Deals of the Week's Dead Presidents Edition

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sanofi/Genzyme: The Hard Work Begins

It's official. The months of haggling and well-timed media leaks are finally over. But that doesn't mean there aren't a number of unanswered questions tied to Sanofi's $20.1 billion purchase of Genzyme.

In their conference calls with investors and the press, Messrs. Viehbacher and Termeer played chums, outlining the merits of a Sanofi/Genzyme tie-up in the broadest of terms, while still managing to stay mum on specifics. But even with the complete disclosure on the proposed CVR payments, the question ahead of the deal is still the central question today: why is Genzyme, at $74-a- share, a good deal for Sanofi shareholders?

Put another way: does the scarcity factor associated with Genzyme's big biotech status justify its premium price tag, in the same way that oenophiles will pay $5000 to quaff a rare vintage? (Or is this acquisition destined to be tarred with the same problems AstraZeneca has endured in trying to bolt on MedImmune?)

At the deal's current price, Sanofi claims the Genzyme acquisition will be accretive, and possibly by 2012. As their CFO Jerome Contamine put it to investors on the call announcing the deal, "We can tell, as early as today, that this transaction will be accretive to our business earnings, the earning per share, as early as one year after closing; and that it will be accretive by €0.75 to €1 per share by year 2013." Moreover, Contamine also promised the return on capital will be in excess of Sanofi's average cost of capital by year two.

Problem is, it's very hard to confirm such a statement independently without knowing how Sanofi internally defines its cost of capital. (And surprise, surprise, when analysts pushed Sanofi management on the question, they didn't exactly answer, instead noting that "we adjust our cost of capital to each and every investment.") And the company wasn't exactly forthcoming about the synergies it sees post-close either. In the Q&A with investors, Contamine demurred, eventually saying that based on Sanofi's assumptions it anticipates generating "north of $600 million in synergies." But apparently uncertainties, which include an announced performance program for Genzyme employees mean "the accretion range...is more meaningful because it includes everything."

Why does this matter? For starters, because Viehbacher has been vocal in his criticism of blockbuster M&A and the return it provides shareholders. Add in his own admission at the JP Morgan Healthcare Conference that "with cheap debt, you can make almost any transaction look accretive," and it's hard not to be a wee bit skeptical of how such a fully loaded deal is beneficial to Sanofi shareholders.

That's not to say Viehbacher didn't put on a good show -- or that he failed to sell his logic to some portion of Sanofi's shareholders. Sanofi's shares, which are listed on the Paris exchange, closed up 3.5% on February 16, ending the day at €51.55. But that positive reaction could also be relief that the months long back-and-forth has come to an end, and that Viehbacher did what he said he would do, which was close the deal. There's also the possibility that Sanofi investors were simply glad the deal didn't cost them any more than $74 a share upfront; recall that at times over the past few months industry wags have speculated the final deal price could cross the $75-a-share threshold.

But will said investors be so happy if Cerezyme and Fabrazyme sales fail to rebound to their pre- 2009 -2010 levels? The $1 per share contingent value right tied to the continued resolution of manufacturing issues Sanofi won't have to pay will be cold comfort in that scenario; after all, it leaves considerable room for looming competitors to take advantage of what Viehbacher called Genzyme's "gold-standard" brand.

During his call with investors Viehbacher emphasized the diligence Sanofi has done on this front. "We have been out there in the marketplace all along the year, really making sure that the Genzyme brand was not really suffering too much because of production difficulties," he said.

But it's hard not to see the brand as somewhat tarnished either. Some 6000 Gaucher patients are currently being treated for their disease and Genzyme still commands the lion's share of the market, with 4700 getting its enzyme replacement Cerezyme. But the manufacturing snafus have allowed competitors like Shire's Vpriiv to come on strong, with some 1300 patients now being treated by non-Genzyme alternatives. That proportion could grow, especially since patients haven't really had the full option to jump to Vpriiv because of that medicine's supply constraints.

Keep in mind, too, that as early as next week US patients could have yet another therapeutic option--and one that's significantly cheaper than Cerezyme. Pfizer/Protalix's taliglucerase could get a positive nod from regulators on February 25; given the medicine is manufactured using a plant-cell based technology that is more cost-effective than the process Genzyme uses to make Cerezyme, it's widely expected that Pfizer and Protalix will market the medicine at a significant discount, potentially more than the 15% price cut Shire is already offering on Vpriiv.

