DOTW: Santa Baby Edition

Santa baby, slip an NDA under the tree for me,
It’s been such a transformative year
Santa baby, so hurry down the chimney tonight.

Santa baby, we’ll take some convertible debt – I bet
We’ll roll it into a Series B before long
Santa baby, so hurry down the chimney tonight

Think of all the M&As!
Are IPOs a choice for biotech pure-plays?
Next year, the milestones will come
An exit by earnout, baby, that’s the new way.

Santa baby, our ex-US rights we’ll shop, you’ll drop
Cash upfront plus biobucks
Santa baby, so hurry down the chimney tonight!



IN VIVO Blog's Deals of the Week crew wishes you a happy and healthy 2011. In the meantime, sign your X on the line just like Eartha says, and point your sleigh toward...

Pfizer / Lpath: If you're on an L-path, and you cross two bridges, you arrive at Pfizer. That's this week's DOTW Zen koan. First, grasshopper, the deal: Pfizer paid the San Diego biotech $14 million for an option for worldwide rights to its Phase I wet AMD antibody Isonep, and it will split costs of upcoming Phase Ib and IIa trials. Pfizer will then have an undisclosed period of time to decide if it wants to fully take over Isonep. If it does, it will pay an undisclosed option fee, plus milestones up to $497.5 million and tiered double-digit sales royalties. Pfizer also gets a time-limited right of first refusal to another antibody Asonep, which Lpath plans to move into a pair of Phase IIa trials next year. During a call Dec. 21, Lpath CEO Scott Pancoast said Pfizer would have roughly two to three years to decide whether it wants to acquire the cancer candidate. Oh, the bridges? The first was a National Cancer Institute "Bridge" grant Lpath received in 2009, a new form of small-business grant to help life science companies make headway on translational projects and reach the clinic. The second was a $5 million private placement (7 million shares at 70 cents each) Lpath announced in November. Each investor also got two-year warrants to buy half again as many shares as they bought in the placement. Lpath's closing share price Dec. 22 was $1.02. -- Alex Lash

Biogen/Neurimmune: Neurimmune received its Christmas present early this year, but will investors? On Dec. 21 came news the Swiss biotech was selling three preclinical neurodegenerative programs to Biogen Idec for $32.5 million upfront and another $395 million in milestone payments. As part of the deal Biogen takes on responsibility for all further development—and importantly cost—for the compounds, which target the neurotoxic proteins alpha-synuclein, tau, and TDP-43. If Biogen seems enamored with Neurimmune’s proprietary Reverse Translational Medicine platform (this is the second time its inked a deal with Neurimmune), it’s a sure bet the biotech’s founders, Karsten Henco and Edward Stuart of HS Life Sciences aren’t complaining. The two gentlemen staked the company with $6 million nearly four years ago, and haven’t had to put in another dime, letting the partnerships fund the company’s growth. (Now that’s capital efficiency.) IN VIVO couldn’t determine if Neurimmune will pull a Knopp and return cash to Messieurs Henco and Stuart, but, by itself, the Dec. 21 upfront would seem to yield a tidy exit. Meantime, the deal is in keeping with Biogen Idec’s strategy of “focused diversification,” pretty words suggesting the company’s desire to amass capacity in areas closely related to its historical strength in multiple sclerosis. Alas, the very early nature of Neuroimmune assets means they can’t do anything to help Biogen, which is overly dependent on franchise products Avonex and Tysabri, from a revenue stand point. The need for additional marketed or very late stage clinical products suggests Biogen, which is in the process of hiring a new head of corporate development, could be on the prowl for bigger deals. It would be good to start 2011 off with a strong DOTY candidate, wouldn’t it?—Ellen Licking

GlaxoSmithKline/Proximagen: Santa baby, just slip an alpha-7 nicotinic acetylcholine receptor modulator under the tree for me. (Okay, so the rhyme scheme doesn’t really work.) We interrupt Santa’s mad dash around the globe to report a big pharma out-licensing event. Despite all the highfalutin talk about the need to balance the internal R&D spend with financing from external partners, big pharmas haven’t really demonstrated a willingness to out-license. GlaxoSmithKline, which spun out two investigational pain products into a new CNS company called Convergence Pharmaceuticals earlier this year, is one notable exception. This week comes news it’s out-licensing two development programs targeting cognition disorders and Parkinson’s disease to the British biotech Proximagen. Even though GSK notified the biopharma community in February that it was exiting certain CNS areas like depression, anxiety, and pain, it sounds like the asset transfer wasn’t for the faint of heart. According to “The Pink Sheet” DAILY, it still took nearly a year for Proximagen to get the compounds, which are positive allosteric modulators of the alpha-7 nicotinic acetylcholine and dopamine D1 receptors, out of the big pharma.Financial terms of the deal weren’t disclosed.--EL

