Deals of the Week: It's the End of the World as We Know It

Been reading the news this week? Apparently the sky is falling in pharma land. The WSJ reports that pharma's golden age is on the wane thanks to looming patent expirations and a poor track record in product approvals. (Hmm. Where have we heard that before?) BMS is the latest pharma to announce lay-offs--yesterday it announced 10% of its workforce would go. China's drug manufacturing capabilities pose a national security risk according to the Kansas City Star. Poor Carl Icahn: it looks like Henri Temeer and Genzyme will elude his clutches after all. (For more on Genzyme's strategy, make sure to watch for our upcoming IN VIVO feature.) And an FDA advisory panel nixed the use of Genentech's Avastin for breast cancer, sending the company's stock price plunging. (C'est la vie. You can't win 'em all right?)

Yep, it's the end of the world as we know it. And I feel fine. (Thanks to Deals of the Week, of course.) Without further ado:

• Novartis/Morphosys: First up: we tip our hats to Morphosys for their avoidance of pure "biobucks" figures in telling the world what they stand to gain in milestones from their latest HuCAL alliance with Novartis, announced Monday. Revolutionary! Now on to the deal, which for Morphosys is a bit revoluationary itself. Novartis will pay the antibody specialists $600 million over ten years in committed payments (roughly 50/50 technology license fees and research support), with an additional $400 million (non-biobucks) in predicted milestone payments. Morphosys basically consolidates its discovery partnership program into this one deal--as older deals come up for renewal, they'll just expire; for example the biotech's deals with Bayer-Schering and Centocor, scheduled to expire at the end of the year, will do so. Interestingly, Morphosys is maintaining more than a small amount of independence. Novartis remains the biotech's largest shareholder, but hasn't upped its stake beyond the 7% it already held, and does not get a seat on the Morphosys board. Morphosys won't be doing any more discovery deals, but will be able to do product-focused outlicensing deals at its leisure. Novartis gains a fully human antibody discovery engine without breaking the bank.
• Merck/Addex: Not a huge deal, cash wise, but the kind of deal Addex's investors were hoping for. Addex gets $3 million upfront from Merck & Co. plus milestones and undisclosed royalties. The companies are targeting the mGluR4 receptor to develop treatments for Parkinson's disease and other indications. Addex's allosteric modulation platform essentially allows modulation of GPCRs without binding to the receptor's active site, leaving that prime real estate open for the receptor's endogenous ligand.
• Pfizer/Adolor: On Wednesday, Adolor signed a deal with Pfizer worth $30 million up-front and $232.5 million more in milestones for two compounds for pain conditions, ADL5859 and ADL5747. Both compounds belong to the delta opioid receptor agonist class, a class of pain drugs related to morphine and oxycodone, but potentially without their debilitating side-effects. As part of the deal, the two companies will split revenues and expenses in the US 60/ 40 with Pfizer taking the lion's share and Adolor retaining co-promotion rights. This is the third big deal this year for Pfizer in the pain space. This summer the company added to its pipeline, signing a $195 million deal with Hydra Biosciences for its TRPV3 antagonists and a $1 billion-plus deal with Icagen for a sodium channel modulator (For more coverage of the pain space see this 2006 IN VIVO story.) This is some much needed good news for Adolor. The company's stock was decimated earlier this year when the FDA put the brakes on the company's mu-opioid receptor antagonist Entereg because of concerns about its lack of and potential CV side-effects. (For more on this product and other GI-related opioid compounds check out this November IN VIVO feature.)
• Lilly/Aveo: Precision Therapeutics wasn't the only diagnostic company making news this week. (For more on Precision's merger with Oracle Healthcare Acquisition Corp. check out this IN VIVO Blog post.) Cancer biomarker play Aveo Pharmaceuticals announced Tuesday it had struck a deal with Lilly to help the pharma identify patients who respond to one of its cancer drugs under development. Aveo's famous for its in vivo cancer models--essentially mice that have been engineered to develop tissue-specific cancers under controllable conditions. To date, the company also has biomarker discovery deals with Schering Plough, Merck, and OSI Pharmaceuticals. Terms of the deal weren't disclosed but if there anything like the $20 million agreement Aveo inked with OSI earlier this fall, it's unlikely there's big money on the table. Historically, that's been one of the problems with the business models of these molecular diagnostic companies. Although they can sign somewhat lucrative fee-for-service deals with pharmas, these partnerhips never seem to translate into upside related to the actual commericalization of a product.
• Fresenius Medical Care/Renal Solutions: On November 29, the German dialysis product maker announced it was buying Renal Solutions, a venture-backed sorbent cartridge maker for as much as $190 million. Just two years ago, Fresenius bet big, buying Renal Care Group for $3.7 billion. That transaction gave the German company an important foothold in the US market, giving it access to more than 30,000 patients at over 425 dialysis centers. The company also made waves when it agreed to a five-year sole-supplier deal with Amgen in October 2006 for that biotech's Epogen and Aranesp. The reason: many critics saw it as aiding Amgen's strategy to prevent widespread US uptake of a competing product from Roche called Mircera. (For more on Amgen and its anemia franchise click here.)

