Deals Of The Week: The ASCO Edition

ASCO is just moving into full swing, but already the press releases are flying fast and furious. Biotechs have long looked to this meeting as a means to showcase their smarts and increase their profile with public investors. But as big pharmas have set their sights on oncology as the therapeutic area of choice -- given its high unmet medical need and, historically, generous reimbursement, there's no doubt ASCO is now a critical meeting for even the biggest players in the industry.

Like last year, the particular tumor type driving a lot of investor interest at this year's Chicago confab is melanoma. Since presenting robust Phase III data at ASCO 2010 showing a survival benefit for Yervoy, Bristol-Myers Squibb has gone on to win rapid approval for its CTLA-4 inhibitor. This year, investors and clinicians will be watching for new data measuring Yervoy efficacy in pretreated melanoma patients; they'll also be monitoring the data associated with Plexxikon/Roche's vemurafenib, which is pending FDA approval for use in patients with the BRAF V600 mutation, a specific genetic abnormality observed in about 50% of melanoma patients.

As "The Pink Sheet" Daily notes, it's not entirely clear how the melanoma market will shake out when both products are finally on the market. They may be competitors, but given their different modes of action -- Yervoy stimulates the immune system, while the Plexx/Roche drug targets only tumor cells that carry the V600 abnormality -- it's equally likely they could act synergistically. Certainly neither drug on its own works in all patients or offers a long-term cure, even if both extend median patient survival in clinical trials.

Thus, the news June 2 that Roche/Plexxikon would find a way to work with BMS to study the two drugs in combination seemed almost a fait accompli. The press releases issued (from three different companies no less) were long on breathless prose and short on detail: the parties will conduct a Phase I/II study evaluating safety and efficacy of the two drugs in combo, but did not provide more clarity on the trial's design, its timing, or its enrollment. "If appropriate, the companies may conduct further development of the combination," Bristol said in its press release.

You will notice there's also no information on the economic sharing that might come from such a clinical collaboration either. That's hardly surprising. We've yet to see much in the way of financial deets for earlier tie-ups in oncology: AstraZeneca's 2009 alliance with Merck to combine development of their respective clinical-stage MEK inhibitor and AKT inhibitor; or Sanofi's December 2010 deal with Merck Serono to marry their Phase I PI3 Kinase- and MEK-targeting molecules.

Despite the increasing complexity of the oncology market, one in which payers are taking a more active role in controlling costs, such cross-collaboration remains the exception rather than the rule. There are plenty of reasons why: issues around control, valuation, and overlap with other non-partnered products mean it can be tough for two large companies to come to agreement on how to share knowledge and find ways to work together.

That BMS and Roche have found a way to do so can only be a smart thing. The reality is organizations like US Oncology, Cardinal's P4 Healthcare, and Via Oncology are going beyond traditional treatment guidelines recommended by the likes of ASCO and the National Comprehensive Cancer Network, working with payers to provide "clinical pathways" that aim to standardize treatment for a specific disease or tumor type. Aimed for now at treating the most costly cancers, these programs, which are still in pilot mode at major players like Aetna, Blue Cross Blue Shield and Highmark, reduce the wide latitude US doctors have historically enjoyed when prescribing oncologics.

The ultimate impact of these pathways on the biopharma industry isn't yet known, but as we write in this IN VIVO feature, their advent has real consequences for how companies should approach drug development. And while it's very early days to be talking about a melanoma pathway, doing clinical trials to show the merit of your drug in conjunction with a competitor, when it's highly likely to see real-world use in such a combination, just makes sense. (We also wonder how this impacts GSK's Phase III melanoma drugs, its MEK1/2 inhibitor and its BRAF protein kinase inhibitor. Can these earlier stages medicines get traction in the current competitive marketplace? GSK certainly hopes so, and has its own combo trials ongoing.)

Will we see more cross-company clinical stage oncology pair-ups in the future? We hope so. Could such alliances be broader and extend beyond on-offs to a ViiV type arrangement? We're doubtful given the deal making complexities and nearly every pharma's desire to be tops in oncology. But as crazy as that idea sounds, it'd be a clear choice for 2011's DOTY.

In the interim, we always have ASCO (if not Paris) and...

Clovis/Pfizer: Attention biopharma trend watchers! We bring you this news flash of another sighting of that rare bird in the wild: the out-licensing. On June 2, Clovis announced it was licensing Pfizer's Phase I/II Poly (ADP-ribose) polymerase (PARP) inhibitor, PF-01367338, for an undisclosed upfront sum. Under the terms of the agreement, Clovis Oncology will take over responsibility for global product development and commercialization, and in addition to paying the u/f, will owe Pfizer additional downstream fees milestones totaling up to $255 million (pending success in the clinic and commercially, of course). Interestingly, as part of the out-licensing, Pfizer Venture Investments is taking an equity stake in the biotech. (So it's a licensing AND a financing in one blow.) Not that Clovis is hurting in the cash department. Recall Clovis, a START-UP A-lister, pulled in one of the biggest Series As EVUH in 2009. PARP inhibition is, of course, a hot topic at ASCO, and a quick search of the pipeline database Inteleos, shows there are more than a dozen drugs in development against this target, including some that are much further along, including Sanofi's iniparib (Phase III, originally developed by BiPar), AstraZeneca's olaparib, and Cephalon's CEP-9722. The press release announcing the news emphasizes '338 is a "potent" PARP inhibitor, so it's a bit curious that Pfizer would give it up unless its trying to walk the talk of jettisoning anything not first-in-class or best-in-class. (But that raises other questions, including what does Clovis see in the compound?). Separately, Clovis also announced this week plans to develop in concert with Roche an in vitro PCR-based companion diagnostic linked to EGFR mutations.--EL

Johnson & Johnson/AVEO: Months after partnering its lead asset tivozanib in a lucrative deal with Astellas, Aveo has extended its network of partners with an early stage deal with Johnson & Johnson's Centocor Ortho Biotech division. The Cambridge, Mass.-based biotech announced the licensing deal for compounds targeting the RON (Recepteur d'Origine Nantais) receptor - believed to play a role in cancer development - for $15 million upfront May 31. Under the deal, Aveo will receive half of the $15 million in an upfront payment and the rest through a separate equity investment that gives J&J a 1.25% stake in the biotech. Given the early-stage nature of the deal, it's not surprising the arrangement is back-end loaded, with Aveo eligible to receive up to $540 million in development, regulatory and commercial milestones. Aveo will also receive tiered, double-digit royalties on sales of any products stemming from the collaboration. Centocor will be responsible for clinical development, manufacturing, commercialization and costs. J&J will also fund some research to be conducted by Aveo to identify biomarkers for patients most likely to respond to treatment with RON-targeted antibodies. "It is about building out a portfolio," said Aveo Chief Business Officer Elan Ezickson of the collaboration in an interview with "The Pink Sheet" DAILY. For J&J, the deal provides access to what could be an important product in oncology, an area of critical importance to the big pharma's overall business success. -- Jessica Merrill

