauskas of Deutsche Bank said AstraZeneca is Targacept’s key partner, as the companies await Phase III data for TC-5214 in adjuvant treatment of refractory depression in the fourth quarter of this year. Targacept, which had about $252 million in cash on hand at the end of 2010, also is awaiting AstraZeneca’s decision on whether it will opt in on the Phase II schizophrenia and ADHD candidate TC-5619 – top-line data in ADHD are expected by the end of this quarter, with AstraZeneca expected to makes its call by mid-year.--JAH

Ipsen/GTx: GTx can’t seem to catch a break. When its Ostarine-focused alliance with Merck blew up last year, GTx at least had the committed support of Ipsen. The two have been partners since 2006 when they aligned to develop the biotech’s selective estrogen receptor modulator (SERM) toremifene to treat the side-effects of androgen deprivation therapy in prostate cancer patients. And Ipsen remained true even though toremifene’s clinical development path has been strewn with obstacles, including a 2009 complete response letter requiring an additional Phase III clinical trial. That’s not to say the alliance didn’t change; after the CRL, the two parties revised their 2006 deal, releasing Ipsen from milestone payments in exchange for in bankrolling up to $58 million to support the additional clinical trial. This week comes news that Ipsen is calling it quits on toremifene after all. Apparently the projected costs associated with the needed clinical trial exceed the $58 million sum the two brokered in 2010. “We spent significant time analyzing the business case for toremifene 80 mg and have concluded that the most appropriate course is to terminate our collaboration,” GTx’s CEO Mitchell Steiner said in a statement. Ouch. Investors hammered GTx’s stock, which slid 9% on the news to $2.35. The troubles with toremifene could mean some hard choices for GTx, which ended 2010 with $58.6 million in cash and cash equivalents. The company will likely need to find another partner for at least one of its Phase III programs, whether it is toremifene or Ostarine, currently in development for the treatment of muscle wasting in patients with non-small cell lung cancer. --EFL

Image courtesy of flickrer lotusutol, used with permission through a creative commons license.

M&A Predictions! Fortune Tellers -- They Are Not

Even though the New Year has come and gone, analysts are still making their predictions about what 2011 will bring for the pharma and biotech industries. (Admittedly, it is still early enough to do so, but March would have been pushing it.)

The latest endeavor to predict the future comes from the fine analysts at Morningstar, who released their “2011 M&A Outlook for Healthcare” report this week. The report includes some sound, albeit a little obvious, deductions on what will be moving M&A in 2011 – a move into emerging markets, slowing R&D productivity, and (cue ominous music) the upcoming patent cliff.

Morningstar experts expect further consolidation in Big Pharma; and say Eli Lilly & Co., as well as Bristol-Myers Squibb will be ripe for the picking as the patents on their lead drugs reach their expiration date – but, honestly, who would buy them?

Merck & Co. (Schering-Plough), Pfizer Inc. (Wyeth), Roche (Genentech), and Novartis (Alcon)have all made major acquisitions in the past two years that have added significantly to their debt situations and are unlikely to dump the burden of a major restructuring on top of the issues they’ve already had to bear while trying to make these puzzle pieces fit.

Morningstar analyst Damien Conover suggests Abbott Laboratories could handle acquiring either Lilly or Bristol. He also thinks Sanofi-Aventis and GlaxoSmithKline could benefit from an acquisition of Bristol as well. This sounds all well and good, but Glaxo has made it pretty clear that it is not interested in any large acquisitions and Sanofi has its hands full already with that little Genzyme deal it has been drawing out for months. And let’s be honest, if the past has taught us anything, it’s that bigger is not always better.

So moving on to more realistic prospects for mash-ups in 2011 – let’s take a look at what biotechs Morningstar thinks will offer the best bang for the buck.

They list Biogen-Idec, Seattle Genetics, Human Genome Sciences, Dendreon, and Actelion as their top five take-out targets this year. The reasoning is complex but the basic insight is that these companies have strong pipelines or technology in really HOT therapeutic areas like neurology, orphan drugs, and cancer. Yet, Biogen, Celgene, Gilead, and Merck KGaA will offer an acquirer the most immediate and gratifying (think mid-to single-digit billions) boost to earnings – something every Big Pharma could use right now. These companies also have the nice bonus of having a lot of cash on hand and fairly low burn rates.

While all of these companies have their positives and negatives, it’s important to keep in mind that just because they can be acquired doesn’t mean that they will be. Take the #1 takeout target this year for example, Biogen; it’s been on Morningstar’s take-out list for three years now despite plenty attempts by billionaire shareholder Carl Icahn to get the company on the market.

That said; Morningstar hasn’t done abysmally in its predictions over the last two years. Three companies from the 2009 list were acquired – Trubion, CV Therapeutics, and Medarex, but none of these companies were in the top 15 that year. Another seven got picked up from its 2010 list – Crucell, ZymoGenetics, Talecris, King Pharmaceuticals, OSI Pharmaceuticals, Biovail and Genzyme – with three of these companies being in their top 15 picks.

So what do you think – will this be Biogen’s year to find a suitor or will the Massachusetts biotech continue to dance alone?

Image from flickr user What Makes The Pie Shops Tick? used under a creative commons license

DotW: Cash for Clunkers

We're baaack. Did you miss us--or was the respite from DOTW welcome? (On second thought, don't answer that.)

Things in D.C. are beginning to quiet down, as members of Congress head for their home districts and vacations. With healthcare reform stalled, the Obama administration's one piece of good news: cash for clunkers has been an undeniable success--at least for certain auto makers--especially now that the popular programs has been recapitalized.

In our own industry, the deal-making was of a small scale--and certainly involved a few clunkers. But this week the small players have nothing on big biotechs Biogen and Genzyme, which increasingly look like they could join the ranks of industry wrecks.

As part of J&J's recent deal with Elan, the big drug maker received an option to help Elan finance the purchase of Biogen's stake in Tysabri in the event Biogen is bought out and Elan decides it wants full control of the medicine. Biogen cried foul after learning of the arrangement via media reports and an Elan earnings call, saying the arrangement with J&J violates the two biotech's existing Tysabri contract. (Certainly, Biogen has a right to be worried. If the maker of Avonex and Rituxan goes on the block, the financing option on Tysabri could give J&J an advantage over competing bidders and enable the pharma--if it wants--to get the Cambridge-based biotech for a lower price.)

