Deals of the Year Nominee: Genzyme/Isis

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

The case for Genzyme's January cholesterol deal with Isis is straightforward: it's Big. In terms of up-front money (not always easy to come by these days), it's the biggest licensing deal of 2008. And of 2007, in fact--the largest one before it was GlaxoSmithKline's Genmab alliance in December 2006.

What’s more, this deal remains top of the money-on-the-table league even after terms were adjusted following one of the year's largest clinical upsets, Schering-Plough and Merck's Enhance data.

To recap: Genzyme, allegedly up against ten other bidders, agreed to pay $325 million up front (including $150 million for shares, at roughly double the price they are today) and over $800 million in development and regulatory milestones for mipomersen, a Phase III, once weekly injectable that targets low-density lipoprotein (LDL), the bad-guy cholesterol—and is perhaps even better at doing so than statins.

Trouble was, days later, data from the notorious ENHANCE study called into question whether lower LDL actually leads to better cardiovascular outcomes—apparently undermining the entire premise on which statins—and mipomersen--is based. Vytorin scrips have been on a nosedive since then.

Small wonder, then, that the deal terms were updated in June, following a delay in April to the drug’s development timeframe thanks to a skittish FDA. Genzyme squeezed another $50 million of development funds out of Isis, bringing its total contribution up to $125 million. Isis gets certain milestones early, in exchange, but—here’s probably the biggest blow—it also shares development costs after the $125 million is used up, until the program turns a profit. (See this story.) In the original deal, Genzyme paid all the development beyond Isis’ $75 million contribution.

That matters, but only later. Mipomersen’s developers may brag that it’s more potent than statins but this isn’t a drug that’s about to displace Lipitor, at least not for a while. For now, mipomersen is being developed for a rare inherited disorder called homozygous familial hypercholesterolemia, which affects only one in a million people. Granted, FDA’s extra data requests post-Enhance will delay the planned filing date by a year (read more about that here), but this shouldn’t break the bank for Isis even under the new terms. Where it might—but where its 30% share of profits could also be significantly higher—is in the subsequent heterozygous hypercholesterolemia program (1 in 500) and the incrementally broader populations beyond that. These ramp up to people with elevated cholesterol at high risk of cardiovascular events, and then to those unable to tolerate statins or for whom statins don’t work.

Which leads us to the second part of the case for this being Deal of the Year: because of the product. Mipomersen’s pyramid-style expansion potential—starting with a tiny, orphan indication, getting the regulators and physicians on side, then broadening out, including with an orally-available follow-on—is the new way to build a blockbuster. In fact it’s probably the only way, mitigating risk and cost for all parties.

And that property of mipomersen—the potential to turn from a small product within specialist comfort zone into something worth $2 billion—explains why Genzyme left its blockbuster upfront cash-wodge on the table. Is it IN VIVO Blog's Deal of the Year?

Genzyme/Isis’ Mipomersen Development Hits A Snag

Talk about bad timing. You could almost feel sorry for Genzyme signing a $1.9 billion development and commercialization deal with Isis for mipomersen just days before ENHANCE data shook up the long-held belief that lower LDL equals better cardiovascular outcomes.

Mipomersen is based on the same lower-is-better lipid theory, after all. In fact, the drug targeting apolipoprotein B-100 has been shown to reduce cholesterol and other atherogenic lipids by more than 40 percent beyond reductions achieved with current standard lipid-lowering drugs.

Given the uncharted regulatory environment post-ENHANCE, we weren’t surprised to hear that Genzyme and Isis are pushing back their development timeline for mipomersen. IN VIVO speculated as much in February, and sure enough FDA is requesting more data to support an NDA filing than the firms had originally banked on.

The revised development plan calls for filing in 2010, not 2009, for an initial indication in homozygous familial hypercholesterolemia – a rare, orphan drug indication. It is the planned filing for a broader indication in patients with high cholesterol at high risk of cardiovascular events, including heterozygous FH, that could face a more significant delay, until 2012 or potentially beyond.

