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

FDA Takes Control Of Avandia Debate

Score one for FDA.


As "Avandia Week" approaches, FDA made a decision to wrestle control of the debate over the safety and efficacy of Glaxo's diabetes drug rosiglitazone by offering the media an embargoed preview of the agency's briefing documents for the two-day advisory committee meeting on July 13-14.


The decision to let reporters look at the documents early was smart, effective and stands in marked contrast to how the debate on Avandia played out in 2007.


In 2007, the meta-analysis conducted by Cleveland Clinic cardiologist Steve Nissen, which showed a increased risk of cardiovascular events linked to Avandia, was published in the New England Journal of Medicine on May 21, 2007. A few days later, a House Oversight & Government Reform hearing, led by then-Chairman Henry Waxman, was scheduled before FDA ever publicly commented on the findings. On June 6, 2007, the hearing took place.


This time around, FDA has been effective, among other media savy strategies, in granting interviews in response to the Nissen meta-analysis published in the Archives of Internal Medicine and the Medicare beneficiary study comparing Avandia to Takeda's Actos conducted by FDA drug safety official David Graham in the Journal of the Amercian Medical Association.


But allowing access to the briefing documents before they were made public was probably the best stroke yet by the agency. Reporters typically get an email from FDA that the briefing documents are made public, then they have about 10 minutes to "read" 300-400 pages of FDA's in-depth analysis and write a short piece for the wires and mainstream media news sites that capture the essence of FDA's point of view.


Instead, FDA gave journalists a full day and access to FDA deputy commissioner Joshua Sharfstein and drug center director Janet Woodcock, among other officials, to digest the briefing documents and pose questions to the agency officials. Brilliant.


There's no doubt that Nissen and Graham know how to make news. But FDA, as a whole, has been equal to the challenge in both ensuring that outside voices--and voices from within--are heard while simultaneously communicating the facts on Avandia as agency leadership views them.

Financings of the Fortnight Checks in on the A-List

Our colleagues at Start-Up do a little thing every year they call The A-List, in which they slice, dice, julienne and slow-cook the year's biopharma and med-tech Series A venture rounds as a way to gauge the health and direction of the industry. If the annual A-List is a three-course meal, consider this post a snack to tide you over.

Four months into 2010, we take a step back and ask: "How are biotechs faring as they try to tap into crucial early-stage funding?"

Not so great, according to Elsevier's verison of the Magic 8-Ball, the Strategic Transactions database. Early-stage biotechs raised $163 million via 15 A rounds through April 30, with the average financing pulling in $10.9 million. (If a deal was tranched -- and many were -- we only count the tranche raised, not previous or future tranches included in the same round. For example, Flexion Therapeutics raised $9 million from Pfizer as part of a much larger A round, but only the Pfizer money was announced this year.)

At this pace, biotechs will raise $652 million in Series A money in 2010. In 2009, the figure was $842 million, and in 2008 it was $709 million. Filter out the massive $145 million A round pulled in last year by Clovis Oncology, and 2009 is still ahead of this year's pace. Paces can change, of course, and last month was one of the busiest for Series As in the past two years.

And that must mean momentum, except that... sigh... it doesn't. So far in May we've seen just one biotech Series A, the low-key Swedish cardiovascular play Cardoz (more on them later).

One trend carrying over from last year is the involvement of corporate venture investors. Last year, about 20% of all venture deals included corporate cash, and 40% of the top-dollar Series As had at least one corporate investor. This year, three deals have had a corporate element. Pfizer leads the Series A corporate pack so far with the aforementioned $9 million funneled into Flexion.

It's early to make grand prognostications on four months worth of data. Still, the numbers are worth monitoring as an indicator of VC health. It boils down to this: Will venture capital rebound to previous norms as the economic wheel turns to the good, or will we emerge from the cave of the global recession squinting at a fundamentally changed landscape in which traditional VC is no longer the dominant source of funding for early-stage R&D? There's a case to be made we've been headed that way for a while, even before the financial crisis. We're curious to see how 2010 eventually fits into the grander of scheme of things. Meanwhile, life goes on, and life requires cash, not to mention long walks, fresh air, and feta cheese. What else can you not live without? How about...