So on July 28 Biogen sent Elan a letter calling for an end to the relationship, triggering a 60-day window in which to effect a break-up. It didn't take long for Elan to respond with a lawsuit, filed in U.S. Federal District Court in New York. Elan is asking the court to stop the 60-day clock that is triggered by Biogen's letter and to expedite a review of the matter. (Read our discussion in "The Pink Sheet" DAILY for more.)

If the Biogen/Elan catfight isn't dramatic enough for you, there's additional entertainment provided by Genzyme, which continues to struggle because of manufacturing problems associated with its Allston plant. As competitors like Shire encroach on Genyzme's money-maker Cerezyme, analysts are beginning to doubt Genzyme's ability to survive the fall-out caused by the manufacturing snafu. On Friday, Aug. 7, Goldman Sachs added the biotech to its Americas conviction sell list. Off-the-record discussions with other industry experts suggest other analysts may follow suit in short order.

Could the events at Genzyme result in the company's sale? It's a good question and one we're pondering. Until such an event transpires, take a look at this week's edition of...


Anesiva/Arcion Therapeutics: Clunker Anesiva got a new engine thanks to this week’s reverse merger with privately–held Arcion Therapeutics. The deal calls for each company to contribute one clinical program to the surviving entity, which will be named Arcion. Anesiva’s existing CEO, Michael Kranda, gets to keep the top spot, and Arcion CEO James Campbell (who is also an Anesiva board member), will become CMO, with Arcion shareholders owning 64% of the newco. Industry watchers have been long predicted consolidation as troubled companies team up with up-and-comers in opportunistic deals; the Anesiva/Arcion tie-up certainly holds a certain logic given Campbell’s dual role at both companies, shared investors (CMEA Ventures and Interwest Partners have staked both players) and the firms' similar focus on novel treatments for pain. Anesiva’s primary contribution to the newco is Adlea, an intravenous formulation of capsaicin that has succeeded in two Phase III trials for post-operative pain in total knee replacement patients; Arcion, which was profiled in Start-Up in January, is developing a topical clonidine gel for diabetic neuropathic pain. For Anesiva, the news means at least a vestige of the company will continue to live on. Once a growing biotech with a marketed product and a stock price nearing $7, Anesiva was down to $315,000 in cash and equivalents at the end of the first quarter as manufacturing challenges forced the biotech to recall its transdermal pain patch Zingo. Baltimore-based Arcion, meanwhile, hasn’t been around long enough to raise a ton of money: InterWest Partners and CMEA staked the company with $8.8 million in a Series A raised in December 2007. The two VCs certainly didn't get an exit out of the deal, but since they already own a chunk of Anesiva, the merger allows them to consolidate their outlays into one, stronger company. We also assume the merger’s allure stems from the promise of Adlea and the management expertise of Kranda (okay, maybe a Nasdaq listing is also a plus). How the new company will be capitalized is still an open question. According to “The Pink Sheet” DAILY, the newco plans to pursue a $20 million private investment in public equity (PIPE) financing in conjunction with the merger--Joseph Haas and Ellen Foster Licking.

GlaxoSmithKline/Vernalis: Vernalis wins DOTW's Monty Python award for "not dead yet" biotech. News Thursday Aug. 6 that the firm was teaming up with GlaxoSmithKline in an option-based oncology research agreement will keep the company alive that much longer. The deal provides Vernalis with $3 million up front cash, and the same amount again as an equity purchase. Vernalis also stands to realize potential payments "in excess of $200 million" (yeah, you know they get carried away with the 'if-all-goes-according-to-plan scenarios') and, maybe, double-digit royalties. For this, Vernalis will do drug discovery against an undisclosed target using its structure-based-drug design technologies. (The target is one that both Vernalis and GSK had been working on previously, according to CEO Ian Garland.) If and when an IND emerges, GSK will have 90 days to decide whether or not to exercise its option to license the compound (s) and take on development and commercialization. Amid today's flurry of option-based deals, where risk is often heavily skewed toward the biotech partner, our first reaction to the press release's "risk sharing" language was "you bet": Vernalis takes all the early risk, with some pocket money, and GSK may--or may not--choose to take on later risk. But this deal is in fact a little more biotech-friendly than that. According to Garland, GSK will pay further pre-IND milestones of "more than $6 million", and the Big Pharma is also committed to doing the IND-enabling studies too (whatever they think of it at that point).--Melanie Senior

Transcept/Purdue Pharma: If Purdue execs were waking up in the middle of the night wondering if their deal with Infinity was going to pay off, then they’ve now got just the thing for a good night’s sleep. Early this week the private pain-focused Pharma licensed US rights (and an option to the rest of North America) to Transcept Pharmaceuticals’ sublingual zolpidem tablet (Intermezzo) back-to-sleep treatment. Transcept gets $25 million up-front and a $30 million milestone at approval (based on that approval’s timing vis à vis its October 30 PDUFA date, i.e. probably adjustable downward if the drug isn’t approved the first time around) plus potential sales milestones. The biotech also gets double-digit royalties on US sales, ranging up to the mid-20-percent range. A year post-launch Transcept can opt to co-promote Intermezzo to psychiatrists. With Intermezzo Purdue continues its expansion into non-pain marketing, a transformation begun with the Infinity alliance. Tiny Transcept—which recently went public via reverse merger with Novacea--gets a partner that it hopes can creatively compete against generic zolpidem (the once-mighty Ambien’s active ingredient) and other marketed and near-market compounds in a crowded sleep market that has seemingly peaked: the market for insomnia meds was just over $2 billion in 2008, down from nearly $2.9 billion in 2007. If approved, Intermezzo’s status as the first drug designed for those middle-of-the-night episodes—essentially sleep-on-demand instead of put-you-to-sleep-every-night—will be an advantage. Whether it’s enough of an advantage to compete in the rough-and-tumble insomnia market remains to be seen--Chris Morrison.