Even with ongoing improvements in its manufacturing, Genzyme has missed (admittedly only slightly) its pre-released revenue guidance for the Gaucher drug. As Chris Raymond, an analyst with Baird, outlined in a note to investors, fourth quarter Cerezyme sales fell short by $2 million, with the final tally for the drug coming in at just $222 million. Calling the information "surprising", Raymond asked "how does one miss a pre-released number?"

Admittedly a small discrepancy, this failure shows the crack team at Genzyme still has work to do to get its flagship rare disease franchise back on track. And given the deal's price tag, that means Sanofi has a lot of its own work to do as well.

Viehbacher on R&D: Smaller Teams "Not Enough"

I couldn't help thinking Sanofi Aventis CEO Chris Viehbacher was having a bit of a dig at his old employer, GlaxoSmithKline, this morning. Check out this response to yours truly's question, after the 2Q results announcement, about what the French group is doing to re-invigorate its R&D: "If you think that just by creating a smaller team you make them more biotech-like....well, that's not enough, in my experience," he said.

Surely the veiled (or not-so-veiled) reference here is to the biotech-imitating drug performance unit structure at GSK, announced last year by CEO Andrew Witty (who, remember, nabbed the top-job off Viehbacher)? It's hard to imagine what other "experience" Viehbacher might be referring to--he joined GSK in 1988 after a stint at PwC.

"I don’t think [the R&D solution] is anything to do with structure. No one has found the answer yet, I don’t believe," he continued. (Ok, he's right there.) "We need to find a different way," Viehbacher continued.

What is that different way? Well, we won't know for sure until the third quarter, when the company plans to say more about how it's turning around its 13,000-strong R&D organization. From today's comments, though, expect a much more porous interface with academia and external partners (yes, big change there), less rigid (or perhaps no) budget and instead a more "grant-like" funding set up, and lots of stuff about culture, governance, and flexible processes.

For all of today's poo-pooing of structures, these are changing, though. In a June 2009 release announcing a new R&D model--and declaring the ambitious goal of becoming "the most effective R&D organization in the pharmaceutical industry by 2013" (take that, Glaxo!)--Sanofi Aventis talked about "grouping researchers in more productive structures", and strengthening “exploratory structures” that work in close collaboration with outside entities, and deploying reactive “entrepreneurial units” to encourage the emergence of innovation. The French group has already begun consolidating scientists at the same locations to foster intimacy (and, let's face it, to save costs).

Viehbacher's point, though, is that structural changes "should follow your vision," they should be the means rather than the ends. Doubtless GSK agrees with that, and, to be fair, this company's R&D experiment is just as much about cultural, process and governance change as it is about structure.

Indeed, for all Viehbacher's talk of a"'new way" (and I'd call it that, too, if I was running my own ship and wanted to stand out) there are more similarities between GSK's and Sanofi's (and indeed other Big Pharmas') R&D re-invigoration efforts than contrasts . Externalization, flexibility, entrepreneurial culture, increased accountability, more appropriate reward structures....you get the picture.

Given Viehbacher's 2013 goal, though, of course there's a race on to see who can find the best R&D model--driven perhaps as much by old rivalries as Big Pharmas' compelling need to sort out the innovation engine before everything goes OTC or generic.

Reassuringly, Viehbacher did today keep referring back to innovation as the heart of the company (although they and others, as we well know, are now officially "global diversified health care companies", not "innovation-driven R&D-based companies"). He also asserted that core pharmaceuticals would "always be more than half the company," despite--you guessed it--planned expansions in OTC and generics.

Image by Flickr user Nebbish1 and used under a creative commons license

Squeeze That Fruit, Just a Little Bit Tighter: Sanofi’s New Life-Cycle Research Job

We don’t know whether the title (SVP, Industrial Development and Innovation) is Orwellian buracrospeak or in fact quite precise, but we were rather taken by the press release out of Sanofi Aventis today noting that its top international development man – Jean-Philippe Santoni – would now be boss of life-cycle management.

Were this the industry of even two years ago, the new job would have been quite a come-down for Santoni, a railroad siding far from the main train track to new drugs. But this is an industry which is recognizing it’s got far more in common with Coke, P&G, and McDonalds than with Big-Bet Big Pharma 1980 – 2007. That is to say: managers these days are learning to leverage only very modest top-line growth into faster bottom-line growth through cost-savings, bolt-on acquisitions, and rapid introductions of incrementally-improved new products. The traditional, high-risk, high-growth R&D-based model is gone, in case you hadn't noticed.