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Deals of the Week: The Alice's Restaurant Edition [UPDATED]

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why I called the post Deals of the Week.

You can get anything you want at the IN VIVO Blog.
You can get anything you want at the IN VIVO Blog.

Log right in, it's a click away.
Just a finger tap. You don't have to pay.
You can get anything you want at the IN VIVO Blog.

Now it all started three days ago--it's been three business days since our last DotW posting, but we decided it would be a friendly gesture for us to fill you in before the tryptophan coma sets in.

(News flash: The NY Times reports here on the possible health dangers of the annual holiday feast. Sadly, the palpitations induced by the requisite Thanksgiving toast were not mentioned. Thankfully, humorist Brian Unger has some helpful suggestions in this NPR podcast.)

In honor of the day, we hope you consider joining the IN VIVO Blog Movement. All you've got to do is walk into the office wherever you are, just walk in and say "You can get anything you want at the IN VIVO Blog." And walk out.

You know if one person, just one person does it, they might think he's really sick and they won't take him...And can you, can you imagine fifty people a day, I said fifty people a day (okay, we'd really like 1000) walking in, quoting a line from IN VIVO Blog and walking out?

And friends, they might think its a movement. And that's what it is, the IN VIVO Blog Movement.

Remember Deals of the Week? (This is a post about Deals of the Week.)

Without further ado, we bring you this week's installment: the Alice's Restaurant Edition. (Feel free to sing along in four part harmony. With feeling.)

• Celgene/Pharmion: As pharma-land speculated on the fates of BiogenIdec and Genzyme, Celgene surprised the Street with its $2.9 billion cash and stock offer for Pharmion (35% cash, 65% equity, at an almost-50% premium to Friday’s close). As colleague Melanie Senior notes in this post, the deal makes exquisite sense, given Pharmion's six year relationship with Celgene for ex-US rights to the controversial cancer treatment thalidomide (Thalomid). While the acquisition certainly gives Celgene heft, it may also make the company even more attractive as a take-over candidate for desperate Big Pharma. One reason (described by Michael McCaughan in more detail here): Celgene's restricted distribution program for Thalomid is routinely cited by FDA as one of the few, clear successes in the industry. And as pharmas move into specialty areas where risk management is critical, having Celgene's in-house expertise could be a boon.
  
• BiogenIdec/Neurimmune Therapeutics: As noted here, Neurimmune eschewed VC funding, opting instead for an undisclosed upfront and biodollars that could one day reach $390 million. (Another case of American blind justice?) Interestingly, this marks the third early stage neurodegenerative deal BiogenIdec has inked in the past 15 months. In August 2006, the biotech signed a deal worth up to $25 million with Amorfix, a Canadian theranostic company profiled in this START-UP article, for potential ALS therapeutics. And in September 2007, Biogen teamed up with the Brain Science Institute at Johns Hopkins University to identify and develop therapeutics for MS and Parkinson's and Alzheimer's Disease.
  