Sanofi/Ascendis: Sanofi continues its bid to become an end-to-end player in the diabetes space, inking a drug delivery deal this week with specialty player Ascendis Pharma. The global licensing and patent transfer agreement gives Sanofi access to Ascendis’TransCon Linker and Hydrogel carrier technology, which are designed to release molecules in the body in a precise, time-controlled fashion without the initial burst and high drug load that can come with other formulations. That would, of course, be a real boon in creating a better version of insulin. Sanofi currently has a lock on the long-acting insulin market with its juggernaut Lantus, but Novo Nordisk is giving the company a run for its money with competitor Degludec. Formulation changes to improve Lantus’ delivery would be one means of extending the life cycle of one of Sanofi’s most important products—and the only one not facing near-term patent expiration. The strategy also borrows a page out of Novo’s playbook. The Danish firm has used a strategy of incremental large molecule innovation to build its dominant position in insulin.--EL

Pfizer/Phylogica: Australian peptide drug discovery specialist Phylogica has struck its third licensing deal in the past year, agreeing to allow Pfizer to discover peptide-based vaccines using its proprietary platform. Pfizer will pay just $500,000 upfront for the license, but downstream payments, options and royalties of undisclosed size could potentially drive the deal’s value as high as $134 million. Founded in 2001, the Perth-based company has also signed separate licensing agreements with Roche and AstraZeneca’s Medimmune subsidiary. The Roche deal covers a mechanism allowing large molecules to attack disease targets inside of cells, while the MedImmune deal addresses antimicrobial peptides that attack the Gram-negative bacterium Pseudomonas aeruginosa. The latter deal, revealed in August 2010, includes a small upfront commitment of just $750,000 plus a 12-month commitment that will double that amount.—PB

Gilead/Arresto: Gilead Sciences took a step beyond its traditional focus in infectious disease by acquiring Palo Alto, CA-based Arresto Biosciences, which is developing disease-modifying drugs that target extracellular enzymes to treat fibrotic disease and cancer. The deal’s price tag is a robust $225 million and includes potential earn-outs; that’s striking in a period when pharmas have shown a greater interest in alliances than acquisitions and is also notable given the development stage of Arresto’s assets. Arresto’s lead candidate is a Phase I drug for idiopathic pulmonary fibrosis, a condition in which the lungs become scarred for unknown reasons. If approved, its compound AB0024 would be the first biologic drug for the condition, currently treated only through lung transplants. This is an area Gilead knows well, having spent considerable time trying to develop its own medicine in the space, Letairis (ambrisentan). Did Saint Nick arrive with the Arresto acquisition in the nick of time? On Dec. 22, after the market’s close, Gilead announced it was scuppering development of Phase III Letairis, which only slows disease progression but doesn’t address its root cause. Arresto, which is three years old has raised an undisclosed amount from a syndicate of backers including Kleiner Perkins Caufield & Byers, HealthCare Ventures, Northgate Capital, DAG Ventures, and Abbott Biotech Ventures.--PB


Pfizer / Adolor: The name is supposed to mean "without pain," but after this week you could read it with a melancholy sigh: Ah, dolor. In its latest setback, Adolor said in a regulatory filing Dec. 21 Pfizer would sever ties three years after it licensed rights to two of Adolor's pain programs, ADL5859 and ADL5747. The termination is effective March 2011. Pfizer said during its R&D day Sept. 27 that '5859 was among several drugs it was dropping from its pipeline, but there was no mention of '5747. Still, the writing has been on the wall since June, when the companies reported disappointing Phase IIa results for both delta opioid receptor programs in osteoarthritis. Neither drug performed better than placebo. Originally signed in December 2007, the deal called for $30 million upfront, nearly $2 million in immediate R&D reimbursement, and up to $232.5 million in milestones for the two programs. The first payment was due at the start of Phase IIb trials. Adolor was responsible for development through Phase IIa, and in for the US market could look forward to a reasonable split of costs and revenues -- 60% for Pfizer, 40% for Adolor -- plus a co-promote option. For the rest of the world, Pfizer had full rights, with sales royalties going to Adolor. – AL