AstraZeneca/Heptares: (Spoiler alert. No oncology refs in this deal.) UK biotech Heptares Therapeutics signed its third Big Pharma agreement in two months this week, this time with AstraZeneca. The two companies have entered into a four-year research collaboration to discover and develop new medicines that target G-protein coupled receptors (GPCRs). AstraZeneca will have worldwide commercial rights to product candidates emerging from the collaboration, with Heptares receiving $6.25 million in unconditional upfront payments plus committed research funding and future milestones. Heptares will also receive royalties on product sales. Research teams drawn from both companies will focus on a number of GPCR targets known to be linked to CNS/pain, cardiovascular/metabolic and inflammatory disorders. The deal brings to more than $13 million the total upfront money that Heptares has received from its pharmaceutical partners this year, which together add an extra 18-20 months to the biotech's cash runway, according to CEO Malcolm Weir. It also represents further validation for the four-year-old company's technology, which helps stabilize GPCR molecules. That AstraZeneca is modality-agnostic in this deal - purporting to seek both small- and large-molecule candidates - reflects the growing importance of the Big Pharma's MedImmune biologics subsidiary within its overall R&D operations.--John Davis
Johnson & Johnson/Diamyd: J&J's Ortho-McNeil-Janssen (OMJP) signed one early stage deal this week -- and called it quits on another. It was barely a year ago when Elisabeth Lindner, then President and CEO of the Swedish diabetes outfit Diamyd, pronounced on a quarterly earnings call that "a new chapter has begun" as a result of the firm's $45 million upfront licensing agreement with OMJP. That chapter closed on June 1, when OMJP returned all rights to the Phase III GAD65, an antigen-based therapeutic vaccine designed to preserve beta cells in type 1 diabetics. A big disappointment to Diamyd and its shareholders, the news can hardly be called surprising. (We're even tempted to say the writing was on the wall.) On May 9, the two companies reported clinical trial data from a European pivotal study, showing GAD65 failed to meet the primary efficacy endpoint of preserving beta cell function in new diagnosed Type 1 diabetics after 15 months of therapy. Although the company noted "a small positive effect was seen", the data weren't good enough to keep OMJP engaged -- and, importantly, willing to shoulder any additional development costs. Recall the 2010 deal stipulated the two partners would share R&D costs until results of the first Phase III study were available, at which time OMJP had the option to assume full development of the drug candidate. It can't be an easy message to give shareholders, but Diamyd's acting president and CEO, Peter Zerhouni (who replaced Lindner after her abrupt departure in late April) did his best to spin the news positively. "With all the rights to returned to us we are free to decide on how to extract the most value from GAD65 going forward," he said. Whether Diamyd can sign a new partner near term is unclear -- a therapeutic vaccine for diabetes is scientifically risky and it's hard to see a lot of interest after the disappointing Phase III study results. (Even Diamyd doesn't seem that interested. In the wake of OMJP's decision it announced it would shelve a planned longer term follow-up of patients in the European trial.) Investors may have more clarity on GAD65's potential partnerability by end of June -- at the upcoming ADA meeting Diamyd will present data on the European trial, presumably providing greater detail about the small positive effect. There's also a Phase III ongoing in the US due to read out in 2012 and two other externally funded studies that may yet result in the vaccine's resurrection.--EL

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.)

Pfizer Deceives, While GSK Shines

Pfizer has apparently held back clinical trial data for its anti-depressant reboxetine (known in Germany as Edronax) from IQWiG, Germany's drug-benefit assessment agency, leading the agency to declare "no proof of benefit" in its preliminary report.

The report was commissioned by Germany's Federal Joint Committee, which uses such information to determine which drugs should be reimbursed.

In holding back data from at least 9 studies of reboxetine (Edronax), which has been tested in at least 16 trials, according to IQWiG, Pfizer's committing "deception through concealment," according to Peter Sawicki, the agency's director, which he describes as a "non-trivial offence."

A Pfizer spokesman was quoted in German daily Die Welt as saying "we made sufficient data available to IQWiG". Whatever the truth--and why else would Pfizer hold back various published and un-published data, we ask, unless it was un-flattering?--it's certainly ruffled IQWiG's feathers.

The Agency issued a separate press release about Pfizer's misdeeds, alongside its announcement of the preliminary report on anti-depressants. In it, it talks about "publication bias" being "one of the most important and dangerous sources of error in medicine." Quite right too. And why is Pfizer's behavior just asking for trouble in this particular case? Because "other researchers have already shown that the effect of several [anti-depressant] agents has always been exaggerated in the published literature--up to 70%."

IQWiG has concluded that a 2005 agreement with one of the country's pharma associations whereby manufacturers voluntarily disclose clinical trial information, published and unpublished, is no longer reliable. It' s calling on an EU-wide legal obligation to publish results--including retrospectively, as exists in the US.

Pfizer isn't the only perpetrator here. "Companies have repeatedly refused to provide the institute with study documents requirement for the benefit-assessment," the press release continues. In this latest preliminary report on anti-depressants, Essex Pharma was also pushed into the spotlight for possible trial concealment, with the result that its drug, mirtazapine, received a distinctly luke-warm assessment as well.

Only GlaxoSmithKline shone as an example of how things should be done. In the case of bupropion XL, the institute was given "access to the complete clinical study reports by the manufacturer." And, guess what, there was proof of benefit for this agent compared to placebo in acute therapy and no indications of harm. (It wasn't a good as venlaxafine XR, mind you.)

These aren't big drugs, they aren't new drugs. But Pfizer isn't doing itself or the sector's reputation any good in holding back data. It should probably at least pretend to take IQWiG a bit more seriously, given the agency's role as a health-technology assessor in Europe's largest market.

All the more so since Pfizer has been stung in Germany before--like when it refused to accept authorities' decision to group Lipitor (known there as Sortis) into a broader 'jumbo-group' pegged at a similar price to other statins. The drug's share fell to below 3%, prompting Pfizer to return with a rebate deal.

And on the subject of rebate deals: we'll have some more posts on those shortly. For now, let's just say that they've become widespread since German payors have been allowed to negotiate directly with pharmacos. And the signs are that some companies now realize they have no choice but to get even more creative in building relationships with payors. So buck up, Pfizer.

image by flikrer Aelle used under a creative commons license

Are More Rent-A-Reps On The Way?

That's what Deutsche Bank analyst Barbara Ryan suggests in an investor note after digesting the news that Pfizer is cutting about 2,400 sales reps, or roughly one-third of its sales force, as part of its ongoing downsizing.

In her view, tapping contract sales organizations makes sense, since revenues now follow a "cyclical pattern surrounding patent expirations" and most US drugmakers will lose more than 25 percent of their revenue base during this upcoming period. The answer? A new model, of sorts, that involves moving from a fixed cost to a variable cost base in order to maintain margins.

How would it work? A mix-and-match approach that calls for augmenting a drugmaker's best salespeople with a CSO. "Mature brands will be managed by less costly outsourced sales forces, which could cost as much as 25 percent less, which can be pulled before patent expirations," she writes.