Pfizer/NicOx: Is it fair to call NicOx's glaucoma drug a clunker? We've known for a year that Phase II data associated with the molecule--the awkwardly named PF-03187207--is, at best, a marginal improvement when it comes to lowering diurnal interocular pressure compared to Pfizer's Xalatan. In May, Pfizer indicated the data did not warrant advancing the compound into Phase III trials but remained "committed" to a joint program with NicOx "where the follow-up compounds ...have produced encouraging results." Looks like Pfizer had a change of heart (or maybe an eye-opener?). On August 6, NicOx took back '207 and the preclinical molecules, agreeing to pay the Big Pharma undisclosed milestone payments plus royalties tied to '207's approval and ability to meet predefined sales figures. We give NicOx credit for its masterful spin of the news: the press release focused on the big drugmaker’s decision to outlicense a non-core product rather than the marginal data associated with '207. (Really, what else was the company going to do?) Investors seemed to buy the idea that this was the best possible outcome for a product that has been mired in uncertainty, sending the company's share price up approximately 3% on the news. Certainly, the milestones NicOx has to pay out for the eye programs are likely small change compared to what the biotech might gain if it can partner the programs to another player. But partnering for a reasonable amount is a big if. Pfizer's Xalatan, which racked up $1.7 billion in worldwide sales in 2008, goes generic in 2011, so future glaucoma products like '207 will have to do significantly better clinically to justify reimbursement. Meantime, it's not as if NicOx is radically changing its focus. It's still naproxcinod all the time over at the French biotech. Just to refresh your memory, NicOx plans to submit that molecule, which is a nitric oxide donating version of Naproxen, for approval to European and U.S. regulatory agencies later this year.--EFL

(Image by flickr user dno1967 used with permission courtesy of a creative commons license.)

While You Weren't in Cooperstown...

Or perhaps you were. You were certainly somewhere because we were dealt some extremely slim pickings in "While You Were" land this weekend so we're hoping everyone had a very nice time doing whatever they did whereever they were (including a few vacationing IN VIVO Bloggers).

But let's give a heartfelt congratulations to two people who WERE and will remain in Cooperstown--Jim Rice and Rickey Henderson. Jim Ed's induction into Baseball's Hall of Fame was long overdue but it's fitting that he stood alongside Henderson, a fellow left fielder who cinched a place in the hall many years ago.

Our only regret is we weren't in Cooperstown to cheer them on, and here are some people who probably also couldn't make the festivities.

• Andrew Witty: The GlaxoSmithKline CEO's last vacation was a ski trip in Vermont, so he certainly could have found his way to Cooperstown in upstate New York. But we're guessing his daily five miles runs and new home project keep him just a little busy these days. Oh, and he's also running one of the world's largest pharmaceutical companies. Read the this interview in the Sunday Times to learn more fun facts and get his take on GSK's H1N1 (aka Swine flu) vaccine.
• Your Doctor: Well, he might have been there, but who can pick a doctor out of a crowd if they're not wearing their white lab coats. No one, says the docs who don't like the American Medical Association's thinking that the white coat may be responsible for spreading disease from patient to patient. The concern has the AMA mulling over the idea of having doctors toss aside their number two prop (stethescope has to be number one). See this New York Times article. Sounds like a good enough reason for physicians to go casual. Plus, think how much money this might save the US health care system in clothing and laundry costs.
• Dr. William F. Streck: Whoa, waitaminute. Dr. Streck actually might have been in Cooperstown since he's president of Bassett Healthcare, a hospital system based in the village. Bassett received a tiny piece of the spotlight for its practice of paying its physicians salaries instead of compensating them for the fees they generate. The New York Times presents Bassett's plan as a potentially more practical role model for curtailing US health care costs than the Cleveland Clinic, which has received a whole lot of love from President Obama for its approach.
• Representative James P. Moran, Democrat of Virginia, who is sponsoring a bill in the House to ban direct-to-consumer ads for drugs treating sexual dysfunction from prime time television on decency grounds. The New York Times reported on his and other measures by legislators to curtail direct-to-consumer drug advertising.
• Curt Schilling: He may be in the Hall of Fame someday although we're still on the fence. But he was likely too busy raising money for his computer gaming start-up to make the four-hour drive on I-90 West. Then again, he's such a fan of the game, so maybe...

DotW: Dollars To Donuts

It was a busy week but not necessarily in terms of deal-making activity. Instead, all eyes were on Washington DC, where the discussion on healthcare reform continued to dominate--from the spacious halls of Congress to the tight confines of taxi cabs. As you muse over how many dollars it will take to close the donut hole (are these the Dunkin' variety or Krispy Kremes?) and ponder emerging news about the exclusivity period for biologics, we bring you...

GlaxoSmithKline/Chroma: We confess we've had entirely too much fun writing about this deal this week. We could use this post to delve into the industry's mysterious desire to inflate a deal's price by including stratospheric but highly improbable bio-bucks figures. But where is the fun in that? So let's focus on the actual deal. Here's what we know: GSK and Chroma teamed up June 23 in an option-based drug discovery and development deal. In conjunction with the deal, Chroma announced its $24.5 million Series D financing, which GSK also took part in, although it hasn't become a major shareholder overall. According to Chroma's CEO Ian Nicholson, GSK's stake is "well below 10 percent." Further terms weren't disclosed beyond the $1 billion 'biodollars' figure Chroma cited in a press release, but the helpful folks at EP Vantage provided some additional color on the tie-up: "we found out that GSK paid £5m upfront and contributed £5m of the £15m Series D, giving GSK a 5% equity stake in Chroma. So a total upfront consideration of £10m," EPV commented on our earlier post.

Every little bit counts, as they say. In exchange for the cash and equity, Chroma will use its macrophage-targeting technology to identify four small molecules, mainly for inflammatory and auto-immune disease indications, although the deal covers other indications as well, according to Nicholson. The biotech will take these compounds through proof of concept, at which point Glaxo can exercise its option to take an exclusive worldwide license. As an option-based deal, the tie-up illustrates yet again that this kind of risk-sharing approach to partnerships is GSK's modus operandi. (When it comes to actually exercising the option--well, that's another story.) Earlier this month the Big Pharma signed a similar deal with Concert Pharmaceuticals around three preclinical candidates in which it paid $18.3 million up front in cash and took a $16.7 million equity stake.