AstraZeneca/Abbott Laboratories: Nothing like burying bad news in the slow days ahead of a holiday. Abbott and partner AZ, which hasn’t had much good news to report recently, announced Dec. 22 that they have decided to discontinue the development of Certriad (rosuvastatin calcium and fenofibric acid), and will unwind their licensing and co-development agreement in January 2011. Certriad is a combination pill that brings together AstraZeneca's statin Crestor and Abbott's fibrate TriLipix and is meant to lower bad cholesterol and improve good cholesterol in patients at risk of heart disease. The companies said the decision was made “after careful review and consideration” of the “complete response” that was handed down by FDA in March 2010. Little information about the complete response was given to shareholders at the time of its issue, but analysts at Leerink Swan speculated a “worst-case scenario in which the FDA might require more long-term data” was a possibility. Adding credence to this assertion, AstraZeneca said in its Dec. 22 statement that “development of Certriad is no longer commercially attractive.”—Lisa LaMotta

2010 Alliance DOTY Nominee: Biogen Idec/Knopp Neurosciences

It's time for the IN VIVO Blog's Third Annual Deal of the Year! competition. This year we're presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (four or five in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

Back in August, hacking through the thickets of the Biogen Idec-Knopp Neurosciences deal for a Phase II amyotrophic lateral sclerosis treatment, we thought for a moment we'd stumbled across a rare beast. Our binoculars at the ready and pith helmets stained with sweat (since we're on a Kipling kick), could it be...an exit-by-license? Egads!

It wasn't, actually. But it was no less exotic, and well worth nominating for our Alliance Deal of the Year. The deal itself was straightforward: Biogen Idec paid $80 million upfront -- $20 million as a fee and $60 million in equity -- for worldwide rights to KNS-760704 (dexpramipexole), which had hit its primary endpoint in a Phase II trial for ALS, also known as Lou Gehrig's disease. Dexpramiprexole came with orphan designation in both the US and Europe, and fast track FDA status. Milestones to Knopp could add up to $265 million more, as well as tiered, double-digit royalties on worldwide sales.

Knopp told our Pink Sheet colleagues that the $80 million was more than it needed for its ongoing operations, and it would return extra cash to investors -- a mix of low-profile institutional investors, angels and foundations.

But it was no exit or share buyback, according to Knopp. Instead the investors who got the distribution kept all their equity: in essence, a one-off dividend. (Biogen's $60 million equity purchase was directly from Knopp.) And spokesman Tom Petzinger said there was no quid pro quo, either. If and when Knopp finds itself in need of cash, the investors are under no obligation to re-up.

Petzinger and the rest of management like to think their gesture will create investor goodwill that will be remembered in the future. "It might be a highly unusual move, but it doesn't mean it's not highly appropriate or strategic," Petzinger said.

The deal was also notable as the first consummated in Biogen's Scangos Era, announced less than a month after George Scangos took over as chief executive. Under Scangos, Biogen has pledged to retrench around neurology and hemophilia, with its oncology and cardiology programs now on the block.

Dexpramiprexole is a reverse-image twin of Boehringer Ingelheim's Parkinson's disease drug Mirapex (pramiprexole). Biogen believes its version has the potential for greater neuroprotective activity because it has less affinity for dopamine receptors and can be used at higher doses. Thus far, the molecule has survived the R&D shake-up; indeed, executives highlighted it at a Nov. 30 R&D roundtable and reiterated last month Biogen would start a Phase III study in 804 ALS patients in the first half of 2011.

However exotic the arrangements of the deal that put dexpramiprexole in Biogen's hands, rarer -- and indeed more welcome -- would be market approval, as to date only one drug to treat the disease has come to market, according to the ALS Association. -- Alex Lash

Photo courtesy of flickr user majorvols.

DotW Considers Restructuring

As part of its announced restructuring this week, Biogen Idec decided to terminate or divest 11 programs in areas such as cardiovascular and oncology and instead focus on its historic strength in neurology and autoimmune disease, as well as promising hemophilia assets.

