Deals Of The Week: The ASCO Edition

ASCO is just moving into full swing, but already the press releases are flying fast and furious. Biotechs have long looked to this meeting as a means to showcase their smarts and increase their profile with public investors. But as big pharmas have set their sights on oncology as the therapeutic area of choice -- given its high unmet medical need and, historically, generous reimbursement, there's no doubt ASCO is now a critical meeting for even the biggest players in the industry.

Like last year, the particular tumor type driving a lot of investor interest at this year's Chicago confab is melanoma. Since presenting robust Phase III data at ASCO 2010 showing a survival benefit for Yervoy, Bristol-Myers Squibb has gone on to win rapid approval for its CTLA-4 inhibitor. This year, investors and clinicians will be watching for new data measuring Yervoy efficacy in pretreated melanoma patients; they'll also be monitoring the data associated with Plexxikon/Roche's vemurafenib, which is pending FDA approval for use in patients with the BRAF V600 mutation, a specific genetic abnormality observed in about 50% of melanoma patients.

As "The Pink Sheet" Daily notes, it's not entirely clear how the melanoma market will shake out when both products are finally on the market. They may be competitors, but given their different modes of action -- Yervoy stimulates the immune system, while the Plexx/Roche drug targets only tumor cells that carry the V600 abnormality -- it's equally likely they could act synergistically. Certainly neither drug on its own works in all patients or offers a long-term cure, even if both extend median patient survival in clinical trials.

Thus, the news June 2 that Roche/Plexxikon would find a way to work with BMS to study the two drugs in combination seemed almost a fait accompli. The press releases issued (from three different companies no less) were long on breathless prose and short on detail: the parties will conduct a Phase I/II study evaluating safety and efficacy of the two drugs in combo, but did not provide more clarity on the trial's design, its timing, or its enrollment. "If appropriate, the companies may conduct further development of the combination," Bristol said in its press release.

You will notice there's also no information on the economic sharing that might come from such a clinical collaboration either. That's hardly surprising. We've yet to see much in the way of financial deets for earlier tie-ups in oncology: AstraZeneca's 2009 alliance with Merck to combine development of their respective clinical-stage MEK inhibitor and AKT inhibitor; or Sanofi's December 2010 deal with Merck Serono to marry their Phase I PI3 Kinase- and MEK-targeting molecules.

Despite the increasing complexity of the oncology market, one in which payers are taking a more active role in controlling costs, such cross-collaboration remains the exception rather than the rule. There are plenty of reasons why: issues around control, valuation, and overlap with other non-partnered products mean it can be tough for two large companies to come to agreement on how to share knowledge and find ways to work together.

That BMS and Roche have found a way to do so can only be a smart thing. The reality is organizations like US Oncology, Cardinal's P4 Healthcare, and Via Oncology are going beyond traditional treatment guidelines recommended by the likes of ASCO and the National Comprehensive Cancer Network, working with payers to provide "clinical pathways" that aim to standardize treatment for a specific disease or tumor type. Aimed for now at treating the most costly cancers, these programs, which are still in pilot mode at major players like Aetna, Blue Cross Blue Shield and Highmark, reduce the wide latitude US doctors have historically enjoyed when prescribing oncologics.

The ultimate impact of these pathways on the biopharma industry isn't yet known, but as we write in this IN VIVO feature, their advent has real consequences for how companies should approach drug development. And while it's very early days to be talking about a melanoma pathway, doing clinical trials to show the merit of your drug in conjunction with a competitor, when it's highly likely to see real-world use in such a combination, just makes sense. (We also wonder how this impacts GSK's Phase III melanoma drugs, its MEK1/2 inhibitor and its BRAF protein kinase inhibitor. Can these earlier stages medicines get traction in the current competitive marketplace? GSK certainly hopes so, and has its own combo trials ongoing.)

Will we see more cross-company clinical stage oncology pair-ups in the future? We hope so. Could such alliances be broader and extend beyond on-offs to a ViiV type arrangement? We're doubtful given the deal making complexities and nearly every pharma's desire to be tops in oncology. But as crazy as that idea sounds, it'd be a clear choice for 2011's DOTY.

In the interim, we always have ASCO (if not Paris) and...