So.....companies need to squeeze a lot more Euros out of each asset. That means selling branded versions of off-patent drugs in emerging markets or, like GlaxoSmithKline with Ventolin, working with Wal-Mart to make it a store-brand generic. It also means revitalizing what has traditionally been an industry backwater: drug delivery and reformulation. Plenty of companies have life-cycle-managed plenty of drugs but it has never before now been the face of R&D, which has been all about the discovery of new compounds. (Nor has it before now been called 'innovation' as far as we're aware.)

By taking a guy like Santoni and giving him a job most self-respecting development execs would once have turned down before the offer left the boss’s lips, Sanofi is saying that it is in fact an industrial company powered by industrial innovations, which are by economic necessity different than scientific ones (like the scientific success/industrial failure rimonabant).

Should the trend catch on, we might even see drug companies split R&D in two: Novel Products R&D (largely outsourced, we’d imagine, to optionalize the spending) and Innovative Industrial R&D (think combination products, drug delivery, and single-isomer formulations). The goal of the latter: say a 50% rate of Phase II products making it through approval, up from what Booz & Co. and Credit Suisse say is 10% today.

Incidentally, the Sanofi announcement is very good news for drug-delivery companies, which have been flailing about, largely unsuccessfully, for the past 15 years or so (see, for example, this analysis). Their clients haven’t been particularly interested in their wares, at least at prices exciting to drug delivery’s investors. Now with a new economics in place at Pharma, all those arguments for reformulation and delivery will begin to sound just a trifle more interesting.

Image courtesy of Flickr user Omar Eduardo and used under a Creative Commons license.

While You Were Liquidating

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

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

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

Deals of the Week: A Little Less Conversation, A Little More Action, Please

This week was one of those weeks where so much more seemed to happen than actually did. Yes there was the rumor that Pfizer was buying Bayer (we tend to agree with Derek Lowe's thoughts on that one, the deal is on the "Edge of Reality"), the Carl and Jim Show ("Return to Sender," covered extensively by our Pink friends) and King's hostile attempt to take over Alpharma ("Don't be Cruel," see yesterday's release here and our coverage of King's original offer here), and various other rants and rumors.

Execs across the industry have been "All Shook Up" in the most compelling actual news this week, with Christine Poon retiring from Johnson & Johnson in March 2009, Ellen Strahlman leaving Pfizer to become GSK's chief medical officer and GSK CEO-runner up Chris Viehbacher taking the top slot away from Gerard Le Fur at Sanofi.

Finally we thank the dealmakers below. They didn't step on our "Blue Suede Shoes" and so they have the honor of ...

GSK/Cellzome: GSK has entered into an option agreement with Anglo-German biotech Cellzome around seven kinase inhibitor programs in the area of inflammation, the companies said on Wednesday. Though the deal generated several hyperbolic wire story headlines the guaranteed payments (about $25 million in equity purchases and cash, split undisclosed) were rather more pedestrian. More importantly, the deal has some interesting features and further underscores the externalization of R&D at GSK under new chief Andrew Witty. Cellzome is essentially becoming GSK's center of excellence in kinase drug discovery, at least in the inflammation space, Cellzome CEO Tim Edwards told IN VIVO Blog yesterday. GSK has an option to license--at clinical proof of concept or earlier--drug candidates from Cellzome's kinases programs against four identified targets (which very likely comprise the biotech's previously announced programs against mTOR, Zap-70, PI3K delta and JAK3) and an additional three further targets. Edwards noted the deal does not include Cellzome's lead PI3K gamma program for which the company hopes to file an IND in 12-18 months. Until such time as GSK opts into a project, Cellzome is footing the R&D bill. However the biotech can earn milestone payments along the way that will cover those costs, and keeps rights to programs GSK declines. "We have day-to-day control," explains Edwards. "They're sponsoring us, as it were, and as we make achievements we bring in additional dollars." Cellzome has previously inked a handful of deals around its proteomics mapping platform and has outlicensed Alzheimer's programs to J&J, but this deal is its first around its Kinobeads technology. That platform allows the firm to screen for kinase inhibitors in a "physiological setting," which Edwards claims means they can identify very selective inhibitors of individual kinases. "In oncology you can hit four or five targets," without compromising the safety/efficacy profile of a kinase inhibitor. "But that isn't OK in inflammatory disease, and the solution is to have very selective inhibitors. It's amazing how you can change a molecule in a very small way and change its selectivity profile in a profound way," he says. Optioning nearly all its programs to one partner in its chosen (and crowded) field of kinase discovery does suggest that GSK is the private firm's only potential suitor, however, significantly limiting Cellzome investors' exit options (the company has raised at least €73 million since 2000 from a variety of VCs). "Today that may be the case," says Edwards. But perhaps not for long, he says. Cellzome aims to reconfigure its screening platform for other target classes and is also diversifying out of inflammatory disease into CNS and potentially other therapeutic spaces. And then there's the PI3K gamma program. For now, Edwards is keeping the details of that program under wraps.