The ripples of that decision are already being felt, most immediately by Cardiokine, a privately-held biotech based in Philadelphia that has raised $87 million in venture dollars since its 2004 founding. Back in 2007 the start-up ,which counts Health Care Ventures and Care Capital among its backers, partnered its sole asset, a selective vasopressin receptor antagonist for hyponatremia called lixivaptan, to Biogen for $50 million upfront.

Amber Salzman, president and CEO of Cardiokine, did her best to spin the divestment news in a positive direction. "I am pleased we have regained exclusive global rights to lixivaptan, a potentially important advance in the treatment of hyponatremia," she said in a statement. "We are nearing the completion of the Phase 3 program and look forward to study results and confirming our registration plans in the near future.”

Biogen nabbed lixivaptan as it was rebuilding its late stage pipeline in the wake of a previous restructuring that began in 2005. At that time Biogen execs admitted they had neglected their pipeline to concentrate on the launch of Tysabri (natalizumab), a next-generation MS therapy that promised much greater efficacy than the interferon-based treatments dominating the market at the time. So they ramped up dramatically in several areas, including CV, buying rights to the pulmonary arterial hypertension drug Aviptadil from mondoBiotech and Adentri, an A1-adenosine receptor antagonist for heart failure, from CV Therapeutics. (Biogen dropped work on Adentri earlier this year. )

As a result of Biogen's new restructuring, Cardiokine loses out on a potential $170 million in milestones. At this point, it's got to hope Big Pharmas in need of late stage products (Lilly? Sanofi-Aventis?) could be drawn into a more lucrative partnership, or even an acquisition.

The safety-first mentality at FDA has resulted in a full-fledged flight away from anything that might be classified with a "C"and a "V," but lixivaptan has a few things going for it, not least that its in Phase III trials. Its use in hyponatremia, an electrolyte disorder characterized by an imbalance of sodium and water, is also a plus. There are currently no approved therapeutic treatments for the condition, which frequently goes undiagnosed. Thus, potential interested acquirers can check the "unmet medical need" box that is now de rigueur in any biopharma transaction. In all likelihood, no deal will emerge until potential acquirers have a gander at top-line data from the ongoing three pivotal trials, especially a 650-patient study in congestive heart failure.

Cardiokine wasn't the only entity to suffer the fall-out from revised priorities this week. The American people also decided to divest more than 60 Democrats from their Congressional pipeline, but for now we'll let others weigh in on the effects of the new portfolio, especially on health care reform. Meanwhile, it's time for this blogger to revisit her own priorities and call it a weekend...


McKesson/US Oncology: The big-ticket acquisition this week was health care services and IT player McKesson's $2.16 billion all-cash take-out of US Oncology, a physician practice management company for cancer physicians. McKesson will pay cash for the outstanding shares of privately-held US Oncology and assume its $1.6 billion in debt. The deal builds on McKesson's aspirations to expand in the oncology specialty services arena, helped out by its 2007 purchase of Oncology Therapeutics Network for $575 million. It also comes as demand for oncology products is on the rise, and drug makers both big and small are doing their best to develop differentiated medicines to tackle the disease, an event that will only increase the need for purveyors of oncology services. (That is until there is pushback from payors about the distribution of pricy cancer meds.) Bringing US Oncology in-house expands the number of oncologists to whom McKesson has access to 3000, according to executives on a November 1 investor call. Currently, The Woodlands, Tex.-based US Oncology supports about 1300 community-based physicians in 38 states. Analysts have reacted positively to the deal, which is expected to close by the end of 2010, because of the complementarity of the two businesses. In a note to investors, Tom Gallucci of Lazard Capital Markets says it gives McKesson “a meaningful land grab within the fast-growth oncology space, lending further scale to its distribution business.” -- Greg Twachtman & E.L.