Of course, such gambits are already under way. Ryan, in fact, points out that Merck tried this a few months ago by signing a deal with InVentiv Health to market Cozaar and Hyzaar just as the drugmaker axed 1,200 sales reps. These sorts of efforts, by the way, were foreshadowed in an IN VIVO article in 2006:

"The drug industry has accepted the need to outsource R&D--now, with sales productivity down, and the rising cost and risk of owning too much commercial infrastructure, why not outsource more of the sales effort, too? Big and small pharmas resist the idea but will eventually have to accept it."

And since then, the need for a new model has been hastened by a few familiar factors - more product recalls, fewer product approvals and ongoing complaints from some physicians about the number and effectiveness of reps walking through their doors. The bright side? This is one job that can't be outsourced overseas.

image from flickr user 'Howdy, I'm Michael Karshis' used under a creative commons license

DOTW: Variations On A Theme

2008 is drawing to a close. Today marks the year's final "Deals of the Week" post. As this blogger takes time to reflect on the pre-holiday deal-making activity, it's no surprise that all of the deals in today's recap reflect broader themes at work in the biopharma industry. From Big Pharma's penchant for specialty products to highly structured alliances that allow both parties to share the financial risk (and gain), these deals mirror past DOTW discussions, as well as the larger themes highlighted in our various Deals Of The Year posts. DOTY voting commences on Monday. Remember to vote early and often. Until then, we hope you enjoy this week's variations on a theme. (Bach is optional.)

GSK/Dynavax: It was a good news, bad news kind of week for Dynavax. The biotech announced that it's partnership with Merck concerning the troubled Hepatitis B vaccine Heplisav was officially over (see below). Despite the bad news, Dynavax can at least take comfort in its recent deal with GlaxoSmithKline: an option-style tie-up that gives Dynavax $10 million up-front in exchange for a worldwide strategic alliance involving endosomal toll-like receptor drug candidates in four autoimmune and inflammatory disease areas, including Dynavax's preclinical TLR7/TLR9 inhibitor, DV1079. Under the deal's terms, Berkeley, Calif.-based Dynavax will conduct research and early clinical development using its proprietary technology, and GSK has the exclusive option to license each program at proof-of-concept, or earlier if certain circumstances occur. Should GSK exercise the option, it will take over development and commercialization activities, with Dynavax getting tiered royalties up to double digits, the two firms said Dec. 17. Dynavax, which could realize milestones up to $200 million apiece in each of the four programs, also retains the option to co-develop and co-market one pre-specified product. During a same-day investor call announcing the collaboration, Dynavax CEO Dino Dina called the partnership with GSK "a transformational event" for his biotech. "The alliance will allow us to diversify and advance a very valuable pipeline of products that target significant unmet needs," he said. According to "The Pink Sheet" DAILY, that's likely to be the case even if GSK ultimately declines the option on Dynavax's drug. Certainly, given the pipeline pressures of Big Pharma companies, it's unlikely there will be the stigma of "tainted product" attached to the program if GSK ultimately declines the option--assuming no adverse side-effects and positive clinical data with DV1079. Case in point: Exelixis. In October, GSK declined its option on Exelixis' small molecule oncologic XL184, ending a six-year R&D partnership that brought the latter firm an estimated $260 million in funding, including an $85 million loan. Exelixis regained all rights to XL184 and quickly partnered the molecule, along with an earlier-stage compound, with Bristol-Myers Squibb for $240 million in assured payments plus a major co-development and marketing role. For GSK , the deal marks the continuation of a business strategy heavily weighted toward option-based deals, which involve a relatively minimal upfront commitment for the global pharma, allowing it to hedge its financial exposure until the R&D risks are known more fully. In addition to its 2002 deal with Exelixis, GSK has also inked option arrangements with Cellzome, Affiris, Anacor, NeuroSearch, Regulus Therapeutics and OncoMed, according to FDC-Windhover's Strategic Transactions database.

Wyeth/Thiakis: This deal, which sees Wyeth acquiring London-based Thiakis’ obesity candidates, could best be described by a made-up word: alli-quisition (hey, you want real words, read a book). Wyeth pays $30 million up-front for Thiakis and its portfolio of synthetic gastrointestinal peptides and up to $120 million in earnouts tagged to downstream milestones. Our Pink Sheet DAILY in-depth coverage of the deal is here. Thiakis’ backers secure an exit—the biotech had raised about $19 million from private investors Novo and Advent Venture Partners—but without some of those milestone payments it’s not a particularly good one. Expect these kind of earn-out based deals to become more prominent as we move into 2009. With Big Pharma content to sit on the sidelines and wait while prices for biotech companies fall, most investors surveyed recently by FDC-Windhover believe future M&A activity is likely to place a premium on hedging risk. Earn-outs haven’t featured in a ton of deals lately—in fact thus far in 2008, just 20 percent of all private acquisitions have included earn-outs, down from a high in 2006 of nearly 43 percent of all private deals. (Read all about it in our next issue of START-UP.) Back to Wyeth: the pharma gets Thiakis' lead project, TKS1225, a potent, long-acting analogue of oxyntomodulin, which is a naturally occurring peptide hormone involved in regulating food intake. The hormone is released by the gut following food ingestion, sending satiety signals to the brain. It is thought to work through the GLP-1 receptor and does not cross the blood brain barrier, an important consideration given the suicidality risks associated with another class of obesity treatments, the CB-1 antagonists--Christopher Morrison.

Pfizer/Auxilium: As Big Pharmas continue to have more negotiating leverage, there’s a clear preference these days for tightly structured alliances rather than the outright biotech purchases. And given the regulatory hurdles associated with many big primary care drugs, Big Pharma is much more interested in specialty care products. Pfizer's tie-up this week with Auxilium illustrates both those trends. The two companies announced this week that Pfizer would pay $75 million upfront for the European rights to Xiaflex, a biological enzyme in Phase III for Dupuytren’s contracture and Phase IIb for Peyronie’s disease. Malvern, Pa.-based Auxilium stands to earn $150 million in regulatory milestones, $260 in sales-based milestones and increasing tiered royalties on Xiaflex if all goes well. Pfizer, meanwhile, has the right to negotiate commercial rights for additional indications within its territories, including frozen shoulder syndrome, where the drug is currently in Phase II trials. It sounds as though there was stiff competition for the biologic. In a conference call discussing the news, Auxilium CEO Armando Anido said the biotech chose Pfizer as its partner over several other global pharmas, because of the larger company's success marketing drugs such as Lipitor and Viagra. As might be expected, Pfizer's newly created specialty care business unit will have the commercialization honors. The Pfizer deal likely occurs at an ideal time for Auxilium, which faces a patent fight with Upsher-Smith Laboratories over intellectual property related to Testim, the biotech's testosterone gel for hypogonadism. Upsher-Smith notified Auxilium in October that it plans to file an Abbreviated NDA with the FDA for its own testosterone gel that it believes does not infringe on Testim's patent, which runs until January 2025.