Tripos/Pharsight: Drug discovery informatics player Tripos said this week it was acquiring clinical-software specialist Pharsight for about $57 million ($5.50/share). That price is a 29% premium to Pharsight's 30-day average. The combined company will now provide R&D software and services from discovery through to the market, says the release. Sorry to "Forrest Gump" you, but that's all we have to say about that.

Alfama/hemoCORM: Alfama and hemoCORM, two companies pursuing the use of carbon monoxide releasing molecules (CORMs) in a variety of chronic and acute diseases, merged this week. The terms were undisclosed. We profiled each of these companies back in 2004 (see here and here). Back then we wrote: "CO is produced naturally in the body as a result of the breakdown of heme oxygenase, an enzyme involved in the recycling of iron. But CO is more than simply a useless by-product. Recent research has shown that under physiological conditions, it is also important signaling molecule with vasodilatory, anti-inflammatory and anti-apoptotic properties." Both Alfama and hemoCORM are working on metal carbonyls, one of the first types of compound identified as a potential CO-carrier. hemoCORM's initial efforts are focused on ischemic perfusion injury, while Alfama is working primarily on treatments for inflammatory and auto-immune disease. Alfama chief Nuno Arantes-Oliveira will lead the combined group.

CV Therapeutics/Menarini: This week's late-breaker see's CV Therapeutics licensing European, CIS, and certain South and Central American rights (27 countries in all) to its recently approved ranolazide (Renaxa) to Italian pharma Menarini for $70 million in upfront payments plus a potential $315 million in milestone payments and investments linked to European label extensions and sales figures. The angina treatment has been marketed in the US by CVT since January 2006; currently the company aims to secure approval in a first-line angina setting.

Amgen/potential denosumab partner: Remember when we were all "Amgen might be looking for a denosumab partner, how much would you pay for it"? And you readers were all "sorry, IVB, I'd really like to take a stab at this, but I'm washing my hair, can I get back to you"? Well, it seems absent any solid advice from you guys, Amgen CEO Kevin Sharer is now saying that a US partnership around denosumab is unlikely (though things might be different overseas). "It is very hard for me to imagine what another company would bring to us," in North America, Dow Jones reports Sharer saying at the Morgan Stanley health care conference on Tuesday. Maybe Sharer needs to watch a little Sesame Street to get those imaginative juices flowing. Let us help out: a worldwide or US partner on denosumab would not only bring Amgen a significant upfront payment, primary care expertise, and drug reps, but also a big ol' hedge against the risk that the product will be delayed or even fail. Bonus Denosumab: The Pink Sheet DAILY points out today that doctors worried about denosumab getting adequate reimbursement are asking Amgen for assurances for financial protection in the event Medicare won't cover the full cost of the drug.

Parallel Pharma Universe First Side Effect of CERN Collider

Well, the Large Hadron Collider powered up underneath the border of France and Switzerland today. No black holes yet, folks. But we may have entered a parallel universe.

At about the same time the first particle beam zipped through the 27km circular tunnel, French Big Pharma Sanofi-Aventis confirmed the Reuters reports from yesterday, announcing it had indeed hired ex-GSK exec Chris Viehbacher to replace Gerard Le Fur as CEO. The company's release stated rather simply: "the evolution of the worldwide pharmaceutical sector requires the key players to acutely redefine their strategy." No arguments here.

To be fair, since the French company's takeover of Aventis in 2004 Sanofi has lost a modicum of its Francocentrism. But the idea that an outsider, much less a non-Frenchman (and yes, we're aware of his french cred, but still), would become CEO of the French giant seemed a bit far fetched . At least until they turned on the LHC.

Coincidentally, Sanofi's share boost on the news created nearly enough market cap to pay for the CHF 10 billion particle accelerator.

