A Deals Of The Week Valentine

The most anticipated deal of the week – Sanofi Aventis’ multi-billion take-out of Genzyme – has yet to come to fruition. That’s not to say the deal is a no go (wouldn't the aftermath of THAT be fun to watch). Indeed, public statements by the French pharma’s Viehbacher suggest Sanofi still desires the big biotech, but is being measured in its diligence.

The months long saga has been more “he said/he said” than SEC-leaked endearments; still for journos avidly covering the “news” the nothings have been sweet. In advance of Monday's Hallmark holiday, perhaps its time for Viehbacher to dial up the Canadian charm, and send a love letter (containing the desired contingent value rights to Campath/Lemtrada, of course) to Termeer and company. (If the deal goes through, does this makeTermeer Viehbacher's work spouse?)

IN VIVO Blog suggests borrowing a line or two from Robert Browning's famous missive to one lovely Elizabeth Barrett. You know, the one that spawned Sonnets From The Portuguese and the immortal question "How do I love thee?" Perhaps something like this..

I love your verses drugs with all my heart, dear Miss Barrett Henri, -- and this is no off-hand complimentary letter that I shall write, --whatever else, no prompt matter-of-course recognition of your genius and there a graceful and natural end of the thing: since the day last week summer when I first read your poems realized the worth of Cerezyme and Fabrazyme despite the manufacturing snafus, I quite laugh to remember how I have been turning again in my mind what I should be able to tell you of their effect upon me (especially after this recent earnings report) ... Perhaps even, as a loyal fellow-craftsman (and CEO honor-bound to return shareholder value) should, try and find fault and do you some little good to be proud of herafter!

Of course, said fault-finding comes with its own ulterior motives, but whether Sanofi's shareholders will be proud of the outcome depends on the deal's final price tag. In the spirit of reciprocity, we suggest Termeer start counting the ways he loves Sanofi, not least because of the exit package he stands to receive if the deal goes through.

In the interim, if you can't say it with contingent value rights, at least remember to say it with flowers. Oh, and make sure to read another edition of...


Cephalon/Alba Therapeutics: Hours before reporting full-year results on Feb. 10, Cephalon said it signed an option agreement for Alba's treatment of the autoimmune disorder celiac disease. Cephalon will pay $7 million upfront and extend a credit line to Alba to fund a Phase IIb trial of the drug, larazotide acetate. After completion of the study, the Frazier, Pa.-based Cephalon will review results with the option to purchase assets related to the drug for $15 million. Beyond the $22 million in upfront and option fees, Alba is eligible to receive unspecified regulatory and sales milestones should Cephalon bring the drug to market. Celiac disease, also known as sprue, is caused by an autoimmune reaction to the ingestion of gluten, found in certain grain-based products such as bread and pasta. It affects more than 2 million people in the US. Cephalon said on a conference call that is sees significant revenue opportunities for larazotide. The deal is Cephalon's first since founder and CEO Frank Baldino passed away late last year after a four-month medical leave of absence. New CEO Kevin Buchi was previously Cephalon CFO and COO and a longtime colleague of Baldino. -- Lisa LaMotta

Salix/Progenics: Progenics Pharmaceuticals this week found a new development partner in specialty player Salix Pharmaceuticals for its subcutaneous injection to treat opioid-induced constipation, Relistor, one of the casualties of the Pfizer/Wyeth deal. Recall that Wyeth, which initially licensed the compound in 2005, paid Progenics a $10 million break-up fee in 2009 to take back product rights. During an extended transition period, the world’s biggest pharma has continued to sell Relistor via a 1700-member sales force, but 2010 worldwide sales were an anemic $16 million. Thus, the entrance of new suitor Salix via a sweetheart of a deal is undeniably good news for Progenics. As part of the alliance announced February 7, Salix pays $60 million upfront plus milestones for worldwide rights (excluding Japan) to Relistor, and will assume all development, registration, and commercialization costs for the drug. Salix, which only intends to market the drug state side, will also pay Progenics 60% of the revenue earned by contractors on ex-US sales. Salix is confident its GI-focused sales force can fully monetize Relistor’s value, thanks in part to an oral product formulation currently in Phase III development. CEO Carolyn Logan told investors February 7, "Relistor just [did] not receive all the attention it would receive in an organization like ours." – Joseph Haas & Ellen Licking