Baxter/Avigen: Like so many other small biotech companies, Avigen, which focuses on neurological compounds, has had a tough year. The company has the dubious honor of posting one of the largest market cap losses among biotechs valued under $500 million in Q3 according to Rodman & Renshaw. Avigen's share price tanked in October when it announced negative news associated with AV650, its Phase IIb drug for the treatment of spasticity associated with multiple sclerosis. The biotech terminated its development partnership with Austria's Sanochemia Pharmazeutika and said it would focus on developing AV411, a novel glial activation inhibitor, for neuropathic pain and opioid withdrawal. But during its third-quarter financial call on Oct. 28, Avigen unveiled a massive restructuring plan that entailed discontinuing work on the glial activator and another preclinical product, AV513, unless a development partner could be found. CEO Kenneth Chahine said the new direction meant Avigen would have sufficient cash for four years of operations, given the $47.4 million the company had in cash, cash equivalents and securities at quarter's end. But the company's largest shareholder, Biotechnology Value Fund, which holds 29 percent of Avigen's stock and has provided capital directly to the biotech, clearly is troubled by the news. In a Dec. 11 letter to Avigen's board, BVF's Mark Lampert decried the steep decline in the company's share price, which has fallen 90 percent since 2004. He charged the company with threatening to destroy shareholder value by broadening "golden parachute" provisions for executives to one-fifth of Avigen's market cap and adopting a "poison pill" to prevent BVF from trying to intervene by purchasing a majority share. Lampert asserted that "Avigen has no real business at this time and has abandoned the development of all its products." Instead of looking for potential new partners and directions, the letter urged Avigen to return its excess cash to shareholders or at least offer a downside guarantee - an obligation to buy shares back at a specified price on a certain date. This week comes news that might appease Lampert and the crew at BVF. Avigen announced it was partnering its preclinical, oral blood coagulation product, AV513, to Baxter Healthcare in deal worth $7 million. "The sale of AV513 is an example of building value in a product that is differentiated from current therapies, and bringing it to a valuation point that generated a positive return on investment," said Avigen's Chahine in a press release announcing the news. Hmm, we can't wait for BVF's response.

GlaxoSmithKline/Genmab: Back in the days when licensors had clout, co-promote options featured in almost every deal. Biotechs figured they would keep their strategic options open just in case going commercial took their fancy, and Big Pharma were in no position to refuse. This week’s news that Genmab has sold back its co-promote option on CLL candidate ofatumumab to partner GlaxoSmithKline makes two things clear: first, many of these options are unlikely to ever be exercised given the logistical and financial commitments required (which is in large part why Big Pharma were so relaxed about granting them in the first place); second, in today's roiling financial markets, getting a guaranteed cash payment is a wiser course of action than holding out for theoretical money in the future. (A bird in the hand, as they say.) Genmab got just $4.5 million from GSK for the option, which covered a targeted oncology setting in the US and the Nordic region. Not a lot, particularly since GSK had granted Genmab the option to co-promote two of its own drugs , too—and agreed to reimburse some sales reps. But Genmab no longer has anything behind ofatumumab that could make a sales infrastructure cost-effective (one that Genmab estimates would have cost $7 million a year); it ended development of the potentially synergistic HuMax-CD4 for cutaneous T-cell lymphoma and its other program is in head and neck cancer. So if it wouldn’t have exercised the option anyway, why not take the money? And why not re-negotiate a lower share of the (currently 50/50) R&D costs, too, in exchange for a bit of royalty?--Melanie Senior.

AstraZeneca/MAP Pharmaceuticals: Another day, another deal heavily weighted on the back end. On Friday Dec. 18, AstraZeneca and MAP Pharmaceuticals announced a worldwide collaboration to develop and commercialize MAP's proprietary nebulized formulation of budesonide, currently in Phase III development, for treatment of pediatric asthma. While the biodollars sounded huge--"AZ, MAP ink $900 million asthma deal" read one write-up of the transaction--the reality is far less glorious. Under the terms of the agreement, AstraZeneca will pay MAP Pharmaceuticals an upfront cash payment of just $40 million (certainly not bad). True, the company owes MAP another $35 million if the ongoing Phase III trial reaches certain primary endpoints with the appropriate safety results. And, it's also true that at some point in the future, MAP could receive up to $240 million in potential development and regulatory milestones, as well as sales performace-related milestones of up to $585 million in the event the product is a considerable commercial success. Don't get me wrong--$40 million is a sizeable chunk of non-dilutive change and kudos to MAP for getting the deal signed at all. But the other $860 million? It may never well materialize--and MAP and its investors would do well to remember that. (NOTE: MAP wasn't the only potential winner in this deal: Elan Pharmaceuticals may also get a welcome boost. MAP's proprietary formulation of budesonide comes courtesy of Elan's nanocrystal technology. )


Merck/Dynavax: It's official. Merck and Dynavax announced Friday Dec. 18 that they were tabling their agreement concerning Heplisav, a Phase 3 hepatitis B virus (HBV) vaccine placed on clinical hold at the FDA earlier this year after a sgnificant adverse side-effect occurred. All rights to develop and commercialize Heplisav revert to Dynavax. According to the press release, Dynavax will continue to evaluate Heplisav's development options, especially as a treatment for adults outside the U.S. and for the global end-stage renal disease markets, which the company estimates represent approximately 70% of the total market opportunity for this vaccine. If the regulatory feedback is favorable, Dynavax plans to line up a new partner or financing arrangement to support necessary clinical work with the drug. It will be interesting to see how regulators outside the U.S. view the drug. Back in October, the FDA notified Merck and Dynavax that "the balance of risk versus potential benefit no longer favors continued clinical evaluation of Heplisav in healthy adults and children." Though Dynavax is putting on a brave face--it wins our award for the little biotech engine that could--there's no denying the company faces some tough choices in the months ahead. With limited cash resources--just $65 million including the recent up-front from GSK and '08 operating expenses for the first three quarters totalling over $50 million--it's hard to see how the company will be able to push Heplisav to the point where it is sufficiently derisked for potential future partners.

through the fingers by flickr user akash k courtesy of creative commons license.

Deals of the Year Nominee: Pfizer/Ranbaxy

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.

In some circles, the event had its own acronym: LLOE – Lipitor Loss of Exclusivity. Now it has a date: Nov. 30, 2011 -- the end of the primary care era for pharma. Think that’s a little extreme? Well, you don’t get to be a Deal of the Year Nominee by playing it safe.

Except in this case you do. While most of the DotYNs you’ve read about here are essentially bets by firms that big ideas will work out in one form or another, this was a tale of two companies not wanting to take a chance. As we explained in the Pink Sheet, the deal gives some certainty to both sides, but what it really offers is closure.

In an era when product expirations – either through the lifting of exclusivity or the weight of safety problems--seem more common than product launches, this deal is an example of how big pharma can try to take its primary care jumbo jets in for soft landings. Protonix’s fall to earth offered a number of lessons for generic and brand firms to learn, and Ranbaxy seems to have gotten some good practice deal-making when it worked out a settlement on Nexium with AstraZeneca.
With the lawsuit behind them, both Ranbaxy and Pfizer can focus on what’s next. For Ranbaxy, it’s resolving manufacturing problems and figuring out how to be a regional growth engine for a big pharma. (The Daiichi/Ranbaxy merger, which may have contributed to the Pfizer settlement, is also a DotYN – vote for them both!)

For Pfizer, the question is how to learn to love being a drug maker again. CEO Jeffery Kindler may not have all the answers to that one yet, but by acknowledging the end of the Lipitor relationship, he’s moving in the right direction. Failing to recognize the seriousness of the problem helped cost the previous management team its jobs, so the decision to sign the divorce papers with the firm’s biggest product perversely takes a weight off the company.