While You Were Nice to Your Mother

Happy belated Mother's Day to all you moms out there. To help celebrate a day late, here are some tidbits of (completely stereotypical) motherly advice tied to a few industry happenings over the weekend.

• The squeaky hip gets the grease. Sunday's New York Times carries an article about artificial hips and the sometimes unwanted squeaking that can result with newer, ceramic, replacement joints. Merely an annoyance or a potential hazard?
• Don't drool! (or, Wipe your face!). Also from the NYT, in the event you don't like the novacaine-induced hour or so of numbness that follows a visit to the dentist, you're in luck. FDA just approved OraVerse, an injectible formulation of the antihypertensive phentolamine, which reverses numbness by dilating local blood vessels which whisks away the anesthetic.
• Don't count your chickens. A late Friday addition to FT.com explains why Sanofi and BMS shares were under pressure at the end of last week. Another generic Plavix may be about to enter the market, this time in Germany. European sales of Plavix were about $3 billion last year, according to the potential source of the generic, Schweizerhall Holding.
• Always wear clean underwear. Merck and Indian generics co. Ranbaxy have inked a deal to discover and develop anti-infectives. You really never know who's going to see them.
• It ain't over 'til it's over (applicable if your mother is Yogi Berra). Yes, Pittsburgh fans, we know the Flyers are in a 2-0 hole.

photo from flickr user shoothead used under a creative commons license

Deals of the Week: The Song Remains the Same

Are you having a case of deja vu? We don't blame you. The main headlines this week echoed those of last week and the weeks prior.

Vytoringate reared its ugly head again. This time Congress is requesting that Internet site CafePharma reveal the identities of contributors who anonymously discussed the controversial ENHANCE trial for the Merck/ Schering Plough cholesterol drug on its message boards. Meantime, more firms announced job cuts this week; among them the drug delivery firms Nektar and Nastech, which both lost partners in high-profile divorces last year.

And here's a shocker: another pharmaceutical company has been accused of anti-competitive practices. No, we aren't talking about Bristol-Myers Squibb, which took some heat last year for its botched negotiations with Apotex over the blood thinner Plavix. Nor are we referring to GlaxoSmithKline, AstraZeneca, or Sanofi-Aventis, whose offices were raided last month by European Commission officials as part of a broad probe into possible industry efforts to delay the arrival of generic medicines. This time the industry bad guy is Cephalon, which apparently spent $200 million to delay generic versions of its blockbuster anti-drowsiness pill Provigil. (You can read the details of the FTC's suit here.)

You see? The song remains the same. Thank god, it's time for deals of the week.

AstraZeneca/ Albireo Pharma: If you feel like AZ's spin-out of its GI assets into Albireo is old news, you're right. We broke news of the rumored event back in November. On Thursday came more specifics about the new Swedish biotech, which is named after a double star in the Cygnus constellation, and has raised $27 million out of a planned $40 million Series A. The new venture inherited several early stage assets and one clinical stage compound from AZ, which maintains a significant minority stake in the company. (For an in-depth discussion of GI R&D strategies, see this story in the November IN VIVO). In their write-up of the deal, our good friends over at the WSJ Health Blog and Fierce Biotech noted that this is an example of pharma's "dis-integration," the industry's need to shed some of its weighty infrastructure, particularly in R&D. Hmmm, that ought to sound familiar to loyal Windhover readers too. (Check here and here and here for more.)

Sanofi-Aventis/Dyax: Another week, another tie-up between an antibody player and a pharma company interested in building its biologics capabilities. This week the honor goes to Dyax and Sanofi, which inked a deal Tuesday worth up to $500 million in up-front and milestone paytments. (Under the terms, Dyax could get as much as $25 million this year.) The agreement gives Sanofi exclusive rights to Dyax's DX-2240, a preclinical monoclonal antibody and cancer therapy that inhibits tumor progression via the Tie-1 receptor. In addition, Sanofi also has non-exclusive rights to use the biotech's phage display technology to discover and develop additional compounds. In addition to illustrating the continuing desire of big pharma to play in the biologics sandbox, the deal also reflects pharma's increased interest in the industry's new blockbusters, specialty products.