Ikaria & NuPathe: A funny thing happened on the way to this year's IPO window. Ten biotech issues that registered last year have gone public this year, ranging in size from Ironwood’s $203 million take in February to Australia’s CBio, which garnered a tiny $6.2 million. But until the past fortnight, no biopharma had filed an S-1 in 2010 -- how's that for enthusiasm? That is, not until Ikaria, which filed its S-1 on May 13, and NuPathe on May 14. Neither has set terms, though Ikaria used the rather ambitious placeholder of $200 million, while NuPathe went for the more typical $86 million. Haircuts have been the rule not the exception in this year’s IPO market, so don't be surprised if they are extra cautious as their bankers gauge the market. One positive for both companies: their assets are in late-stage clinical trials. Ikaria’s Lucassin is entering Phase III in hepatorenal syndrome, and NuPathe already has advanced its migraine drug, Zelrix, through Phase III and hopes to win approval and launch by 2012. Also of note: Whether Ikaria goes public or not, it will distribute a $130 million dividend to 12 company officials this quarter, payable from a new $250 million loan. Ikaria says the payout is a one-time deal. Prospective investors should also note that Ikaria's top investor New Mountain Partners will continue to run the show post-IPO, controlling as many as three board seats. -- Joseph Haas

Cardoz: After a boffo April for early-stage funding, only one biotech reeled in a Series A round this past fortnight. Spotlight, then, on Cardoz, a low-profile Swedish startup working on repositioned drugs. It doesn't have a Web site, so its investors announced a SEK 100 million round (about US $13 million), which Cardoz will receive in two tranches that aren't tied to milestones, Cardoz CEO Carl-Johan Dalsgaard told IVB. The funding comes from a European syndicate led by Dutch firm Forbion Capital Partners. YSIOS Capital Partners of Spain and Sweden's HealthCap, where Cardoz was incubated and Dalsgaard is a partner, also joined. Its lead compound, the origins of which Dalsgaard declined to reveal, is already in the clinic, and the cash will help push it through Phase II to treat abdominal aortic aneurysms. Cardoz also has a preclinical program to develop novel inhibitors of leukotriene A4 hydrolase. -- A.L.

Sequenom: Look who's back. In April 2009 the diagnostic firm Sequenom admitted employees mishandled data from its Trisomy 21 Down syndrome test, resulting in the dismissal of CEO Harry Stylli, among others, federal investigations, and accusations of insider trading. But new management has recouped enough investor confidence to boost the stock -- if not quell skepticism in other corners -- and raise $51.6 million in a private placement announced on May 12. It was much-needed cash, as Sequenom reported only $30 million in the bank at the end of the first quarter. There's a caveat to the comeback: Sequenom sold the 12.4 million shares at $4.15 each, a 23 percent discount to the previous day's close. On its May 6 earnings call the new management team detailed a clinical development plan using outside data and also, for the first time, clarified that the Trisomy 21 test will be DNA-based (it is now being run on Illumina’s sequencing platform). Whether a Trisomy 21 diagnostic gets to market -- as a laboratory developed test (LDT) by the end of 2011, to be followed by a PMA application for regulatory approval by the end of 2012 -- remains a question, but the company is at last giving details. That, plus the significant discount to its stock price, certainly helped complete the financing. -- Mark Ratner

NeuroTherapeutics Pharma: The B-list needs some attention, too. This Chicago-area startup said May 20 it pulled in a $43 million Series B, notable not just for its size but for its participants, which include corporate funders GlaxoSmithKline and Pfizer. NTP's lead molecule, NTP-2014, has potential applications across numerous diseases, including epilepsy, pain and other CNS indications, according to the company. The drug is still in preclinical development with an IND filing planned for later this year and trials planned in pain and epilepsy. As noted in our intro, corporate funders played an ever-larger venture role last year. We also take note of the presence of GSK's SR One fund. This is the first SR One deal we've heard of since the big re-org, or should we say, the latest big re-org, with ex-Sirtris chief Christoph Westphal taking the reins as he also tries to launch a separate fund that reportedly has cash from GSK. Meanwhile, it's Pfizer's second venture deal this year. NTP officials told "The Pink Sheet" they did not give away any rights, such as right of first refusal or options, in order to secure the financing. NTP chairman Heath Lukatch, a partner at Novo Ventures, said the Series B cash should see the firm through three years and three "robust" Phase IIa trials in pain and epilepsy. -- Jessica Merrill

Photo courtesy of flickr user cheesy42.