And the Roger Goes To ... Your 2010 In Vivo Blog Deals of the Year Winners

Thank you, dear IVB readers, for your decisive voting this year. Gone are the days when a DOTY winner squeaked through with only 27% of the vote (we're looking at you, Roche's acquisition of Genentech). Again this year it seems that you'd rather vote on some categories and not others -- a hint for 2011? -- but at least you've managed to come to a consensus.

In short, everything's turning up Jersey in this year's contest, with Celgene apparently given a mandate to do as it pleases. But we're getting ahead of ourselves. The envelopes, please...


The IN VIVO Blog 2010 M&A Deal of the Year, with a shade over 50% of the vote, goes to Celgene/Abraxis, the $2.9 billion cash-and-stock-and-(whew!)-CVRs deal that puts Celgene deeply into solid tumors. Congratulations. Coming in second, with nearly 24%, is Abbott/Piramal, and third, with 18%, is Pfizer/King. No love for generics (Teva/Ratiopharm, 5%) or Endo's acquisition of Healthtronic (3%).

The IN VIVO Blog 2010 Alliance Deal of the Year, with a whopping 55% of the vote, goes to Celgene and Agios. This early-stage pact, in the area of cancer metabolism, was worth $130 million in upfront cash and equity payments and gives Celgene an option on Agios programs at the end of Phase I. Pfizer/Biocon was no slouch with nearly 32% of the vote, while four nominees were relegated to also-ran status: Abbott/Reata (7%), GSK/Amicus (2.5%), Pfizer/UCSF (3%) and Biogen/Knopp (less than 1%).

The IN VIVO Blog 2010 Exit/Financing Deal of the Year, with about 46.5% of the vote, goes to Ablexis. The mouse that roared! The company's June 2010 Series A from Third Rock and Pfizer Venture Investments twinned with its five-pharma consortium deal for its antibody discovery technology won the day in a well-qualified field. Incline took in 23%, Ironwood had 19%, and Castlight nearly 12%.

Thanks everyone for voting and if Celgene, Agios or Ablexis would care to make an acceptance speech, please contact us here.

2010 M&A DOTY Nominee: Celgene/Abraxis Bioscience

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™.


As we noted a week ago, Celgene hasn't been shy about striking creative deals. The $2.9 billion cash and stock acquisition of Abraxis Bioscience fits the mold, for reasons we'll explain in a minute, but the creativity isn't what makes this deal worthy of a DOTY nomination.

It's actually Celgene's bet itself that intrigues us: after building its bona fides in liquid tumors with Thalomid (thalidomide) and the now-blockbuster Revlimid (lenalidomide), the New Jersey firm is spending nearly $3 billion to expand into solid tumors, an aggressive move at a time when retrenchment (Biogen Idec), reorganization (Genentech, via its parent Roche), desperate defense (Genzyme) and urgent reinvention (Amgen) are the main trends for big biotechs. In late 2007, Celgene's dealmakers high-stepped into the spotlight after years of relative silence, and they haven't relinquished the stage. The Abraxis deal, dollar-wise, is Celgene's largest yet.

For what, exactly? Abraxis' only marketed product is Abraxane, a reformulation of the generic chemotherapy paclitaxel using albumin nanoparticles that's been approved for metastatic breast cancer. It's a modest seller so far -- $360 million in 2009 revenue -- but Celgene sees promise in other solid tumor indications, including a potential submission for use in non-small cell lung cancer in the first half of 2011. Abraxis owns the "nab" nanoparticle delivery technology; whether Celgene puts it to use to reformulate other drugs remains to be seen. Investors at first were befuddled at the June 30 deal announcement, driving Celgene's stock below $50 from a high of $56.58, but they've since come round. Celgene ended trading Thursday, Dec. 16 at $58.79.

Terms of the acquisition were complicated and suggest this was a product Celgene had to have. In the end, Celgene paid $2.5 billion in cash and issued 10.7 million shares of common stock worth $58.21 each, or about $620 million, on Octo. 15, the day the acquisition finally closed.

In addition, Celgene has promised significant earn-outs, or contingent value rights (CVRs), to Abraxis shareholders -- most especially founder Patrick Soon-Shiong (pictured, right). The CVRs include a $250 million cash payment upon approval of Abraxane by FDA for NSCLC with a progression-free survival claim; either a $300 million or $400 million cash payment upon approval of Abraxane by FDA for pancreatic cancer with an overall survival claim; and potential cash royalty payments if Abraxane and certain pipeline drugs reach established sales thresholds.

It's hard to say CVRs are creative deal-making when so many acquisitions these days require them, though in the public markets, unlike the private side, they're still the exception, not the rule. There was an added twist, as well. To get the deal past the finish line, Celgene agreed to make the CVRs tradeable -- in essence, a tracking stock that follows the value of one product, Abraxane. Very few CVRs have ever been converted into tradeable securities, and Soon-Shiong has been involved in two of the most prominent examples as we discuss here.