• Olympus/Gyrus: When you plunk two billion buckaroos on the table, people tend to take notice--even if it isn't a particularly crowded or dynamic space. Tongues were wagging after Olympus announced its decision to acquire UK-based Gyrus, which makes visualization devices for use in minimally invasive surgery. It's interesting that Olympus appears willing to pay a premium—by some estimates up to 60%--for a publicly held company that has had its share of struggles. It's not clear what's driving the big dollar value. Perhaps Olympus's desire to dominate in the endoscopy market--or did they sense someone else was going to play? An FT article speculates that there may have been other suitors. Among the rumored contenders: Johnson & Johnson and Stryker. At the same time, Monday's deal clearly validates Gyrus' 2005 acquisition of ACMI, a merger that (as we wrote here) helped solidify Gyrus's position in a number of urologic and gynecologic categories.
  
• Merck/ Nicholas Piramal: Call it the first step to off-shoring proof of concept. With the price of Phase II deals climbing ever higher, Merck took an unusual step this week to get POC compounds on the cheap. It's going to India. (Not China!) The company announced a deal with Nicholas Pirama India to research and develop new oncology drugs against two selected targets. Under the agreement, Nicholas Piramal will develop the targets from the discovery stage up to proof-of-concept and then hand them back to Merck, which will handle late-stage clinical trials and commercialization. For its work, Nicholas Piramal stands to receive milestone payments of up to $175 million per target, as well as royalties on sales of any products resulting from the collaboration. Here's the release.

And remember, you can get anything you want at the IN VIVO Blog.
(Excepting Roger)
Da da da da da da da dum
At the IN VIVO Blog.
(apologies to Arlo Guthrie)

UPDATE: Because excess is de rigueur at Thanksgiving, we give you this bonus deal, just announced: GSK has ponied up $1.65 billion for Reliant Pharmaceuticals, a privately held company focusing on in-licensing and developing late stage cardiovascular drugs. Reliant has four marketed products, including US rights to Lovaza, an omega-three derivative designed to treat high-triglyceride levels. Reliant's certainly had it's ups and downs: in 2005 the company tried to go public and failed and this past August it filed again for a public offering potentially worth $400 million (for our analysis of Reliant, see this IN VIVO article). Reliant's acquisition adds credence to our twin track IPO/M&A thesis: i.e when companies register for IPOs they are effectively putting themselves on the auction block. (Remember Adnexus?) In addition, it's the second spec pharma tie-up this week, coming just days after Celgene's take-out of Pharmion. It seem's likely that other spec pharmas could be acquired near-term. MGI is reportedly for sale, and there could be increased pressure on ProNovo BioPharma, the original developer and manufacturer of Lovaza, which still retains ex-US rights to the product. On a conference call this morning, ProNovo management refused to speculate on that possibility. One final note: ProNovo and Reliant aren't the only ones benefitting from GSK's deep pockets: the Boston Business Journal reports that Alkermes will receive $175 million when it sells its stake in Reliant to GSK. Not a bad Thanksgiving present, eh?

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Deals of the Week: "King of Pain" Edition

Admittedly, it's been a quiet week for biz dev in pharma land. The big news has been clinical. On the positive side, the diabetes triumvirate of Amylin, Alkermes, & Lilly published studies on October 31, reviewed here , showing that long-acting Byetta has staying power. And then there's the therapeutic effect of good vibrations. On the negative side, GPC's stock price cratered on the news that accelerated approvals aren't really under threat, it's just that satraplatin doesn't work as advertised. Bad news from Lilly and Daiichi too, who announced this week that they are suspending two prasugrel trials due to concerns about side-effects.

And a new survey posted this week--this time from IMS--gives pharma execs yet another reason to worry: US pharmaceutical sales for 2008 are projected to increase at their slowest rate since 1963 as cheaper generic drugs drive down prices and docs write fewer scripts for medicines tied to harmful side-effects. (At least sales are increasing, right?)

But in case you missed them, here's the deal-flow round-up:

• Lilly inked a deal with India-based Glenmark Pharmaceuticals to acquire rights to a portfolio of TRPV1 antagonist molecules, including a Phase II compound, GRC 6211, for osteoarthritic pain. Terms of the deal: Lilly pays Glenmark $45 million up-front and up to an additional $215 million in milestones. The deal's a bit surprising--according to Windhover's Strategic Transactions Database, the pharma has signed only 12 deals in the pain space since 1994 and three of those transactions were out-licenses, including a $211 million deal to NeoSan for US rights to Darvon and Darvocet N.