Newron/Hunter-Fleming: When we last checked in with Hunter-Fleming, we were quizzing them about VC reluctance to fund early-stage Alzheimer's R&D. And this week we can see the result of a tough fundraising environment for the biotech. H-F was looking to raise about GBP 7 million to finish off proof of concept studies for its lead AD treatment, HF0220, a naturally occurring human steroid that drives production of prostaglandins key for cellular protection and repair. The going back then, in September 2007, was tough. And on Monday the company was acquired by Newron for €8 million (minus net debt) in stock, plus a further potential €17 million in "success-based milestones."

Sanofi Aventis: Sign of the Big Pharma Times?

Sanofi-Aventis’ 2007 results presentation on Tuesday provides a nice little snapshot of Big Pharma circa early 2008.

The company reported rather paltry sales growth (you can see all the numbers here), but boasted about its cost- and head-count cuts and its shareholder-sweetening dividend payouts (how else do you keep your investors, with top drugs going off patent and new ones not coming through fast enough?).

It also provided pointlessly hypothetical? useful? information such as what pharmaceutical sales growth in 2007 would have looked like (up 6.4%) excluding the impact of generic Ambien IR in the US, and Eloxatine in Europe (as if to day, “it’s not our fault; we weren’t expecting it.”).

More significantly, perhaps, Sanofi provided numbers to back up the growing importance of vaccines to the group’s current and future growth. Rarely before have so many of Big Pharma's slides been devoted to this once-unfashionable category. Vaccines sales were up 14.5% in 2007—over double even the buffed-up pharmaceutical growth figure--and now account for 10% of group revenues, the largest among any of the Big Five. (And these numbers aren’t thanks to the cutting-edge cancer vaccine Gardasil, marketed in Europe by the Merck/Sanofi JV SPMSD, since Sanofi doesn’t consolidate SPMSD’s sales. They’re driven by more pedestrian things: seasonal flu, pneumonia, travel vaccines…)

So, we’re reminded, vaccines are no longer a backwater, they’re a “strategic pole.” At Sanofi, they’re the only segment where headcount’s going up, not down, and they saw by far the largest growth in R&D spend at the French group in 2007 (and are unlikely to be the target of this year’s R&D budget freeze).

Elsewhere, entire slides were devoted to developing markets China and Brazil—another sign of the times. In China, sales were up 36% (including vaccines), and the company has certainly joined most other Big Pharma in its China investments, whose value we discuss in the February issue of START UP. Who used to care about Brazil? Never mind; the market will be worth over €11 billion in 2011 and Sanofi claims to be the number one international company there.

More telling perhaps is Sanofi’s highlighted new franchise in Brazil: Generics. Copycat drugs are no longer the domain of generics groups; Big Pharma is playing in this field too, even though to do so often blatantly contradicts all the talk of innovation and R&D investments. (It’s also playing in the large-molecule equivalent of generics, as you'll read in February's IN VIVO.) Indeed, authorized generics and price-adjustments in response to generics was the first example that EVP Pharmaceutical Operations Hanspeter Spek provided to illustrate how Sanofi is “anticipating and adapting to the increasingly complex pharma landscape.”

As for where Sanofi’s focusing its innovator efforts: Diabetes. Move over metabolic syndrome, then—since fat-buster Zimulti’s high-profile flop at the US regulators, the French group, it seems, is sticking to diseases that it can define. But since Sanofi doesn’t have an innovative new diabetes drug to highlight just yet, it stuck with an old favourite: insulin. Sales of long-acting Lantus, launched in the US in 2001, surpassed €2 billion in 2007 (and Sanofi is surely still gloating over its decision to sell its share of blighted Exubera for a cool $1.3 billion).

And to our last sign of the times message: Sanofi talked as much about life-cycle management for Lantus (earlier insulin usage and various combinations), manufacturing improvements and emerging market opportunities as it did about exciting new compounds. Still, waiting in the wings are a GLP-1 agonist (entering Phase III; not the first), an SGLT-2 inhibitor (still in Phase II), and, you guessed it….rimonabant.

We've seen that last one before, haven't we? The drug that’s still looking for its disease.

Deals of the Week: New Year's Resolutions

It's day four of the New Year and you've already broken that resolution to exercise, eat better, or spend more time with the family. Hey, it's okay. Those are tough ones to keep.

So how about an easy one: tune in every Friday for a run-down of the week's most interesting biopharma deals. It's a quick, easy way to stay on top of the industry's events, leaving more time for the kiddos or the gym, or your blackberry.

Once again, we bring you:

(Aren't you glad we aren't on strike?)

