AZ Makes Its Move in GI

Back in November we broke the news that AstraZeneca may be spinning out its gastrointestinal R&D. (Those news outlets that only read the Swedish papers caught up on the news this week.)

Well we can report now that the Big Pharma has made its move, though it's not the move that some reports were salivating after. In fact, it's quite modest in scope compared to most rumors, even if it is a strategic leap for AstraZeneca.

AZ has teamed with Nomura Phase4 Ventures to create a new Swedish biotech, Albireo, around one clinical and an undisclosed number of preclinical GI assets from AZ. David Chiswell, a founder of Cambridge Antibody Technology and a man who knows his way around the European biotech scene, is the firm's executive chairman.

AZ is hanging onto a significant minority interest in the newco, which has raised $27 million out of a planned total $40 million Series A from Nomura, TVM Capital, and Scottish Widows Investment Partnership. AZ retains its GERD franchise (namely the blockbuster Nexium) and reflux R&D.

As we said at the time: AZ is simply too big to manage the internal research it’s got – let alone depend on the notion that it can afford big bets on areas unlikely to generate big advances in medical care. (For an in-depth discussion of GI R&D strategies, see this story in the November IN VIVO).

It isn't the first pharma to spin off its GI assets--Movetis took a handful of Johnson & Johnson projects when it spun out backed by €49 million from Sofinnova et al. back in early 2007. But this is the first such move in any therapeutic area from AZ--a taste of what's to come?

image from flickr user red5standingby used under a creative commons license

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While You Were Settling

Well, it was an interesting weekend: the writers' strike may have been settled, Obama swept (and won a Grammy), and there was an unusual amount of blood spilled around the NHL (Lets Go Flyers!). But what happened in your world?

• First up: AstraZeneca is considering sale of some GI research projects, according to a Swedish newspaper (via Reuters). Perhaps Dagens Industri reads IN VIVO: we reported this news back in November!


• The NYT reviews the options for those of you who want to do a little personal genome spelunking. In other consumer genomics news, deCODE announced on Sunday the launch of a genomic test to identify individuals with a higher risk of prostate cancer.
  
• Newron announced early Monday that it was buying the private CNS-focused biotech Hunter-Fleming, for €8 million in stock plus a potential €17 million in earnouts (also in shares).


• “Generally I am very brave…only today I happen to have a headache.”
  
• Sorry, but we have to be firm on this one: Atonement should not have won best film at the BAFTAs last night (we loved the book, but...). And riddle us this: how does it lose in the 'best British film' category yet win 'best film'?

photo by Flickr user Here in Van Nuys used under a Creative Commons license

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The Disaggregation Road

When we saw a conference selling itself with the concept that Big Pharma is likely to disaggregate, we began to realize that what we had once seen as a kind of quirky idea has now gained the respectability of promotional material.

So first, let us invite you to follow our logic for disaggregation: just click here (the presentation’s free).

Since that talk, at the Pharmaceutical Strategic Alliances conference in September, we’ve only become more convinced that Big Pharma – at least to thrive, if not survive -- has got to start thinking small.

Some are. The less-than-confirmed but more-than-rumored information we've got is that AstraZeneca is set to spin off its GI R&D organization, keeping of course its big commercial assets, the Nexium franchise, but letting private equity fund the early-stage candidates. Good idea, we say. AZ is simply too big to manage the internal research it’s got – let alone depend on the notion that it can afford big bets on areas unlikely to generate big advances in medical care. (For an in-depth discussion of GI R&D strategies, see this story in the November IN VIVO).

AZ has by no means abandoned primary care blockbusters, but is clearly moving towards an increasingly disaggregated future. That, it seems to us, is one key message of its independently managed MedImmune acquisition-now-division. We’ll see how much farther AZ is willing to push its strategic envelope – perhaps, eventually, all the way down the disaggregation road paved by the most successful drug company in the industry—the Roche-Genentech-Chugai cluster?

We acknowledge there’s risk to the AZ strategy (spending 20% of one’s market cap for a company providing an additional 5% of sales looks pretty dicey – even if it does provide 25% of AZ’s pipeline going forward). Disaggregation is no panacea. But big-bet development--witness Novartis' well-publicized struggles with its diabetes would-be blockbuster Galvus and the management reshuffle in the wake of that debacle--is no strategy, either.