Industry pundits continue to opine about the wisdom of spending billions for a single asset, but this diversification into solid tumors makes sense for Celgene. Data released at ASH suggests Revlimid may face headwinds in the maintenance setting for multiple myeloma. That could stymie the product's growth, a worrisome fact since it now accounts for 70% of Celgene's total revenue. Celgene wants to be one of the leaders in the increasingly competitive oncology space and it's not afraid to spend money or meet the deal requirements of the companies its courting. That chutzpah deserves your vote for DOTY, if nothing else.

Photo courtesy flickr user health2con.

2010 Alliance DOTY Nominee: Celgene/Agios Pharmaceuticals

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™.

In terms of licensing dollars, Reata/Abbott may have garnered the numero uno spot in 2010, but just because the tie-up was one of the largest EVAH, doesn't mean it should win a Roger. Come on, peeps, absent the dollar signs (and really, couldn't that just be desperation), this is pharma doing what its always done--in-licensing a product at proof-of-concept to bolster a pipeline that's going to suffer when a juggernaut (in this case the TNF-alpha Humira) goes generic.

For sheer creativity and chutzpah--and proof that big platform deals still occasionally happen--one must vote for the now joined at the hip Celgene/Agios.

Why? Let this IN VIVO Blogger count the ways.

For starters, the $130 million upfront (which include an $8.8 million equity component according to Celgene's 10K filings) is a hefty sum for a biotech that has published a couple of scientific papers but hasn't yet put a drug into a clinic. Second, it's the latest iteration of the big sib/little sib concept, in which smaller companies hitch their wagon to a larger, better funded entity to better weather the ups and down of biopharma drug development. Third, it's a welcome evolution in option-based deal-making, and shows that some companies really are serious about change, with both parties giving up something in the hopes of reaping a larger upside down-stream.

Recall the deal's basic terms: in exchange for the sizeable upfront, Agios, one of the leaders in a happening scientific space called cancer metabolism, gives Celgene an exclusive option to develop any drugs resulting from its research platform at the end of Phase I. Celgene can extend the exclusivity period – if Agios agrees – but it will have to provide additional funding for the privilege. On each program Celgene licenses, Agios could receive up to $120 million in milestones, as well as royalties on sales.

Sounds pretty good. What did Celgene give up? The considerable upfront cash can't be overemphasized. At a time when most big pharma are inking low-cost option-based deals, Celgene is clearly doubling-down, giving Agios sufficient dry powder to push its platform forward, meaning that even if the first one or two targets don't pan out, the biotech has enough capital to try, try again.

But Celgene also gave up control. Note that Agios remains the one running the discovery and early translational work until an option is exercised--and the biotech has a say if Celgene wants to delay bringing a program in house. (At that point Celgene will lead and fund global development and commercialization of any licensed drugs.) The hope, of course, is that an independent but not cash-constrained Agios can harness its entrepreneurial spirit and spin-off multiple products to bolster the specialty pharma's growing oncology pipeline as it expands beyond Revlimid. To cite an overused and oversimplistic truism, it's the "win-win" that comes from admitting you can't own it all.

Joining hands for mutual benefit is a structure Roche and Genentech both benefited from. It's helped Regeneron and Infinity, both past DOTY nominees for their big sib alliances with Sanofi and Purdue/Munidpharma respectively, pursue their individual goals. But there's a twist to the Celgene/Agios hip-joining and it's directly related to Agios' privately-held status. Truly, the deal structure represents a different financing path from that usually traversed by start-up biotechs. Rather than opting to complete Series B or Series C financings and eventually out-license one or two clinical-stage candidates, Agios has decided to lock in a long-term partner early. In return, Agios gains a secure financial runway, building on its not insignificant 2008 $33 million Series A.

But Agios also gives up considerable freedom to operate. Oh, we know the start-up can pursue outside deals for products that aren't in the cancer metabolism bailiwick, but that seems unlikely in the near-term given management has publicly stated its priority will be churning out INDs in this particular therapeutic arena. And, given the moribund IPO market (where firms with late stage or marketed products are having to take haircuts to get out), such close ties to Celgene could seriously limit Agios' exit opportunities. Indeed, would a company like GSK or Pfizer bid hundreds of millions to take out Agios with Celgene owning the biotech's nearest term clinical opportunities?

Two years ago, when GSK took out Sirtris for the unbelievable sum of $720 million, such a notion would have been heresy. But Agios has big dreams--and big dreams require big bucks. Kudos to both it and Celgene for realizing you get what you pay for.

Image courtesy of flickrer wwarby via a creative commons license.