Clovis/Pfizer: Attention biopharma trend watchers! We bring you this news flash of another sighting of that rare bird in the wild: the out-licensing. On June 2, Clovis announced it was licensing Pfizer's Phase I/II Poly (ADP-ribose) polymerase (PARP) inhibitor, PF-01367338, for an undisclosed upfront sum. Under the terms of the agreement, Clovis Oncology will take over responsibility for global product development and commercialization, and in addition to paying the u/f, will owe Pfizer additional downstream fees milestones totaling up to $255 million (pending success in the clinic and commercially, of course). Interestingly, as part of the out-licensing, Pfizer Venture Investments is taking an equity stake in the biotech. (So it's a licensing AND a financing in one blow.) Not that Clovis is hurting in the cash department. Recall Clovis, a START-UP A-lister, pulled in one of the biggest Series As EVUH in 2009. PARP inhibition is, of course, a hot topic at ASCO, and a quick search of the pipeline database Inteleos, shows there are more than a dozen drugs in development against this target, including some that are much further along, including Sanofi's iniparib (Phase III, originally developed by BiPar), AstraZeneca's olaparib, and Cephalon's CEP-9722. The press release announcing the news emphasizes '338 is a "potent" PARP inhibitor, so it's a bit curious that Pfizer would give it up unless its trying to walk the talk of jettisoning anything not first-in-class or best-in-class. (But that raises other questions, including what does Clovis see in the compound?). Separately, Clovis also announced this week plans to develop in concert with Roche an in vitro PCR-based companion diagnostic linked to EGFR mutations.--EL

Johnson & Johnson/AVEO: Months after partnering its lead asset tivozanib in a lucrative deal with Astellas, Aveo has extended its network of partners with an early stage deal with Johnson & Johnson's Centocor Ortho Biotech division. The Cambridge, Mass.-based biotech announced the licensing deal for compounds targeting the RON (Recepteur d'Origine Nantais) receptor - believed to play a role in cancer development - for $15 million upfront May 31. Under the deal, Aveo will receive half of the $15 million in an upfront payment and the rest through a separate equity investment that gives J&J a 1.25% stake in the biotech. Given the early-stage nature of the deal, it's not surprising the arrangement is back-end loaded, with Aveo eligible to receive up to $540 million in development, regulatory and commercial milestones. Aveo will also receive tiered, double-digit royalties on sales of any products stemming from the collaboration. Centocor will be responsible for clinical development, manufacturing, commercialization and costs. J&J will also fund some research to be conducted by Aveo to identify biomarkers for patients most likely to respond to treatment with RON-targeted antibodies. "It is about building out a portfolio," said Aveo Chief Business Officer Elan Ezickson of the collaboration in an interview with "The Pink Sheet" DAILY. For J&J, the deal provides access to what could be an important product in oncology, an area of critical importance to the big pharma's overall business success. -- Jessica Merrill

AstraZeneca/Heptares: (Spoiler alert. No oncology refs in this deal.) UK biotech Heptares Therapeutics signed its third Big Pharma agreement in two months this week, this time with AstraZeneca. The two companies have entered into a four-year research collaboration to discover and develop new medicines that target G-protein coupled receptors (GPCRs). AstraZeneca will have worldwide commercial rights to product candidates emerging from the collaboration, with Heptares receiving $6.25 million in unconditional upfront payments plus committed research funding and future milestones. Heptares will also receive royalties on product sales. Research teams drawn from both companies will focus on a number of GPCR targets known to be linked to CNS/pain, cardiovascular/metabolic and inflammatory disorders. The deal brings to more than $13 million the total upfront money that Heptares has received from its pharmaceutical partners this year, which together add an extra 18-20 months to the biotech's cash runway, according to CEO Malcolm Weir. It also represents further validation for the four-year-old company's technology, which helps stabilize GPCR molecules. That AstraZeneca is modality-agnostic in this deal - purporting to seek both small- and large-molecule candidates - reflects the growing importance of the Big Pharma's MedImmune biologics subsidiary within its overall R&D operations.--John Davis
Johnson & Johnson/Diamyd: J&J's Ortho-McNeil-Janssen (OMJP) signed one early stage deal this week -- and called it quits on another. It was barely a year ago when Elisabeth Lindner, then President and CEO of the Swedish diabetes outfit Diamyd, pronounced on a quarterly earnings call that "a new chapter has begun" as a result of the firm's $45 million upfront licensing agreement with OMJP. That chapter closed on June 1, when OMJP returned all rights to the Phase III GAD65, an antigen-based therapeutic vaccine designed to preserve beta cells in type 1 diabetics. A big disappointment to Diamyd and its shareholders, the news can hardly be called surprising. (We're even tempted to say the writing was on the wall.) On May 9, the two companies reported clinical trial data from a European pivotal study, showing GAD65 failed to meet the primary efficacy endpoint of preserving beta cell function in new diagnosed Type 1 diabetics after 15 months of therapy. Although the company noted "a small positive effect was seen", the data weren't good enough to keep OMJP engaged -- and, importantly, willing to shoulder any additional development costs. Recall the 2010 deal stipulated the two partners would share R&D costs until results of the first Phase III study were available, at which time OMJP had the option to assume full development of the drug candidate. It can't be an easy message to give shareholders, but Diamyd's acting president and CEO, Peter Zerhouni (who replaced Lindner after her abrupt departure in late April) did his best to spin the news positively. "With all the rights to returned to us we are free to decide on how to extract the most value from GAD65 going forward," he said. Whether Diamyd can sign a new partner near term is unclear -- a therapeutic vaccine for diabetes is scientifically risky and it's hard to see a lot of interest after the disappointing Phase III study results. (Even Diamyd doesn't seem that interested. In the wake of OMJP's decision it announced it would shelve a planned longer term follow-up of patients in the European trial.) Investors may have more clarity on GAD65's potential partnerability by end of June -- at the upcoming ADA meeting Diamyd will present data on the European trial, presumably providing greater detail about the small positive effect. There's also a Phase III ongoing in the US due to read out in 2012 and two other externally funded studies that may yet result in the vaccine's resurrection.--EL