From Chroma's standpoint the equity stake was likely just as important as the option portion of the deal. At a time when every small company is a seller, and Big Pharma is barraged with pitches screaming "Buy me!" (or at least "Buy a piece of me!"), engaging the larger company is the real sticking point for smaller biotechs. With skin in the game, GSK is far likelier to pay closer attention to the ongoing work at Chroma, which likely stands to benefit the company as its programs move through development. Indeed, the need to engage Big Pharma is one reason traditional VCs are going out of their way to include corporate venture investors in their syndicates (the fact that CVCs still have money to commit is just a minor detail).

Biovail/Cambridge: Okay, we admit it: we’re obsessed with Xenazine, a drug for Hungington’s chorea that was approved by FDA last year. But we have our reasons. We see Xenazine as exactly the type of narrow-market product that the new regulatory and reimbursement climate favors. And, as the flurry of deal-making triggered by its approval indicates, it demonstrates that these types of products can be very lucrative, albeit not at the level of the primary care blockbusters Big Pharma is built on. (You can read much more “The Billion Dollar REMS,” from The RPM Report.)

Biovail certainly agrees with us: the company paid $200 million to buy-out Xenazine developer Prestwick Pharmaceuticals. That deal was complex, since Ovation (now Lundbeck Inc.) simultaneously acquired US marketing rights for the drug for $50 million, so Biovail really acquired Canadian marketing rights and a US royalty stream. Now Biovail is upping its piece of the Xenazine pie by acquiring global commercial rights from Cambridge Labs. Biovail paid $200 million when the deal closed June 22—an indication of the value the company sees in the product. The company will pay an additional $30 million over the next two years.

In one sense, Biovail is simply buying out a large royalty obligation: Cambridge collected 50% of US revenues. With almost 2,000 patients already on therapy at an average annual cost of $30,000 to $50,000 each, that is already a significant amount. Biovail won't save all that money; the company will continue to pay a royalty to an undisclosed third-party who manufacturers the product for global markets.

Still, Biovail says the transaction will be immediately accretive to revenues and margins, and will add $23 million to $26 million to Biovail’s cash flow in 2010. (Those figures include the contribution from international sales from European marketers of the drug as well as the impact from canceling out the royalty obligation.) It is also a pipeline play, giving Biovail full rights to a controlled-release formulation of the drug and a single isomer version of the active ingredient. Those line extensions may be key to expanding the market beyond Huntington’s; the extended release form is in development for Tourette Syndrome.

But the deal has one more wrinkle, in keeping with the unique profile of Xenazine: It takes out a layer between Biovail and international marketers of the drug, and this is a case where cutting out a middleman can pay off for reasons that aren't strictly economic. Xenazine is basically a generic drug around the world, raising a high potential for diversion into the US to capitalize on the premium price. Biovail told its investors during its second quarter call in May that Cambridge was keeping appropriate track of the supply in Europe, and the company says preventing diversion is not a factor in this deal. But we’re still betting that this transaction buys Biovail some peace of mind.—Michael McCaughan

MediciNova/Avigen: It ain't over till it's over, but for Avigen--and major shareholder Biotechnology Value Fund--the future grows clearer every day. Late on Thursday came news that MediciNova and Avigen had reached an "understanding of certain key terms", paving the way for MediciNova's acquisition of the troubled biotech. Should it come to fruition, the deal would combine the two companies' development programs based on the novel glial activation inhibitor ibudlast. (Avigen's AV-411 is stalled in Phase I studies for neuropathic pain; while MediciNova's MN-166 has advanced to Phase II for multiple sclerosis.) Interestingly, the buy-out by MediciNova recalls the plan Biotechnology Value Fund proposed several months ago.

Avigen has been reeling ever since last fall when its multiple sclerosis spasticity drug, AV-650, failed to meet its primary endpoint in a Phase IIb study. Shortly afterwards, Avigen reduced headcount and suspended its other clinical programs but BVF, loudly and publicly, called upon the biotech to suspend operations and return its remaining cash to its shareholders. Meanwhile, BVF offered to buy the company's outstanding shares with a tender offer of $1.20 per share, with the intention of merging Avigen with MediciNova. But to effect this latter proposal, BVF needed to win control of the board, a change that could only happen with the support of two-thirds of Avigen's shareholders. In late March, BVF came close--its proposal swayed 58% of Avigen's investors--but that wasn't good enough. At the time Avigen's acting CEO, Andrew Sauter, promised the biotech would sell off the remaining assets and roll-up the company. In an interview with "The Pink Sheet" DAILY, Sauter made it clear that Avigen would consider a bid by MediciNova as long as it offered fair return to Avigen shareholders.

And it looks like both sides have come to an agreement on the definition of "fair". Under the terms of the merger, Avigen shareholders will receive a consideration approximating Avigen's net cash liquidation value plus $3 million. Avigen shareholders would be able to elect to receive this consideration in cash or as MediciNova stock. At the end of 18 months, any unexercised convertible securities would be paid out at their cash value. "We believe that the proposed merger presents clear advantages for the shareholders of both companies," said Yuichi Iwaki, MediciNova's President and Chief Executive Officer, in a press release.

Astellas/NeurogesX: This week's deal with Astellas to market and distribute the neuropathic pain patch Qutenza in Europe bolsters NeurogesX’s cash position, giving the company some breathing room to prepare for regulatory approval and a 2010 launch in the U.S. market. Qutenza was approved for neuropathic pain in non-diabetic patients by the European Medicines Agency in May and it is pending review at the FDA, with an Aug. 16 user fee date. A European launch is expected by the first half of 2010. NeurogesX is set to get €30 million ($42 million) upfront for Qutenza commercialization rights from Astellas' European subsidiary. In addition to 27 countries in the European Union, the deal covers Iceland, Switzerland, and some countries in the Middle East and Africa. This isn't exactly the deal Astellas watchers have been expecting ever since it tried--and failed--to bring CV Therapeutics in-house. But in a small way, rights to Qutenza help the Japanese pharma achieve another ambition: bolstering its European presence with an additional product it can market alongside its specialist-focused medicines in dermatology, urology, transplantation, and infectious disease. The dermal patch Qutenza packs a high concentration form of synthetic capsaicin (also called trans-capsaicin) that stimulates transient vanilloid 1 receptors in the skin to subdue overactive pain receptors. As part of this week's agreement, Astellas will also pay €5 million upfront ($7 million) for a co-development and commercialization option on NGX-1998, a Phase I liquid formulation of the NeurogesX product.