Admittedly, deal-making activity has been lighter than usual this past week. We surmise that's because execs are shining their shoes, amassing their business cards, and honing their laser pointer skills in preparation for the biotech's annual coming out party, aka the JPM conference. (The burning questions: 1. Can a company's success be correlated to its executives' neckwear preferences? 2. What color will the famous tote bag be this year?)

Sepracor/Bial: Specialty pharma Sepracor inked a much-needed licensing deal with Bial on Wednesday for the Portunguese drug maker's Phase III anti-epileptic compound BIA 2-093. (Naturally enough for Sepracor, the drug is an enantiomer, (S)-licarbazepine, a metabolite of an analogue of the off-patent anti-convulsant carbamazepine.) Last year the company lost the bidding war for Kos Pharmaceuticals to Abbott Labs and analysts began raising questions about the company's pipeline beyond its insomnia drug Lunesta. (For more, read here.) Under the terms of the agreement, Sepracor will pay Bial a $75 million up-front fee, plus an additional $100 million in development and regulatory milestones for rights to the compound in the US and Canada. In addition, Sepracor will also file the compound's new drug application with the FDA, which should occur late this year or early in 2009. "Strategically, BIA 2-093 further strengthens our existing central nervous system portfolio, which includes Lunesta for the treatment of insomnia, as well as earlier-stage candidates for various central nervous system disorders," said Adrian Adams, President and Chief Executive Officer of Sepracor in a company press release.

Merck/Addex: In terms of "biobucks", the Merck/ Addex agreement was the week's biggest splash. As we wrote yesterday, the two companies announced an exclusive licensing agreement centered around the Swiss biotech's ADX63365, an allosteric modulator currently in preclinical development for schizophrenia and other undisclosed indications. The deal terms are potentially rich: Addex could see up to $680 million in downstream development, regulatory, and sales milestones, but that would require an unlikely alignment of the R&D planets. Guaranteed money was not quite as generous, but the solid upfront of $22 million for a non-clinical compound does suggest Merck is taking the idea of allosteric modulation seriously, and is roughly an order of magnitude greater than the company's previous discovery deals ... so who knows what a deal around its lead Phase IIb candidate might look like (you'll have to wait til next year to find out). For more on Addex and allosteric modulators check out this profile of the company from the January 2006 START-UP.

Sanofi-Aventis/IDM Pharma: Bad news for IDM Pharma this week. On Monday, the company learned that its partner since 2002, Sanofi-Aventis, would no longer help develop its dendritic cancer vaccine, Uvidem, which is currently being tested as a melanoma treatment. No reason was given for the move, but cancer vaccines have had a tough go in recent months, especially after the FDA required one of the field's leading lights, Dendreon, to submit additional efficacy data for the approval of its immunotherapy Provenge. IDM noted in a release that it will continue to evaluate the Uvidem clinical program, which recently completed Phase II trials "with promising results." But already, restructuring plans are in the works, involving "staff reductions in the Company's workforce and a review of the assets and costs associated with products under development." The news comes just weeks after the biotech issued a press release with updated news about its pipeline and a promise to investigate "strategic alternatives."

Sanofi Pasteur/Crucell: On Thursday, Dutch antibody maker Crucell and Sanofi Pasteur, the vaccines division of Sanofi Aventis, announced they were teaming up to develop next-generation rabies biologicals to be used in association with a vaccine for post-exposure treatment against this fatal disease. Under the terms of the agreement, Sanofi will pay Crucell 10 million euros following the deal's execution; Crucell could receive an additional 66.5 million euros in milestones as well as an undisclosed percentage on sales of the final product if the rabies antibodies pan out. To date, Crucell has developed a combination of two rabies mABs that are well tolerated and provide immediate neutralizing activity in Phase I clinical trials. Crucell expects to enter Phase II clinical trials in the first half of this year. If approved, peak sales of the rabies antibody cocktail could exceed $300 million.

Exdoomera: Why Is Sanofi-Aventis Smiling?

Pfizer CEO Jeff Kindler must have been gritting his teeth as he read out loud the costs of the now-terminated Exubera inhaled insulin product.

Pfizer announced pre-tax charges of $2.8 billion related to the Exubera exit, with approximately $1.1 billion of intangible assets, $661 million of inventory, $454 million of fixed assets and $584 million of other exit costs.

That's a lot of zeros. Exubera, along with the now defunct cholesterylester transfer protein (CETP) agent torcetrapib, were supposed to lead Pfizer into an new age of blockbuster products. Now both programs are in rubble.

