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 Senses Change In The Air

Fast away the old year passes. Hail the new ye lads and lasses.

As the last days of 2010 fast approach, already there is a sense that change is in the air (except perhaps in Washington D.C. but that's another matter.) In biopharma land, Dick Clark is packing up his office, making way for Ken Frazier, described by some Merckies as "visionary." Meantime the abrupt departure of Pfizer's Jeff Kindler has industry wags' tongues...well, wagging.

Kindler's hefty severance package suggests he may well have been pushed from the Pfizer nest. Regardless, it would appear that Ian Read, who takes over as the CEO of the world's biggest pharma (and no, that ain't necessarily an appellation to be proud of), may well find himself the agent of change--whether he wants to or not.

Less than a week after being installed in the top spot, Read already faces the task of sorting out the firm's emerging markets strategy in an increasingly competitive environment. On Dec. 9, Pfizer revealed that David Simmons, the president and general manager of the established products division, will assume duties vacated by retiring emerging markets chief Jean-Michel Halfon, who had led that unit since its formation in late 2008. In what can only be described as additional--and certainly unwelcome--news, media outlets reported that same day the pending departure of Steve Yang, who moves to AstraZeneca after leading efforts to develop Pfizer's Asia-based R&D strategy and playing a critical role in helping integrate Wyeth post-merger.

Pfizer clearly faces a potentially difficult 2011 as it seeks to replace revenue when the juggernaut Lipitor’s patent exclusivity ends. (Contrary to popular opinion that won’t mark the end of the world; 2012 is the year to watch for those of an apocalyptic bent.) To compensate, the drug maker appeared to be devising a strategy that would allow it to breathe extra life into its cholesterol-lowering drug via a bolstered presence in emerging markets such as Latin America and the all-important Asia-Pacific.

With Simmons now leading two of the five biopharmaceutical units, some speculate those divisions will be merged, possibly as part of a broader restructuring. Tim Anderson, the knowledgeable pharmaceuticals analyst with Sanford Bernstein, wrote in a research note Thursday Dec. 9 that his firm believes the emerging markets and established product divisions will be combined, potentially resulting in cost savings through the elimination of redundancies in separate units. (Anderson also speculates that Pfizer’s oncology business unit could be folded into the specialty biz; despite efforts to build strength in this particular arena, things haven’t exactly gone as planned.)

Certainly the union of the established products group and the emerging markets division makes a lot of sense for Pfizer. While innovative products account for the majority of the company's overall revenue, its off-patent products can essentially acquire a second life around the globe. Branded generics, baby!

The changes taking place at Pfizer are worth noting not because they provide an important, er, read on Read’s management style. No, as Pfizer continues to react to its own patent woes, the choices it makes could influence decisions at competitors (we aren’t saying in what direction). As such, it becomes if not an important bellwether, at least a means of benchmarking how industry continues to respond in the post health-care reform era.

Where else is change afoot? At expert network cos. where doing biz has gotten a lot harder. Not, however, at Genzyme. At this point in the year, only those who have been hanging out on exotic islands with absolutely no mobile, "sat" phone, or internet access could possibly be unaware that Sanofi’s hostile take-over for Genzyme expires today. In the absence of a white knight, the French pharma has no compelling reason to raise its bid (investors certainly haven’t been impressed with the biotech’s PR efforts to boost share price.) Analysts like Mark Schoenebaum at ISI Group, believe Sanofi will let Genzyme execs sweat it out for the rest of the year. Unfortunately for the biotech, last we checked deodorant wasn’t considered a legitimate reimburseable health care expense. (Botox on the other hand…)

Finally, a remonstrance to vote early and often for this year’s DOTY nominees and support the change you believe in. Meantime, while reviewing your favorite transactions, don’t forget to take a gander at this week’s round-up of the industry’s deal making. Change may be in the air, but it’s also true some things never change. Thus, we bring you another edition of…

Cephalon/Mesoblast: This week’s tie-up between Cephalon and Mesoblast shows stem cell technologies can garner hefty upfront dollars. Cephalon is spending $130 million upfront to develop and commercialize the Australian biotech Mesoblast's adult mesenchymal precursor stem cell therapies for multiple indications, the companies announced late Dec.7. In addition, Cephalon has agreed to pay regulatory milestones of up to $1.7 billion, with a hefty percentage of that amount deliverable upon U.S. regulatory approval of selected products. In exchange, Cephalon is getting exclusive worldwide rights to co-develop and commercialize products in several indications: congestive heart failure, acute myocardial infarction, Parkinson's disease, Alzheimer's disease, and, furthest along, products for augmenting hematopoetic stem cell transplantation in cancer patients. The large upfront is striking given the early stage of Mesoblast’s technology; also striking is the equity component — Cephalon is buying a 19.9% stake in the Aussie firm for $220 million. It certainly demonstrates Cephalon’s commitment to the technology. A spot check of Elsevier's Strategic Transactions database indicates big stem cell deals are still the rarity: the 2008 Genzyme/Osiris alliance, which gave the smaller biotech $75 million in upfront money, is the only one that comes close. For Cephalon, the Mesoblast alliance is part of its ongoing strategy to amass biologics capabilities via the deal table. Other examples: Ception, Bioassets, and Arana Therapeutics.--Wendy Diller