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While You Were at AHA

Well, the big prasugrel v clopidogrel showdown went down pretty much how observers expected it would: Lilly's prasugrel has the edge in efficacy--cutting heart attacks by 24% over Bristol/Sanofi's Plavix--but comes with an increased risk of bleeding. The press release is here. The WSJ covers the news here. We'll probably have more on this later.

• In other AHA news, Integrilin: a little jab'll do ya. Probably not great news for Schering-Plough, which, unsurprisingly, did not fund the study that suggested angioplasty patients do just as well with a significantly smaller dose of the drug.


• The New York Times chronicles Pfizer's fight to protect its Lipitor franchise from incursion by generic simvastatin. As the Financial Times pointed out last week, AstraZeneca has its own simvastatin-induced challenges with its blockbuster statin Crestor.


• GSK's gepirone antidepressant received a non-approvable letter from FDA. This is the third time FDA rejected gepirone, previously under development at Akzo Nobel (Organon), so not exactly a shocker.


• A study in Nature published on Sunday describes a new lung cancer target. Mutations in NKX2-1, which controls the activity of alveoli, may be responsible for up to 12% of lung cancers, according to researchers led by Matthew Meyerson of the Dana-Farber Cancer Institute and the Broad Institute. Reuters has the story.


• The Boston Globe looks at MIT professor Lenny Guarente's dormant relationship with Elixir Pharmaceuticals, the about-to-go-public company he founded in 1999, and his potential relationship with Elixir competitor Sirtris Pharmaceuticals.

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While You Were Sweeping

Congratulations to the Red Sox and their fans, victorious in a 4-0 rout of the Rockies in the WS. Some of us were hoping for a little suspense, but oh well ... other news from the weekend that was, below.

• JP Garnier, one foot out the door at GSK, taking one for the (management) team, sort of. Check out the Times (London).
  
• The New York Times takes a look at which presidential candidates are drawing donations from the health care industry. Bucking recent trends, Democrats are outpacing Republicans.


• Pharmagossip knows what AZ's David Brennan is wearing this Hallowe'en ...
  
• Bayer-Schering's Betaseron ... double the dose shows no improvement over single dose and Teva's Copaxone.
  
• The Wall Street Journal ($$) asks whether Biogen Idec's pipeline is going to deliver the growth that a Big Pharma acquirer would need. Want to change your vote now?
  

(Photo by Jeff Gross/Getty Images)

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While You Were Coming Back

It would be wrong for us not to mention the Red Sox in this space, the Boston nine having completed their three-game comback victory over the Tribe last night (sorry, Steve). There are a few contributors to this page that despite seeming to be upstanding citizens in most other respects actually cheer for the Sox. Probably some of you dear readers too. So there you have it. Congratulations.

So what did you miss while your favorite baseball/football/rugby/formula one team was golfing/losing ugly/coming up short against South Africa/driving really slowly?

• Cancer rates may be declining in the US, says the American Cancer Society, but as the New York Times reports, rates of certain cancers are increasing. Why?


• The Times laments the loss of Cambridge Antibody Technology, the name anyway, in the wake of AstraZeneca's MedImmune integration.
  
• Kirin Brewery has settled on the terms of its offer for a stake in Japanese drug company Kyowa Hakko Kogyo. Kirin aims to take a nearly 28% stake in KHK in a deal valued at roughly $2.6 billion.
  
• Two days left to guess which big biotech will be the next pharma takeout target. Check out our poll in the upper-left hand corner of the blog.

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Chomp! Wyeth Snaps Up Haptogen

The names are different but the premise seems the same: a struggling big pharma snaps up a promising biologics player to add bite to its large molecule divsion. Less than two weeks after BMS announced its buy-out of next-generation protein player Adnexus, Wyeth broadcast its decision to buy the Scottish biotech Haptogen.

This is the twelfth acquisition by either a big pharma or big biotech in the biologics space since September 1 2006 according to Windhover's Strategic Transactions Database. Does IN VIVO blog see a trend? Hint: Do fish swim?

