Recent early-stage deals between drug companies and biotech firms underscore pharma's increasing reliance on biotech as a source of innovation. Biotech stocks benefited from the flurry of deal making.
This article published with permission from The Burrill Report.
Early-stage deals between pharmaceutical companies and biotechnology firms underscore pharma’s increasing reliance on biotech as a source of innovation. Both Roche Holding PLC and Eli Lilly & Co. (NYSE: LLY) have been stung by setbacks in their drug-development programs in recent weeks, and both of them announced new alliances to develop novel therapeutics.
Roche will partner with Belgium biotech reMynd to develop novel therapeutics that could slow down neurodegeneration in Parkinson’s and Alzheimer’s patients. The initial focus will be on two of the company’s pre-clinical, small-molecule programs.
The partners will form joint teams to take the programs forward, after which Roche will be responsible for all clinical development and worldwide commercialization. reMynd will be eligible for more than half a billion Euros (or about $637 million) in milestone payments, plus potential double-digit royalties on sales of any resulting products. The novelty of the reMynd’s drug candidates lies in the fact that they are considered disease modifying unlike currently available drugs that only treat symptoms of the disease. (Read more about the deal here.)
Meanwhile, Lilly is partnering with Anacor Pharmaceuticals Inc. of Palo Alto, Calif., to take advantage of Anacor’s boron chemistry platform to create and develop new therapeutics for animal health, as both companies seek to fill significant unmet needs in new therapeutics for both companion and food animals.
Anacor has already advanced six molecules into human clinical trials. “As a result of some of our work in human neglected diseases,” says Anacor CEO David Perry. “We identified the opportunity to address unmet medical needs in animals as well.”
Under the terms of their agreement, Anacor and Lilly will collaborate to discover products for a variety of animal health applications. Anacor will receive an upfront payment, research funding, and will also be eligible to receive milestone payments contingent on achieving development and regulatory hurdles as well as commercial royalties on sales. Financial details were not disclosed. Lilly’s shares were at $35.80 in afternoon trading Monday.
Anacor recently filed a registration to sell up to an estimated $86.3 million in an initial public offering, to pay for Phase 3 clinical trials and pay down debt, according to the company's Securities and Exchange Commission filing. It had filed to go public in 2007, but the plans fell through the following year due to the financial upheaval on Wall Street.
Johnson & Johnson’s (NYSE: JNJ) Ortho-McNeil-Janssen Pharmaceuticals signed a collaboration and license agreement with Anchor Therapeutics of Cambridge, Mass., to develop G protein coupled receptor or GPCR-targeted therapeutics using Anchor’s proprietary technology. The technology allows the company to pursue targets that are intractable to current approaches and represents a new approach for modulating GPCR signal transduction. The approach could potentially transform the scope of GPCR therapeutics to treat a broader of serious diseases, including inflammatory and metabolic disorders.
The companies will work together to discover and optimize preclinical development candidates against GPCR targets in oncology and metabolic disorders, including Anchor’s program targeting gpr39, a GPCR involved in metabolic diseases, after which Ortho will assume responsibility for development and commercialization. Anchor will receive an undisclosed upfront payment and research support and could be eligible for development and regulatory milestone payments up to $480 million. Johnson & Johnson shares were trading at $60.78.
U.K pharmaceutical Shire PLC (NASDAQ: SHPGY) added a new drug candidate to its orphan drugs portfolio in a joint development and commercialization deal with Acceleron Pharma Inc., potentially worth $498 million, for its lead drug ACE-031 in phase 2b development as a potential treatment for Duchenne muscular dystrophy, a fatal genetic disorder characterized by the progressive loss of muscle strength and function.
There are currently no available treatments for the condition that primarily affects boys and occurs in approximately 1 in every 3,500 male births. Duchenne is caused by genetic mutations that result in the absence of dystrophin, a protein necessary to maintain the structural integrity of muscle fibers. Few people with the disease survive past their 20s.
While most research in the field has taken a genetic approach, Cambridge, Mass.-based Acceleron’s drug candidates target the activin receptor type IIB pathway, a pathway that plays critical roles in regulating the growth of skeletal muscle, and work by encouraging muscle growth.
Under the terms of their agreement, Shire will receive exclusive license to Acceleron’s ACE-031 and other novel molecules targeting the activin receptor type IIB pathway, in markets outside of North America. Acceleron is retaining all commercial rights in North America. The companies will work together to advance ACE-031 through clinical trials and each will commercialize the therapy in their respective markets.
Shire will pay Acceleron $45 million upfront, along with potential development, regulatory, and sales milestone payments up to $165 million. Acceleron will also be eligible for an additional $288 million for other indications and molecules, and royalty payments on product sales. The companies will share development costs in North America and Europe, and Shire will be responsible for development costs in other markets. Shire American despositary shares were at $70.45.
Bristol-Myers Squibb Co. (NYSE: BMY) decided to buy its hepatitis C drug development partner ZymoGenetics Inc. (NASDAQ: ZGEN) of Seattle for $885 million to gain full ownership of the promising PEG-interferon lambda. Bristol-Myers’ offer of $9.75 per share in cash represents an 84 percent premium to its closing price before the announcement, and values the company at $735 million excluding cash acquired with the purchase. Danish drug maker Novo Nordisk A/S (NYSE: NVO) agreed to sell its 26 percent stake in ZymoGenetics as part of the deal.
Analysts praised the deal, noting that gaining full ownership of the hepatitis C treatment, a potential blockbuster, fits Bristol-Myers strategy of finding new therapeutics to replace revenue lost from drugs facing generic competition. ZymoGenetics’ pipeline and biologics also includes treatments for bone diseases, thrombosis, arthritis, melanoma, and multiple sclerosis, and one marketed drug. (Read more about the deal here.)
Bristol-Meyers shares were at $26.92, ZymoGenetics shares were at $9.74 and American depositary shares of Novo Nordisk were at $93.52.
Finally, St. Jude Medical Inc. (NYSE: STJ), a global medical-device company, is making a $60 million equity investment in medical-device maker CardioMEMS Inc., giving it a 19 percent ownership stake, and has the exclusive option to acquire the company for an additional payment of $375 million during the period that extends through the completion of certain commercialization milestones.
Atlanta-based CardioMEMS has developed a wireless sensing and communication technology that can be placed, in a simple surgical procedure, directly in the pulmonary artery to assess cardiac performance via measurement of pulmonary artery pressure. The sensor transmits real-time hemodynamic data via an external monitor, enabling doctors to obtain critical information without the need for a cardiac catheterization. Patients can transmit the readings from their homes, and physicians can more effectively direct treatments to keep patients out of the hospital. The system has been supported by strong clinical evidence that was presented in May at the European Society of Cardiology Heart Failure Congress in Berlin. St. Jude shares were at $36.08.
In other market-moving news:
In the holiday-shortened trading week, biotech maintained its momentum. All blue-chip biotech companies posted positive numbers. Leading the way was Celgene Corp. (NASDAQ: CELG) , which saw its shares move up 4 percent thanks to a positive analyst’s report on the company’s prospects going forward. Biogen Idec Inc. (NASDAQ: BIIB) was up 2.5 percent -- the drug maker participated in a $28 million series B financing round of iPerian through its New Ventures corporate venture group. San Francisco-based iPerian is developing patient-derived induced pluripotent stem cells for drug delivery. The Dow Jones Industrial Average closed the week up slightly as investors’ fears about the economy weakening appeared to ease. The Nasdaq Composite Index posted a 0.4 percent gain.
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