The deal is definitely a balm to NeurogesX's uncertain cash position: the company had about $19 million in cash and marketable securities at the close of the first quarter, enough to carry it through 2009, but insufficient to give the company much comfort in making plans for breaking into the U.S. market. During a June 22 investors’ call, Chief Financial Officer Stephen Giglieri declined to provide runway guidance, but added: “Obviously, putting $49 million into the bank is going to extend our runway fairly significantly.” (It's all about the runway, people.) NeurogesX is also eligible for roughly $100 million in sales-based milestone payments and additional option payments for the liquid formulation. (Not billion dollar bio-bucks territory, but nothing to sneeze at either.)--Emily Hayes

LabCorp/Monogram Biosciences: Molecular diagnostics specialist Monogram Biosciences will become part of LabCorp under a tender offer announced this week. The deal, for $4.55 per share of Monogram’s stock is worth $155 million including the net indebtedness LabCorp picks up. (According to the press release announcing the news that gives Monogram an implied equity value of $106.7 million.) For the cash, LabCorp gets two of the more innovative marketed commercial tests in the molecular diagnostics space: Trofile, developed in collaboration with Pfizer, identifies patients who are eligible for the CCR5 class of HIV drugs and is a companion diagnostic for Pfizer’s first-in-class drug Selzentry; HERmark, the first commercially available functional Her2 assay, is one of a new wave of Her2 tests for breast cancer patients. Monogram is also applying the technology that led to HERmark, called VeraTag, to other cancer markers in the EGFR pathway. But it’s been struggling to come up with the resources to do that--or, as we wrote earlier this year in our coverage of the new generation of Her2 tests--to validate its Her2 assay in a prospective trial. Moreover, Monogram has been building disease management capabilities in two distinct therapy areas – HIV and oncology – also a difficult challenge for a small company with limited capital. The cash reserves at LabCorp, which has been eying the esoteric testing market for some time, should solve those problems.--Mark Ratner

(image by flickr user Pink Sherbet Photography used with permission via a creative commons license.)<

DotW: The Rumorville

Pssst! Did you hear that Elan is up for sale? Probably, since it's hardly a secret that the company has been up for grabs since the start of the year, when the Irish biotech hired Citigroup to conduct a review of its business.

On Wednesday, CEO Kelly Martin added fuel to the rumor fire when he spoke at a Goldman Sachs healthcare conference, suggesting a strategic transaction "in the near term" was in the offing. "A lot of people are interested in talking to us," Martin said.

But as we all know talk is cheap. And talk certainly hasn't resulted in a deal with either BMS or Pfizer to date--two pharmas that have in recent weeks been rumored buyers of the perpetually troubled company.

Has Martin's bravuro performance assuaged investors or Elan's board? It doesn't look like it. On Thursday, Reuters reported Elan decided to forgo the proxy fight and nominated two dissidents to the board. (Perhaps Elan's board learned something from the recent experiences at Amylin and Biogen Idec?)Interestingly, Jack Schuler, cofounder of Crabtree Partners and a vocal critic of Martin, is one of the candidates. The annual meeting, scheduled for July 16, promises to be very interesting doesn't it?

What other rumors surfaced this week? Sanofi board members may have nixed a big acquisition according to Les Echos, after major shareholders rejected the planned purchase as too risky. Or maybe not. A Sanofi-Aventis spokesman said the company "formally denied" that a major acquisition project in the U.S. had been presented to the board. (Denial is a river in Egypt, right?) Wasn't it just one week ago that Sanofi's stock was on an upswing as people speculated the company had its eyes on partner Merck's shares of the animal health biz Merial?

And now that the FTC has come out against the 12-14 year exclusivity period for follow-on biologics, rumors are, of course, flying about what's actually feasible. Still think it's possible to get a proposed pathway for FOBs into the healthcare reform legislation happening this summer? According to "The Pink Sheet" DAILY, FDA is likely to be a critical player in this ongoing drama's next act. Will the agency testify before Congress or write a letter supporting a FOB approval pathway? Alternatively, will the agency adopt a cautious tone, much the way the Bush FDA chief medical officer Frank Torti did last September when he warned in a letter to Congressman Pallone of serious questions associated with the approvability of follow-on biologics? (Washington types, what are you hearing through the grapevine?)

Do you have Clorox wipes, Purell, and surgical masks handy? (For you DIY types, eHow.com notes that while pre-fab surgical masks exist, "sometimes it’s more fun to make your own." Somebody has got to get out more.) After weeks of rumors, the WHO finally pulled the trigger and raised the pandemic alert level to 6 (on a six-point scale), the first time in 41 years. What does the new alert level mean? Nothing radically different in the US, where public health specialists and the CDC put pandemic preparations on the front burner some time ago. (I know. You were secretly hoping for an updated color coded warning system ala the Homeland security threat notices weren't you?)

As you mull the events of the week, here are some items that are far from rumor. Your "just the facts, ma'am" analysis, courtesy of IVB's resident Sgt. Friday and...