Deals Of The Week: CATT Fight

Well, the cat (er catt) is out of the bag – and, n,o we aren’t talking about Kate Middleton’s decision to wear a long-sleeved ivory confection with flower appliqué details when she tied the Windsor knot.

While fashionistas, pundits, and the British nation had their eyes trained on Westminister Abbey, the biopharma industry was focused on the release of data comparing the utility of the high priced Lucentis versus the much cheaper Avastin to treat wet age-related macular degeneration. And as everyone now knows, the data from the 1200-patients trial sponsored by NIH suggest that in this particular setting, there seems to be little reason—based on overall outcomes—to spend thousands of dollars on Lucentis when Avastin works just as well for a fraction of a cost.

Dr. Phillip Rosenfeld, an ophthalmologist at the University of Miami Miller School of Medicine, was particularly blunt in his assessment in a NEJM editorial that accompanied the data’s publication: "Healthcare providers and payers worldwide will now have to justify the cost of using ranibizumab [Lucentis]," he said.

That’s not to say Genentech and Novartis aren’t channeling their inner Churchill (or perhaps, more appropriately, their inner John Paul Jones). Already the companies are highlighting potential unanswered safety questions, including discrepancies in dosing and a slight increase in the incidence of non-specific serious adverse events, mostly hospitalizations. Expect the drug companies to play up whether the controlled conditions of the NIH trial can adequately be replicated in a real world setting too.

Given we are talking about people’s sight, those questions may provide a persuasive argument for docs and patients wary of not using the formulation that has FDA’s stamp of approval. Provided payers play along, of course.

And that's why Medicare’s decision is so critical. Avastin vs. Lucentis has become the poster child for the comparative effectiveness debate; thus, you can bet industry will be watching closely to see whether or not CMS initiates a coverage review that would limit Lucentis’ use. Such a decision would certainly give private payers more license to limit the medicine as a first-line treatment option.

The ripples of CATT will almost certainly be felt outside the walls of Novartis and Roche/Genentech as well. Ophthalmology – particular treating diseases that blind—has become an area of interest for big pharma because of the unmet medical need for new therapies. Because back of the eye diseases are treated by a highly trained and technically savvy group of specialists, the sector has long been a favorite of the venture community as well.

What does this mean for new AMD drugs coming down the pike like the complement inhibitors developed by Optherion or the anti-PDGF inhibitor developed by Opthotech? Given such medicines work by a different mechanism of action than the anti-VEGF inihibitors Lucentis and Avastin, their value proposition is still a little bit easier to explain. But whether potential partners will bite without superiority data is another question.

Certainly the CATT data seem to make life much tougher for Bayer and Regeneron, who now face some thorny questions about their VEGF Trap-Eye medicine, aflibercept. Phase III data released last fall showed the drug to be non-inferior to Lucentis, with fewer doses required. But with data from CATT suggesting drugs like Lucentis and Avastin can be given at less frequent intervals, a dosing advantage alone seems unlikely to be enough to ensure Regeneron and Bayer coverage and commercial uptake of their medicine – especially when data showing a much cheaper alternative can do the job.