Bristol-Myers Squibb/Simcere: Behold the rise of regional deal-making. As drug makers look to push into important emerging economies like China and India, they face important decisions related to the development and commercialization of products. Is it better to invest in costly infrastructure and distribution networks, building capacity from the ground up, or leverage the capabilities of an in-country firm that is more familiar with the "hows" and "whos" -- particularly the government regulators and KOLs -- of the local market? BMS chose the latter route in its tie-up with Simcere, a Chinese pharma with a diverse portfolio that includes branded generics and the proprietary medicine Endu, a recombinant human endostatin, for non-small lung cancer. Financial terms of the BMS/Simcere deal weren't disclosed, but as part of the agreement, Simcere receives exclusive rights in China to develop and commercialize BMS-817378, a preclinical MET/VEGFR2 inhibitor. BMS retains rights in all other markets, and the two firms will jointly determine development. Interestingly, it appears the early work will be carried out by Simcere, in what may be an attempt by BMS to leverage two critical advantages offered by China: 1) the still -- for now -- cheaper labor market keeps the R&D burn rate low; 2) with greater access to treatment naive patients, it can be much faster to run oncology trials in a place like China than the US or Europe, where competition for patients is greater. In 2009, Simcere inked a similar deal with OSI Pharmaceuticals for the development of OSI930, a small molecule oncologic in Phase I that targets multiple tyrosine kinases, including one of the same targets hit by BMS's drug, the VEGF2 receptor. -- E.L.

Gedeon Richter/Grunenthal: The European women’s health market is in significant flux with the third major deal in a month, and the second involving Budapest, Hungary-based Gedeon Richter. On November 3, Richter purchased Grunenthal’s oral contraceptive business for €236.5 million (about $331 million), roughly one month after Richter bought out Switzerland’s PregLem for CHF150 million ($156 million). Meanwhile on October 28 Teva purchased Merck Serono’s Théramex division for €265 million to deepen its geographic reach in women’s health and particularly in the contraceptive space. Like Teva/Théramex, Richter is eyeing both geographic expansion and growth of its oral contraceptive portfolio with the purchase of Germany’s Grunenthal. The small family-owned firm adds seven contraceptives including Belara to Richter’s portfolio, with sales largely based in Germany, Spain and Italy. The deal covers commercial rights in all markets where Grunenthal’s products are approved, except for Latin America. Richter said the transaction will provide a platform upon which it can establish a sales and marketing base in key Western European countries; currently, Richter’s primary commercial base is central eastern Europe and the Commonwealth of Independent States. -- Joseph Haas

Kadmon/Valeant: Just one week after Kadmon Pharmaceuticals, Sam Waksal's post-ImClone reprise, emerged from stealth mode with the acquisition of Three Rivers Pharmaceuticals, the biotech is back in the limelight. On November 1, the biotech announced a pair of strategic agreements with Valeant Pharmaceuticals that allows the start-up to hit the ground running with a mid-stage HCV candidate. In part one of the two-part alliance, New York-based Kadmon licensed worldwide development and commercialization rights (excluding Japan) to taribavirin, an analog of ribavirin that has completed Phase IIb studies for HCV, for $5 million upfront. Toronto-based Valeant, which said continuing development of taribavirin no longer fit its specialty pharma business model, stands to earn development milestones and sales royalties between 8% and 12% of future net sales related to taribavirin. That doesn't mean Valeant is getting out of selling hep C medicines altogether, however. The deal's second part calls for Valeant to pay Kadmon $7.5 million for rights to distribute in six Eastern European nations the start-up's Ribasphere and RibaPak, formulations of ribavirin that Kadmon acquired via the Three Rivers' deal. Kadmon will serve as the supplier of the two drugs. For Kadmon, a still stealthy company that has released little information about its financial backers, the complicated deal means the company nets $2.5 million and gains a mid-stage asset simultaneously. For Valeant, the outlicensing is consistent with its streamlining after the Biovail merger, as it looks to divest programs that require sizeable R&D dollars to get to market. -- J.H. & E.L.


Swedish Orphan Biovitrum/Amgen: Stockholm-based Swedish Orphan Biovitrum, which wants to be known as “Sobi” -- a decision IN VIVO Blog supports because it sounds like a tasty buckwheat noodle -- is selling back to Amgen its co-promotion rights in Nordic countries to hyperthyroidism compound Mimpara (cinacalcet). "Strategic business reasons" were a driving factor in the "mutual agreement," according to the press release announcing the split. Unfortunately, the two companies declined to say more about why the seven-year deal was ending, or how much Amgen will pay Sobi to wind down the deal. It can't be much. Sobi's revenues from Mimpara were a scant 26.2 million Swedish Krona ($3.9 millon) in 2009. Could this be the converse to the regional dealmaking brouhaha in India and China (see above)? Certainly it's well known that co-promotion deals limited to a handful of smaller markets are time-consuming and complex to manage, which may make the return for both parties de minimus. For its part, Sobi, which has developed its marketing capabilities throughout Europe, is to reallocate resources to its newer products, such as Yondelis, Multiferon and Ruconest. -- John Davis