GlaxoSmithKline/MeiRui: Rumors that GlaxoSmithKline was pursuing MeiRui have become a reality. On December 8, the Big Pharma announced it was acquiring the Chinese urology firm from stakeholders Pagoda Pharmaceuticals and Allergon for approximately $70 million, as it further deepens its commitment to this important emerging market. Among MeiRui's leading products: Prostat for benign prostatic hyperplasia and Sheniting for overactive bladder syndrome. As part of the transactionGSK, the maker of Avodart, gets not just products but also MeiRui's established sales and marketing platform and a manufacturing facility in Nanjing City, Jiangsu Province, China. Completion of the transaction is expected by the end of 2010, subject to regulatory approval. Ahead of the deal's announcement, consultants told sister publication PharmAsia News just why a GSK/MeiRui marriage made sense. GSK already has four urology products registered in China: Fortum, Augmentin, Zinacef and Timentin. But deeper relationships with Chinese KOLS would undoubtedly help its commercial efforts in the Middle Kingdom, especially as it looks to launch its most important urology product, Avodart. MeiRui certainly helps with that ambition, given its ties to the China Urology Association. MeiRui stands to benefit as well. It has been trying to take Prostat over-the-counter, so Glaxo's considerable OTC expertise should be attractive. Building an emerging markets presence is an important piece of GSK's evolving strategy--and most every other big pharma, for that matter. The MeiRui take-out shows the firm's preference for bite-size acquisitions that can be bolted on to existing businesses isn't waning any time soon.--EFL

Geron/Angiochem: Geron will pay $35 million upfront to license Angiochem’s novel peptide technology that helps transfer oncology drugs across the blood brain barrier. The deal, which consists of a $7.5 million cash payment and a $27.5 million stock issue due to occur on January 5, 2011, gives Geron worldwide rights to Angiochem’s technology linking peptides. These molecules target the LRP-1 receptor with tubulin disassembly inhibitors, disrupting mitosis in tumors. More specifically, Geron gets rights to a drug now known as GRN1005, a derivative of the common chemotherapy paclitaxel, which is slated to enter Phase II trials to treat brain metastases by the second half of 2012. Furthermore, Geron and Angiochem will collaborate on projects that conjugate the same peptide technology with telomerase inhibitors, which inhibit an enzyme crucial to cell division, in an effort to transport those compounds into the central nervous system. Geron already has several telomerase inhibitors under investigation. Unspecified milestone payments, royalties, and a share of any sublicensing revenues will also be due to Angiochem as the projects advance toward commercialization. Angiochem may be due additional cash up front if fluctuations in the price of Geron’s stock drive the equity component’s value below $27.5 million.--Paul Bonanos

Pfizer/Morphosys: Partner-driven bonanza for MorphoSys today! Not only did the German antibody player secure a technology transfer deal with Pfizer via its newly-acquired Sloning BioTechnology unit, but it also announced three other partners have filed to begin Phase I clinical trials with MorphoSys-designed antibodies. That means lots of milestone payments, and triple-validation of the HuCAL technology. It seems those partners believe MorphoSys' rhetoric that HuCAL is "one of the most powerful methods available for generating fully-human antibodies". The German group now boasts 13 partnered HuCAL programs in the clinic, declaring the associated milestone payments as "an important source of revenue." Eat your heart out, Genmab! That humbled Danish antibody group is also upping its partner-generated revenue with a new 'networked' strategy; question is, whether its technology (much of it licensed originally from Medarex) will prove as popular. The Pfizer/Morphosys deal isn't that sexy, certainly not in terms of what was disclosed (nothing, financially, we mean). Sloning's Slonomics (?!) technology platform for making highly-diverse gene and protein libraries will be installed at Pfizer's Rinat subsidiary; MorphoSys gets an up-front payment and annual license fees. Check out MorphoSys' same-day ad hoc announcement for some clues on the size of those payments: it's increasing its 2010 financial guidance ("mainly as a result of the achievement of revenues from additional commercial activities, resulting from the acquisition of Sloning") to anticipate FY revenues of €91-94 million (up by €4-5 million) and operating profit of €13-16 million (rather than €7-9m).--Melanie Senior

Image courtesy of flickrer barney_holmes via a creative commons license.