Deals of the Week: Winter of Our Discontent

Seems like many folks in pharma land are channeling Richard the Third this week. (Alas, there is no son of York to make winter's discontent glorious summer.)

Certainly staffers at both AstraZeneca and Sanofi-Aventis are less than happy: both companies announced more job cuts this week. (AZ will lay-off some 300 R&D employees from its Alderly Park site while Sanofi plans to reduce its German sales staff by 380.) And, pity the poor VCs. The Star Ledger is reporting that VCs are accepting smaller returns on smaller deals and waiting longer to cash-out as a result of the global credit crunch and the flagging IPO market.

Finally, remember Trimeris? Back in December that company put its R&D activities on hold to review its strategic options. But management isn't moving fast enough for the company's largest shareholder, HealthCor. On Feb. 1, HealthCor officials wrote a letter to Trimeris executives asking for two board seats, stating: "We are not in favor of strategic transactions other than those involving a sale of the business." (Hmm. Maybe the HealthCor folks are actually channeling Carl Icahn...)

If you, too, are suffering the winter blues, fear not. The IN VIVO Blog has a cure. (WARNING: Side-effects may include motivational deficiency disorder, sudden on-set of snarkiness syndrome (SOSS), maniacal laughter, and IN VIVO Blog addiction. Hey, there are worse things...) You guessed it. It's that time again.

• Dynogen/Apex Bioventures Acquisition Corp.: On Wednesday, Dynogen and Apex Bioventures announced they have signed a definitive agreement that will allow Dynogen to become public through a merger with one of Apex Bioventure's subsidiaries. (In case you don't know, Apex Bioventures is a special purpose acquisition company--or SPAC--that raises money for the sole purpose of buying another entity. The key thing is the SPAC can't say whom its acquiring--or even considering acquiring--before it raises the money. SPACs have enjoyed a resurgence in popularity in the life sciences in recent years as an alternative to the IPO market or a reverse merger.) The move gives Dynogen plenty of cash--the press release says the company should have up to $65 million at the deal's closing. Dynogen will certainly need it. It's currently developing two Phase II-stage drugs for gastrointestinal disorders, including irritable bowel syndrome. And given pharma's own R&D heartburn in the space, Dynogen may need the additional data before a partner with deep-pockets will assume some of the development risk. In the past, SPACs have favored companies with a shorter runway to commercialization like Alsius and Precision Therapeutics so this combination will be interesting to watch.
  
• Amgen/Takeda: Hit by declining sales of its EPO franchise and growing competition, Amgen announced a monster two-part deal with Takeda this week. In Part I, Takeda gets Japanese rights to 12 of Amgen's pipeline assets in exchange for $200 million up-front, up to $340 million in development costs, and potentially $363 million in sales-linked milestones and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum. In Part II, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer, for another $100 million up-front and $175 million in additional success-based milestones. The deal embodies two major trends we’ve talked about: the need to cut unnecessary infrastructure and the importance of risk-sharing in the vein of Bristol-Myers Squibb's deals with AstraZeneca and Pfizer. (For a more in-depth look at the deal, see here and here.)
  
• GE Healthcare/ Whatman: On Monday, GE Healthcare announced it was buying Whatman, a global supplier of filtration products and technologies for approximately $713 million. That's a lot of money for a research tools business, even if Whatman posted 2007 revenues of more than $225 million. Still it's a far cry from the $8 billion GE planned to plunk down for Abbott's point-of-care and diagnostics businesses, a deal that was eventually scuppered. It's likely GE has realized it must resort to a serial acquisition strategy if it's to challenge Siemens for the title of global leader in IVD. And Whatman's filtration and sample prep technologies could play a key role in building better protein and DNA-based tests, an area in which GE is interested in bulking up. Meanwhile, we continue to ponder the fundamental connections between tool and test companies, something we wrote about here.
  
• GlaxoSmithKline/ Amira: Also on Monday, GSK and Amira teamed up to develop Amira's 5-lipoxygenase activating protein (FLAP) inhibitors in a deal that could be worth up to $425 million for the biotech. (But only if it meets all potential development and regulatory milestones. Makes you wonder what the up-front payment was, doesn't it?) Most of the flap...sorry, we couldn't resist...is about Amira's lead product, AM103, a once-daily, non-steroidal asthma treatment that just completed Phase I trials in November. This isn't the first monster deal Amira has inked. Back in 2006 it signed a deal with Roche worth up to $287 million to develop three anti-inflammatory candidates.

"West," by Flickr user Dreamer7112, used under a creative commons license.

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Amgen Cashes out of Japan; Follows Bristol's Risk Sharing Example

It’s a sign of the times when Amgen starts licensing its drugs to mid-sized Japanese pharma.

Sure, we knew that troubled Amgen, hit by declining sales of EPO drugs and growing competition--including from forthcoming biogenerics--was looking for ways to cut costs. It had already last year declared workforce culls and its intention to partner certain R&D assets.

