A Deals Of The Week Valentine

The most anticipated deal of the week – Sanofi Aventis’ multi-billion take-out of Genzyme – has yet to come to fruition. That’s not to say the deal is a no go (wouldn't the aftermath of THAT be fun to watch). Indeed, public statements by the French pharma’s Viehbacher suggest Sanofi still desires the big biotech, but is being measured in its diligence.

The months long saga has been more “he said/he said” than SEC-leaked endearments; still for journos avidly covering the “news” the nothings have been sweet. In advance of Monday's Hallmark holiday, perhaps its time for Viehbacher to dial up the Canadian charm, and send a love letter (containing the desired contingent value rights to Campath/Lemtrada, of course) to Termeer and company. (If the deal goes through, does this makeTermeer Viehbacher's work spouse?)

IN VIVO Blog suggests borrowing a line or two from Robert Browning's famous missive to one lovely Elizabeth Barrett. You know, the one that spawned Sonnets From The Portuguese and the immortal question "How do I love thee?" Perhaps something like this..

I love your verses drugs with all my heart, dear Miss Barrett Henri, -- and this is no off-hand complimentary letter that I shall write, --whatever else, no prompt matter-of-course recognition of your genius and there a graceful and natural end of the thing: since the day last week summer when I first read your poems realized the worth of Cerezyme and Fabrazyme despite the manufacturing snafus, I quite laugh to remember how I have been turning again in my mind what I should be able to tell you of their effect upon me (especially after this recent earnings report) ... Perhaps even, as a loyal fellow-craftsman (and CEO honor-bound to return shareholder value) should, try and find fault and do you some little good to be proud of herafter!

Of course, said fault-finding comes with its own ulterior motives, but whether Sanofi's shareholders will be proud of the outcome depends on the deal's final price tag. In the spirit of reciprocity, we suggest Termeer start counting the ways he loves Sanofi, not least because of the exit package he stands to receive if the deal goes through.

In the interim, if you can't say it with contingent value rights, at least remember to say it with flowers. Oh, and make sure to read another edition of...


Cephalon/Alba Therapeutics: Hours before reporting full-year results on Feb. 10, Cephalon said it signed an option agreement for Alba's treatment of the autoimmune disorder celiac disease. Cephalon will pay $7 million upfront and extend a credit line to Alba to fund a Phase IIb trial of the drug, larazotide acetate. After completion of the study, the Frazier, Pa.-based Cephalon will review results with the option to purchase assets related to the drug for $15 million. Beyond the $22 million in upfront and option fees, Alba is eligible to receive unspecified regulatory and sales milestones should Cephalon bring the drug to market. Celiac disease, also known as sprue, is caused by an autoimmune reaction to the ingestion of gluten, found in certain grain-based products such as bread and pasta. It affects more than 2 million people in the US. Cephalon said on a conference call that is sees significant revenue opportunities for larazotide. The deal is Cephalon's first since founder and CEO Frank Baldino passed away late last year after a four-month medical leave of absence. New CEO Kevin Buchi was previously Cephalon CFO and COO and a longtime colleague of Baldino. -- Lisa LaMotta

Salix/Progenics: Progenics Pharmaceuticals this week found a new development partner in specialty player Salix Pharmaceuticals for its subcutaneous injection to treat opioid-induced constipation, Relistor, one of the casualties of the Pfizer/Wyeth deal. Recall that Wyeth, which initially licensed the compound in 2005, paid Progenics a $10 million break-up fee in 2009 to take back product rights. During an extended transition period, the world’s biggest pharma has continued to sell Relistor via a 1700-member sales force, but 2010 worldwide sales were an anemic $16 million. Thus, the entrance of new suitor Salix via a sweetheart of a deal is undeniably good news for Progenics. As part of the alliance announced February 7, Salix pays $60 million upfront plus milestones for worldwide rights (excluding Japan) to Relistor, and will assume all development, registration, and commercialization costs for the drug. Salix, which only intends to market the drug state side, will also pay Progenics 60% of the revenue earned by contractors on ex-US sales. Salix is confident its GI-focused sales force can fully monetize Relistor’s value, thanks in part to an oral product formulation currently in Phase III development. CEO Carolyn Logan told investors February 7, "Relistor just [did] not receive all the attention it would receive in an organization like ours." – Joseph Haas & Ellen Licking

Pfizer/Ferrosan: From Russia and Norway and Eastern Europe with love? Pfizer’s acquisition February 7 of Danish firm Ferrosan’s consumer health care unit shows diversification is alive and well within the world’s biggest pharma, even as the company pulls back on R&D. Exact financial terms of the deal weren’t disclosed, but sister publication "The Tan Sheet" reports executives from Ferrosan's owner, Altor Equity Partners, said the deal was larger than €100 million ($136 million according to same-day conversion rates); analysts with UBS Investment Research, meanwhile, assume a price around $600 million based on Ferrosan's recent yearly sales figures. The deal gives Pfizer some key brands -- including Multi-tabs multivitamins, Bifiform probiotics and the Imedeen skin care supplement line – in Nordic countries as well as the rapidly growing market of Russia. More importantly, it expands Pfizer’s global footprint, allowing for the expanded distribution of its own nutritional brands, such as Centrum multivitamins and Caltrate calcium and vitamin D supplements. – Elizabeth Crawford

