Deals of the Week: Super Sunday Edition

The news from around the globe wasn’t pretty this week, as uprisings in the streets coincided with dangerous weather, spreading misery from Cairo to Lake Shore Drive to northern Queensland. And while Deals of the Week is sensitive to the gravity of these situations – unlike a certain fashion designer who attracted plenty of attention for putting his foot in his mouth – we’re not above a bit of diversion as the weekend approaches.

Neither are at least a hundred million Americans, who will be parked in front of their TVs on Sunday. Whether your preference runs toward bratwurst and cheese curds or a Primanti Bros. sandwich with fries on it, or whether you just like expensive commercials and the Black Eyed Peas, chances are you’ll be watching.

This year’s Super Bowl matchup got DotW thinking: What were the crucial decisions that got the Steelers and Packers to the big game? Was it a deal, or even a no-deal, and is there a lesson that pharmas could draw from what they did? Like, say, keeping one potentially lucrative compound in-house while partnering a later-stage drug, the Pack sensed it was time to bet on Aaron Rodgers and trade aging Brett Favre in 2008, allowing their young star to emerge. The Steelers, meanwhile, dealt troubled asset Santonio Holmes to the Jets, despite his potential for delivering more value in someone else’s hands, and instead looked to their pipeline for standout deep threat Mike Wallace.

Like drugs in the clinic, the players’ performances are only somewhat predictable, and require enormous financial commitments with no guarantees. But a well-timed deal can leave exiting venture investors celebrating like B.J. Raji after his fourth-quarter pick against the Bears, while mounting discontent can get a biotech subsidiary pushed out the door like Wade Phillips.

With our metaphor in mind, admittedly stretched beyond belief like Dwight Clark's fingertips as he brought down The Catch, please enjoy this super edition of…

Alexion Pharmaceuticals/Taligen Therapeutics: Announced Jan. 31, the union of Alexion and Taligen is designed to be complementary in more ways than one. Both companies have designed drugs that inhibit pathways in the complement system, a subset of the body’s innate immune system in which blood-borne proteins attack pathogens. Alexion, which has thus far specialized in orphan diseases, said it would pay $111 million upfront plus unspecified milestone payments for Taligen, whose lead program has been studied for ophthalmology as well as other disorders. Taligen had been planning to partner its lead program, TT-30, for age-related macular degeneration while keeping it in-house for orphan indications such as atypical hemolytic uremic syndrome and paroxysmal nocturnal hemoglobinuria, two rare disorders linked to deficiencies in complement factor H. Cheshire, Conn.-based Alexion already markets a complement inhibitor for PNH, Soliris (eculizumab), although it affects a different pathway. Robert W. Baird analyst Christopher Raymond speculated that TT-30 could replace Soliris as Alexion’s lead program. The deal represents a payday for Taligen’s venture investors, which had supplied at least $40 million to the Cambridge, Mass., startup since 2004. They include Sanderling Ventures, Clarus Ventures, Alta Partners and High Country Venture. -- Jessica Merrill & P.B.

AstraZeneca/WellPoint: A new agreement between Britain’s second-largest pharma and US-based health benefits provider WellPoint is designed to give AstraZeneca deeper insights into “real world data” surrounding post-market outcomes for its medications. AstraZeneca struck a four-year deal to harvest information from WellPoint’s clinical outcomes research unit HealthPoint, which will deliver data concerning cost effectiveness, clinical effectiveness and comparative effectiveness. That information could prove influential as AZ negotiates with payers to cover new pharmaceuticals. The agreement will focus especially on medications for chronic disorders including diabetes, cardiovascular disease and dyslipidemia, and will draw from a database covering 36 million enrollees in 16 US states. Specific terms of the contract weren’t disclosed, although the companies said the agreement could be extended beyond its initial term. The agreement could also be used to identify areas of unmet need in order to spur research and development initiatives, according to AstraZeneca executive James Blasetto. Although AZ has contracted WellPoint to study specific disorders before, their latest deal is the broadest yet. -- Cathy Kelly & P.B.

Allergan/Map Pharmaceuticals: Botox marketer Allergan paid $60 million upfront for rights to co-promote Map Pharmaceuticals’ orally inhaled migraine therapy Levadex, which has completed Phase III clinical trials and could be ready for an NDA submission in the first half of 2011. The deal value could increase to $157 million if milestones tied to Levadex’s approval in additional indications such as adolescent migraine are met. The first order of business is getting approval for acute migraine; while the companies establish joint steering committees, Map retains ownership of the NDA, which also means it bears the costs associated with the submission. The amount of upfront money is worth noting, given what the deal doesn’t include: Map keeps rights to promote to primary care docs in the US and elsewhere, meaning it ostensibly could capture more value for the product through a series of smart licensing deals. Still analysts and investors were puzzled why Map, which can’t afford the costs of primary-care marketing in a competitive space like migraine, didn’t seek a partner from the get-go that could broaden Levadex's commercial reach to U.S. internists and family-practice docs, as well as physicians practicing abroad. -- Ellen Licking