It's no secret that pharmas have lately had a tough go getting drugs approved. The FDA has approved just 10 new molecular entities through September, representing a 17% drop year-over-year and matching a 10-year nadir, according to a report today by Jim Kumpel, an analyst with Friedman Billings Ramsey. (Kudos to Pharmalot for its posting.)

Desperate to get access to new therapeutic modalities, cash-rish pharmas have spent the last several years trawling for biologics players. Recall these recent deals: Roche's acquisitions of GlycArt Biotechnology and THP; Merck's take-outs of GlycoFi, Abmaxis, and Sirna; GSK's purchase of Domantis; and AZ's $15.6 billion stunner for MedImmune. (Yeah, we're still talking about that deal. If you haven't read our take, click here and here. FYI, there will be even more in the October IN VIVO.)

It's not hard to see why a company like MedImmune would make a pharma salivate--the company's pipeline was full; and they had soup-to-nuts capabilities--from discovery through marketing--in biologics. But why the interest in Adnexus or Haptogen--companies with interesting platforms but no late stage products?

It's easy: Access. Most companies just launching large molecules programs are shut out of the most desirable targets because licenses to them--at least through "gold standard" antibody providers such as Medarex and Genmab--have already been given away.

“If you want to develop a product to one of those really important targets—say the CD-20 antibody—you’re blacked out,” notes Donald Drakeman, former CEO of Medarex and now with the VC firm Advent Ventures.

Better, it seems, to spend some dough and acquire new platform technologies that provide freedom to operate—for example, GlycoFi’s yeast engineering capabilities or Adnexus’s protein program--than engage in licensing deals that may blow up when a next-generation player gets acquired by a competitor.

The Wyeth/Haptogen deal fits nicely in this paradigm. Wyeth, though comparatively biologics-rich thanks to its acquisition of Genetics Institute about a decade ago and its focus on large molecule Alzheimer's Disease therapies, has had it's own share of pipeline troubles.

According to Cavan Redmond, EVP and general manager of Wyeth's biopharmaceuticals division, the pharma has been on the look-out for "technology driven companies that help us take it [biologics] up a notch, so that we can customize antibodies even more than in the past."

That was certainly the thinking behind the pharma's 2006 deal with Trubion, which included a $40 million up-front payment for access to the biotech's CD-20 therapy for rheumatoid arthritis, Tru-15.

Seems like the same philosophy applies to Haptogen. The Scottish biotech promises it can generate antibodies against targets normally too small to elicit an immune response. In addition, the company has developed novel drug discovery techniques based on the shark immune system. (And you thought it was just a great shark picture. Ha!)

Haptogen's shark platform "has a lot of potential to generate smaller therapuetic proteins that can be taken as oral drugs," Steven Projan, VP and head of biological technologies at Wyeth, told BioWorld Today (subscription required).

Wyeth and Haptogen didn't disclose deal terms, but its doubtful there was big money on the table. Wyeth, after all, is notoriously frugal in the business development department. And, in the biologics space, the pharma tends to pursue one-off opportunities, where it can leverage its own biologics infrastructure to lower the total cost of the deal.

There's no sign that pharma's biologics feeding frenzy will abate anytime soon. Who's next? The IN VIVO Blog's crystal ball is cloudy, so it's hard to say for certain. But companies worthy of keeping an eye on include: Ablynx, which makes camelid antibodies; Biolex, which recently registered for its IPO, and uses the plant Lemna to manufacture its proteins; and Xencor, which produces souped-up antibodies using its proprietary protein engineering platform.

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PSA Day 2: Buying into Biologics

AstraZeneca's $15.6 billion acquisition of MedImmune may well go down as the deal of the year. Though it has been described as overly expensive, David Mott, MedImmune's CEO who remains at the helm of the "operationally independent but strategically aligned" biologics business, begs to differ. Think of it this way, he suggested this morning at our Pharmaceutical Strategic Alliances conference: AZ paid 20% of their market cap to secure 25% of its pipeline going forward, a target for AZ's biologics output.

Still, if AZ investors had sticker shock, well, it was a seller's market. Still is. "Fully built biologics capabilities are rare," says Mott. Acquiring MedImmune gave AZ the whole biologics package; it was too late for the Big Pharma to build those capabilities through collaboration.

Building biologics expertise and capabilities piecemeal, says Mott, will be a long, slow and high-risk proposition, thanks in part to the dearth of biologics industry talent in key areas like regulatory affairs.