Danaher/Beckman Coulter: The big deal of the week was diversified med-tech play Danaher’s $6.8 billion acquisition of Beckman Coulter, which has struggled to get its testing business back on track after an FDA-triggered withdrawal of its cardiac troponin test last spring. The sale isn’t unexpected; following the resignation of Beckman CEO Scott Garrett in September 2010 and ongoing quality issues, speculation about a possible deal has been rampant since December, when it was widely repored the firm had retained Goldman Sachs. Nor is it surprising that Danaher is the ultimate buyer; Beckman is not known as a particularly innovative company and has been very slow to move into the molecular diagnostics space. It therefore makes sense that its assets, heavily centered on consumables and services in clinical chemistry, would be of greater interest to a company like Danaher, a noted acquirer of established instrumentation plays. In addition to pushing forward with ongoing clinical trials supporting two 510(ks) required for the market reentry of Beckman’s AccuTn1 troponin test, Danaher’s other main priority as the testing firm’s new owner will be completing quality control fixes and cutting $250 million in costs. – Jon Dobson

Optimer/Astellas: Promising new Phase III data surrounding its antibiotic candidate fidaxomicin has Optimer Pharmaceuticals preparing for a possible summertime launch of the drug, pending approval and a PDUFA date of May 30. While Optimer intends to keep the drug in-house in the US, the San Diego biotech has partnered with Astellas to advance and commercialize the drug in Europe, selected Middle Eastern and African nations, and the Commonwealth of Independent States. (In addition to US rights, the biotech has for now also retained Asian rights, although it may partner those territories soon.) Astellas paid $68 million up-front for the rights to fidaxomicin, with a further $156 million in milestone payments and tiered sales royalties that range above 20%. Optimer is positioning fidaxomicin as a first-line treatment for patients at risk of recurrence of C. difficile infections, which cause severe diarrhea often in hospitalized patients and those who have received other antibiotic treatments that have disrupted the balance of flora living in the gut. Robert W. Baird analyst Thomas Russo pegged the market for the drug at nearly $250 million annually by 2018. – Paul Bonanos

Needy Candy Hearts image courtesy of flickrer piratejohnny

Deals Of The Week Gets Exclusive

Commitment is such a weighty decision, isn’t it? Whether it’s high schoolers obsessed about going steady or 30-somethings who stay over three nights a week but refuse to stash their extra underwear in an available drawer, making the choice to be exclusive is hard. What if things don’t work out? Gulp.

In biopharma land, exclusivity is no less thorny a subject, especially when it relates to options-to-acquire. This week news comes that Novartis, which alongside Cephalon remains one of the most active in inking this specific flavor of option-based deals, is at it again. On November 11, Novartis said it had taken an option either to buy San Diego-based Aires Pharmaceuticals outright or license the biotech’s mid-stage treatment for pulmonary arterial hypertension called Aironite.

Along with the option announcement, Aires said it reeled in a $20 million Series B financing, enough money to finish Phase II trials of Aironite, a nitric oxide prodrug that causes vasodilation and has anti-inflammatory properties. Novartis didn’t officially take part in the financing, but it has ties nonetheless. That’s because the new investor, MPM Capital, made the investment out of its MPM Bio IV NVS Strategic Fund (try saying that three times fast), a side-car fund backed by—you guessed it—Novartis. Existing Aires backer ProQuest Investments also participated in the round.

Details surrounding the option are murky. We know that Novartis paid a separate fee for the right to acquire Aires after it successfully completes Phase II studies of Aironite and, all-in, the deal price could reach $250 million. But the price of the option remains undisclosed, as do values for the initial acquisition payment and the regulatory and sales milestones.

Since its formation in 2007, the MPM/Novartis fund has signed at least eight option deals, including the recent Aires transaction, according to Elsevier’s Strategic Transactions. The Aires deal hews closely to a familiar formula designed to give Novartis an advantage at the deal-making table. Except for the overall buy-out price, the Aires news is reminiscent of Novartis’ March 2009 option-to-acquire Proteon Therapeutics for up to $550 million. That deal, contingent on Proteon’s ability to demonstrate proof-of-concept with its Phase I/ II recombinant human elastase, was also announced concurrently with the first tranche of Proteon's $50 million Series B financing.

Given the cash constraints privately-held start-ups face, option-type deal making has become more common. Such deals might cap investor upside, but the additional non-dilutive cash and greater certainty of an exit mean it’s an offer investors have a hard time refusing.

But as anyone who's watched a Mafia flick can tell you, "hard to refuse" isn't the same as "popular." Some VCs and biotech executives worry that the Novartises of the world will try and wiggle out of the pre-agreed upon terms that trigger an alliance or acquisition. Indeed, there is recent precedent.

In 2007, Radius optioned its mid-stage osteoporosis medicine, BA058, to Novartis for $10 million. According to the terms of the deal, once Radius announces Phase II data for BA058, the big pharma has 90 days to evaluate the information before making a go/no-go decision. At the end of the option period, Novartis can say “no” and walk away, leaving Radius to shop the product to anyone they want, or “yes” and trigger the pre-negotiated deal. The thing is, Radius announced its Phase II data in August 2009, and there’s been no nay or yeah about the option in the intervening period. Math may not be this blogger’s strongest suit, but even a nine-year old can calculate that a decision from Novartis is a year overdue.