Johnson & Johnson/Arena: On November 5, J&J's Ortho-Macneil-Janssen Pharmaceuticals division officially called it quits on the development of ADP597, a GPR119 agonist for type 2 diabetes it in-licensed from Arena as part of a two-compound 2004 deal worth $17.5 million upfront. The news marks the end of the six-year collaboration between the two parties; in 2008, J&J discontinued work on another GPR119 called APD668 in order to devote more resources to ADP597, which was believed to be the more potent compound. As of December 28, 2010, all rights to ADP597 officially revert to Arena, which has a portfolio of internally discovered GPR119 agonists, including follow-on versions of APD597 that weren't part of the original J&J deal. It's not clear why Janssen returned rights to the drug, which had just finished Phase I and demonstrated no obvious safety signals, according to company reports. Preliminary data suggest the oral molecule may have utility both alone and in combination with DPP-IV inhibitors like Januvia or Onglyza. It's possible the competitive landscape was one reason the deal came to an end. An interesting new class of small molecule drugs for type 2 diabetes, GPR119 agonists are a hot target in the type 2 diabetes landscape, with players such as Boehringer Ingelheim and GlaxoSmithKline vying to be first to market. The drugs target a protein expressed on the surface of pancreatic beta cells and endocrine cells in the gastrointestinal tract. In preclinical and clinical studies, GPR119 activation has been show to stimulate the relase of GLP-1 and other incretins that play an important role in insulin regulation. All told, Arena netted $32 million from the six-year collaboration with J&J, according to Elsevier's Strategic Transactions database. The return of the asset is another piece of negative news for Arena, which in late October received a complete response letter for its obesity drug lorcaserin. -- E.L.

Image courtesy of flickrer jasoneppink.

DOTW: Biogen Deal Means Sunshine and Rainbows For Knopp Investors

It's tough times for biotech investors, not much disagreement there. But in covering one of the deals of the week, we found a bright spot. The deal was Biogen Idec's purchase of rights to Knopp Neurosciences' Phase II ALS treatment for $80 million upfront, a sum comprised of a $20 million license fee and $60 million for equity in the privately-held Pittsburgh firm.

Knopp told our Pink Sheet colleagues that the $80 million was in essence more than it needed for its ongoing operations. Its lead drug, KNS-760704 for ALS (also known as Lou Gehrig's disease -- although a new study questions whether Gehrig had his eponymous disease or something else) is now in Biogen's hands, and the smaller firm is back to discovery work.

Instead of squirreling away the extra cash for a rainy day, however, Knopp gave it back to its investors, which are a mix of low-profile institutional investors, angels and family foundations. "Ah!" we thought, our little reptilian deal-brains churning, "An exit via license! How exotic!"

But no. The investors who got the distribution kept all their equity. Every last dime, according to Tom Petzinger, a former Wall Street Journal-ist who runs the firm's business development and public affairs. It wasn't an exit, and it wasn't a share buyback (or a private version thereof). Nor did shareholders sell to Biogen, whose $60 million equity purchase was from the company itself. It was, basically, a one-off dividend, or as Petzinger put it, "taking care of our investors."

Indeed, it was a case of Knopp saying this is your money, not ours. Petzinger said there was no quid pro quo, either. If and when Knopp finds itself in need of cash, the investors are under no obligation to re-up.

But he and the rest of management like to think that their gesture today will create investor goodwill in the future. "It might be a highly unusual move, but it doesn't mean it's not highly appropriate or strategic," Petzinger said.

Imagine that: a biopharmceutical startup in 2010 happily giving up cash that, for now, it doesn't need.

by Alex Lash

Medco/United BioSource: Any doubts about the importance of outcomes-based research in the post-health care reform era, look no further than Medco’s August 16 announcement that it plans to acquire the Bethesda, Md-based information services company United BioSource Corp. (UBC) for $730 million. The tie-up gives the pharmacy benefit manager a new business capability--drug outcomes based research for biopharma companies--that's likely to be a valuable service in the comparative effectiveness era in which we now reside. Among other things, UBC is the market leader in designing and conducting risk evaluation and mitigation strategies (REMS) for new medicines. UBC says it has been involved in the design, implementation and/or assessment of more than 60 REMS and predecessor programs, known as risk minimization action plans. In addition to safety and risk management, UBC focuses on health economics and outcomes research, including drug cost-benefit and cost-effectiveness analyses. UBC also brings Medco the capacity to conduct post-approval research in Europe and Japan. Medco's deal with UBC is more strategic in nature than recent moves by CVS Caremark and Express Scripts, PBMs which have aimed to add volume by acquiring large chunks of business from insurers. In July, CVS Caremark announced a 12-year contract with Aetna to manage duties previously handled by the insurer's internal PBM covering 9.7 million plan members. That followed Express Scripts' outright purchase of WellPoint's internal PBM, NextRx, which handles pharmacy benefits for about 25 million.—Cathy Kelly