Whether you think the CATT results are the cat’s meow or worth nothing more than a cat call, it’s time for another edition of deals of the week…

Johnson & Johnson/Synthes: The deal garnering the lion’s share of the PR this week is Johnson & Johnson’s $21.3 billion tie-up of orthopedic trauma device maker Synthes, announced April 27. Under the terms of the deal, J&J will pay $181.75 per share for Synthes in cash and stock, an 8.5% premium over Synthes’ stock price close on April 26 and a 21.7% premium over its close on April 14, when rumors about a possible tie-up first surfaced. It’s the largest deal in J&J’s history, coming half a decade after the diversified giant passed on upping its $25 billion bid for Guidant. Strategically the Synthes buy-out makes a lot of sense: it gives J&J the pole position in orthopedics boosting sector revenues from around $5.6 billion to more than $9 billion, and deepens its expertise in trauma fixation devices, an arena less prone to payer oversight and the vagaries of a slowing economy. (Fixing the damage arising from a major accident ain’t exactly elective.) At the time of the Guidant bidding war, analysts noted J&J’s interest in that company and the size of the deal said a lot about the health care company’s view on the relative merits of investing in med-tech versus pharma. Given the Synthes acquisition, the question of J&J’s dedication to Rx is sure to resurface, though the early approval of Zytiga may help the balance.

One interesting wrinkle is whether this big orthopedic deal could presage additional dealmaking in CV, since within J&J there’s historically been a school of thought linking opportunities in these two markets. As rumors about the possible J&J/Synthes tie-up coalesced, speculation ran the gamut. Thanks to the precipitous drop in market share of its drug-eluting stent biz, some predicted J&J would exit CV altogether, selling off its Cordis business; others said 'no,way,' opining this will spur J&J to re-up in CV, perhaps via acquiring percutaneous valve-leader Edwards Life Sciences.

Because J&J is paying for Synthes mostly in stock -- just 35% of the payment is cash -- the health care firm has plenty of ammunition for additional deal making. Given J&J's hefty balance sheet, its use of stock to ink the deal took some by surprise since it creates additional unwelcome earnings pressure. Even though the deal bolsters the struggling DePuy subsidiary, which like the consumer division, has seen major setbacks due to recalls, some claim J&J is simply putting a Band Aid (pun definitely intended) on its problems. Critics argue the company’s manufacturing problems are significant and that integrating Synthes will detract from the hard work required to fix a broken system. —The EBI Device team

Kadmon/Nano Terra: Sam Waksal’s Kadmon is at it again. After its deal-making bonanza last fall – recall the firm acquired Three Rivers and set up a strategic partnership with Valeant—Kadmon is teaming up with privately-held Nano Terra, a nanotech accelerator developing technologies with applications from biopharma to more industrial settings. Terms of the tie up weren’t disclosed but they do provide Kadmon with an exclusive license to three novel, clinical stage assets and access to Nano Terra’s proprietary Pharcomer Technology drug discovery platform. (FYI, the product candidates and the Pharcomer technology were originally developed by another private biotech, Surface Logix, and only recently acquired by Nano Terra, though no formal announcement about that deal appears to have been made.) Perhaps the most interesting asset for Kadmon is Slx-2119, a selective Rho-associated coiled-coiled kinase 2 (ROCK2) inhibitor that impacts cell shape and cell migration and may play a role in diseases as diverse as diabetes, cancer, and spinal cord injury. As part of the recent alliance, the assets and technology will be transferred to a new joint venture owned by Kadmon and Nano Terra called NT Life Sciences.—EFL

Sequella/Maxwell Biotech Venture Fund: Anti-infectives developer Sequella of Bethesda, Md., signed an unusual deal that gives Maxwell, a venture fund that specializes in Russian investments, rights to tuberculosis treatment SQ109 in Russia and the Commonwealth of Independent States, which includes Armenia, Kazakhstan, and Ukraine. Maxwell is taking an undisclosed equity stake in Sequella, but the parties do not consider the transaction a round of funding. Sequella could receive up to $50 million from Maxwell, the first tranche being an upfront payment and near-term milestones that the companies declined to disclose. Run by former Pfizer discovery executive and incubator chief Alex Polinsky, Maxwell has responsibility for development and approval of SQ109 in its licensed areas. Sequella has completed three Phase 1 studies of SQ109 in the U.S. and is currently running Phase 2 efficacy studies in TB patients in Africa. It is also testing the compound as a treatment for Helicobacter pylori infections and fungal infections. Sequella officials told the IN VIVO Blog that the company has not raised traditional rounds of venture capital, instead leaning on individual investors and hedge funds to supplement government grants. -- Alex Lash