Indeed, there’s little clarity on whether any of the options associated with the MPM/Novartis fund have actually been exercised, even though a number of them have undoubtedly reached critical decision points. Does Novartis’ decision regarding BA058say anything about the long-term viability of the option model?

Maybe yes. Maybe no. (Depending on the daisy--er, asset-- it's a little bit like playing effeuiller la marguerite.)Given current uncertainties in the marketplace, it’s a fair bet option-style deal making isn’t going away. And for the cynics in the readership, there are happy endings: Purdue Pharma and Cephalon recently exercised prior options associated with their respective tie-ups with Infinity Pharmaceuticals and BioAssets Development Corp.

Ultimately commitment is a leap of faith—or at least a flying leap. Here at IN VIVO Blog we’ve got your exclusive line-up of deal making news. It’s time for another edition of…


Clovis Oncology/Clavis Pharma: News flash! IN VIVO Blog has learned that several other firms were also involved in this deal: Cleavis, which is working on DNA repair mechanisms; Clyvis, an under-the-radar Scottish start-up; and Clivus, with the latest advances in phrenology! Of course we jest. The real deal here is just between Clovis and Clavis, announced Nov. 11, and it expands upon the November 2009 tie-up that saw Clovis pay Clavis $15 million upfront for partial rights to CP-4126, a reformulated gemcitabine currently in Phase II for pancreatic cancer. The reformulation with Clavis's Lipid Vector Technology aims to promote gemcitabine uptake in patients with low levels of the nucleoside transporter protein hENT1, which normally allows gemcitabine into cancer cells. Several studies suggest a significant percentage of pancreatic cancer patients, perhaps up to 67%, have low levels of hENT1, and the partners are working on a companion diagnostic to sort low- from high-hENT1 patients. With the expanded deal, Clovis pays $10 million immediately for full global rights, plus $30 million in Asian milestones and up to $165 million in sales milestones. Clovis is still on the hook for the $365 million in milestones attached to the development and commercial rights it originally bought for North America, South America and Europe. -- Alex Lash

GlaxoSmithKline/Xenoport: The partners on the restless-leg syndrome (RLS) treatment Horizant said Nov. 8 they had amended their February 2007 agreement to give the San Francisco Bay Area biotech the right to pursue development of the drug for diabetic peripheral neuropathy (DPN) and additional indications in the US. All ex-US rights previously granted to GSK have reverted back to Xenoport, as well, and the firms have made undisclosed financial adjustments in milestones and royalty rates to reflect the new responsibilities. GSK remains responsible for US approval of Horizant – formerly known as Solzira and burdened with a track record of clinical and regulatory misses – for restless-legs syndrome and post-herpetic neuralgia. The drug failed a Phase II trial for DPN in 2009, then FDA rejected Horizant for RLS in February 2010, issuing a complete response letter and prompting investors to bail on Xenoport. But FDA has accepted GSK's response and has issued a new PDUFA date of April 6, 2011. Under the original deal, GSK paid Xenoport £40 million upfront, promised up to £298 million in milestones, and sales royalties. -- A.L.

Eli Lilly/Avid Radiopharmaceuticals: Lilly announced a deal this week, but not the blockbuster M&A investors have been hankering for. Even as ratings agencies downgrade the Indianapolis pharma, Lilly is sticking to its strategic guns, replenishing its pipeline with bite-sized transactions centered on late-stage assets. The company’s decision Nov. 8 to purchase Avid Radiopharmaceuticals, a privately-held diagnostics company that specializes in the detection of chronic diseases through brain imaging, is further evidence of Lilly’s mindset. It also shows that despite the risks of Alzheimer’s drug development (semagacestat, anyone?), Lilly still believes in this therapeutic arena. Lilly will pay $300 million upfront to acquire all outstanding shares of Avid and another $500 million tied to regulatory and commercial milestones to get its hands on the biotech’s molecular imaging agent, florbetapir F18, which is pending FDA approval. While such a large sum isn't unusual for a biotech with a late-stage asset in a valuable therapeutic area like oncology, it's almost unprecedented in the diagnostics arena, where M&A targets generally have marketed assets and are acquired not by drug companies but by fellow diagnostics specialists. Given the risks associated with Alzheimer's, technologies that help prevent costly late-stage failures like semagacestat are worth a premium. And Lilly, determined to push forward its remaining Phase III Alzheimer's drug, the antibody solanezumab, certainly can’t afford to repeat its semagacestat outcome. But those peculiarities mean the startling deal price for Avid is likely the exception rather than the rule. Meantime, Avid’s backers, which include Safeguard Scientifics, Alta Partners, Pfizer Strategic Investment Group, and Lilly's own corporate venture group, can celebrate a tidy exit. Based on the deal’s upfront alone, investors stand to realize an estimated 4x return on their venture, having put in just under $70 million since Avid’s 2004 founding. -- Lisa Lamotta and E.L.