To get the most out of MedImmune, AZ will have to keep the group at arms length, while at the same time fostering a sort of collaborative independence in R&D as well as sales and marketing between the Big Pharma's traditional small molecule business and its biologics business--which (Cambridge Antibody Technology included) is being transferred in practice if not in geographical terms, to MedImmune.

For example, "juxtaposing the biologics commercial business with a traditional pharma primary care commercial business will help us take the best of both worlds to create a new commercial model" with a lower cost base--something in line with, instead of twice as big, as R&D costs.

Mott noted that the biggest challenge arising from the integration of MedImmune has been subsuming CAT into the organization. "CAT was in a difficult position" after AZ bought MedImmune, having been sidelined only a year after it was itself acquired by AZ to become its biologics arm, explained Mott. Becoming part of MedImmune "was not the vision that CAT had for itself." That said, "what we can do together is actually quite persuasive, and it's striking how non-overlapping" the companies' technologies and strengths really are.

Beyond bringing CAT into the MedImmune fold, the biotech is taking the lead in AZ's venture activities through its own MedImmune Ventures business, as well as ownership of AZ's existing large molecule collaborations and programs such as those with Silence Therapeutics in RNAi and Abgenix in antibody development.

We're taking a look at the state of the industry's biologics efforts in the next IN VIVO.

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While You Were Packing for New York

A few notes from the weekend that was. We hope you had a good one. Several of your resident bloggers will be converging on New York this week for our Pharmaceutical Strategic Alliances conference (remember, UBS isn't the only game in town this week!). Hope to see some of you there. Stay tuned to IN VIVO Blog for a few updates from the conference on Wednesday and Thursday.

• Profit up but care down at many PE-backed nursing homes, says the New York Times in a Sunday feature.


• Pfizer gets maraviroc approval in the EU--here's the early morning release--and Novartis gets an EU OK for its transdermal Exelon mild-to-moderately-severe Alzheimer's disease patch. Both approvals were expected.


• The WSJ is the latest paper to take a gander at GSK's slightly unusual CEO succession contest, while the FT wonders who will replace Jon Symonds as CFO at AZ (hat tip, Pharmagossip).

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While You Were in Italy

Temple of Antoninus and Faustina

Your blogger spent the past four days overeating in Rome and Tuscany and trying and failing to think of a Roman empire/Big Pharma joke, and all you'll get is this lousy weekend/early Monday roundup. What, you wanted a T-shirt?

• We came, we saw, we outsourced: AstraZeneca to offload all manufacturing activities, the Times is reporting this morning.
• Et tu, Dan? Via Reuters: "I have no indication that could confirm any rumours about tie-ups between big players in the sector," Vasella told French newspaper La Tribune in an interview.
• Ahead of Sanofi-Aventis' R&D meeting today, the company says it will bulk up in biologics. We'll have much more to say on the Big Pharma haves and have-nots in the biologics world in the next IN VIVO.

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Wyeth's Leaky Pipeline

Poor Wyeth. The bad news just keeps coming. First came the FDA's July 24 letter asking for an additional year-long study of the company's menopause drug Pristiq. Then on August 10, the company announced it's own "daily double": a non-approvable letter for bifeprunox, a Phase III schizophrenia drug it's developing with Solvay Pharmaceuticals; and the preliminary halt of a study of HCV-796, a Hepatitis C drug Wyeth is co-developing with ViroPharma.

In addition to this negative trifecta, there's an on-going legal battle with generic-drug maker Teva over Wyeth's Protonix patent. (Wyeth has asked for an injunction to prevent the launch of the generic prior to the drug's patent expiration in 2010. A decision on the matter could come any day between now and September 7.) Perhaps it's no wonder the stock has been sliding. As of yesterday, Wyeth shares had fallen nearly 24% from their May high of $59.

Coming hard on the heels of the Pristiq news, the announcements about bifeprunox and HCV-796 must have been hard for Wyeth execs to swallow. DrugResearcher reports that just a few days prior, at the Drug Discovery & Development of Therapeutics Conference in Boston, Tom Hofstaetter, Wyeth's head of business development, told attendees that the pharma industry's productivity woes were a thing of the past. "The pipelines are more diverse and better quality than ever before," claimed Hofstaetter.