Pfizer/Ferrosan: From Russia and Norway and Eastern Europe with love? Pfizer’s acquisition February 7 of Danish firm Ferrosan’s consumer health care unit shows diversification is alive and well within the world’s biggest pharma, even as the company pulls back on R&D. Exact financial terms of the deal weren’t disclosed, but sister publication "The Tan Sheet" reports executives from Ferrosan's owner, Altor Equity Partners, said the deal was larger than €100 million ($136 million according to same-day conversion rates); analysts with UBS Investment Research, meanwhile, assume a price around $600 million based on Ferrosan's recent yearly sales figures. The deal gives Pfizer some key brands -- including Multi-tabs multivitamins, Bifiform probiotics and the Imedeen skin care supplement line – in Nordic countries as well as the rapidly growing market of Russia. More importantly, it expands Pfizer’s global footprint, allowing for the expanded distribution of its own nutritional brands, such as Centrum multivitamins and Caltrate calcium and vitamin D supplements. – Elizabeth Crawford

Danaher/Beckman Coulter: The big deal of the week was diversified med-tech play Danaher’s $6.8 billion acquisition of Beckman Coulter, which has struggled to get its testing business back on track after an FDA-triggered withdrawal of its cardiac troponin test last spring. The sale isn’t unexpected; following the resignation of Beckman CEO Scott Garrett in September 2010 and ongoing quality issues, speculation about a possible deal has been rampant since December, when it was widely repored the firm had retained Goldman Sachs. Nor is it surprising that Danaher is the ultimate buyer; Beckman is not known as a particularly innovative company and has been very slow to move into the molecular diagnostics space. It therefore makes sense that its assets, heavily centered on consumables and services in clinical chemistry, would be of greater interest to a company like Danaher, a noted acquirer of established instrumentation plays. In addition to pushing forward with ongoing clinical trials supporting two 510(ks) required for the market reentry of Beckman’s AccuTn1 troponin test, Danaher’s other main priority as the testing firm’s new owner will be completing quality control fixes and cutting $250 million in costs. – Jon Dobson

Optimer/Astellas: Promising new Phase III data surrounding its antibiotic candidate fidaxomicin has Optimer Pharmaceuticals preparing for a possible summertime launch of the drug, pending approval and a PDUFA date of May 30. While Optimer intends to keep the drug in-house in the US, the San Diego biotech has partnered with Astellas to advance and commercialize the drug in Europe, selected Middle Eastern and African nations, and the Commonwealth of Independent States. (In addition to US rights, the biotech has for now also retained Asian rights, although it may partner those territories soon.) Astellas paid $68 million up-front for the rights to fidaxomicin, with a further $156 million in milestone payments and tiered sales royalties that range above 20%. Optimer is positioning fidaxomicin as a first-line treatment for patients at risk of recurrence of C. difficile infections, which cause severe diarrhea often in hospitalized patients and those who have received other antibiotic treatments that have disrupted the balance of flora living in the gut. Robert W. Baird analyst Thomas Russo pegged the market for the drug at nearly $250 million annually by 2018. – Paul Bonanos

Needy Candy Hearts image courtesy of flickrer piratejohnny

DotW: Wishful Thinking

The biotech M&A storm is coming. Really. So sayeth the good attorneys at the UK patent firm Marks & Clerk, based on survey data of 381 pharmaceutical execs who predict industry consolidation as various players attempt to hurdle the looming patent cliff.