While FDA has guided Genzyme and Isis that reduction of LDL-cholesterol is an acceptable surrogate endpoint for accelerated approval for patients with hoFH, the agency is requesting two carcinogenicity studies to be included in the filing, rather than the one the firms had been planning to have completed in time for the submission.

For the broader indication, FDA is requesting a cardiovascular outcomes trial, three words that would send a tremor through even the most deep-pocketed big pharma. Outcomes data means long, expensive trials. Take for example Merck/Schering’s ongoing outcomes trial for Vytorin, IMPROVE IT, which is enrolling 18,000 patients with data anticipated in 2012.

Genzyme and Isis management are assuring investors that they can run a significantly smaller outcomes trial given the high-risk patients that will be enrolled, but that remains to be seen.

The one outcome that is clear is that the cost of developing mipomersen just went up.

And that leads to yet another snag: the transaction hasn’t officially closed. It’s expected to this quarter, but before the door shuts on the deal, there may still be an opening for Genzyme to re-negotiate. Both chief execs were less than forthcoming when asked about re-negotiating, which makes us think some changes are likely.

One line item Genzyme might look to gain an edge on is the development costs. Under the original agreement, Genzyme is responsible for paying all but $75 million of the development costs, meaning it would bear the brunt of the outcomes trial.

The deal also includes a pretty hefty upfront payment - $325 million – but the bulk of the regulatory and commercial milestones hedge Genzyme’s risks. Only $50 million of the $825 million in development and regulatory milestones are related to the homozygous FH indication, with the rest of the allotted payments falling to a heterozygous FH indication, a non-FH indication and approval of a follow-on product.

Read more about mipomersen and the latest regulatory setback at “The Pink Sheet” DAILY.

by Jessica Merrill
The Pink Sheet Daily

“We’re a Buyer, not a Seller,” Says Genzyme With Isis Deal

Genzyme’s $325 million up-front deal with Isis Pharmaceuticals on Phase III cholesterol-lowering drug mipomersen achieves two goals for the Big Biotech. It plugs a worrying gap in the company’s otherwise healthy growth trajectory and makes a bold statement about Genzyme’s determination to remain independent.

After activist shareholder Carl Icahn took a small stake in the company at the back end of last year, Genzyme needed to do something to minimize takeover speculation. CEO and chairman Henri Termeer--although always clear in his desire to drive an independent ship--took the trouble to go on the road and make his case, as reported in the Wall Street Journal.

Fortunately, as we now know, Termeer was also busy bidding for mipomersen. The product went up for auction last summer, according to Isis' CEO Stanley Crooke, and the timing of Genzyme's victory is opportune. The deal's size and structure--$150 million for about 5% of Isis’ equity, plus $175 million in cash upfront, a headline-grabbing potential $825 million in development and regulatory milestones, plus up to $750 million in commercial milestones—sends a strong message that Genzyme is out to buy and build, not to sell.

The deal also reinforces elements of Genzyme’s diversified-yet-specialist strategy, whose advantages, as we argued in a recent IN VIVO feature, are becoming increasingly clear. Mipomersen, a lipid-lowering compound that targets apolipoprotein B-100, is a weekly injectable being investigated, in the first instance, for familial hypercholesterolemia (FH). That’s a relatively rare, inherited disorder, suitable for a specialist sales force—bang in Genzyme’s bailiwick. Termeer describes the asset in the press release as a “very Genzyme-like product.”

Not that cardiovascular is exactly a Genzyme-like TA; not yet, anyway. For now in this area it sells only Cholestagel, a tablet for high cholesterol patients who can’t tolerate statins or who need additional help lowering LDL. But that’s the diversification bit: CV may now become one of Genzyme's emerging franchises as the company continues to broaden out beyond lysosomal storage disorders, where top-selling Gaucher’s treatment Cerezyme accounts for about 30% of total revenues.