Pfizer/Biovista: This week’s deal between Pfizer and Biovista illustrates yet again the thrifty mindset at work in the halls of the the biggest pharmas. To discover additional uses for existing compounds, Pfizer has inked a pilot research collaboration with privately-held Biovista that gives the big drug maker access to the service firm's proprietary datamining technology, which uncovers potential utility in various therapeutic areas, including oncology, ophthalmology, metabolic disease, and CNS disorders. Biovista will collaborate with Pfizer’s Indications Discovery Unit to identify up to three novel indications for each of the Pfizer candidates being evaluated. In return, Pfizer will pay Biovista an undisclosed upfront payment and success-based milestones. Biovista has inked numerous partnerships around its technology, including one earlier this year with the FDA to help regulators identify and understand the mechanisms resulting in adverse events. Biovista isn't content to remain a service play; in 2009, the firm started its own drug development program based on repositioned compounds in CNS diseases. Pfizer, meanwhile, continues to try to wring value from every compound in its research pipeline. This is the second repositioning deal the behemoth has inked in 2010 alone. In May, it announced it was teaming up with Washington University in a $22.5 million, five year collaboration designed to find new uses for a 500-compound Pfizer data set. -- E.L.

Image courtesy of flickrer dmixo6 under a creative commons license.

Deals of the Week Gets Its Exercise On

It's always nice to see option buyers out there Sweatin to the Oldies. Last week's exercisers Cephalon and Purdue followed through on their deals with BioAssets Development Corp. and Infinity, respectively. We salute your exertions.

Ablexis/ Pharma 5: This week next-generation antibody company Ablexis, which can also be thought of as Abgenix 2.0, announced the formation of a five-member consortium that includes Pfizer and four other top global drug companies. The alliance gives the pharmas non-exclusive access to Ablexis’s proprietary AlivaMab mouse technology, a next-generation platform for the discovery of antibodies. Financial details of the alliance were not explicitly revealed. However, as part of the transaction, each consortium member paid an undisclosed and non-refundable seven-figure fee to Ablexis as a down payment on the souped-up mice strains in development. Upon delivery of the AlivaMab mice, the drugmakers will each pay an additional eight-figure sum. While the consortium is officially closed to new drug makers, Ablexis is interested in additional partnerships related to its transgenic mouse platform, according to Ablexis CEO Larry Green, who says the nonrefundable upfront payments provide the biotech with “a comfortable runway for building out the technology.” Although the existence of the consortium was only announced October 26, the deal has been in the works for many months; its possibility was one of the primary attractions allowing the San Francisco-based biotech to pull in a $12 million Series A in June from a syndicate that includes Third Rock Ventures and (interestingly) Pfizer Venture Investments. Forming a consortium in order to get a bolus of non-dilutive money near term is one way to solve what has become a chicken and egg problem for platform start-ups. With the IPO market still challenging, and the value of platform alliances dropping significantly in recent years, it’s hard for investors to recoup their outlay in such biotechs in rapid fashion. But Green said in an interview “the back-end obligatory payments by licensees provide a very attractive return for our investors.” According to Green, Ablexis, which is a structurally a limited liability company as opposed to a “C company”, will not require any additional venture money. The start-up will return cash to its investors based on their relative ownership stakes. That’s one reason the LLC structure for Ablexis is so critical. Had the biotech been a standard corporation, the cash distributions would have been taxed heavily. Because of the non-exclusivity, it's clear that various consortium members are free to go after the same target(s) if they desire. What's not clear is how the intellectual property related to the mice are divvied up. If for instance, Pfizer's researchers tweak the mice to improve antibody production, does the consortium own the knowledge? Pfizer? Ablexis? IN VIVO Blog asked Green for clarification but learned only that "those elements of the collaboration will remain confidential."--Ellen Licking

Kadmon/Three Rivers: Former ImClone Systems Chief Executive Sam Waksal’s new biotech Kadmon Pharmaceuticals has officially emerged from stealth mode, purchasing privately-held Three Rivers Pharmaceuticals in a mostly cash deal that is rumored to be worth more than $100 million. Three Rivers will serve as the commercial and operational cornerstone of Kadmon, which is focused on oncology, infectious disease, and immunology. The new biotech has raised over $200 million in debt and equity from investors in Japan and China. Three Rivers will contribute a portfolio of three marketed hepatitis C treatments including Infergen, Ribasphere, and RibaPak, as well as the fungal treatment Amphotec. Kadmon is expected to keep the Three Rivers headquarters in Warrendale, Pa. and its manufacturing plant. Waksal hopes to follow up on the success of ImClone, which was acquired by Eli Lilly in 2008 for $6.5 billion. While Waksal is famous for his contributions to ImClone; he is infamous for his stint in jail after an insider trading scandal involving homemaking guru Martha Stewart erupted in 2002.--Lisa LaMotta