Ah, sweet irony. Seems like Wyeth's "diverse pipeline" has sprung a sizeable leak. And that puts additional pressure on the success of on-going collaborations with Progenics and Elan in pain and Alzheimer's disease. You don't have to be a brain surgeon--or even a lowly Windhover reporter--to know that the company is going to have to act--and fast--to shore things up. Investors are a flighty bunch and few these days are patient enough to endure a protracted turn-around.

Barbara Ryan, an analyst with Deutsche Bank, summed it up in her investor note: "While our expectations for Wyeth's pipeline have been relatively modest, it is now clear to all that the combined commercial potential of these products won't be sufficient to replenish revenues that will be lost at the end of the decade to generics." In the immortal words of Homer Simpson:"Doh."

I'm a glass full kind of gal. Earlier this year Wyeth won approval for Torisel, it's kidney cancer drug, and Lybrel, it's birth-control pill. More importantly, Wyeth is sitting on $12.19 billion in cash--money it could use to in-license some much needed late stage compounds or acquire smaller outfits to build up it's existing neurological or large-molecule franchises.

Still it's tough to see how Wyeth can quickly plug it's leaks through M&A or alliances. The company simply doesn't have much of a history as a deal-maker. (For a review of Big Pharma's acquisitive nature see these April and May IN VIVO articles, but be warned: Wyeth only gets mentioned in discussion of Big Pharma out-licensing [Wyeth's Hofstaetter tells us that Wyeth has to outlicense because it is over-productive in internal R&D] and as a non-acquirer.)

In fact, a quick search of Windhover's Strategic Transactions Database shows that, historically, Wyeth favors research-stage alliances over acquistions. In the past six years, the company has brokered only two deals for Phase III products--a $416.5 million deal for Progenics' pain drug methylnaltrexone and a $145.5 million deal for Solvay's bifeprunox. The other big deals? A 2004 alliance with Plexxikon for rights to its Phase I drug PLX-204 for Type II Diabetes worth $22 million, and a 2006 deal with Trubion Pharmaceuticals for rights to CD-20 targeted therapies worth $41 million. (See chart below.)

And you have to go back to the mid-1990s--a time when the names Wyeth-Ayerst and American Home Products were still in use--to find a buy-out linked to the company. Compare that with AstraZeneca and Pfizer, which, in the past five years, have spent $17 billion and $4.2 billion respectively snapping up biotech companies.

It's going to be an interesting few months for Wyeth. You can bet the IN VIVO Blog will be watching--and writing. And Wyeth execs, if you want to talk strategy, we are all ears.

(click chart to enlarge)

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The Most Important Deal of the Last 12 Months

In preparation for our Pharmaceutical Strategic Alliances meeting in September, we decided to send the same question to 35 of our smartest friends in the business: what deal signed in the last 12 months said the most about the drug industry’s current situation?

The answer (caveat: responses are still coming in) was AstraZeneca’s acquisition of MedImmune.

We suppose the choice shouldn’t have been surprising. At $15.6 billion in cash, it was arguably the biggest biotech acquisition ever. (Amgen’s 2001 buyout of Immunex looked bigger, but what was worth $17.9 billion in a combination of cash and stock at the deal’s announcement had, thanks to the dip in Amgen’s shares, dropped below AZ/MedImmune all-cash price by the time Amgen/Immunex closed in 2002.) And you can read what IN VIVO said about AZ/MedImmune at the time by clicking here and scrolling down to the sidebar (“AZ Spends Big on MedImmune”).

At the PSA meeting, we’ll interview in front of the assembly the man who engineered this remarkable deal—MedImmune’s CEO David Mott, who is now going to run AZ’s combined biotech efforts. And we’ll ask him what appetites at Big Pharma drove that astonishing price —since the auction he ran allowed him peeks at a variety of companies and their challenges.

By and large, our polltakers (a mix of heads of Big Pharma R&D and business development organizations, a few biotech CEOs, a couple of bankers, and a handful of VCs) figure the deal’s real driver was product panic.