Added to IN VIVO Blog’s To-Do List: Call Marks & Clerk to determine where to purchase the rose-colored glasses apparently so in fashion.

We admire the glass-half-full sentimentality. It’s cheaper than Prozac or Paxil (though purchasing either would help sales at certain pharmas). We’re just a bit skeptical that the patent cliff will translate into a big-pharma buying spree of innovative biotechs. Here's why: For starters, the big acquisitions of 2010 have mainly been about diversification, marketed products, generics, emerging markets or some combination thereof. Innovative pipeline material? Not so much. Big pharmas want revenue.

According to Elsevier’s Strategic Transactions database, the top deals of 2010 have been Merck’s acquisition of Millipore, Teva’s purchase of ratiopharma, Astellas’ flight into oncology with OSI, and Charles River’s take-out of WuXi. Of these, only the Astellas/OSI transaction fits the patent-cliff theory, in which a drug maker pays top dollar for a biotech to replace revenues lost to looming--or current--generic competition. And companies like OSI, with money-making products far from patent expiry, remain a relative rarity, which as we’ve pointed out in our reporting, is one reason that biotech’s price tag climbed as high as it did.

We’ve said it before. On the private side, companies can’t rely on the stalking horse of IPOs to force pharmas into acquisitions; M&A--when it happens-- will likely to be in the guise of earn-out heavy deals, with eye-popping returns (think >5X when all the milestones are factored in) for the future. (Want data? See here and here.)

Other forces are lined up to stifle the oft-predicted M&A storm. On the public side, many smaller biotechs are still struggling to attract investor love. (Will ASCO help?) For European companies, the debt crisis isn't going to help. With biotechs’ stock prices trending down, there’s simply not much pressure for Big Pharm to get involved in pricy bidding wars. Moreover, big pharma buyers are burdened with infrastructure and more early stage programs than they can afford to develop, suggesting that when they do bring programs in it will be via alliances not acquisitions.

Does IN VIVO Blog think there will be some M&A? Absolutely--and if there isn't, this column will get awfully lonely. But are we talking Perfect Storm? Boom Times? That smacks of wishful thinking. Any doubt? Take a look at this week’s round-up of deals, which emphasize R&D on the cheap, EMs, and branded generics.

Astellas/OSI: Japanese drug maker Astellas' pursuit of OSI Pharmaceuticals was rewarded on May 17, 2010 with a $4 billion merger agreement supported by both companies' boards. At $57.50 per share, the deal cost $500 million more than the original hostile bid that Astellas launched in late February, and it will consume roughly half of the drugmaker's available cash. It seems no other white-knight bid emerged to counter Astellas' hostile offer, which turned semi-friendly at the end of March. Astellas, meanwhile, had made OSI the linchpin of its strategy to become a global oncology player. To walk away empty-handed would have raised serious questions about Astellas management, especially in the wake of its previous hostile bid, an unsuccessful run at CV Therapeutics. The newly sweetened price is a 55% premium to OSI's stock price on February 26, 2010, the day before the Japanese firm publicly disclosed its $52-a-share hostile offer for the biotech. The price is also 50 cents more than the informal offer in the $55-to-$57 range that Astellas originally suggested in 2009, according to SEC filings. With its ability to do further big deals limited for now, Astellas must extract full value from both Tarceva and OSI's earlier stage molecules. The key will be retaining and integrating OSI's management team into Astellas' U.S. operations.—Ellen Foster Licking