Valeant Pharmaceuticals International/PharmaSwiss: Focusing its growth almost completely on deal-making, Canadian specialty firm Valeant got off to a quick start this year, announcing a €350 million ($480 million) purchase of PharmaSwiss on Feb. 1. Having said in early January that Valeant planned at least five ex-U.S. deals this year, including one of significant size, CEO Michael Pearson looks to have made a smart move in acquiring the privately-held generics and over-the-counter products firm. PharmaSwiss has averaged growth rates of 20% the past five years and with its management team staying, the company will transition into Valeant’s European base of operations a year after Valeant expanded via last year’s $3.3 billion reverse merger with Biovail. In addition to tax benefits from operating in Switzerland, PharmaSwiss offers its status as partner of choice for companies such as Pfizer, Eli Lilly and Amgen that want to commercialize products in Eastern Europe without adding infrastructure. Pearson said PharmaSwiss will continue that practice under the Valeant umbrella. Separately, in a deal announced Feb. 3, Valeant acquired all U.S. and Canadian rights to topical herpes drug Zovirax (acyclovir) from GlaxoSmithKline for $300 million. -- Joseph Haas

Apeiron Biologics/Merck KGaA: Austrian immunotherapy firm Apeiron has licensed a fusion protein consisting of interleukin-2 linked to a GD2 antigen-targeting antibody from Merck KGaA, and it aims to conduct Phase II/III trials with it. Money from an out-licensing deal struck with GlaxoSmithKline a year ago enabled Apeiron to snap up the product, which CEO Hans Loibner said he has kept tabs on for some time. Apeiron believes it has the knowledge necessary to conduct trials in the very small numbers of children who develop neuroblastoma, and Merck probably recognized that, Loibner said. The immunocytokine has shown preliminary activity in a subset of children with neuroblastoma in a Phase II study. Apeiron now has full development and commercial rights and would like to take the product to market, but that decision may change, Loibner added. The companies did not disclose financial terms of the deal. Apeiron's previous deal came in October 2010, in-licensing a recombinant human superoxide dismutase (SOD) from fellow Austrians Polymun Scientific, which Loibner believes has potential as a dermatological for the treatment of skin damage associated with radiotherapy. -- John Davis

Image of "The Vince" courtesy of flickr user WBUR.

Financings of the Fortnight Struts and Frets but Finds No Exit

Places everybody! Settle down, please. Welcome to the FOTF Playhouse, and thanks for coming to our first-ever audition. I'm your director, and the woman holding the clipboard is my editor. Rule #1: Do not make her angry, or you'll be off this stage faster than you can say "Kelsey Grammer in a kilt."

As you all know from the audition call, we're putting up something no one's ever tried before: An absurd tragicomedic musical drama about biopharma financing in four acts. Good thing we've got some of the best writers around, especially when it comes to the existential dilemma of the modern private biotech. That's our playwright in the fifth row with the notepad and the ashtray. Don't bother waving; he can barely acknowledge his own existence, let alone yours.

So what are we looking for? For the first act, which we're calling IPO or Die Trying, our characters are stubborn, perseverant, and they've got a bit of the huckster in them, a crucial element given the need to convince investors to buy stock in a company that has no revenues, no marketed products, and is subject to massive regulatory power. And they could also use some cash. A lot of cash.

As the curtain rises on Act I, we see our heroes going to their investors in Silicon Valley, asking them to buy shares in their upcoming IPO. A chorus of bankers wails in the background, knowing their commission dwindles the more the insiders buy the IPO. Our heroes' VC friends press their Blackberries to their foreheads, trying to divine wisdom.

It's a universal dilemma, as old as the Greeks and as breathtaking as King Lear out in the storm. If the VCs agree, they're saddled with more stock, and who knows how liquid it'll be in the next two years. But if they don't agree, they might never exit at all, and they'll be forced to sit in this little room, the walls close and sweaty, the muted TV tuned to the 24-hour celebrity-news channel, like the waiting room of a doctor who sneaks out the back to play golf and doesn't bother with decent magazine subscriptions. Think Sean Hannity's vision of Obamacare meets Dante's Inferno enlivened with a little Waiting For Godot.

How did we get here, the investors ask? Who are we? We're talking big questions here, and an excuse to break into a wavering minor key version of Once In a Lifetime.

If you're auditioning for the VC roles, here's some helpful background. There's another kind of exit taking place these days: Of the 153 US venture firms with a biopharma focus that made investments in 2008, 10 didn't invest in 2009, a 6.5% "dropout" rate, according to DowJones Venture Source. Of the 143 that invested in 2009, 39 have yet to make an investment in 2010. That's more than 25%. There's still time for the drop-out rate to decline to last year's rate, but for that to happen about 30 of those 39 laggards will have to pony up in the next four and half months.

Now we come to Act II of our little drama, and we get into a kind of Hair thing: This is the dawning of the age of the post-genome! or something like that. We haven't finalized the libretto. When VCs drop out, what happens? Do they tune in and turn on? Become management consultants? Baristas? Curtain rises, and we meet a former VC who one day hopped the fence to become CEO of a company he helped found as an investor. (He will be playing himself, by the way. That's one of the perks of raising a $25 million B round.)