There has been a lot of buzz about the titanic failure of Exubera to meet expectations, but seeing the numbers in black and white is, nonetheless, staggering.

Less than two years ago, in January 2006, Pfizer paid Sanofi-Aventis a king's ransom--$1.3 billion--for the full rights to Exubera. Then the company brilliantly navigated the product, which had respiratory safety concerns that stalled its development for years, through an FDA advisory committee and US approval by focusing on a comprehensive risk management plan.

At one point, the drug was projected to be a $2 billion-a-year franchise. In the third quarter, Exubera generated $7 million in revenue. Pfizer took one last shot at jump starting the launch by unveiling a national direct-to-consumer ad campaign earlier this year, but that was throwing good money after bad.

Exubera may have failed for any number of reasons: patients were overly concerned about respiratory side effects; the failure of a primary care sales & marketing effort to make a mark in a specialty pharmaceutical category; or it was simply a bad product for the subset of Type 2 diabetic patients it was trying to serve. And it may have been all of those things together.

In the end though, it looks like Sanofi-Aventis pulled a fast one on Pfizer, Gordon Gecko-style (you have to have seen the movie "Wall Street" to understand this reference), giving up its right to a potential blockbuster only if Pfizer paid a huge premium for the French company's troubles. Someone's laughing all the way to the bank. However, that hit may be a tad easier to take if Pfizer chooses to make a significant run at taking a stake in the French drug maker, as rumor would have it.

For Kindler, this hardly seems like a fair shake for his first year as CEO. Will investors view him as a stoic leader making tough decisions to clean up someone else's mess? They may. However, this could be the last time Kindler gets the benefit of the doubt.

While You Were Considering the Alternatives

"When you come to the fork in the road, take it."

We hope the weekend gave you a chance to look in on the news of the day, Strategic Alternatives: Biogen Idec edition. We saw it coming (and said so here last Thursday). Late on Friday Biogen Idec confirmed that it is up for sale, having received offers from both strategic and financial buyers (the latter being Carl Icahn). We've noted the folly of buying Biogen for its current products, since any acquirer would have to share Rituxan with Genentech and since Elan has a change-in-control right to buy Tysabri (and the Irish drugmaker has brought in Lehman Bros. to help decide what to do with Tysabri in the event of a sale). But beyond a beef-up in biologics, such a move--likely to cost at least $30 billion--would help a primary-care acquirer to radically shift from primary care drugs into specialist marketing, an expensive kind of reality-show makeover for Big Pharma.

But what else happened this weekend?

• A team of scientists at Stanford University and elsewhere have published preliminary bu promising results of a new Alzheimer's diagnostic. The New York Times reports on the Nature Medicine article. Satoris is the company that aims to commercialize the test.


• News out of ECTRIMS in Prague: Bayer and Genzyme's good-news-bad-news Phase II results for Campath in multiple sclerosis. A Phase III is in progress.


• Reformulation specialist Orexo is buying Swedish R&D co Biolipox for SEK 856 million ($133 million). "The acquisition will create an innovative specialty pharma company [there's that term again!] with a broad product pipeline, global partnerships with major financial potential, and established sales channels" says a statement.


• Second prize, two weeks in Philadelphia! Glaxo considers CEO-also-rans for its board, says the Financial Times.


• The FT also interviews Sanofi-Aventis CEO Gerard Le Fur. What do we learn? Well lets just say there's a lot of color. For starters, Le Fur doesn't smoke marijuana. He prefers the Continental two-kiss to the Anglo one-smooch. And he's a rugby guy, so he probably had a very bad weekend!

While You Were in Italy

Temple of Antoninus and Faustina

Your blogger spent the past four days overeating in Rome and Tuscany and trying and failing to think of a Roman empire/Big Pharma joke, and all you'll get is this lousy weekend/early Monday roundup. What, you wanted a T-shirt?

• We came, we saw, we outsourced: AstraZeneca to offload all manufacturing activities, the Times is reporting this morning.
• Et tu, Dan? Via Reuters: "I have no indication that could confirm any rumours about tie-ups between big players in the sector," Vasella told French newspaper La Tribune in an interview.
• Ahead of Sanofi-Aventis' R&D meeting today, the company says it will bulk up in biologics. We'll have much more to say on the Big Pharma haves and have-nots in the biologics world in the next IN VIVO.