One typical comment came from a Big Pharma R&D chief: “The deal shows the magnitude of the desperation of the pharmaceutical industry, and how badly things are going right now.” Or from a Big Pharma’s head of business development: the deal’s price “illustrates the general paucity of pipelines in many major companies. Over time I believe this is a value destruction deal and if replicated too often will lead to trouble.”

But the price also reflected, said our respondents, the capability AZ badly wants – large molecules and specifically antibodies. Relatively representative was the comment of one biotech CEO (whose company is pursuing small molecules). The price, he said, represented the fact that “biologics are likely to represent 30% of any Big Pharma’s future product portfolio and that they have to get in the game now, not via this or that product but, rather, by acquiring a soups-to-nuts biologics capability.”

Later this week, we’ll detail some of the other deals selected by our respondents -- every single one analyzed at the PSA meeting by the executive responsible for it.

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AZ, Silence team up in RNAi

AstraZeneca is joining the RNA interference crowd via a deal announced earlier today with Silence Therapeutics (formerly SR Pharma/Atugen). AZ will pay the biotech an upfront fee of ₤7.5 million, two thirds of which is an equity investment in Silence at 146p/share, a 10% premium to the company's recent share price. The companies will focus on respiratory diseases, discovering and developing proprietary siRNA molecules against up to five targets over three years.

The alliance is certainly small potatoes in comparison with the Big Pharma's embrace of other large molecule technologies (see MedImmune etc.), but not wholly out of synch with the vast majority of deals in the RNAi space. Until the conspicuously high-value takeout of Sirna Therapeutics by Merck & Co. last year, just about every siRNA agreement was back-end loaded. With up to $400 million in fees and milestones this one is no different. A more apt comparison would be GSK's April 2006 deal with Sirna in the respiratory area, which netted the biotech only $12 million up-front (half in exchange for equity).

For Silence the AZ backing provides not a small degree of validation in a space that's quickly becoming crowded with variations on a technological theme and a multitude of IP skirmishes. Moreover respiratory disease is not Silence's singular focus--IN VIVO Blog is anticipating a bigger deal in the oncology area. Our most recent coverage of the RNA interference space is here.

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Large Molecules: Antidote to a Toxic FDA

AstraZeneca is out aggressively explaining why it committed so much of its investment capital on the $15.6 billion acquisition of MedImmune.

The Wall Street Journal’s May 22 story “AstraZeneca Thinks Bigger” highlights the strategic effort to broaden AZ’s pipeline into large molecules. Seen in the larger industry context, AZ’s MedImmune deal stands out only by its size: the land rush into large molecules by big pharma has been underway for over two years.


Beyond the goals of pipeline balance and keeping ahead of the pack in the race into biologicals, there is an important note in AZ’s public defense of the acquisition that resonates deeply about the current drug development climate. AZ Chief Executive David Brennan is quoted by the The Journal’s Jeanne Whalen as being attracted to large molecules because they “have demonstrated that they’re not just symptomatic treatments but that they actually alter the course of the disease.” (IN VIVO's own far-reaching interview with Brennan, pre-MedImmune deal, is available here.)


That marks an important change in big pharma’s development objectives and one that responds directly to signals from the Food & Drug Administration on what types of projects are likely to get favorable reviews from the agency. AZ’s willingness to reach deep into its financial resources to retool its development projects won’t bring fast results but it begins to align AZ more appropriately with FDA’s developing hierarchy of drug projects.


The dean of FDA’s drug regulatory policy, Office of Medical Policy Director Robert Temple, MD, has openly cautioned drug sponsors about a shift in attitude at the agency away from products that rely on symptomatic improvements for approval.

Temple told a meeting sponsored by The Institute of Medicine in March that there are “reasons for industry to worry” about a continuing evolution in requirements from FDA for new drug applications aimed at products for symptomatic relief. If Temple’s frank assessment is not enough, sponsors need only look at the rejection of Merck’s etoricoxib (Arcoxia) despite a vaccine-size clinical trial database of about 40,000 patients.


Focusing on disease-modifying projects also will have benefits for drug sponsors as they continue to try to win places on formularies and favorable ratings from a payer community that is increasingly focused on comparative assessments of treatments.


In the long-run, AZ and the other major pharma companies have few options other than to try to read the signs from FDA. They need to replenish their pipelines with projects that are likely to demonstrate clear disease modifying properties. That type of approach may mean lean days for some of the big players for the next few years, but it is clearly worth a big time bet to stay in the game for the long-term.