Acts III and IV are riffs on the old phrase "Neither a borrower nor a lender be," turning that classic nugget of questionable advice on its head.

Got it? Good. Let's start the audition, and remember "all the world's a stage" which is always our motto. But you knew that, because you're a regular reader of...

Trius Therapeutics: Antibiotic developer Trius launched an initial public offering Aug. 2, selling 10 million shares at $5 each after postponing the issue for several months. Whatever momentum Trius had when it registered to go public in November was blunted by two forces: the weakening general economy, now prompting midsummer whispers of a dreaded double-dip; and the Food and Drug Administration, whose evolving guidance on antibiotic trial design for skin and soft tissue infections led Trius to revamp its crucial Phase III trial protocols in March and postpone its IPO. The firm detailed the redesign in June and the IPO was back on, but with a lot of help from existing investors, who bought more than half of the shares issued. Trius is testing oral and IV versions of its lead candidate, torezolid phosphate, as a better treatment for skin and soft tissue infections often caused by methycillin-resistant Staphylococcus aureus, better known as MRSA. We wrote in November about antibiotic developers pushing into late stage trials despite murky design guidance from FDA; so far Trius is the highest-profile example of a company whose business strategy hit a bump because of the regulatory landscape. Citi ran the offering with help from Piper Jaffray, Canaccord Genuity, and JMP Securities. They had to forgo discounts and commissions on more than half the stock sales. -- AL

Dicerna Pharmaceuticals: In a deal more than eight months in the making, the RNA interference platform startup Dicerna said Aug. 1o it has secured $25 million in Series B funding from a syndicate that includes first-time investor Domain Associates. Repeat investors Oxford Bioscience Partners, Skyline Ventures and Abingworth also joined in the round. Former Oxford partner Doug Fambrough, who led Dicerna’s seed round for the firm, became the startup’s CEO in May. Fambrough also was among the early backers of Sirna Therapeutics, a pioneering RNAi company Merck acquired for $1.1 billion in 2006. Dicerna is developing gene-silencing therapies via a platform that works with slightly longer double-stranded RNA than those used by Sirna or RNAi stalwart Alnylam Pharmaceuticals, typically with more than 25 nucleotides. Dicerna’s strands interact with an enzyme called Dicer that cleaves the strands into small interfering RNA, which can mute the expression of genes selectively. Dicerna has a preclinical oncology drug candidate, a partnership with Kyowa Hakko Kirin to develop more drugs and an agreement with Ipsen to explore uses of its peptide program for intracellular delivery of therapeutics in both oncology and endocrinology. Dicerna’s Series A round arrived in two tranches totaling $21 million during 2007 and 2008. -- Paul Bonanos

Gilead Sciences: Even with $1.8 billion in product sales during the second quarter, Gilead has a significant need for cash. The firm has irons in many fires, including a pair of ongoing Phase III trials for its experimental “quad” pill for HIV and a previously announced $5 billion share buyback initiative. In late July the biotech undertook a complex series of transactions in which it sold $2.2 billion in convertible senior notes, proceeds from which are intended to retire convertible notes expiring in 2011 and 2013 and finance about $1 billion of the share buyback plan. It sold $1.1 billion of 1.00% convertible senior notes due in 2014 and another $1.1 billion of 1.625% convertible senior notes due in 2016, netting approximately $2.166 billion. Both series of notes will pay interest twice annually, on May 1 and Nov. 1, until they mature. The initial conversion rate for the 2014 notes will be 22.1845 shares of Gilead common stock per $1,000 principal amount of notes, the company said. That translates into an initial conversion price of $45.08 per share, a 35% premium over Gilead’s July 26 stock price. The 2016 notes will convert to 22.0214 shares of Gilead stock per $1,000 principal amount of notes, a conversion price of $45.41 per share and a 36% premium over the Gilead’s July 26 stock price of $33.39. -- Joseph Haas

Arena Pharmaceuticals: The publicly traded Arena tapped creditor Deerfield Management for a $60 million stock sale, taking advantage of a massive stock boost as its lead obesity drug lorcaserin approaches a key FDA advisory committee meeting in September. As of the close of trading Aug. 11, Arena shares had jumped more than 80% since July 15, the day obesity rival Vivus' Qnexa got a negative review from the same FDA committee. Arena said Aug. 6 it agreed to sell nearly 9 million shares to Deerfield at $6.70 a share, with $30 million of the $60 million gross proceeds used to prepay a Deerfield loan that was due in July 2012. If FDA approves lorcaserin by July 2011, Arena can defer a $20 million repayment due at that time to Deerfield until June 2013. Previous obesity drugs have run into cardiovascular safety problems, and the FDA committee reviewing lorcaserin on Sept. 16 will spend the day before reviewing cardiovascular risks in obesity drugs in general, which might not bode well for Arena, according to a Pink Sheet analysis of the obesity regulatory landscape. -- Emily Hayes and AL.

Photo of the Prairie Fire Theatre Summer Camp courtesy of flickr user Nic's Events.