Merck/Xenon Pharmaceuticals: So much for being distracted by its take-out of Schering-Plough. This week, Merck announced a small deal with privately-held Xenon Pharmaceuticals in the CV space. In what is now becoming de rigueur in the industry, this pact is a low money down (but certainly better than no money down), option-style arrangement that initially provides Xenon with research funding related to the development of its small molecule compounds. Xenon will perform validation studies using its clinical genetics platform, as well as drug discovery for those targets selected by a joint steering committee. Under the terms of the agreement, Merck has the option to exclusively license targets and compounds from Xenon for development and commercialization. In return, the biotech also stands to receive option-exercise fees, and milestone payments tied to research, development, and regulatory progress. Unlike other biobucks deals, milestones aren't sky-high: totaling up to $94.5 million for the first target and up to $89.5 million for each subsequent target selected for drug discovery. In addition, Merck will pay Xenon undisclosed royalties on sales of products resulting from the collaboration. Of course, Xenon retains the right to develop and commercialize certain compounds for which Merck does not exercise its option. Simon Pimstone, CEO of Xenon, waxed poetic in an over-the-top statement announcing the news. "We are very excited to be collaborating with Merck to define new therapeutics in the area of cardiovascular diseases," he said. "With this deal, Xenon is continuing its strategy of risk mitigation by select partnering, while retaining ownership of other programs." (What else was he going to say? "We wanted more money upfront, but we couldn't get it." That would have gone over well with Xenon's existing backers, which include MX Associates, LipoteRx, and Invesco Private Capital.) In truth, the deal probably is a big step forward for Xenon, which hasn't raised money since it pulled in $31 million in private financing in 2006, and hasn't inked a deal since late December of the same year, when it signed a pact with Roche worth $7 million up-front for its anemia inhibitors. Merck, of course, could use an infusion of innovative CV medicines. The drug maker suffered a major setback last week when it announced that preliminary results from the Phase III study of its highly touted rolofylline for acute heart therapy failure did not meet primary or secondary efficacy endpoints. In a note to investors, Sanford F. Bernstein analyst Tim Bernstein noted the setback represented a "psychological negative for Merck." (You think?)

Genentech/Bayhill Therapeutics: Genentech announces a deal and the whole world sneezes. Not really, but we do sit up and take notice. Genentech is definitely not one of the most active deal-makers in the industry; it's focus is typically on access to new technologies or compounds that bolster it's on-going work in cancer. For examples, recall last November's arrangement with Thermo Fisher Scientific for RNAi design and the October 2008 pact with GlycArt. Moreover, this is the first in-licensing deal announced since Roche took the big biotech private, providing an early glimpse in what to expect from Genentech biz dev now that it is a wholly owned subsidiary. (You'll be able to glean even more if you read the upcoming June IN VIVO.) As is typical for most BD deals involving Genentech (unless it's Genentech being bought), there's not a lot of money on the table: just $25 million and that includes an equity stake in the smaller biotech. (There are, of course, the requisite bio-bucks, which could bring privately-held Bayhill another $325 million in the product hits certain sales and regulatory milestones.) Interestingly the deal, which is focused around a Phase I/II compound called BHT-3021, seems to move Genentech into a new direction: type 1 diabetes. '3021 is a DNA-based immunotherapy designed to protect against an inappropriate immune response that triggers the destruction of insulin-producing islet cells. In an interview with "The Pink Sheet" DAILY, Genentech's head of business development, Joseph McCracken explained why the Big Biotech was interested in the compound: "The mechanism of action suggests that it could actually impact the underlying cause of type 1 diabetes, truly be disease-modifying, [instead of] just treating symptoms," he said. Under the deal, Bayhill will complete ongoing clinical work with '3021, to be reimbursed by Genentech. At that point, Genentech will assume all development, manufacturing and commercialization work for the compound, advancing '3021 through Phase II before handing the program over to a joint global development organization that will be managed by execs coming from both Genentech and Roche. Apparently Genentech had been interested in Bayhill's technology for quite some time--long before Roche's bid for the company came to fruition. McCracken's team brought the deal to Roche, explained why it was excited about the science behind '3021 and made the case that Genentech was in position to close the deal. The money should help Bayhill fund the rest of pipeline, including lead program, BHT-3009, a Phase III candidate for multiple sclerosis, and may spark additional deal-making. (If Genentech thinks the immunotherapy technology is a "go" will other Big Pharmas comes to the same conclusion?) That's important--the small company tried to go public last year but ultimately pulled its IPO due to market conditions. To date, it's raised an estimated $63 million in venture funding from backers including, Morgenthaler Ventures and Lilly Ventures.

GlaxoSmithKline/Shenzhen Neptunus: How many buzz words can we include in the write-up of this deal? This week's joint-venture with China-based Shenzhen is noteworthy despite its modest deal size because it seems to bolster the Big Pharma's vaccine distribution network in an important but opaque emerging market at a time when there is renewed fear about the global spread of swine flu. (How's that?) In addition to a cash infusion totaling roughly $30 million, GSK will provide the joint-venture with leading-edge vaccine technology and equipment. Stephen Rea, a spokesman for GSK, told sister publication PharmAsia News that the J/V should be operational by next year. "It might take a couple of years to begin producing vaccines at the joint venture," he explained, noting that the initial focus will be to produce a seasonal flu vaccine, but the outpost could also be used to generate a defense against swine flu. The J/V seems likeley to become a lifesaver for Shenzhen Neptunus, which produces vaccines, and recombinant human proteins, including interferon and interleukin-2. The firm has been fighting to stay afloat, hit hard by earnings losses, and the halt in March of production of its influenza vaccine. In a report submitted to securities regulators at the Hong Kong Stock Exchange--where the firm's shares are listed--Neptunus execs stated that the biotech outfit posted a loss of RMB 5.089 million for the first quarter of this year, compared with a loss of RMB 1.498 million for the corresponding period of 2008. Neptunus also revealed in the report that the Good Manufacturing Practices certification for its interleukin-2 facility had expired, and that to meet higher regulatory standards established by China's State FDA in 2008, they would be forced to make a significant investment into upgrading production.


CSL/Talecris: Ever since the Federal Trade Commission filed a complaint in late May to halt the proposed $3.1 billion deal between CSL and Talecris, a break-up has seemed in the cards. Realizing it didn't have the requisite hand to call FTC's bluff, CSL folded this week, shelving its planned acquisition of P-E backed Talecris, saying it was not worth the money and time to battle the agency in court. In early June, CSL's CEO Brian McNamee offered strong words in protest to the FTC's complaint that the proposed tie-up, which would have created the largest maker of blood plasma products, was not anti-competitive. But despite initially signaling that it would challenge the commision in court, CSL had a change of heart in the intervening week, announcing June 8 that it would pay Talecris a $75 million break-up fee. "CSL's Board of Directors did not believe that entering into a protracted litigation process with the FTC, with its inherent risks, substantial costs and lengthy distraction of CSL management and staff from planning and running our businesses would be in the best interest of our shareholders," said McNamee. That $75 million is likely cold comfort for Talecris and its private equity backers, Cerberus Capital Management and Ampersand Ventures. Back in 2005, Cerberus and Ampsersand put up the capital necessary to buy Bayer's plasma business and found the company, which was originally known as NPS Biotherapeutics. Talecris, which has roughly $1.4 billion in revenues, markets Gamunex, an intravenous immunoglobulin. The company was in the throes of attempting to go public when it pulled its IPO because of CSL's lucrative $3.1 billion offer last August. Because of the specialty pharma's lucrative revenue stream, the company is still a viable acquisition target but the question is who might be interested in picking it up. Bayer and Baxter, the other major players in the plasma market, are out of the running since they would generate the same FTC concerns as CSL. We suppose another private equity group or a big pharma company looking to diversify might make a bid. Alternatively, the company could be one of the first to test the IPO waters.