Hikma/Baxter: In an apparent bargain, Hikma’s US subsidiary West-Ward Pharmaceuticals has snapped up the generic injectables business of Baxter Healthcare for $112 million in cash. Multi-Source Injectables, as the group was called, sold roughly 40 different drugs in a variety of dosages and presentations and is on track to book revenue of $180 million in 2010, according to the companies. The deal elevates Hikma to the number two spot behind Hospira in the interesting US generic injectables space and boosts the group’s market share from 1% to 16% by adding Baxter’s suite of chronic pain, anti-infective and anti-emetic products. Hikma and West-Ward executives pointed to the solid strategic fit between the two groups, noting the company was one of the few logical homes for Baxter’s many DEA-scheduled controlled substances products – an area Hikma’s small injectable generics business was already familiar with. Nevertheless, Jason Grenfell-Gardner, sales and marketing VP at West-Ward told “The Pink Sheet”, there is very little overlap between the two companies’ portfolios. Hikma wants to expand the market for Baxter’s products in other territories, and plans to reintroduce heparin to the company’s line up. Beyond portfolio, Hikma adds Baxter’s 20-strong sales force to its current group of 8, as well as Baxter’s Cherry Hill, NJ manufacturing facility and a warehouse/distribution center in Memphis, TN – all told shifting 750 employees from Baxter to Hikma. The deal also shifts the center of balance for Hikma, a multinational with historic strengths in the Middle East and North Africa.--CM

Teva/Merck KGAA's Théramex: Israeli generics maker Teva has been quietly building up its biz dev activities, particularly in the oncology and respiratory arenas. This week, via its acquisition of Merck Serono’s Théramex division for €265 million, comes proof of its desire to deepen its geographic reach in women’s health, especially the contraceptive space. Teva has agreed to acquire 100% of Monaco-based Théramex’s operations, gaining a solid European presence, especially in France and Italy, a diversified portfolio of branded products, and perhaps most importantly, a seasoned sales force. In addition to the upfront payment, Merck Serono stands to receive undisclosed performance-based milestones. The deal’s upfront price is roughly 2.5x Théramex’s 2009 sales; major products of interest include Colopotrophine (promestriene), Lutenyl (nomegestrol acetate), and a combined estrogen/progestin contraceptive currently under development and in partnership with Merck & Co.For Merck Serono, the divestiture should not be viewed as evidence of the company’s lack of interest in women’s health. The company is retaining its valuable fertility franchise, after all. However, it does provide sizeable cash with which to build its oncology and neurology franchises. In September, the maker of Rebif (interferon beta) suffered an unexpected blow when its oral multiple sclerosis medicine cladribine was rejected by European regulators; a decision by US regulators is expected in the fourth quarter of 2010. For Teva, the Théramex transaction is also critically important as its builds out capabilities in Europe, following its acquisition earlier this year of ratiopharm. Group. That deal solified Teva’s number one position in the European generics industry, especially in Germany, where it had heretofore been only a minor player.--EL

Sanofi/BMP Sunstone: Sanofi-Aventis, which is already feeling the revenue impact of generic competition to its Lovenox (enoxaparin) franchise, continues to send a signal to the marketplace that it isn’t idly waiting around for Genzyme to realize the wisdom of its $69-a-share offer. The French drug maker’s hostile offer is stalled in “he said, he said” mode, as Genzyme’s CEO Henri Termeer tries to persuade investors to hold out for a significantly higher offer. In the meantime, Sanofi’s bid to acquire BMP Sunstone for $520.6 million, helps the drugmaker reach its goal of doubling over-the-counter sales– a plan Viehbacher announced in early 2009, when annual nonprescription revenues were $1.4 billion. With BMP Sunstone, which reported $146.9 million in sales in 2009, Sanofi gains a leadership position in China's OTC cough/cold market, thanks to popular brands such as the pediatric cough/cold medicine Hao Wawa (Good Baby) and Kang Fu Te (Confort) for women’s health. Sanofi estimates China’s consumer health space is worth about $16.55 billion. Perhaps more importantly, the BMP Sunstone tie-up gives Sanofi an in-country base of operations from which it can distribute Western OTCs. Certainly, the acquisition builds on Sanofi’s ongoing dealmaking in the region. In October, Sanofi established Hangzhou Sanofi Minsheng Consumer Healthcare Co. – the result of a joint venture with vitamin and supplement company Minsheng Pharmaceutical Group announced in early 2010.--Dan Schiff & EL

GlaxoSmithKline/Amicus Therapeutics: GSK unveiled a standalone rare-disease unit in February and has been aggressively filling its portfolio. On Friday, Oct. 29 it added its nearest-term commercial prospect yet. GSK will pay Amicus Therapeutics $60 million upfront for rights to the Phase III Fabry disease treatment Amigal (migalastat HCl). Half the upfront is an equity purchase of 6.9 million shares of Amicus stock, or 19.9% of the company. GSK is also paying an undisclosed portion of Amigal's development, and the cash infusion will be enough to see Amicus through U.S. approval of Amigal, said the biotech’s CEO John Crowley. The deal could also pay Amicus up to $170 million in milestones, some of which could come in 2011, Crowley said. Genzyme’s manufacturing flubs in its rare-disease business further emboldened Big Pharma competitors to push into orphan and rare diseases, but they were already moving in that direction as industry economics have forced them to look beyond blockbuster primary-care indications. GSK's other rare-disease deals include a March partnership with Isis Pharmaceuticals to use that firm's antisense drug discovery platform to develop new drugs against five targets including infectious disease and conditions causing blindness; an October 2009 agreement with Prosensa to develop four RNA-based compounds for the treatment of Duchenne muscular dystrophy; and the purchase of a nearly 17% stake in Japan's JCR Pharmaceuticals, which makes recombinant biologicals for orphan diseases.--Alex Lash