Eli Lilly/Medtronic: While drug companies routinely team up with device makers to find better ways to deliver drugs, the April 26 deal between Eli Lilly and Medtronic, to research and develop a new treatment for Parkinson's disease is notable for two reasons. For starters, the collaboration involves two very early stage technologies. But the alliance also facilitates Lilly's move into a new area of CNS that heretofore hasn’t been a primary focus. If all goes according to plan, the alliance will result in a combination of Lilly's modified form of glial cell-derived neurotrophic factor (GDNF) and Medtronic's implantable drug infusion system. Because the large protein growth factor can't get past the blood brain barrier, and, on its own, isn't targeted, the Medtronic device would deliver it directly to the dopamine-producing neurons that degenerate as Parkinson’s disease advances. The companies aren't disclosing much about the terms of their alliance, except to note that it is a 50-50 split in both costs and revenues and spans clinical development, regulatory and ultimately commercial stages. The aim is to produce a combination product that can be submitted jointly for regulatory approval. The partners don't have a fixed time line for getting their therapy through development, but expect to move it into the clinical within five years, said Ros Smith, a senior research director of regenerative biology at Lilly.While the modified GDNF is most advanced, Lilly also has several compounds in pre-clinical development for Parkinson's disease. Medtronic, for its part, doesn't currently sell a device that delivers drugs directly to the brain, although it markets a deep brain neurostimulation technology for treating Parkinson's disease and sells implantable pumps and catheters for delivery to the spinal cord.--Wendy Diller

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

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.

One Small Biomarker Step for Bapineuzumab

Our boss wouldn't sign off on a business trip to Hawaii, even to cover the International Conference on Alzheimer's Disease in Honolulu. Something about not letting us leave our brains on the beach.

Instead we've been neural surfing from the IVB HQ this week. We spent time on the phone with a couple clinical execs to discuss Johnson & Johnson and Pfizer's release of biomarker data Tuesday, which the firms say is evidence the drug bapineuzumab is having an effect on the underlying processes of Alzheimer's.

The news is not the answer to the $64 million (or several-billion-dollar?) question whether the drug is slowing or reversing cognitive decline through disease modification. No drug has shown that yet, and until one does the frustration that's come with several Phase III setbacks will continue. (We'll have to wait until at least 2012 to know the answer about bapineuzumab.)

But the new bapi data underscores the importance developers are placing on biomarkers to help understand disease progression and guide clinical trial practice in the Alzheimer's field. The Phase III bapi trials are underway and can't be modified, but the data could affect future studies. (We'll examine the effects of biomarker development and the clinical setbacks on Alzheimer's-focused startups in the upcoming issue of START-UP.)

Pfizer and J&J were quick to caution that the data are also preliminary. Taken from Phase II trials that ended in 2008, they need to be confirmed in the global Phase III program that Pfizer and J&J's Janssen Alzheimer Immunotherapy division are running. Company officials said Tuesday that bapi seems to lower the amount of a variant of the protein tau in spinal fluid (CSF) that has been linked to neurodegeneration. (Data are at the end of this post.)

Bapineuzumab itself does not target tau. The CSF measurements are a "downstream" biomarker rather than direct effect, Ron Black, Pfizer's assistant vice president of clinical R&D, told the IN VIVO Blog.

A humanized monoclonal antibody, bapineuzumab is designed to prevent the beta-amyloid plaques that accumulate in patients' brains. But the tau biomarker study, which measured "phospho" tau, or P-tau, shows bapi is also having some effect on a second Alzheimer's pathology. "Recent scientific data suggests both [Aβ and tau] processes might be important," Janssen Alzheimer Immunotherapy's head of clinical development Eric Yuen told IN VIVO Blog. "The initial step may be overproduction or underclearance of toxic Aβ...that aggregate and become more toxic. The increase in P-tau subsequently produces more toxicity to neurons. It's a long process."

Another study released Tuesday showed the predecessor to bapineuzumab, AN1792, also made statistically significant reductions in tau (as well as Aβ). Development of AN1792 was halted after Phase II trials in 2002 when patients were struck with brain inflammation. Researchers continued to follow the patients, however. "The findings give us more basic information about the interaction between beta amyloid and tau in Alzheimer's and may clarify how the disease progresses in the brain," researcher Delphine Boche of the University of Southampton's School of Medicine said in a statement.

When neurons die, the tau from the microtubules inside the neurons is released into the spinal fluid. With less P-tau in the spinal fluid, it's more evidence to suggest bapineuzumab is preventing neuronal death. (The statistically significant data came from 46 patients in two Phase II studies; 27 got bapineuzumab, 19 received placebo.)