But this double-deal with Takeda, announced this morning, is still worth a second look. In Part I, Takeda gets Japanese rights to 12 of Amgen’s pipeline assets in exchange for $200 million up front, up to $340 million in development costs—not just for Japanese, but for worldwide development—plus up to $362 million in sales-linked milestones, and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum.

That regional deal’s interesting enough: Amgen, while touting its wider international expansion outside of the US, is exiting Japan. It wouldn't be the first; other companies have acknowledged that this tough market is best tackled by locals, who’ll pay dearly for access to assets. Amgen's move is also about cutting infrastructure—a trend, and need, that we’ve talked about in the context of Big Pharma’s unwieldy bureaucratic machines (and Amgen, too, is increasingly compared to Big Pharma, as we noted in this IN VIVO feature.)

Part II is the most telling bit of this deal, though. For another $100 million upfront and $175 million in additional success-based milestones, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer. It'll pay double-digit royalties on Japan sales, but will also cover 60% of ongoing development expenses outside of Japan, and share profits on a 50-50 basis.

This, in case you hadn't noticed, is Amgen doing risk- and cost-sharing, big time—like Bristol Myers Squibb did via monster deals in early 2007 with AstraZeneca and with Pfizer. Amgen's not only got itself a partner in a market that's now clearly non-core, but has also secured a good chunk of its ex-Japan costs, too, on all 13 molecules.

Amgen didn’t used to do out-licensing, at least, not until a lonely deal with InteKrin last January. Now it knows it has to: it needs the cash to help cushion some of the EPO blow (which may yet get worse following the next ODAC meeting in March) and, with commitments to cut 14% of staff, it doesn’t have the development muscle to deal with its entire pipeline in-house.

Not that motesanib is the crown jewel; far from it. It'll hardly be the first tyrosine kinase inhibitor to market, after all--hence Bear Stearns analyst Mark Schoenebaum's comment that the motesanib terms are particularly good for Amgen, since "we believe that the molecule's future is bleak."

Osteoporosis candidate denosumab is the company’s big hope—some say its only life-line—and Japanese rights to that went to Daiichi Sankyo last year, for what may now appear a rather paltry $20 million up front and $150 million contribution towards global development costs.

But Takeda’s nevertheless doing ok here. Twelve of the 13 Amgen assets are large molecules, granting the Japanese company its own foothold in biologics door, following similar moves by compatriots Astellas and Eisai Co. (along with most Western Big Pharma). Many of those were acquisition-driven, though (read more about the various strategies here).

By effectively signing a regional Japanese deal, Takeda gets to cut its teeth in biologics development alongside experts—albeit paying a price for that privilege—and will likely enjoy the comfort of ex-Japan approvals for some of the compounds before taking on the task itself at home.

And worldwide rights to motesanib—a small molecule—ticks another of the boxes on Takeda’s wish-list: international expansion. All Japanese firms (at least, all the larger ones) are desperate to expand outside their domestic market because of sluggish growth and harsh price cuts. That’s in large part what drove Eisai’s $3.3 billion cash acquisition of US spec pharma MGI Pharma in December 2007—a headline-grabbing transaction that Takeda will have badly wanted to answer to, if not, this time at least, out-do. (Read more about Eisai/MGI here.)

Photo "Pharma Spam Tower" by Flickr user shimown used under a Creative Commons license

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While You Were Eating Chili and Drinking Beer

Sometimes coming up with a headline for our weekend roundup can be difficult. This was not one of those times.

While we went with what we figured was the most universal of Super Sunday experiences, we had choices. Also considered: While You Were Watching It For the Ads, While You Were Giants, While You Were Eli-d, While You Weren't Going Undefeated, While You Were Choking, While You Were Jumping Off the Pats' Bandwagon, While You Were Participating in the Unauthorized Use of Game Footage Without the Express Written Consent of the NFL, and While You Were Praying There Would Be No Tom Petty Wardrobe Malfunction.

Some of us here at the IN VIVO Blog are Eagles fans (no, really, we probably haven't mentioned it before) and so the only suitable Superbowl outcome would have been for both teams to get disqualified somehow. But alas, at least it was a tight game.

Believe it or not there was more than Super Sunday and Super Tuesday prognosticating going on this weekend. Or so we heard.

• Amgen and Takeda inked a broad alliance to develop and commercialize 13 Amgen products in Japan. In a second and related deal, Takeda becomes Amgen's worldwide partner for the Phase II oncology candidate AMG-706 (motesanib). Amgen gets up-front payments of $200 million and $100 million respectively, and a further hundreds of millions in milestones and R&D expense sharing, plus royalties on Japan sales (and worldwide 50/50 profit sharing on motesanib). Takeda is also acquiring Amgen's Japanese subsidiary Amgen KK.
  
• From the Financial Times: a preview of GSK's forthcoming results this week with one key question--can the Big Pharma get FDA approval for Cervarix? We weighed in on this question on Friday.
  