Celtic Therapeutics/Resolvyx Pharmaceuticals: Private equity investor Celtic Therapeutics Holdings has bought an option to the rights to Resolvyx's RX-10045, a treatment for dry eye syndrome that is slated for Phase III trials in 2011. Financials details were not disclosed, but Celtic has an option to acquire and license rights to RX-10045, which is administered as a topical eye drop, in all ophthalmic indications. It also has an option to license a second Resolvyx compound. As part of the transaction, Celtic also bought a note convertible to Resolvyx equity. Resolvyx is one of several companies in the past several years to benefit from a flurry of venture interest in ophthalmology, a therapeutic area where small, privately backed companies have a possibility of commercializing a product if an attractive alliance or acquisition doesn’t materialize. Resolvyx’s most recently announced round of funding, a $25 million Series B, came in 2008 and was led by QVT Financial LP. The round included new investors Radius Ventures and Biogen Idec New Ventures, as well as existing investors. It's the fourth deal Celtic Therapeutics has made in its new incarnation after founders of Celtic Pharma, which aimed originally to invest $1 billion mainly in assets, not companies, went their separate ways, drastically paring back their ambitions as the model for project financing struggled during the recession.--AL

Boehringer Ingelheim/MacroGenics & Boehringer Ingelheim/ Pfizer: Antibody drug discovery startup MacroGenics Inc. struck two new platform deals that will help compensate for the Phase III failure of type 1 diabetes treatment teplizumab, which it had been developing in conjunction with Eli Lilly & Co. Inc. The broader agreement of the two is with Boehringer Ingelheim GmbH, and represents one of the first signs that the privately-owned German drug maker is serious about deepening its pipeline of biologics offerings. Under the terms of the deal, Boehringer committed an initial $60 million over three years to discover drugs around ten combinations molecular targets using MacroGenics’ trademarked DART platform, which creates compounds that react with two different antigens simultaneously. If any of the molecules becomes a marketable drug, MacroGenics would receive milestone payments worth up to $210 million for each. The partnership will first address immunological disorders, but could extend into oncology, respiratory, cardiometabolic and inflammatory diseases. MacroGenics’ alliance with Pfizer is narrower in scope, covering two dual-action antibodies engineered to redirect the body’s own effector T-cells against tumor cells. Financials of the Pfizer alliance—including the upfront payment—remain undisclosed. MacroGenics, which is privately-held, has raised more than $135 million over a decade from a syndicate of investors that includes Alta Partners, InterWest Partners, and TPG Ventures. Both alliances provide the biotech with important non-dilutive funding as a time when exit options for all venture-backed start-ups are constrained and builds on the $41 million MacroGenics received when Lilly licensed teplizumab.--Paul Bonanos

Endologix/Nellix: Can we call this a venture exit financing? Or a private investment in a public equity that’s buying one of our companies. (PIPETBOOOC)? Well, the branding of this deal clearly needs work. But Essex Woodlands Health Ventures rightfully earned some creativity points from other venture investors for its crafting of an exit/PIPE investment in the form of the announced acquisition of its portfolio company Nellix by publicly traded Endologix Inc. Nellix, which is developing a device to treat abdominal aortic aneurysms, will be acquired by Endologix for $15 million in stock. (Final payout could reach $39 million, all in stock.) At the close of the deal, Essex Woodlands – Nellix’ largest shareholder – will buy $15 million in Endologix stock to fund the continued development and the planned 2012 European launch of Nellix’ device. Essex Woodlands also will take a seat on Endologix’ board. At a time when it’s difficult for venture capitalists to exit companies with development stage products, the transaction gives Essex Woodlands and Nellix investors a somewhat clearer exit route now that it holds public instead of private stock. The returns aren’t great, based on the initial terms, since Nellix raised $30 million from venture investors. Of course, Essex Woodlands says it doesn’t intend to sell any time soon even after the one-year lock up expires. Instead, it and other Nellix investors hope to see the value of their holdings – now in Endologix stock – increase as the publicly traded company uses its existing and future sales teams to push Nellix’ endograft system in an increasingly competitive AAA market.--Tom Salemi

Valeant/Acadia & Valeant/Santhera: One of the inevitable consequences of M&A is the unwinding of certain alliances that aren’t central to the buying company’s strategy. This week’s news that Valeant Pharmaceuticals International has terminated a pair of partnerships and returned the drugs—both Phase III assets to treat Parkinson’s disease—to their originators is further proof of the phenomenon. The moves come four months after Valeant agreed to merge with Canadian biotech Biovail Laboratories Inc., which originated the high risk, high reward collaborations in its efforts to transform itself into a CNS powerhouse. Thus the “no deals” are consistent with Valeant’s desire to pursue a traditional specialty pharma model - i.e. one that doesn’t emphasize in-house research - with a strong focus on emerging markets. As part of a post-merger review following the $3.3 billion union with Biovail, Valeant will return the compound pimavanserin, being evaluated as a treatment for psychosis related to Parkinson’s, to Acadia Pharmaceuticals. As a balm, Acadia will also receive an $8.75 million payment to wrap up the transaction. In May 2009, Biovail agreed to pay $30 million upfront, plus milestone payments, to license the drug in the U.S. and Canada. Separately, Valeant returned fipamezole, a late-stage candidate to treat dyskinesia in Parkinson’s patients, to Swiss drug developer Santhera, after paying the first $12 million of a development and licensing deal covering U.S. and Canadian development rights. An ongoing licensing agreement with Ipsen for fipamezole will continue.--PB & EL