Aspen/Sigma: The beleaguered Australian-based health care firm Sigma finally bought its way out of a jam, inking a deal this week with South Africa-based Aspen Pharmacare. Under the terms of the deal, Sigma, which is the largest pharmaceutical manufacturer by volume in Australia, will sell its its pharmaceutical group to Africa’s largest drugmaker for 900 million Australian dollars ($811 million). In hiving off the branded and generics drug unit and its most profitable division, Sigma will once again become a wholesale distributor; it will also be able to retire its total debt burden of A$785 million ($654 million). Sigma ran into trouble after spending $2.2 billion to acquire generics maker Arrow in 2005, with write-downs associated with that transaction resulting in a A$389 million loss for the 12 months to January 31, 2010. Interestingly, even though Aspen already has operations in Australia, the company has also commited to a long-term supply, distribution and logistics agreement with Sigma. According to sister publication PharmAsia News, opinions about the deal’s value vary, in part because the continued relationship between the two companies carries execution risks for Aspen. There are risks for Sigma as well, including whether the Aussie company’s new CEO Mark Hooper can find growth in a generics-free company. —Daniel Poppy

BioMarin/ZyStor Therapeutics: In a move to bolster its orphan drug pipeline, BioMarin Pharmaceutical has acquired enzyme replacement specialist ZyStor Therapeutics of Milwaukee for up to $115 million in upfront and milestone payments. As with many recent buyouts of private startups, the deal is back-end loaded, with a modest upfront payment of $22 million plus a $93 million earn-out. As part of the deal, announced August 17, BioMarin gets ZyStor's ZC-701, a novel therapy to treat the inherited enzyme deficiency Pompe disease, as well as a platform to create additional future enzyme replacement therapies. BioMarin says ZC-701 features a faster development timeline and lower projected development costs than its in-house candidate for Pompe disease, BMN-103. (Both compounds are in pre-clinical development.) The deal illustrates the new math currently in operation at many venture-backed companies. In order to advance ZC-701 through proof-of-concept, ZyStor would have had to raise a much larger round of capital; instead ZyStor’s backers, chiefly a syndicate of Midwestern venture firms, chose to sell. Given the $22 million upfront, ZyStor investors got their money back, but only just. The step-up multiple was a meager 1.5x, meaning the deal value was only 50% more than the amount of cash raised privately. Add in the earn-out, and the multiple could rise to 7.9x, higher than the average return for private biotechs acquired in 2009. Alas, BioMarin wouldn't discuss the duration of the earn-out or the timing of specific milestones, except to say that one $13 million payment will be made when the first patient is enrolled in ZC-701's Phase III trials.—Paul Bonanos

Novartis/Quark: Novartis has agreed to pay Quark Pharmaceuticals $10 million for the option to later in-license QPI-1002, a systemically delivered synthetic siRNA currently in Phase II for prevention of acute kidney injury in patients undergoing major cardiovascular surgery and for prophylaxis of delayed graft function in patients receiving kidney transplants. The companies revealed few details of the Aug. 18 agreement. The exercise fee and milestones for '1002 could reach $670 million but Quark CEO Daniel Zurr was not able to break down those biobucks more specifically or say when Novartis' option kicks in. Of course there are royalties on net sales too--if a drug ever reaches the market. In an interview with The Pink Sheet DAILY Zurr could only say he was "quite happy" with the royalty rate. (Gives you the warm fuzzies doesn't it?) Also left unanswered is what this week's tie-up means for Novartis' ongoing collaboration with Alnylam, under which the two companies are developing RNAi candidates in a variety of therapeutic areas. Originally a three-year agreement, Novartis has extended the Alnylam partnership twice for one year, with a termination date coming in October. At that time, Novartis will have to decide whether to non-exclusively license the Alnylam platform and further increase its ownership stake in the RNAi pioneer.--Joseph Haas