But while the Ranbaxy settlement is a great example of what a company like Pfizer can get when it has a former general counsel as its CEO, that talent for certainty may also be emblematic of what a firm might miss out on. Because while some other new big pharma CEOs have been out trying to gobble up innovative technology or swallow up successful partners, one of the principal development decisions Pfizer has made with Kindler at the helm has been to stop placing bets on cardiovascular research.

But at least the financial community now knows how to model PFE’s LLOE. And so we formally nominate Pfizer/Ranbaxy for achievement in the category of playing it safe.

image by flickr user maxymedia used under a creative commons license.

Pfizer's Newfound Flexibility

The restructuring at Pfizer that will see the group split into business units may or may not improve productivity, boost the bottom line, or resonate positively with investors. But one thing's for sure: Pfizer's move should lead to a more flexible, nimble company. If they're not quite Gumby, they're no longer Pokey either.

Our take on the new structure--and on Pfizer's slimmed-down R&D focus--will be in the next issue of IN VIVO.

In the new Pfizer, the company's business units--comprising mature products, emerging markets, oncology, specialty products, and primary care--will be managed independently.

Essentially the groups will vie for resources with one another, manage their own P&Ls, and as Pfizer R&D chief Martin Mackay tells us, essentially run the show. "It really empowers those business unit heads to run P&Ls so they will have tremendous responsibility to maximize revenues of the projects we have in those groups but also to make sure the business is thriving at the earlier stages," he says.

Mackay and the rest of the executive leadership will then decide how to dole out Pfizer's dollars between these different businesses. "Of course a lot of strategy is simply down to where do you allocate your resources," he says.

Running smaller units under the umbrella of a large pharma isn't a new concept; GSK's centers of excellence in drug discovery (CEDDs) similarly compete with one another for corporate resources, albeit earlier on in the value chain. In some ways Pfizer's move is less ambitious than GSK's experiment, started way back in 2001 and aimed in part at mimicking the entrepreneurial essence of a biotech firm.

The CEDDs though still have to prove their worth 8 years on--GSK may talk about a broader pipeline but the proof of the pipeline is in the marketing, to stretch a phrase. And if the CEDDs were really thriving, new initiatives like GSK's drug performance units, announced over the sumer, mightn't be necessary. (It's worth noting too that GSK has also recently created an oncology unit--GSK Oncology--which takes different DPUs out of various CEDDs.)

But Pfizer's new structure ought to by its very nature (in that the units are later-stage development and commercialization focused) thrive or fail more quickly.

And when Pfizer decides its time to pull the plug on a unit--presto!--it's already wrapped up in an easy to spin-off or sell package. And it should, by then, have plenty of practice in offloading unwanted assets. As part of the research reshuffle, Pfizer is pushing forward with its efforts to monetize shelved programs. Earlier this year, it spun-off both RaQualia and Esperion 2.0.

“We’ll be much more active in out-licensing assets,” Mackay promises. “It will vary between single assets and small groups of assets, depending on what is the best deal for both parties.” Pfizer, he says, is in active discussions with potential collaborators. “We’ll be much more creative than we’ve been in the past in this particular arena.” For more on Pfizer's externalization program, see this piece in today's Pink Sheet Daily.

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

Pfizer to Tin Man: Drop Dead

You're axing what?

Pfizer is, according to today's Wall Street Journal (not to mention at least one astute blogger last week), giving up on R&D in heart disease, obesity and bone health.

The big news here is the abandoning of cardiovascular medicine--Pfizer's profit center driven by $17+ billion annual revenues from Lipitor and Norvasc--but of course there are exceptions to consider. Pfizer isn't dropping its late-stage programs, like the much-written about apixaban, for example.

But the strategic shift, not wholly unexpected and certainly not conflicting with statements made by Pfizer leadership lately (including comments by R&D chief Martin Mackay and head of strategy Bill Ringo at FDC/Windhover's Pharmaceutical Strategic Alliances meeting last week) says a lot about where Pfizer--and Big Pharma generally--is moving.

Where's that? Toward a greater emphasis on specialty therapeutic spaces like oncology (look for a feature on Pfizer's oncology ambitions in the next IN VIVO) and into large molecules like next-generation biologics, of course. By now this is not a surprise, but just how Big Pharma manages to transform itself while at the same time dealing with massive patent expirations and the demands of dividend- and buyback-hungry shareholders remains to be seen. Nevertheless, pulling out of the increasingly genericized cardiovascular space and some other primary care areas should speed this transition.

Some of the smaller top-tier companies, like Bristol-Myers Squibb, can make do with focused business development strategies--the acquisition of Adnexus, for example, or the please-let-it-be-over-soon-we're-so-sick-of-it Imclone takeover. For Pfizer such add-ons won't do the trick. But Bill Ringo noted at PSA that although Pfizer on the whole would have trouble moving the growth needle with a string-of-pearls strategy akin to BMS's, it could do so within the context of specific disease areas. Cardiovascular R&D is clearly not one of those areas.

Layoffs are likely (as of now still no official word from Pfizer on the cuts). But look also for more Pfizer spin-outs like the Japanese business RaQualia and the second incarnation of Esperion, as well as out-licensing deals, to help smooth the transition. Pfizer has, by its own estimates, too substantial a Phase II pipeline to take through to pivotal trials. "We need to be more creative with development," noted Mackay at PSA, and he said RaQualia was a good example of that creativity at work, as was the apixaban deal, which could be replicated in the other direction with Pfizer partnering on one of its own Phase III candidates. What should be worrying to Pfizer and other pharmas is that despite a Phase II glut these companies have a difficult time determining which post-proof-of-concept projects will succeed in Phase III and at the regulators.

Pfizer isn't the first pharma to abandon what most would consider its core therapeutic space. GSK and AstraZeneca, for example, sustained for years by the profits from GI franchises, each exited the bulk of their R&D in that area (witness AZ's spin-out of Albireo, though that pharma has noted it remains active in GERD research whereas Pfizer seems unlikely to continue in hypercholesterolemia R&D).

So where does the Tin Man turn when his new ticker gets rusty? And where do those small pharma and biotech companies in need of a partner for their next-big-thing HDL raiser or anti-hypertensive turn? In this up-is-down, black-is-white pharma shift to specialist drugs, perhaps primary care becomes the domain of a few specialists while the rest of the industry piles into oncology and orphan drugs.

One further irony: even as its exits cardiovascular research, Pfizer wants to remain one of those few remaining primary-care specialists. Bill Ringo noted exactly that at the PSA and in this article in IN VIVO -- as other Big Pharmas cut back primary-care commercial programs to boost their presence in specialist marketing, Pfizer, while certainly doing the specialist thing, is going to keep its primary-care capabilities, theoretically giving itself a comparative advantage as an in-licenser when it comes to those increasingly rare, and expensive, late-stage primary care candidates.

DotW: Specifics a Surprise; Trends -- Not a Surprise

Your blogger this week did not expect that John McCain would select a nationally obscure, half-term governor of Alaska as his running mate. What wasn’t a surprise was the selection of a pro-life evangelical to shore up the Republican base.