DOTW: Biogen Deal Means Sunshine and Rainbows For Knopp Investors

It's tough times for biotech investors, not much disagreement there. But in covering one of the deals of the week, we found a bright spot. The deal was Biogen Idec's purchase of rights to Knopp Neurosciences' Phase II ALS treatment for $80 million upfront, a sum comprised of a $20 million license fee and $60 million for equity in the privately-held Pittsburgh firm.

Knopp told our Pink Sheet colleagues that the $80 million was in essence more than it needed for its ongoing operations. Its lead drug, KNS-760704 for ALS (also known as Lou Gehrig's disease -- although a new study questions whether Gehrig had his eponymous disease or something else) is now in Biogen's hands, and the smaller firm is back to discovery work.

Instead of squirreling away the extra cash for a rainy day, however, Knopp gave it back to its investors, which are a mix of low-profile institutional investors, angels and family foundations. "Ah!" we thought, our little reptilian deal-brains churning, "An exit via license! How exotic!"

But no. The investors who got the distribution kept all their equity. Every last dime, according to Tom Petzinger, a former Wall Street Journal-ist who runs the firm's business development and public affairs. It wasn't an exit, and it wasn't a share buyback (or a private version thereof). Nor did shareholders sell to Biogen, whose $60 million equity purchase was from the company itself. It was, basically, a one-off dividend, or as Petzinger put it, "taking care of our investors."

Indeed, it was a case of Knopp saying this is your money, not ours. Petzinger said there was no quid pro quo, either. If and when Knopp finds itself in need of cash, the investors are under no obligation to re-up.

But he and the rest of management like to think that their gesture today will create investor goodwill in the future. "It might be a highly unusual move, but it doesn't mean it's not highly appropriate or strategic," Petzinger said.

Imagine that: a biopharmceutical startup in 2010 happily giving up cash that, for now, it doesn't need.

by Alex Lash

Medco/United BioSource: Any doubts about the importance of outcomes-based research in the post-health care reform era, look no further than Medco’s August 16 announcement that it plans to acquire the Bethesda, Md-based information services company United BioSource Corp. (UBC) for $730 million. The tie-up gives the pharmacy benefit manager a new business capability--drug outcomes based research for biopharma companies--that's likely to be a valuable service in the comparative effectiveness era in which we now reside. Among other things, UBC is the market leader in designing and conducting risk evaluation and mitigation strategies (REMS) for new medicines. UBC says it has been involved in the design, implementation and/or assessment of more than 60 REMS and predecessor programs, known as risk minimization action plans. In addition to safety and risk management, UBC focuses on health economics and outcomes research, including drug cost-benefit and cost-effectiveness analyses. UBC also brings Medco the capacity to conduct post-approval research in Europe and Japan. Medco's deal with UBC is more strategic in nature than recent moves by CVS Caremark and Express Scripts, PBMs which have aimed to add volume by acquiring large chunks of business from insurers. In July, CVS Caremark announced a 12-year contract with Aetna to manage duties previously handled by the insurer's internal PBM covering 9.7 million plan members. That followed Express Scripts' outright purchase of WellPoint's internal PBM, NextRx, which handles pharmacy benefits for about 25 million.—Cathy Kelly

Aspen/Sigma: The beleaguered Australian-based health care firm Sigma finally bought its way out of a jam, inking a deal this week with South Africa-based Aspen Pharmacare. Under the terms of the deal, Sigma, which is the largest pharmaceutical manufacturer by volume in Australia, will sell its its pharmaceutical group to Africa’s largest drugmaker for 900 million Australian dollars ($811 million). In hiving off the branded and generics drug unit and its most profitable division, Sigma will once again become a wholesale distributor; it will also be able to retire its total debt burden of A$785 million ($654 million). Sigma ran into trouble after spending $2.2 billion to acquire generics maker Arrow in 2005, with write-downs associated with that transaction resulting in a A$389 million loss for the 12 months to January 31, 2010. Interestingly, even though Aspen already has operations in Australia, the company has also commited to a long-term supply, distribution and logistics agreement with Sigma. According to sister publication PharmAsia News, opinions about the deal’s value vary, in part because the continued relationship between the two companies carries execution risks for Aspen. There are risks for Sigma as well, including whether the Aussie company’s new CEO Mark Hooper can find growth in a generics-free company. —Daniel Poppy