Image by flickrer Pricklebush used with permission through a creative commons license.

DotW: Open Your Mind

To the possibilities...

The week started off on a positive note with the interesting news that AstraZeneca and Merck had come together to conduct a clinical trial combining their two promising but early stage oncology assets. Can you imagine? Two pharmaceutical companies actually pooling assets (see below).

While we are more interested about what potentially could come next--will this lead to future pipeline sharing deals, for instance?--we admit to being impressed by the news, and are almost willing to say that the tie-up counts as one of this year's most interesting deals (the other being the GSK/Pfizer joint-venture in HIV, of course).

Who else opened their minds this week? Shareholders at Biogen Idec seemed swayed by the arguments of "Team Icahn", awarding at least one board seat to the dissident shareholder group. Alex Denner, the managing director of Icahn Partners, will definitely get to participate in regular Biogen Idec confabs. No word yet on whether Richard Mulligan--the other Icahn supporter--has also won a seat at the table. (All we know is someone is taking a Mulligan here.)

Elan investors certainly see the hope of an impending sale after a week that was rife with rumors. First BMS was interested in a minority stake and then they weren't. On Thursday, the Financial Times reported that Pfizer was sniffing around the biotech. It's not the first time the New York behemoth's name has been linked with Elan. Why, pray tell, would Pfizer, still embroiled by the integration of Wyeth, want to purchase the company? Maybe it likes the data associated with Elan's Phase III mAB for Alzheimer's disease, bapineuzimab. Thanks to the Wyeth purchase, it already owns a piece of the molecule anyway. If the data are stellar, why not take the risk and own it all? And if they aren't? We assume Pfizer will be on to its next acquisition target by then anyway.

Novavax may open its mind to taking advantage of the uptick in its share price by raising additional money. Investors have swarmed into the biotech, in part because of the company's novel technology to develop a vaccine for the H1N1 flu strain. An agreement with the National Institutes of Health to evaluate a potential vaccine, announced Friday, only added to the excitement.

See? The possibilities are endless when you just open your mind and read...

AstraZeneca/Merck: Does the tie-up announced Monday June 1 between AstraZeneca and Merck to test a combination of two early-stage oncology candidates represent a more enlightened approach to deal-making? It's too soon to tell given the limited nature of this first collaboration, which pairs Merck's MK-2206, an AKT inhibitor, with AZ's mitogen-activated protein kinase 1 blocker, AZD6244 (also known as ARRY-886) in a soon-to-commence Phase I safety and tolerability trial. MK-2206 is currently in Phase I trials as a monotherapy; AZ's '6244 in a bit further along, having completed several Phase II studies. Both represent the most advanced molecules in their respective classes.

The very fact that the tie-up happened at all is proof that the industry is taking an important step forward in how it thinks about building innovative pipelines (though we would have been more impressed if the firms' business development groups had come up with the concept). In what is sure to become one of the most repeated stories on the origin of a partnership, the pact has its roots in a security line in the Dublin airport back in 2007. Somewhere between removing their shoes and coats and placing their laptops on the X-Ray machine, the two scientists got to chatting about how sensible it would be to collaborate given the increasing importance of combination therapy in oncology. Eighteen months later the deal came to fruition, with the blessing of Merck's chief strategy guru Mervyn Turner and AZ's BD ace John Goddard.

The reason so few Big Pharma-Big Pharma development deals get done is that they're very tricky. Issues related to control, valuation, and overlap with other, non-partnered projects must be hammered out before two large companies can come together in even basic ways. Indeed one reason it may have taken so long to forge this seemingly simple pact is that both Merck and AZ are developing competing MEK and AKT inhibitors. With multiple targets in each pathway and the potential to be used to treat a number of different cancers, the possible variations on a deal (it is not as well known as Brahms's famous opus) were "overwhelming", said Merck's Turner.

As a result, the companies are starting slowly, taking a step-wise approach to collaboration that need not go beyond this Phase I program. According to Turner, "We decided, let's start with the easy part, work out how we'll do these experiments together in patients in Phase I, and if that succeeds, we'll go on to the next part," he says. If the eventual goal is some sort of fixed-dose combination, the companies will eventually have to jump in with two feet, perhaps partnering on multiple compounds or even entire pathways.--Christopher Morrison

GlaxoSmithKline/Concert Pharmaceuticals: This deal was heavy, man. Just weeks after announcing it had been granted patents by the USPTO, Concert Pharmaceuticals inked a deal with GlaxoSmithKline on June 2 to gain access to the biotech's deuterated technology. The biobucks were sky-high, but the upfront GlaxoSmithKline agreed to pay was quite down-to-earth: just $35 million, which included $16.7 million for equity that was priced at a similar level to shares Concert issued when raising its $37 million 2008 Series C. In exchange, the big drugmaker gets option rights to multiple Concert projects, including CTP-518, a deuterated version of Bristol Myers-Squibb's HIV protease inhibitor atazanavir that is scheduled to enter Phase I trials later in 2009.

Like most of GSK's previous option-deals, the Big Pharma can buy into a program at clinical proof-of-concept (generally post Phase IIa but in the case of '518 post Phase I). Concert will also create deuterated versions of three additional molecules for GSK, and hand those off after lead optimization. The deal's milestones total more than $1 billion and are heavily weighted to the three option candidates, says Concert's chief business officer Steve Bernitz. What's more, the majority of the payments are for clinical and regulatory accomplishment, as opposed to sales-based payments. Concert will get a double digit royalty on compounds from its pipeline and an undisclosed royalty on deuterium-containing molecules from GSK's pipeline.