Which leads to our theme in this edition of Deals of the Week. Specifics a surprise. But basic trends: not a surprise.

Take for example the announcement from Zymogenetics and Merck Serono that the two companies were restructuring their deal on the fusion protein atacicept so that Zymo could save up to $260 million in co-development and –commercialization contributions through 2012. (See our Pink Sheet Daily coverage here). Fact is deals which could get biotechs bigger downstream profits also cost them a lot more upfront – and with biotech funding scarce, those obligations are looking pretty scary these days. And particularly scary for Zymo, which was hoping to pay its share mostly out of proceeds from its marketed drug Recothrom. But the recombinant thrombin product hasn’t become the blockbuster Zymo hoped it would be – sales are actually down from the last quarter. In effect, Zymo is now opting to share a lot more of the risk – risk which, following the commercial challenges of Recothrom, looks a lot hairier than it did in 2001, when Recothrom was a great idea about to be a great reality and atacicept the next engine to turbocharge Zymo’s journey to the biotech valuation stratosphere.

And so, on to our surprising but unsurprising...


Medivation/Pfizer: Luckily, little risk sellers have big-company risky buyers to help them out. The late-stage products in other companies’ pipelines look like the only bridges available over the vertiginous patent chasm most Big Pharmas must cross in the next few years -- however shaky those bridges may be. Were it not competing with plenty of other bidders, Pfizer wouldn’t have agreed to pay $225 million upfront, $500 million in development milestones, 60% of the development and commercial costs in order to get 60% of the profits from Medivation’s Alzheimer’s disease drug dimebon (for more of our analysis, see this post). But even Big Pharmas are increasingly unwilling to make these bets on their own. Lilly has taken on financing from TPG-Axon to help it fund Phase III trials of its two late-stage Alzheimer’s drugs. (For a brief idea of what Lilly’s doing, take a look at this posting; for a more significant analysis, see the September issue of IN VIVO – out next week). The economics of the Medivation deal aren’t all that dissimilar from the deal Bristol-Myers Squibb signed last year with Pfizer on apixaban, in which it off-loaded a bunch of the risk that drug might not work out very well. And as we noted last week, that wasn’t a bad move: the drug underperformed Lovenox in its knee-replacement trial and now has lots of people scared that it won’t work in its larger indications, particularly acute coronary syndrome and stroke prevention. Less noted – another big-bet Phase III deal looks smart for the licenser, less so for the licensee: the mid-sized Spanish firm Almirall collected $60 million from Forest Labs plus big help in funding trials, which last week underperformed their sponsors’ and investors’ expectations, with Forest stock dropping 17%.

Shionogi/Sciele: It’s likewise unsurprising, though again the specifics continue to astonish, to see Japanese companies continuing to snap up US properties. We’ve got to believe Shionogi is, years later, still smarting over its decision to out-license Crestor to AstraZeneca. Had it been a bit more self-confident, it could have done what Takeda did with Actos, co-commercializing the drug with a US partner (Lilly, in that case) and then taking the thing over when it could stand on its own two feet. Now Shionogi is paying $1.4 billion, a 37% premium over the pre-announcement 10-day average price (but only an 8% premium to what the company had been trading at last October), to take over spec pharma Sciele Pharma which – probably for all sorts of good reasons – has nonetheless seen declining operating income and prescription volumes in key products. (Check out our PharmAsia News report on the deal.) A comparatively strong yen and a constricting home market are making the US look real good to Japanese companies – which is why you’ve seen them willing to pay up big time for Millennium (Takeda), MGI Pharma and Morphotek (Eisai), and Agensys (Astellas).

Novacea/Transcept: When a company’s major drug fails, and it has plenty of cash left, it’s got basically two choices: distribute the money to shareholders (rarely done) or roll the dice on someone else’s pipeline – usually through reverse mergers (the popular choice). Indeed, since January 2005, we’ve seen 29 such deals announced (not all closed), with privately held Transcept’s reverse-merging into publicly traded Novacea the most recent. Since November of 2007, when it stopped its pivotal trial of its anti-cancer drug Asentar because more people were dying on the drug than in the control arm, the writing was on the wall for the company. With something like $90 million in cash and marketable securities as of its last 10Q, Novacea was more valuable as a bank and a listing than as a company. And although these deals are hardly picnics, they seem a lot easier than going public (two IPOs in the US this year vs. two dozen in 2007). Whether that’s the right thing for investors is another question: analysis from our colleague Chris Morrison shows that the average share price decline for reverse-merged companies was about 40%, worse even than the declines from IPOs or the biotech index in general (we’ll publish a more in-depth analysis in next month’s Start-Up).

Ablynx/Merck-Serono: Apologies for spoiling the theme, but it wasn't all surprises this week. Merck-Serono has been relatively straightforward in its ambitions to assemble rights to a handful of next-generation large molecule technologies around chosen targets (or so said M-S EVP research Dr Bernhard Kirschbaum when we spoke to him for a story about one of their current partners, Archemix, a few months ago). And so its deal with Ablynx announced Thursday fits right in. The two-target deal will see M-S and Ablynx co-discovering and co-developing Ablynx Nanobody-based therapies in the areas of oncology and immunology. Ablynx receives €10 million up-front and the companies will split all costs and profits 50/50. Unless! Unless Ablynx decides to fully opt out (in which case it will receive milestones and a royalty) or partially opt out (in which case it will receive a reduced profit share). Ablynx CBO Eva-Lotta Allan told us today that this was the biotech's first 50/50 deal, a result of being in a solid financial position thanks to last year's healthy IPO proceeds of €85.2 million. --CM

Acucela/Otsuka: On Thursday, Japanese pharma Otsuka and ophthalmology-focused biotech Acucela announced twin licensing deals. In Part One, Otsuka will pay Acucela $5 million upfront plus milestones for co-development rights to Acucela's Phase I dry AMD small molecule compound ACU-4429. The companies will share commercialization expenses and profits 50/50 in North America, Acucela retains all European rights, and Otsuka gets Asia and some rest-of-world territories. The pharma also funds all pre-Phase III development costs. Part Two sees Acucela getting co-dev/co-promo rights to Otsuka's Phase III rebamipide suspension for dry eye in the US. Otsuka will again pay Acucela an (undisclosed) upfront and milestones, plus royalties on sales, and Acucela will take the lead in getting the drug approved. Under certain circumstances, Acucela could co-promote rebamipide as well, but Otsuka will cover all development and commercialization costs. If you are having deja vu, that might be because Otsuka has licensed this drug before (though the first time it probably took money in instead of paying it out). In 2005 Novartis took on worldwide rights to rebamipide (which was in Phase III back then as well), but at some point between now and then killed the project. In a conversation with IN VIVO Blog, Acucela CEO Ryo Kubota, MD, PhD, wouldn't let on what hindered the drug, saying only that the partners hope to run another Phase III and that the drug could be developed "relatively quickly." Acucela was founded in 2002 but only came out of stealth mode earlier this year. The biotech is developing so-called visual cycle modulators and has raised more than $40 million in three rounds of venture funding from Japanese investor SBI Investment Co. Ltd.--CM

Pfizer Snaps Up Dimebon

This morning, Pfizer announced that it’s paying $225 million in cash upfront and up to $500 million in development milestones, plus assuming 60% of the development costs and commercialization expenses, in exchange for a 60% share of the profits of Medivation’s dimebon, a potential treatment for Alzheimer’s Disease and Huntington’s Disease. Medivation, in addition to retaining a 40% share of the reward and the risk, also gets a US co-promote and a royalty ex-US.