BioMarin/ZyStor Therapeutics: In a move to bolster its orphan drug pipeline, BioMarin Pharmaceutical has acquired enzyme replacement specialist ZyStor Therapeutics of Milwaukee for up to $115 million in upfront and milestone payments. As with many recent buyouts of private startups, the deal is back-end loaded, with a modest upfront payment of $22 million plus a $93 million earn-out. As part of the deal, announced August 17, BioMarin gets ZyStor's ZC-701, a novel therapy to treat the inherited enzyme deficiency Pompe disease, as well as a platform to create additional future enzyme replacement therapies. BioMarin says ZC-701 features a faster development timeline and lower projected development costs than its in-house candidate for Pompe disease, BMN-103. (Both compounds are in pre-clinical development.) The deal illustrates the new math currently in operation at many venture-backed companies. In order to advance ZC-701 through proof-of-concept, ZyStor would have had to raise a much larger round of capital; instead ZyStor’s backers, chiefly a syndicate of Midwestern venture firms, chose to sell. Given the $22 million upfront, ZyStor investors got their money back, but only just. The step-up multiple was a meager 1.5x, meaning the deal value was only 50% more than the amount of cash raised privately. Add in the earn-out, and the multiple could rise to 7.9x, higher than the average return for private biotechs acquired in 2009. Alas, BioMarin wouldn't discuss the duration of the earn-out or the timing of specific milestones, except to say that one $13 million payment will be made when the first patient is enrolled in ZC-701's Phase III trials.—Paul Bonanos

Novartis/Quark: Novartis has agreed to pay Quark Pharmaceuticals $10 million for the option to later in-license QPI-1002, a systemically delivered synthetic siRNA currently in Phase II for prevention of acute kidney injury in patients undergoing major cardiovascular surgery and for prophylaxis of delayed graft function in patients receiving kidney transplants. The companies revealed few details of the Aug. 18 agreement. The exercise fee and milestones for '1002 could reach $670 million but Quark CEO Daniel Zurr was not able to break down those biobucks more specifically or say when Novartis' option kicks in. Of course there are royalties on net sales too--if a drug ever reaches the market. In an interview with The Pink Sheet DAILY Zurr could only say he was "quite happy" with the royalty rate. (Gives you the warm fuzzies doesn't it?) Also left unanswered is what this week's tie-up means for Novartis' ongoing collaboration with Alnylam, under which the two companies are developing RNAi candidates in a variety of therapeutic areas. Originally a three-year agreement, Novartis has extended the Alnylam partnership twice for one year, with a termination date coming in October. At that time, Novartis will have to decide whether to non-exclusively license the Alnylam platform and further increase its ownership stake in the RNAi pioneer.--Joseph Haas

Life Technologies/Ion Torrent: This week’s acquisition of Ion Torrent by Life Technologies, for $375 million in cash and stock, continues the flurry of recent activity among gene sequencing instrument providers, who are continuing their march into the next generation of technological innovation. Seven weeks ago, Roche’s 454 Life Sciences bought up rights to IBM’s nanopore-based single molecule sequencing program, and just before that, Pacific Biosciences aligned itself with Gen-Probe. PacBio subsequently completed a $109 million Series F, including $50 million from Gen-Probe, and this week it also announced an IPO filing. Another player, Complete Genomics, filed for an IPO at the end of July and also just raised $39 million in a Series E. Did someone say “Building a war chest?” Unlike its more visible competitors, Ion Torrent’s Personal Genome Machine (PGM), which should hit the market in 2010 and sell for less than $100,000, is still kind of a black box: its capabilities are largely unknown. The heart of the PGM is a novel chemical detection system that directly measures the change in pH after a nucleotide incorporates into target DNA, using what is basically a semiconductor chip layered with an ion sensor. The company, founded by 454’s founder Jonathan Rothberg, gave a splashy demonstration of its machine at the February 2010 Advances in Genome Biology and Technology meeting on Marco Island. But it has not provided specs for the PGM, nor has there been any public third-party validation of the system from early access users. Nonetheless, because of the PGM’s novel detection system and semiconductor-based manufacturing, Ion Torrent has created quite a buzz, fueled in part by its LeBronian unveiling at Marco Island. Unlike PacBio and Complete Genomics, for example, which use optical detection, Ion Torrent could create a different set of users for gene sequencing. “For reasons of cost and footprint, I think that chemical detection-based sequencers can extend toward the clinical setting,” says Leerink Swann director of research, John Sullivan. That said, according to Life Technologies, the initial application for the PGM will be the life sciences [research] market.—Mark Ratner

Abbott/SkyePharma: Back in January FDA declined to approve Skye’s Flutiform fixed-dose combination asthma product, instead issuing a complete response letter. After a June meeting with the agency it became clear the companies would need to conduct additional clinical trials. On August 20 the other shoe dropped, with Abbott backing out of the Flutiform deal (one originally signed by Kos back in 2006 for $25 million up-front and renegotiated slightly by Abbott in 2008), penalty free. Skye hasn’t given up on the project, according to a statement, but won’t be taking home a break-up fee to keep it warm during those cold English summer nights, either. The therapy remains under review in Europe, where--perhaps luckily for Skye--“the regulatory approach is different from the United States,” the release notes. If Skye sees a path forward in the US it’ll try to sign up another marketing partner. For now, nobody seems surprised by Abbott’s decision – yet SkyePharma’s shares still slid 5% on the news.--Chris Morrison

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