But that's a long way from showing positive clinical outcomes. The main Phase II tests for bapineuzumab, run by J&J and Pfizer's predecessors Elan and Wyeth, showed that only patients who did not carry the ApoE4 allele had statistically significant cognitive and functional improvement. That's crucial, because in Alzheimer's trials only such "real-world" measurements, can lead to a drug's approval. It's one reason why the so-called amyloid hypothesis, which holds that to cure Alzheimer's you have to curtail Aβ, is in question these days: There's little evidence so far that fighting Aβ leads to a functional difference to patients.

That's another reason to study biomarkers: the more data researchers gather about the underlying molecular biology of Alzheimer's, the more chance to correlate changes in the biology to improved cognition and function if and when those improvements carry the day in a late-stage trial.

Elan's rights went to J&J in a far-reaching deal last year, and Pfizer got partial rights when it bought Wyeth. Janssen's data are due main trial is expected to end in 2012 and Pfizer's in 2014.

The top-line data from the Phase II CSF tau study pooled two patient populations. They showed a statistically significant decrease (p=0.0270) in P-tau in bapineuzumab treated patients (9.49±2.74 pg/mL) compared with placebo-treated patients (-0.51±3.26 pg/mL). Although not statistically significant, the analysis also showed a trend (p=0.0856) for a decrease in T-tau in bapineuzumab-treated patients (-73.31±32.73 pg/mL) compared to placebo (+9.79±38.95 pg/mL) in the change from baseline to month 12 values.

Image courtesy of flickr users Eva and Rodney Harris.

Deals of the Week in a Parallel Dimension

It's ADA season, and this week didn't disappoint with diabetes deals coming out of the woodwork. But if FOTF can go a little off-piste, permit your favorite deals roundup to stray as well , straight into uncharted regulatory and reimbursement territory. (We promise to get to the juiciest deals eventually.)

This week FDA and CMS agreed to routinely share data in what could serve as a first step toward parallel reviews by FDA and CMS for marketing approval and medicare coverage. We're already seeing reimbursement milestones popping up in deal terms, and we can imagine that a parallel review by the massive government insurer would only mean they'd be even more common.

To be sure this isn't a new discussion, as our colleagues from "The Gray Sheet" wrote this week. But there may be more substance to this new effort, under which the agencies are "seriously exploring the ability to start, at a manufacturer's request, a Medicare national coverage determination process" while a medical device is under FDA review. That remark, from FDA center for devices and radiological health director Jeff Shuren, was made before a device-oriented audience, but he clarified that the memorandum of understanding between FDA and CMS will apply "FDA-wide."

Hmmm. Who will be the first to channel his/her inner Ray Stantz and order FDA and CMS to "cease any and all supernatural activity and return forthwith to your place of origin?"

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Before we get to the deals this week please allow us a moment to say GOOOOOOOOAAAAALLLLLLL!

Oh and yes, we did the movie thing last week, but it's hard to resist this one. We had the same reaction as Derek Lowe to the idea of Lilly launching a statin in 2010 -- surely someone threw us in a DeLorean, cranked up the Huey Lewis, scored some Lybian plutonium and sped up to 88 miles per hour, because we all went Back to the Future this week.

Never mind that Biff guy, it's time for ...


Sanofi/Regulus: Sanofi-Aventis made its first foray into the emerging microRNA field by forging a collaborative development agreement with Regulus Therapeutics, a startup co-owned by publicly traded Alnylam Pharmaceuticals and Isis Pharmaceuticals. For an upfront payment of $25 million and an equity investment of $10 million, Sanofi received options to license four Regulus compounds, beginning with a co-development agreement targeting fibrosis. If all milestones are reached on all four, Sanofi could pay Regulus more than $750 million; Sanofi also has a $50 million option to expand the partnership into a broader alliance that to us recalls the first broad RNAi deal between Alnylam and Novartis. MicroRNAs regulate gene expression by binding to target messenger RNA transcripts and developers hope that disruption by a single microRNA can interfere with disease pathways. Nearly all microRNA-based therapies have yet to reach the clinic. Regulus, which has programs in oncology, cardiovascular and metabolic diseases, also has two separate partnerships with GlaxoSmithKline. One gives GSK four options in Regulus’s immunological and inflammatory disease portfolio, and the other pertains to a specific hepatitis C treatment. The deals collectively are a sign of Big Pharma’s renewed interest in innovative early-stage technologies.--Paul Bonanos