• [Self Promotion Alert] The line-up for our Pharmaceutical Strategic Outlook conference in New York (March 18-20) keeps on getting better.

Photo from Flickr user jwinfred used under a Creative Commons license

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Why No More Roche-Genentechs?

Another note from the Oxford Bioscience CEO retreat: why can’t more acquisitions follow the Roche-Genentech model?

The question is being raised with increasing frequency. Understandably so: it’s frustrating to biotech CEOs and scientists to watch their creations disappear into what they see as the bureaucratic abyss of Big Pharma. Sure, these disappearances delight VCs, but they don’t do a lot for the employees who worked as hard as they did because they felt they were building something uniquely valuable.

Sometimes those employees are right. If you think about Genentech-Roche, the deal actually saved both parties. At the time unable to invest in research and delivering sub-par commercial results, Genentech would certainly not exist as an independent company today without the Roche reprieve. Neither would Roche, which gets from Genentech products nearly 50% of its sales and 60% of its operating profit growth. Its ownership position in Genentech shares now accounts for 30% of its own market cap.

Indeed, there is virtually no question that the deal was the single most successful transaction in the modern history of pharmaceuticals. Granted by the deal nearly six years of freedom from stock-market concerns, Genentech created a product-development engine which has delivered virtually unprecedented productivity. And Roche reaped the benefits.

So why have there been no repeat successes? Early on, American Home (now Wyeth) bought a majority of Genetics Institute, and American Cyanamid traded some cash and products for a stake with Immunex. Both were attempted variations of the Roche/Genentech deal; so, in some ways, was Novo's spin-off of Zymogenetics, Novartis' acquisition-cum-alliance with Idenix, and GlaxoSmithKline's alliance-cum-put/call transaction with Theravance.

The jury is still out on the last three; only the Wyeth/GI deal can really be said to have worked at all (that’s the source of Wyeth’s biologics business—key to its growth). But it took Wyeth way too long to capitalize on what it had and when it did, it wasn’t with GI as an independent company. Cyanamid disappeared into Wyeth before it could take advantage of Immunex – and Immunex disappeared into Amgen.

When the subject of acquisitions was raised at the Oxford meeting (full disclosure: the Blog was on the panel), it was pretty clear that there are plenty of biotechs which, rather than getting taken out completely, would welcome the chance to continue semi-independent existence. John Dee, former CEO of Hypnion, sold to Lilly a few months ago, said that he would have preferred it; he apparently even discussed the idea in deal negotiations. But it went nowhere.

There are probably plenty of good reasons Roche-Genentech is tough to duplicate. VCs would certainly rather have a simple exit; so would public shareholders. More importantly, while there probably aren’t many Genentechs around, there certainly aren’t many Roches: controlled by the Hoffmann and Oeri-Hoffmann families, the virtually private Swiss company could make big long-term bets without listening to the carping of investors and analysts (“You’re consolidating those losses for how long? And you don’t even get worldwide rights to its programs?”).

Still, Tuan Ha-Ngoc, the CEO of Aveo, noted two interesting candidates for the Roche role: Astellas and Takeda. Both have global ambitions; both have relatively tolerant shareholder bases. Both apparently want to buy into the biotech industry.

So who knows—maybe the next Roche will be Japanese.

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When DDMAC Attacks

Insomnia drug Rozerem's Your Dreams Miss You advertising campaign may have crossed the line into Nightmare for its marketer, Takeda. (if we can find a copy of the problematic spot, we'll post it here. meanwhile, enjoy Rozerem's pitch in happier times.)

Abe & the beaver, in better days

Admired for their off-beat and clever take on the results of insomnia (and questioned for being too convoluted for the average consumer), the ads, say the FDA, may have gone too far this time.

The agency's division of drug marketing, advertising, and communications (DDMAC) slapped the drugmaker with a warning letter for one of its ten-second reminder ads. For such a short spot, the ad broke a ton of rules. Some of DDMAC's more serious allegations point out that while Rozerem is not indicated for use in children, some of the language in the ad is misleading:

The combination of these statements ("Back to School") and images of school-aged children and school-related objects suggest that Rozerem is indicated for and can be safely used in the pediatric population. The presentation in the TV ad is especially concerning given that the PI for Rozerem includes the following Precaution regarding pediatric use: "Safety and effectiveness of ROZEREM in pediatric pateints have not been established. Further study is needed prior to determining that this product may be used safely in pre-pubescent and pubescent patients." (FDA's emphasis)

That study is warranted because of Rozerem's known affect on reproductive hormones in adults--decreased testosterone levels and increased prolactin levels. Making matters worse, Takeda failed to submit the ad to FDA "at the time of initial dissemination" as required by current regulations.

Yikes, Honest Abe would not be happy. Takeda, go sit in the corner. You're in a time-out.

Incidentally, it makes one wonder who's next ... perhaps the FDA will crack down on Osama bin Laden's endorsement of the erectile dysfunction drug Levitra?

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