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M&A: Gulf War

So there's now a class-action lawsuit that asserts MedImmune's shareholders are getting a raw deal in that company's acquisition by AstraZeneca, pretty much because MEDI CEO David Mott is now the $400 million man.

On the other hand, AstraZeneca shareholders have been none too pleased with MEDI's $15.6 billion price tag, asking, essentially, where's the beef? And by beef, we mean value. And by value, we mean late-stage clinical projects.

Perspective is an amazing thing.

Whether or not AZ paid too much or too little (in other words, whether the deal will eventually pay off for the Big Pharma) is impossible to know right now, and therefore isn't as interesting to us as looking at the value of MedImmune, the stand-alone biotech giant, versus the value of MedImmune, the industrial-strength pharmaceutical company fertilizer. This valuation gulf and the monster takeout premiums it creates have been evident across the board in looking at the biggest companies’ biggest biotech acquisitions of the past five years.

Why this gulf? Pick your reason: stingy public markets, desperate Big Pharma (and some none-too-clever acquisition hunting tactics by senior management, if you believe the grapevine), savvy biotech dealmakers?

We looked at those deals for an upcoming IN VIVO article, and weighed in on the success or failure of the ones far enough in the rear-view mirror to judge. The twenty top pharma companies (by 2006 revenues) made 33 biotech/small pharma acquisitions valued at greater than $100 million since the beginning of 2003 (we excluded generics, diagnostics, devices, OTC, etc.). Acquisitions like AZ/MedImmune brought the mean value of those deals close to $2.9 billion (median is about $900 million). Pfizer, J&J and AZ did the most deals, while Wyeth, Sanofi-Aventis, and BMS did none that fit the criteria. Here’s another taste of the data, all from Windhover’s Strategic Transactions Database.

So which do you think were the best deals of the past five years? Let us know in the comments.

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MedImmune Investors Get Paid

In a clearly opportunistic deal AstraZeneca is buying MedImmune for a whopping $15.2 billion ($58 per share). AZ says the acquisition will add significantly to its pipeline and complement the biologics discovery expertise within its Cambridge Antibody Technology unit with development and manufacturing skills and infrastructure. MedImmune also brings AZ for the first time into the vaccines space, an increasingly popular market for Big Pharma.

The price is a 53% premium to MEDI's closing price the day before it announced it was for sale, and 21% above its Friday close. But AZ investors hopeful that for all that cash the Big Pharma would boost its ailing late-stage pipeline (where it has suffered a handful of setbacks in the past few months) aren't likely to be pleased by the deal. MEDI CEO David Mott noted on a call today with AZ analysts that MEDI anticipates having only three to five projects in pivotal trials in the 2009-2010 timeframe. Most of MEDI's $1.3 billion annual revenue comes from sales of the respiratory drug Synagis ($1.1 billion in 2006).

The acquisition was first reported over the weekend by the WSJ ($), which noted their were four pharmaceutical bidders for MedImmune, including AZ and Eli Lilly & Co. The deal is the latest sign of biotechs increased leverage over product-hungry Big Pharma, and will further the agendas of biotech shareholders that argue for immediate satisfaction via M&A.

AZ will finance the cash deal with a variety of debt vehicles, according to AZ CFO Jon Symonds. The refinancing plan hasn't been put in place yet, he says, but "clearly we'll want to preserve our financial capacity to take further opportunities as they come. This is not the end of our externalization ambitions."

The company's next move is anyone's guess. After all, AZ went after MedImmune despite its protestations that it wasn't in the market for such a deal, suggesting Big Pharma in some cases doesn't know what it wants until it's presented with an opportunity--and if biotech investors get their way, many more such opportunities will come AZ and others' way. Just how does the acquisition of MedImmune jive with CEO David Brennan's comments during an extensive and exclusive interview with IN VIVO last month:

Q: Are larger bolt-on acquisitions out of the question?

I never say never. But bigger acquisitions are not really on the radar screen at the moment. We're focused on getting more quality products into the portfolio. Large-company transactions are complicated, painful, and take a lot of effort.

Good luck!