Valeant/Biovail: While complementary lines of business played an important role, it was probably Biovail’s advantageous tax setup that led larger specialty pharma Valeant to merge with it in a deal announced June 21. Canada (and hockey?) will be a major focus for the newco – to be named Valeant Pharmaceuticals International but based in Biovail’s hometown of Mississauga, Ontario, rather than Valeant’s current home of Aliso Viejo, Calif. The new Valeant’s four main business areas will be specialty central nervous system (comprising Biovail’s CNS franchise and Valeant’s neurology business), dermatology, Canada, and branded generics/emerging markets. Valeant CEO J. Michael Pearson, who will run the new company, said each firm currently has a roughly $100 million business in Canada, and both are experiencing a better than 20% growth rate. Asked to estimate what the new company’s effective tax rate would be, Biovail CEO Bill Wells, who will be chairman of the new company, said Biovail currently pays in the 5 percent to 8 percent range. The combined company’s rate will be somewhat above that but far below Valeant’s tax rate of 36 percent, he said. Biovail has done its manufacturing in Canada, generating excess net operating losses. Now, those NOLs will help shelter Valeant’s considerable income in Canada. The new company also will retain Biovail’s principal subsidiary in Barbados, where intellectual property is developed, funded and managed, taking advantage of that country’s very low tax rates. The merged company also should realize $175 million in cost synergies in 2011 before tax savings are even factored in, derived partly from combining commercial operations in Canada, which will detail both specialty and primary care products.—Joseph Haas

J&J/Metabolex: Metabolex's first deal this week sees Johnson & Johnson taking time out from their OTC recall issues to boost its diabetes pipeline. In addition to licensing a type 1 diabetes vaccine from Swedish biotech Diamyd (see below), J&J's Ortho-McNeil-Janssen unit snapped up worldwide rights to several undisclosed first-in-class preclinical drug programs for type 2 diabetes from Metabolex. The deal is the companies' second, following on a 2006 alliance around two Metabolex PPAR-gamma programs, which are now both in Phase II development. In the current deal, Metabolex gets an undisclosed up-front payment and the typical assortment of development, regulatory and sales milestones plus royalties. If the stars align, the biotech could see up to $330 million.--CM

J&J/Diamyd: The same day OMJ inked its deal with Metabolex it also signed up Sweden's Diamyd, paying $45 million up-front for that company's Phase III type-1 diabetes vaccine. The vaccine could slow or halt the disease by protecting insulin producing pancreatic cells. Development and commercial milestones on the deal total $580 million, and Diamyd is eligible for tiered royalties on potential sales. The companies are sharing the costs of the vaccine's ongoing EU Phase III trial, and J&J can take over development if it chooses based on the results of that study. J&J's strategy is clearly one designed to leverage its presence in diabetes devices -- it does not market any diabetes drugs, yet, but its two deals this week augment an internally and externally sourced suite of compounds the roots of which goes back at least ten years to a research deal with Mitsubishi-Tanabe in 2000. --CM

Sanofi-Aventis/Metabolex: Sanofi-Aventis may not be making big news at this year's 70th Scientific Sessions of the American Diabetes Association but that doesn’t mean it isn’t creating its own buzz—and no vuvuzelas required. On June 25, the company announced its third deal since March 31 in the diabetes space, becoming the second pharma to ink a deal this week with Metabolex. The global licensing agreement is for the biotech’s Phase II, oral GPR119 receptor agonist, MBX-2982, for the treatment of type 2 diabetes. Specific deal terms of the Sanofi partnership weren’t disclosed but biobucks could total $375 million. It’s no secret that Sanofi has grand ambitions to become one of the leading players in diabetes but to do that, the company will need to diversify beyond its juggernaut Lantus. As Sanofi bolsters its pipeline, the focus has been on novelty and diversification—the March alliance with Agamatrix gives the French firm a foot in the blood glucose monitoring space; the tie-up with privately-held CureDM gives Sanofi a potentially first-in-class compound in the islet cell regeneration space. Agonists of GPR119 represent a first-in-class oral treatment for type 2 diabetes that simultaneously increase insulin secretion while stimulating the release of GLP-1 from the intestines. (They are also an au courant target as evidenced by last week’s deal between Neurocrine and Boerhinger Ingelheim.) —Ellen Foster Licking

Gilead/CGI: Finding a use for some of the $4.6 billion of cash it has on hand and also seeking some diversification beyond the antiviral space, Gilead Sciences June 25 announced that it would buy privately held CGI Pharmaceuticals for up to $120 million in cash. Gilead said the majority of the payment would be an upfront purchase price with the remainder paid out in clinical development milestones but did not break down the exact amounts. CGI, formerly known as Cellular Genomics, has nothing in the clinic but is doing discovery and development in three platform areas, of which Gilead seems most intrigued by its spleen tyrosine kinase inhibitor (Syk) program, which includes a lead preclinical compound with potential to treat rheumatoid arthritis. Under the deal, CGI would continue operating as a fully-owned Gilead subsidiary at its current headquarters in Branford, Conn. Gilead Chief Scientific Officer Norbert Bischofberger cited CGI’s scientific expertise as “a strategic fit with Gilead’s existing research organization” and said Gilead will work to move CGI programs into clinical development. Standard & Poor’s analyst Steve Silver called the transaction a “modestly priced opportunity to broaden Gilead’s long-term pipeline.” GCI's backers are probably seeing about a 2x multiple on the deal, should those milestones materialize; the company had not raised money since a 2004 Series C led by Lilly Bioventures that brought in $34.9 million.—JH