The deal is not surprising given Pfizer’s recent Alzheimer’s forays. The pharma bought Rinat Neuroscience in 2006 mostly to have a large-molecule play that would round out its AD portfolio--an antibody in early-stage development now known as PFE360365 that binds Abeta peptide, one of the hallmarks of the disease. Around the same time, Pfizer also inked a deal with TransTech Pharma on a dual-mechanism antagonist of RAGE (receptor for advanced glycosylation products), a molecule that both binds Abeta peptide and may also reduce the neuro-inflammation seen in AD.

Dimebon is significantly more advanced that the Rinat and TransTech compounds, but the collaboration with Medivation isn't all that expensive in comparison with the price tag of other Pfizer late-stage partnering deals, including that apixaban deal we've talked so much about lately. It also tops the numbers on the other recent deal for one of the few late-stage AD drugs—Lundbeck’s ill-fated spend on Myriad’s Flurizan in May 2008, which included $100 million upfront. Flurizan’s development was discontinued in June after its Phase III trial failed to show any difference between treated patients and the placebo group.

Dimebon also fits the Pfizer portfolio because it differs from most of the late-stage approaches to AD, which are based on modulating the so-called amyloid cascade. The amyloid hypothesis posits that deposition of amyloid beta (Abeta) peptides and the formation of amyloid plaques in the brain are early events that trigger subsequent ones such as neurodegeneration and the formation of the neurofibrillary tangles that can destroy nerve cells and neurons.

Abeta-targeting drugs include Flurizan, the Wyeth Phase III antibody bapineuzumab, and Lilly’s two late-stage AD candidates, the gamma-secretase inhibitor LY450139 and the Abeta antibody LY2062430, whose ultimate development Lilly recently decided to share with TPG-Axon and NovaQuest (the partnering arm of CRO Quintiles), in order to hedge the clinical risk.

The data on a completed Phase II/III trial of dimebon in Russia, which got considerable play at this year’s International Conference on Alzheimer’s Disease (ICAD) in late July, had been previously reported. But the context of Flurizan, disappointing Phase II data on bapineuzumab reported in June and further discussed at ICAD (a highly anticipated explanatory presentation that did nothing to assuage doubters), and even Lilly’s seeming bail-out on its candidates (the antibody data, less noticed than bapineuzumab certainly, remain tantalizing) could only have bolstered Medivation’s bargaining position.

Dimebon also appears to be the only late-stage AD drug candidate with a shot at potentially improving disease symptoms, as opposed to delaying progression of the disease, as is the hope with other putative disease modifying AD agents in development including the Abeta targeting compounds.

The completed Phase II/III study of dimebon was a 26-week trial, with an added blinded open-label six-month extension. More than 80% of the patients decided to stay on, giving the investigators an extended look at both the drug and placebo groups.

They determined that patients given dimebon were significantly improved compared with baseline and compared to those taking placebo, for all five of the designated outcome measures including assessments of cognition, function, and behavior. The primary analysis showed a significant drug-placebo difference in change from baseline on the ADAS-cog (a cognition scale), which was similar to the difference seen in the fully evaluable population at week 26. The improvements “were evident to clinicians assessing global function (CIBIC-plus), which supports the relevance of the treatment effect,” the investigators wrote in the report on the trial in the July 19, 2008, issue of The Lancet.

Moreover, they concluded that the drug-placebo differences were not just driven by worsening of the placebo group: there was actual improvement, which also increased substantially at week 52 compared with week 26, “suggesting that benefits continue to increase with time,” they said. “The continued and increasing benefit of dimebon over the course of the study is especially important because at present no approved therapies for mild-to-moderate Alzheimer’s disease have shown increasing improvement over 12 months,” they added.

At a time when many AD drug developers are content with running Phase II trials focused more on confirming mechanism than on showing efficacy, dimebon stands out. Despite the fact that it was done on a shoestring budget, the Phase II Russia trial was designed to be potentially pivotal, according to Rachelle Doody of Baylor School of Medicine, a consultant to Medivation who was instrumental in its planning. (Doody was also the lead clinical investigator in the development of Aricept, the AD drug marketed by Pfizer and Eisai.)

If an ongoing dimebon Phase III study, set for completion in 2010, meets its endpoints, Medivation (and now Pfizer) may even be able to piggyback the Phase II study as a second pivotal trial. The investigators did the study with English reports forms and “all the things that would be required for FDA audit,” she says. “We are fully prepared to have FDA audit it. [We were] never expecting we would get it, but were being ready just in case.”

The theme of ‘what can you know and how can you know it’ in Phase II is critical in AD drug development, and is the focus of a feature article set for the upcoming issue of IN VIVO (out next week!), based largely on discussions at ICAD about the perils of late-stage clinical trial design in AD. For purely selfish reasons, we wish Pfizer had waited to announce the deal. It’s already too late to amend it in the context of the Pfizer deal. (Woe is us.) And since the article didn’t make it to print before the deal, it’s also too late for us to sound all that prescient. But for what it’s worth, the piece touches on dimebon in its conclusion, as follows:

Perhaps the greatest cause of excitement at this year’s ICAD centered on Medivation’s dimebon, which in a Phase II study conducted in Russia was safe and appeared to improve the clinical course of patients with mild to moderate AD. The drug’s potential in AD was first identified by screening known compounds for dual activity against the cholinesterase and NMDA receptors—its mechanism of action is still being debated--and dimebon is now lined up to begin a pivotal Phase III study. If the new study meets certain endpoints, the FDA has said it would accept an application for approval with the completed Phase II as a second pivotal study—a testament to that study’s design and conduct.

That’s encouraging news for the field... But at the same time, the serendipitous nature of dimebon’s discovery as an AD drug has led some to lament that, in terms of discovery approaches, it may be the best they can do. No wonder Pharma is hedging its bets.

The theme of serendipity is worth reprising here—it goes a long way to explain Pfizer’s portfolio strategy in AD and the price it needed to pay for a competitive asset like dimebon. In fact, there’s no consensus on the mechanism underlying AD: it could be Abeta, aggregation of the Tau protein that causes neurofibrillary tangles, and/or some co-factor such as oxidative stress or the consequences of a build-up of calcium in the brain. In the words of one company’s clinical director, “If there was one mechanism we were sure would work, everybody would be working on it.”

Oh, and congratulations to Medivation's president David Hung, who purchased the patent on dimebon, an antihistamine that was put on the shelf after Claritin hit the market.

Deals of the Week: Signage

Another week, another big pharma reorganizes. This week comes news that Lilly's CEO John Lechleiter plans to reorganize several business units, including R&D, to "minimize bureacracy by reducing the layers of management." We wonder if that will impact Lilly's Chorus group, which is attempting to push drugs rapidly to proof-of-concept before investing significant dollars in development.