Life Technologies/Ion Torrent: This week’s acquisition of Ion Torrent by Life Technologies, for $375 million in cash and stock, continues the flurry of recent activity among gene sequencing instrument providers, who are continuing their march into the next generation of technological innovation. Seven weeks ago, Roche’s 454 Life Sciences bought up rights to IBM’s nanopore-based single molecule sequencing program, and just before that, Pacific Biosciences aligned itself with Gen-Probe. PacBio subsequently completed a $109 million Series F, including $50 million from Gen-Probe, and this week it also announced an IPO filing. Another player, Complete Genomics, filed for an IPO at the end of July and also just raised $39 million in a Series E. Did someone say “Building a war chest?” Unlike its more visible competitors, Ion Torrent’s Personal Genome Machine (PGM), which should hit the market in 2010 and sell for less than $100,000, is still kind of a black box: its capabilities are largely unknown. The heart of the PGM is a novel chemical detection system that directly measures the change in pH after a nucleotide incorporates into target DNA, using what is basically a semiconductor chip layered with an ion sensor. The company, founded by 454’s founder Jonathan Rothberg, gave a splashy demonstration of its machine at the February 2010 Advances in Genome Biology and Technology meeting on Marco Island. But it has not provided specs for the PGM, nor has there been any public third-party validation of the system from early access users. Nonetheless, because of the PGM’s novel detection system and semiconductor-based manufacturing, Ion Torrent has created quite a buzz, fueled in part by its LeBronian unveiling at Marco Island. Unlike PacBio and Complete Genomics, for example, which use optical detection, Ion Torrent could create a different set of users for gene sequencing. “For reasons of cost and footprint, I think that chemical detection-based sequencers can extend toward the clinical setting,” says Leerink Swann director of research, John Sullivan. That said, according to Life Technologies, the initial application for the PGM will be the life sciences [research] market.—Mark Ratner

Abbott/SkyePharma: Back in January FDA declined to approve Skye’s Flutiform fixed-dose combination asthma product, instead issuing a complete response letter. After a June meeting with the agency it became clear the companies would need to conduct additional clinical trials. On August 20 the other shoe dropped, with Abbott backing out of the Flutiform deal (one originally signed by Kos back in 2006 for $25 million up-front and renegotiated slightly by Abbott in 2008), penalty free. Skye hasn’t given up on the project, according to a statement, but won’t be taking home a break-up fee to keep it warm during those cold English summer nights, either. The therapy remains under review in Europe, where--perhaps luckily for Skye--“the regulatory approach is different from the United States,” the release notes. If Skye sees a path forward in the US it’ll try to sign up another marketing partner. For now, nobody seems surprised by Abbott’s decision – yet SkyePharma’s shares still slid 5% on the news.--Chris Morrison

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

This Charming CEO

Well, well, well. Of all the people to replace CEO Jim Mullen, the ever-more-Icahnized Biogen Idec tabbed George Scangos, the chief of Exelixis. Scangos' replacement is less of a surprise (small hint above), but more on that in a moment.

There are plenty of fun juxtapositions -- East Coast/West Coast, rumpled Mullen/dapper Scangos -- but one that can't be waved away is that Biogen Idec is squarely a commercial company, squeezing as much revenue as possible from its multiple-sclerosis leader Avonex and turning more and more to business development to bolster its pipeline; while Scangos, for all his revving of Exelixis' oncology discovery engine, has never brought a drug to market, let alone run a four-billion-dollar commercial operation.

"The Pink Sheet" Daily will dissect the major move in greater detail, so we don't want to steal our sister publication's thunder. [UPDATE: Here's the PSD piece.] Meanwhile, we point you to the other man behind the Exelixis engine, Michael Morrissey, the R&D chief who now steps into Scangos's CEO shoes.

Morrissey? We can't help wonder which song he'll use to take the stage at his first investor conference as CEO...

"A Rush and a Push and the Kinase is Ours"
"How Soon is NDA?"
"Please Please Please Let Me Get XL184 Approved"
"Panic" (Hang the VP, hang the VP, hang the VP...)

Feel free to suggest your own. If you're not a Smiths fan, just tap your foot to whatever song is in your head.

Photo courtesy of flickr user Djenan.