Bristol-Myers Squibb/Exelixis: Exelixis revealed June 21 that Bristol is walking away from its late-stage partnership on the biotech's lead compound XL184, a multikinase inhibitor in Phase III trials for medullary thyroid cancer (MTC). GlaxoSmithKline had an option on '184 but passed in late 2008, soon after which Bristol swooped in with a lucrative deal, $240 million in upfront and near-term milestones. With Bristol's decision, the question becomes whether Exelixis can find another home for the drug. It insisted the data were sound, and officials on both sides of the no-deal talked vaguely about portfolio conflicts and pipeline reviews. Two investigators working on XL184 trials told "The Pink Sheet" they knew of no clinical problems serious enough to merit BMS's decision, but some analysts were skeptical that Bristol would give up rights, given what it has already spent, on a drug with serious potential. Fresh from layoffs of nearly 30% of staff, Exelixis said it will push on with XL184 and start a Phase III trial in glioblastoma by the end of 2010 and file an NDA for MTC in the second half of 2011. The firms' partnership on XL281 remains intact. -- Emily Hayes

Image courtesy of flickrer TheAlieness GiselaGiardino23.

Put a Cap on It

Toyota. Massey Energy. British Petroleum. Johnson & Johnson?

That is not a list J&J wants to see. But, as the company testifies today about a series of recalls affecting its consumer product line, J&J's corporate brand is very much at stake.

Sometimes, it isn't so much what you do but when you do it that matters. For pharmaceutical manufacturers, quality control problems are an unfortunate fact of life. Even the best run companies run into problems. Manufacturing is complex, QC standards evolve, and global multinational management structures invariably mean pockets of underperformance. No one is perfect.

Unfortunately for J&J, there may not be a worse time for a company to have problems like it is having. A massive recall of well known consumer product brands like Tylenol would be a black eye any time. A recall at a time when FDA is moving back towards a tougher enforcement posture is even worse. When the newly installed FDA deputy commissioner (Josh Sharfstein) has made his public health bona fides by focusing on the risks of OTC medicines, including Tylenol, it is a double whammy.

But to face all that at a time when Congress is investigating industrial disasters in multiple sectors means moving from a major FDA issue to a potential life-and-death moment for the corporation. We're talking Enron here.

What can J&J do?

Well, like BP, they need to stop the gusher. The analogy to the oil pouring into the Gulf of Mexico is a stretch, but for J&J there is a distinct sense that the bad news keeps coming. Just this year, there was an FDA warning letter for failing to follow-up with alacrity on complaints about a "musty smell" associated with some bottles of Tylenol. That was followed by the shut down of its Fort Washington, PA facility and the recall of much of the company's OTC product line.

Heading into a Congressional hearing, J&J faced two more untimely developments: the final resolution of an investigation into off-label promotion of Topamax (including a guilty plea by the division responsible), and another FDA warning letter focused on its medical device manufacturing. (Read more here.)

Today's hearing (and a likely follow-up in the Senate) will bring more negative headlines and unflattering attention. The key for J&J is to make it stop.

There is hope: as Genzyme seems to have proven, a company can indeed put a cap on a seemingly out of control compliance issue. Cynics would say it took awhile, but once Genzyme brought in outside managers to take over its manufacturing QC, the company seems to have regained control of the situation. The company moved into a consent decree negotiation, achieved a resolution along the lines it predicted, and received approval for an important new product as a result. Genzyme has a lot of work ahead of it, but the gusher of bad news has been capped, for now at least.

We don't think J&J will have the same period of time to get its house in order that Genzyme had: progress from here better be fast and sure. But it can be done.

Then there is the uncontrollable element of luck. The hearing today coincides with what might be BP's last chance to seal the Gulf Oil leak. Whether that effort succeeds or fails, that will be the lead story tonight--and J&J's issues will get a bit less attention than they might have otherwise.

Of course, if BP succeeds in capping that gusher, it means even more pressure on J&J to stop the flow of bad news about its brand.