Abbott/Piramal: Rumors have been circulating for weeks that Piramal, one of India's leading biopharma players, was up for sale. There was quite a bit of truth to the rumor mill, except the buyer wasn't one of the usual suspects: GlaxoSmithKline, Sanofi-Aventis, or Pfizer. The ultimate winner was Abbott, which also made waves with last week's collaboration with Zydus Cadila and the creation of its established product unit. Abbott says the deal gives it the numero uno position (in Hindi, that's nambara ēka) with 7% market share in the Indian pharmaceutical market. It doesn't come cheap. Abbott will pay a total of $3.7 billion for Piramal, but not all is upfront cash. Piramal gets an initial payment of $2.12 billion and then $400 million annually for the next four years starting in 2011. (A hedge, perhaps, to mitigate the snafus Daiichi Sankyo has encountered with Ranbaxy?) Structured this way, Abbott says the all-cash transaction will not impact its ongoing earnings per share guidance. The strategy behind Abbott's deal is obvious and one familiar to IN VIVO Blog readers. Indeed, it can be summed up in three catch phrases: diversification, branded generics, and emerging markets. --EFL

Pfizer/Washington University: The R&D belt continues to tighten, and nervous companies ask more loudly how best to cheaply and efficiently identify innovative medicines? What about academia? What about new uses for existing medicines? Why not combine the two? This week Pfizer announced a five-year collaboration worth $22.5 million with Washington University in St. Louis in what is essentially a re-profiling experiment of 500 compounds originated at Pfizer. Don Frail, the chief scientific officer of Pfizer’s Indications Discovery Unit and the brains behind the deal, said the partnership could result in the university participating in clinical trials and holding downstream financial rights to drug candidates. Pfizer, meanwhile, can tap the thinking of a different group of researchers, and it won't spend an additional dime (beyond the $22.5 million) developing idle programs. Indeed, just one moderately successful product from the tie-up could cover Pfizer’s investment many times over. Wash U researchers will submit proposals for studies of compounds to a joint advisory committee. Pfizer researchers will work with Wash U scientists, with the university owning rights to its discoveries and the ability to negotiate terms for their development and commercialization.--Joseph Haas and EFL

Quintiles/Kaiser Permanente: It's not the kind of deal we normally cover, but we were intrigued by a collaboration between a major CRO and a leading insurer/health provider. With a dearth of details in the press release, IN VIVO Blog is still intrigued. We thought perhaps this deal augured a future wave of partnerships, in which pharmaceutical companies—or their CROs—ally with groups to develop outcomes-based data to support the commercial prospects of drugs under development. While this may be one of the longer term outcomes of the project, for now the emphasis is on enhancing the quality and productivity of clinical research. As such, Kaiser’s Southern California Permanente Medical Group becomes Quintiles’ fourth global prime clinical research site, joining the University of Pretoria in South Africa, Queen’s Mary College in the UK, and Washington D.C.'s Washington Hospital. Adam Chasse, Quintiles’ head of global prime sites, says the interests of both groups are mutually aligned since SCPMG wants to expand its clinical research efforts while the CRO hopes to tap the physician expertise within Kaiser--as well as its diverse patient base.--JH and EFL

Sanofi/Nepentes: Once again Sanofi-Aventis is expanding its consumer products business with a $130 million offer for the Polish drug, dietary supplement, and cosmetics firm, Nepentes Group. Sanofi announced May 19 it would pay approximately $8-a-share to Nepentes’ main shareholders and $8.60-a-share to minority shareholders in order to establish a presence in Europe’s fifth leading consumer health care product market. According to “The Tan Sheet," Sanofi believes it can boost Nepentes’ growth by extending distribution of its products, which include Selsun Blue, Melisana Klosterfrau supplements, and the Marimer line of nasal sprays, to additional markets. The Nepentes transaction marks the seventh consumer deal for Sanofi since CEO Chris Viehbacher outlined plans in February 2009 to double the drug maker’s OTC offerings in five years, primarily through bolt-on acquisitions. The most costly so far is Sanofi’s acquisition of Chattem for $1.9 billion. It’s all part of Sanofi’s larger strategy to diversify into arenas less risky than branded pharmaceuticals while simultaneously tapping those necessary "pharmemerging" markets.--Malcolm Spicer

Image courtesy of flickrer furiousgeorge81.