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Tekturna: looking for growth in antihypertensives

One company's generic-infested, avoid-at-all-costs, too-little-too-late, carcass of a primary care market is another company's big relief, big news, and big hope for a rebound.

Novartis AG's aliskiren (Tekturna), the first ever renin inhibitor approved to treat hypertension, got the FDA nod yesterday in what can only be described as Novartis' best piece of news in a long while. The Swiss pharma can take a minute to enjoy its success before getting back to defending its right to fight against cheaper versions of its drugs in India, sweating about delays to its great diabetes hope Galvus, and arguing with shareholders over the mountain of money it pays its chairman and CEO Dan Vassella.

OK, minute's up.

Other pharmaceutical companies, even those with established cardiovascular franchises that have clung to their primary care aspirations during the current decidedly specialist shift, like AstraZeneca, now consider the blood pressure market to be tapped out. Genericly available drugs do a pretty damn good job of controlling blood pressure for the vast majority of patients, so why spend a fortune developing a Tekturna to compete against these cheap alternatives in an environment where payors are increasingly asking for innovation in exchange for top dollar pricing.

That's not to say Tekturna isn't innovative--the drug was successfully developed by Novartis and Speedel Group (who for now looks to be the big winner, at least stock-wise) in an area where every one else who gave it a try had failed, and data suggests it can control blood pressure a bit better and longer than ARBs, ACE inhibitors and beta blockers. Novartis will aim to transfer patients off Diovan, it's ARB, and onto Tekturna, as Diovan goes off patent in 2012.

But is it innovative enough, for enough patients, enough of the time? In an upcoming interview to be published in IN VIVO in March, AstraZeneca CEO David Brennan notes that AZ has moved away from hypertension, suggesting the company doesn't "see the science breaking in such a way to compel us to invest in that," unlike other primary care areas like diabetes.

There are believers out there. Analysts estimate billions of dollars in peak sales and profits. Novartis may yet enjoy that rebound.

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AZ: Radical Re-think?

David Brennan's certainly made his mark just over a year into his tenure as CEO of AstraZeneca. The company has embraced externalization with fervour, completing a dozen or so significant alliances or acquisitions in the last 12 months, bolting on biologics capabilities by snapping up compatriot CAT, and joined in the cost-cutting, efficiency drives and re-focusing that are fast becoming Big Pharma's hallmark.

But is that enough? Brennan doesn't seem to think so. When asked in an IN VIVO interview last month whether he's contemplating more revolutionary change to set AZ apart, the answer's an assertive "Yes". But he's not going to talk about how. So what might be afoot within the Mayfair HQ?

It's not going to be a merger--that's an old trick, after all, and one that hasn't been shown to work very well. Nor did he sound that excited by the notion of acquiring a new, ready-built franchise by buying a specialty pharma firm such as Shire (not that he'd want to now, anyway, after that firm's large lunch of Vyvanse promotion partner New River Pharmaceuticals.

Doing a Novartis doesn't seem to be on the agenda either--"we think about [buying] generics, vaccines or diagnostics, etc. during each annual review," admits Brennan. "But the whole point of the Astra-Zeneca merger was to focus us solely on innovative pharmaceuticals. Anything else would detract from that."

So what's left? Splitting up? As Brennan points out, AZ is already organized into small-ish units, research units, since recently including CAT and Arrow--and plans to remain that way, GSK-style--"better than putting everyone in one unit and saying, now we're all going to do things this way."

Perhaps that means more, smallish, bolt-on acquisitions--what most of the punters are predicting. But as these entrepreneurial cells are increasingly left to their own devices (unless you're Pfizer), it raises the prospect of Big Pharma as portfolio managers, assessing and managing a series of external partners rather than, not as well as, their in-house R&D.

"The hurdles for in-licensing are lower," Brennan says. "The way we look at it now is, we’ve got risk in our portfolio, there will be risk in what we’re licensing in, so let’s make sure we’re looking at the best technology, project, or product that we think we can get at the time, and we’ll deal with it accordingly." Sound a bit like a portfolio manager to you?

Big Pharma used to bask in relatively easy-won double digit growth--the safe havens of the stock market. That has changed. Today, "being successful is not a certainty—you have to make it happen," notes Brennan.

Watch this space.

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