Mipomersen, on paper at least, fits beautifully into Genzyme’s tried-and-tested strategy of broadening out assets beyond an initial niche indication and picking up lucrative corners left un-served by larger, sometimes primary care drugs. Thus mipomersen, due for filing in FH next year, will also be tested in patients with high cholesterol and at high risk of cardiovascular events—those for whom statins don’t work or aren’t suitable. (The drug, a second-generation anti-sense product, likewise confirms Genzyme's willingness to embrace novel, often risky technologies.)

Given the fit, the timing, and the drug's late-stage, it’s no surprise to see the smaller biotech win above-average up front fees, lucrative milestones--although, as Bear Stearns analyst Mark Schoenebaum points out, it’s unclear how these are distributed--and also at least 30% of profits without lifting a finger on the commercialization front.

That detail—commercialization--is perhaps more surprising: until recently, most biotechs have tended to go for a co-promotion option on their drugs at a minimum (although that trend has been waning, as we reported here). If the drug reaches $2 billion or more in sales (unlikely; Bear Stearns is forecasting a conservative $750 million) Isis would be eligible for 50% of profits, with a linear sliding scale in between.

Genzyme also has preferred access to future Isis drugs in CNS and certain rare diseases; that, courtesy of the $150 million equity purchase, at more than double Isis’ pre-announcement share price. Isis’ shares rose almost 50% in after-hours trading on Monday, according to Reuters.

Bristol & Isis: Stop Making Sense

Bristol-Myers Squibb must have missed the memo about the obsolescence of antisense therapies in light of RNA interference advances. The pharma is paying Isis Pharmaceuticals--a prolific and formidable conjuror of IP and drug candidates--$15 million upfront for exclusive rights to the biotech's PCSK9 antisense research program for prevention and treatment of hypercholesterolemia.

Bristol will pay all the bills associated with the discovery, development and commercialization deal, which will focus on Isis' second-generation PCSK9 inhibitors and backup compounds. Isis will also get at least $9 million in research funding over the next three years, up to $168 million in development and regulatory milestones, and high-single-digit to low-double-digit milestones on sales of any drugs. Solid figures for a realtively new discovery program that barely warrants a mention in Isis' own corporate materials.

Did Bristol pay over the odds for such an early stage program? Not necessarily: the deal's financials are roughly in line with its last pre-clinical deal in the space, a more traditional small molecule adventure with Exelixis back in 2005. This time the target (longwindedly, proprotein convertase subtilisin kexin 9) is a protease that helps to regulate levels of LDL cholesterol. Too much PCSK9, too much LDL cholesterol (just why is still undetermined).

And PCSK9 has proven impossible to modulate using small molecules or protein therapeutics, which is why it has drawn attention in the nucleic acid therapy crowd, namely Alnylam Pharmaceuticals and partner UT Southwestern. The RNAi company considers PCSK9 the most intriguing cardiovascular target out there, and aims to file an IND for an injectible PCSK9 inhibitor this year. If Bristol felt the same way about the target, they didn't have many options.

But wait, you say. Statins are cheap, orally available, and generally work well at lowering LDL cholesterol. All true--but Alnylam is targeting the several hundred thousand patients (out of the millions on statin therapy) whose LDL remains out of control despite statin therapy.

Going after a smaller, unsatisfied segment of a massive market like the statins with a specialty therapy may pay off handsomely for biotechs like Alnylam. It will be interesting to see whether Bristol (which has signed two excellent, risk-hedging, biotechy out-licensing deals this year with AstraZeneca and Pfizer) can further embrace the biotech ethos and do the same.

If so it may also take a close look at Isis' apolipoprotein B-100 inhibitor, ISIS 301012, a compound we picked as one of our top-10 licensable cardiovascular projects a few months ago. That Phase II candidate, also being tested as an LDL lowerer against a traditionally undruggable target, ought to land a much more lucrative deal than PCSK9, Isis CEO Stanley Crooke told Reuters today.