• King Pharmaceuticals signed a deal with Acura Pharmaceuticals worth $30 million up-front and up to $28 million (per product) in milestones to develop and commercialize 4 of Acura's immediate release opioid analgesics. This isn't King's first foray into pain of course. Nearly two years ago, the company inked a much bigger deal with Pain Therapeutics for that company's Phase II, abuse-resistant, long-acting oxycodone product Remoxy. (See this March 2006 IN VIVO story for more.) Perhaps this week's deal is a signal that King is returning to a specialty focus centered on neuroscience and hospital/ acute care--the "King of pain," perhaps? That may be necessary for the company's survival. Last week King announced it was slashing 20% of its work force after losing patent protection on its heart failure remedy Altace.
  
• Another spec pharma deal: NycoMed announced it was purchasing Bradley Pharmaceuticals for $346 million. The reason: "This brings together the strengths of both companies with the objective of creating a leading specialty pharmaceutical player in dermatology," said Paul McGarty, Chief Executive Officer of Nycomed US, in the company's press release. European spec pharma companies have been knocking on the door to the US via acquisitions--witness also the Meda AB acquisition of Medpointe earlier this year (at nearly $800 mm). We won't be surprised to see more of these.
  
• Finally, on November 1, Merck inked a deal with Dynavax worth up to $136 million for rights to that biotech's Phase III Hep B therapy, Heplisav, which promises an easier dosing schedule and potentially better efficacy in weakened immune systems than the drug Recombivax HB Merck already markets. Heplisav combines a segment of the hepatitis B virus and a DNA sequence that activates a toll-like receptor, triggering an early immune response. While the terms of the agreement weren't overwhelming, it's signing suggests the following: 1) There is still faith in the Toll-like receptor field despite Coley Pharmaceutical's high profile failure last January; 2) Pharmas continue to show interest in vaccines, thanks in part to new adjuvants that allow the development of more potent medicines that also come with higher price tags. (See this September 2006 story by our RPM brethren for more.)

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Who Do You Buy?

(Apologies to Bo Diddley and George Thorogood and The Destroyers)

Who Do You Buy?

I walked 850,000-square feet in Cambridge, I got Tysabri for a drug.

A pipeline full of products, and it's a-made out of biologics.

Got Carl Icahn as a suitor, and it's a-made my stock price soar.

Come on take a little walk with me Kindler, and tell me who do you buy?

Who do you buy?

Who do you buy?

It's official. The biotech most likely to be bought as determined by our completely non-random, totally unscientific poll is...drumroll, please...Biogen Idec.

Fifty of the 106 people who completed the poll--a whopping 47%--believe that Biogen Idec is the most likely biotech candidate to be taken out in the coming weeks. We at IN VIVO Blog are certain the result has absolutely nothing to do with the fact that Carl Icahn owns at least 1%--and as much as 4.9%--of the company or that it posted a for sale sign a couple of weeks ago and announced disappointing earnings yesterday.

Still there was clearly some disagreement among the poll takers. Sixteen cowards--15% percent of participants--refused to commit, hedging their bets by checking the "someone else" box. There was a two-way tie for third place, with Amgen and Genzyme each garnering 15 votes. And ImClone, poor ImClone, earned our wall-flower prize. Just 10 iconoclasts--a lowly 9%--think its ripe for the picking.

Now that we have finished mashing our metaphors, we'd like to thank the intrepid souls who devoted the two--maybe three--seconds it took to answer our questionnaire. (The rest of you are immeasurably lazy.) Like you, we are eager to know which biotech name we can eliminate from our Outlook folders. We remain steadfast in our belief that $23 billion--or more--for a company with encumbered products such as Rituxan and Tysabri is crazy money.

But we also understand that these are the times that try pharma execs souls. Your weekly bad news round-up (courtesy of Pharmalot and WSJ Health Blog, and of course IN VIVO Blog): Pfizer torches its costly inhaled insulin, Exubera (10/18); Schering Plough's stock price slumps(10/22); Roche stumbles on Amgen patents (10/23); Lilly anti-clotting drug stumbles on dosing(10/24); and GSK cutting costs as Avandia slumps (10/24).

As the bad news mounts, it's no wonder that pharma has been forced to reconsider its shunning of the large-molecule movement. As DataMonitor reported last week, these molecules really do have lower clinical failure rates, improved safety profiles, and the potential for billion-dollar revenue streams. (Newsflash: specialty drugs can be blockbusters!)