Replacing hydrogen atoms with deuterium atoms (hydrogen atoms saddled with a neutron) may be the ultimate in life cycle management since it allows for the creation of new chemical entities that get around existing composition-of-matter IP. And it's a low risk approach to drug development, since "it does not change the physical characteristics of a drug," president and CEO Roger Tung, PhD, told IN VIVO Blog. Because deuterium forms stronger bonds with other atoms in comparison with hydrogen due to its greater mass, Tung believes deuterated versions of medicines are likely to be metabolized differently, an important fact that can potentially affect safety, tolerability--and potentially efficacy. While this has yet to be proven in the clinic, it could mean that certain "problem" drugs might be salvaged by the substitution of deuteriums for hydrogen.

Interestingly, given the importance of '518 to the deal, one might have assumed that Bristol Myers-Squibb was interested. Tung confirms that Concert talked to BMS prior to inking the pact with GSK, but it's unclear whether BMS was ever in the running for the compound. BMS's version of atazanavir, Reyataz, remains on patent and will likely still be protected by the time Concert's '518 hits the market.--Christopher Morrison

OrthoBiotech (Johnson & Johnson)/National Cancer Institute: Topping off a busy day Thursday in which the diversified drug maker touted its robust late stage pipeline, Johnson & Johnson's OrthoBiotech division announced a five-year cooperative research and development pact (otherwise known as a CRADA) with the National Cancer Institute. As NCI's involvement implies, the pact is focused on developing novel cellular immunotherapies as potential treatments for a variety of cancers including melanoma. Steven Rosenberg, who is chief of NCI's surgery branch, will help lead the research effort.

The deal is interesting on a number of levels. It continues to show J&J's commitment to doing deals with a wide variety of players, from consortia to academic collaborators to industry groups. As "The Pink Sheet" DAILY notes, this external focus mirrors an industry-wide trend. (Recall GSK's efforts to biotech itself and Lilly and Merck's FIPNet strategies.) J&J's worldwide chairman for pharmaceuticals Sheila McCoy echoed this sentiment in her comments at the drug maker's R&D confab, noting such deals "allow you to diversify. The trend is to look at consortia in certain areas... [There's] a lot of discussion about how to share capabilities." In January , J&J's Janssen unit announced a deal with Vanderbilt University; in March, Centocor signed a deal with the University of Michigan.

Diversity in terms of both molecules and therapeutic approaches is important, but so is curbing risk. And what could be more risky--the apparent success of Provenge notwithstanding--than cancer immunotherapy? NCI's Rosenberg is a pioneer in the field, working in recent years to develop technologies to alter a patient's T cells to express specific immunity against cancer cells. Despite the controversy surrounding the space, OrthoBiotech has also dabbled in cancer immunotherapy, developing an approach designed to stimulate a patient's immune system to recognize and attack cancer cells via the administration of tumor antigens and other materials. Now Rosenberg's lab will conduct a clinical trial in melanoma patients using OrthoBiotech's proprietary technology.

"This public-private partnership represents an extraordinary opportunity to bring together complementary and substantial expertise and resources from two groups with the common goal of advancing a highly promising new modality of therapy for patients with cancer," said Jay Siegel, chief biotechnology officer of J&J's Pharmaceuticals and Medical Devices and Diagnostics businesses.

Microsoft/Merck: Ever since Merck announced in October 2008 the closure of Rosetta Inpharmatics, a genomic-information software company it purchased in 2001 for $576 million, execs have speculated about the ultimate fate of the bio-IT group's assets. Speculation only increased in February after Stephen Friend, Rosetta's founder and one of the prime defenders of these kinds of tools, announced he was leaving Merck to found Sage, a new, not-for-profit, open-source initiative that will develop biological networks across tissues and organs that model disease. (For more see this March START-UP story and this April IN VIVO piece. )

Now we know. On June 1, Microsoft announced it was buying "certain assets"--code for some but not all of Rosetta's powerful software. According to genomeweb's BioInform, the deal centers around Rosetta's Resolver, Elucidator, and Syllego programs, although financial details of the deal were not disclosed.

Why are we covering it? Because the deal marks an important step forward in Microsoft's quest to play in the life sciences. And Microsoft is big enough and creative enough (notwithstanding the ludicrous decision to saddle its new search engine with the unfortunate acronym But It's Not Google) that it must be taken seriously. Microsoft plans to incorporate the genetic and genomic data-management software into Microsoft Amalga Life Sciences, which helps research organizations assemble data from disparate platforms that can be located internally or externally. Merck will remain a contributor as well. According to the WSJ, Merck will provide strategic input regarding the program's use and will become an Amalga customer.

AstraZeneca/Abbott: On June 4, AstraZeneca and Abbott announced a co-promotion agreement for their investigational Crestor/TriLipix compound, as well as their submission of a new drug application with the FDA for the product in mixed dyslipidemia (basically a combination of two or more lipid abnormalities including high LDL-cholesterol, high triglycerides and low HDL-cholesterol.)

The co-promotion extends the two drug makers' existing commercial relationship--the original deal was inked in 2006--ahead of an FDA decision on the combo product, which will be marketed as Certriad if approved. TriLipix, a delayed-release fenofibrate approved in December 2008, is Abbott's play to build on the success of the older fenofibrate brand TriCor.

As "The Pink Sheet" DAILY writes, Certriad is an important product for both Big Pharmas, but especially Abbott given that TriCor will face generic competition in just two years. As part of the agreement, AstraZeneca gains non-exclusive rights to sell TriLipix alongside Abbott in the U.S., excluding Puerto Rico. Abbott agreed to co-promote AstraZeneca's Crestor under similar terms last August.

The American Heart Association estimates that about 34 million people in the U.S. are affected by mixed dyslipidemia. But despite this huge opportunity, the drug will face an increasingly competitive market for similar fixed-dose combination CV products. For example, Daiichi Sankyo is developing a triple combination product combining its antihypertensive Azor with hydrochlorothiazide, and Merck and Schering-Plough have a combination of Zetia and Pfizer's Lipitor in development.

(Image courtesy flickrer mythic_moonlight, used with permission through a creative commons license.)