Shareholder activism reared it head again this week too. More than one third of Glaxo investors refused to endorse the consolation package--a stock bonus estimated between $4 and $5 million--of Chris Viehbacher, who lost out to Andrew Witty for GSK's top spot. (Perhaps they actually want the company to invest in something important, like pipeline? Nah, probably just share buy-backs.)

And Enzon shareholders are itching for that company to explore all strategic options for its remaining commercial operations, according to documents filed with the SEC. Apparently, the recently announced spin-off of the company's biotechnology businesses doesn't go far enough. The twist? DellaCamera Capital, which holds a 5.9% stake in the company, earns this week's award for stirring the pot--not Carl Icahn. (But for you Icahn watchers, fear not. Carl may be up to his old tricks. He's increased his shares in Byetta maker Amylin Pharmaceuticals and is reportedly in discussions with management about ways to maximize product sales and development.)

Meantime, the Institute for Safe Medication Practices published its list of most dangerous drugs and--surprise--Pfizer's Chantix took top billing. As we wrote here, Chantix has been steadily climbing to the top spot on ISMP’s list, based in large part on an increased incidence of psychiatric adverse events. Now comes news, published in Drug & Therapeutics Bulletin, that the Pfizer pill may cause--among other things--serious accidents and falls, potentially lethal cardiac rhythm disturbances, severe skin reactions, acute myocardial infarction, seizures, and diabetes. (Aren't you glad it's for healthy people?) The findings prompted the Federal Aviation Adminstration to ban pilots and air traffic controllers from using the drug. (That makes you feel much better, doesn't it?)

Another "top" list made headlines this week: World Pharmaceutical Frontiers published its annual top 40 most influential people in our industry. Sadly, our own Roger Longman was passed over yet again (hey, I need my job). Still the list was informative and indicative of the changes roiling the industry. In 2007, execs from Pfizer, Novartis, and Bayer all took top billing, but this year no single big pharma exec made the top ten. (Andrew Witty, at number 6, was the one exception, but he hasn't held his position long enough to really screw up.)

Interestingly, the group placed an emphasis on innovation (really!) and regulation, with Genentech's Arthur Levinson taking the number two spot, and NICE chairman Sir Michael Rawlins at Number 5. And guess who took the number 10 spot? Shlomo Yanai, CEO of TEVA, a company that's making a name for itself in follow-on biologics as well as generics. But lest you think Big Pharma has forgotten about innovation, you'll be happy to learn this nugget of truthiness: Joe Jimenez, who recently took charge of Novartis’s pharmaceutical division, told the WSJ that selling drugs is a lot like selling ketchup. It depends on "key account management," code for building better relationships with insurance companies. If that's not a sign of the times, I don't know what is.

Unless, of course, its my own personal favorite:

Myriad/Lundbeck: Myriad Genetics announced a critical tie-up for its Phase III Alzheimer's drug, Flurizan, with the Danish pharmaceutical company H. Lundbeck A/S on Thursday May 22. In exchange for merely European commercialization rights, Lundbeck has agreed to pay Myriad a generous $100 million up-front, plus an additional $250 million in regulatory milestones as well as escalating sales royalties in the 20-39% range. Undoubtedly, the deal terms for Myriad's so-called selective amyloid beta-42 lowering agent are rich, but the real upside seems likely to come later, when the Utah-based biotech looks to ink a revenue-sharing arrangement for the product in the US market. We've written extensively about the potential for alliances to bleed value, but in the case of Myriad's Flurizan, this is a deal that's likely to be validating. Lundbeck, after all, has both the largest CNS sales force in Europe and experience selling Alzheimer's meds. Moreover, Myriad can now afford to partner Flurizan in the US for a dear but not prohibitive price. That's a situation likely to interest partners who might be interested in a biggish deal but who couldn't otherwise afford world-wide rights. Potential interested parties? Forest Labs, which markets Alzheimer's medicine Namenda, comes to mind, as does Takeda, which needs to fill the hole left by the pending patent expiry of its blockbuster Actos. (For an update on the risks and rewards of investing in Alzheimer's drugs, see this recent START-UP piece.)

Medivir/Tibotec: HCV polymerase inhibition gets a boost as Medivir inked an R&D pact with J&J's Tibotec subsidiary. Medivir sees €5 million in cash now, potentially much more later if two compounds reach the market and are approved in two indications. Joining up with J&J keeps Medivir's NS5B polymerase activity in the family as it were, given the two groups' previous deal in the area of protease inhibition (TMC435350 is in Phase IIa trials). HCV polymerase inhibition has had a tough ride lately, with Wyeth/Viropharma and Novartis/Idenix each dropping mid-stage programs in the past ten months. Medivir has pretty extensive R&D experience in the polymerase area--it's developing compounds against herpes virus, shingles, HBV, CMV and HIV polymerases, and even has a five-year old deal with Roche in HCV polymerase (terms of which are/were undisclosed). As in it's 2003 deal with Roche, Medivir has hung onto Nordic commercialization rights in its deal with Tibotec.

Pfizer/FivePrime: Pfizer announced a research tie-up with next generation protein developer FivePrime this week. The collaboration will focus on the discovery of antibody targets and novel protein drugs to treat cancer and diabetes according to the press release. Specific deal terms weren't disclosed, but FivePrime will receive an up-front payment and three years of research funding for its efforts. In addition, Pfizer is taking an equity stake in the company. This deal highlights two major trends we've been watching for some time: the importance of bringing in biologics capablities and the flight to specialist markets. Pfizer has been slow to the biologics party, but has been attempting to make up ground with torrid deal-making, including the recent acquisitions of Coley Pharmaceuticals, CovX, and Biorexis. In addition, the at least partial focus of this deal on oncology represents a shifting attitude among Big Pharma away from the risky primary care markets to a focus on specialty, where there is still great unmedical need but also a less onerous regulatory path. Recently Pfizer CEO Jeff Kindler says he is putting "Pfizer's full scope and scale" behind a push into the cancer market. As part of that effort, he's hired Garry Nicholson, a 30-year veteran of Lilly, to oversee Pfizer's newly created oncology business from clinical trials through marketing.

Daiichi Sankyo/ U3: Another week, another Japanese pharma making noise. Takeda has taken top honors lately, with its big cancer deals with Cell Genesys and Amgen and its acquisition of Velcade developer Millennium. But the other Japanese pharmas aren't giving up on either oncology or their ability to become international powerhouses. Take this week's news that Daiichi Sankyo is buying German biotech U3 Pharma for $235 million in cash. Among the drugs in U3's pipeline: a fully-human anti-HER3 monoclonal antibody due to begin clinical trials this year that is partnered with Amgen. Daiichi is no stranger to the Thousand Oaks biotech. It has Japanese rights to market Amgen's denosumab, currently in Phase III trials for osteoporosis and bone metastases in patients with advanced breast cancer. In addition, Daiichi also has several other cancer products in development, including the Phase II CS-1008 to combat malignant neoplasms.

Photo courtesy of Flickr user ramson via a Creative Commons license.