It's no accident that the companies most often rumored to be in the chase for Biogen Idec--Pfizer, Sanofi-Aventis, and GSK--are, as we describe in this October IN VIVO piece, biologics "wannabes". These pharmas have been active on the deal-making front, trying to make up for their past indifference by spending their share-holders dividends. (In the past five years, for instance, Pfizer has inked at least 20 biologics deals and spent $2 billion to acquire 5 companies, while GSK has signed over a dozen partnerships and acquired 2 companies for nearly $2 billion.)
This chart, also from our latest IN VIVO, shows how the "wannabes" stack up to biologics "haves" such as Roche and Lilly. We even have a score-card where we rate the pharmas, but you have to be a subscriber--or buy the article--to see that one.

It's not clear whether Pfizer and it's "have-not" brethren have decided on the optimal strategy for acquiring biologics capabilities. Perhaps they'll continue to opt for serial acquisition, piecemealing capabilities in $500 million chunks. Or maybe, the execs in pharma-land will decide that AstraZeneca was on to something when it paid $15.6 billion for MedImmune and got soup-to-nuts biologics capabilities with one deal.

Who knows? Only time--and the acquisition of Biogen Idec--will tell.

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While You Were Redesigning Your Blog

Does our blog look big in this? You may have noticed a few changes round these parts, and we hope you like them. No, not that the pace of our posting has slowed (this will surely pick up as industry deal activity awakes from its summer slumber), but moreso the new look and feel of our corner of the web.

Today you'll even see the addition of our first blogroll (in the right-hand column). If you're not already familiar with these Web sites, go check them out. For now, it's a short list, and sure to expand. There are plenty of other high-quality blogs, and rest assured we will aim to update that list relatively frequently.

We'll be rolling out a few other new features in the days, weeks, months ahead. IN VIVO Blog started out only a few months ago as an experiment, and judging by feedback we've received from readers it seems to be working.

So thanks for dropping by, tell your friends and colleagues about us, and feel free to send suggestions, tips, rants, praise, remonstrations, or commiserations about the Phillies' inevitable collapse to blog [at] windhover.com. Or, as always, speak your minds in the comments.

Now, on to some weekend news you may have missed ...

• Back in the U.S.S.R.: Several drugs in clincal trials to treat hepatitis C have suffered setbacks this year, potentially opening the door to new mechanisms of action. On Friday night Implicit Bioscience announced that a Phase IIa study of its immune modulator oglufanide disodium had commenced in Australia. The drug originally hails from Russia, where it was developed and marketed to treat severe infections.
  
• I'm So Tired: The Guardian weekend magazine has an excerpt from The Family That Couldn't Sleep: A Venetian Medical Mystery, by D.T. Max. The book describes the mystery surrounding fatal familial insomnia, along the way illuminating the history of other prion diseases like vCJD and kuru.


• Everybody's Got Something to Hide Except Me and My Monkey: The New York Times writes about functional MRI, and how a company called Omneuron is using the brain imaging technology to treat chronic pain. But the tech's first application could be in lie detection, says the CEO of the aptly named No Lie MRI.
  
• Cry Baby Cry: Results from Neurochem's Phase III trial of its Alzheimer's disease candidate Alzhemed were "inconclusive"--i.e. didn't show statistical significance--the company reported Sunday night. This is the latest setback for the company and its drug; shares of Neurochem have been in freefall since late last year.

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Roche makes Ventana an offer it may or may not be able to refuse: $3 billion

As the market in the US closed today, Roche offered to buy the histopathology company Ventana Medical Systems for $75 per share, or about $3 billion to complement its in vitro diagnostics business. The bid is a 44% premium to Ventana's share price last Friday.

Lovely. The only problem? Ventana isn't playing ball. Which forced Roche to go public with the offer, and even disclose Roche chairman and CEO Franz Humer's "Dear Jack" letter to Ventana CEO Jack Schuler (see the link the the PR, above). Apparently Jack won't even take Franz's telephone calls; Ventana has been unwilling to engage in dialogue, etc. (No word on whether Ventana still sends Roche flowers or sings it love songs. We'll keep you posted.)

Meanwhile, there's a call for investors tomorrow--more to come.

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