In this first review of 2013, as normal, we are focusing on the top headline value transactions (where financial terms are disclosed) announced during January.
There is normally a flurry of activity during December to get deals signed up before the end of the year, sometimes leaving us less to report for this month. However, for 2013 this does not seem to be the case. January is also a good opportunity for us to test the water with the predictions made by the Deal Watch team in our Annual Review of the previous year. So it is interesting to see that this month there seems to be something for everyone; licences, acquisitions NGO deals, orphans, emerging markets plus options and terminations!
Licensing continues but still rather risk averse
Topping the table this month was the deal announced by Gilead for access to MacroGenics’s DART platform for 4 undisclosed targets. This is the fourth deal for the DART technology, a bi-specific antibody platform allowing a single molecule to address two different antingens.
In keeping with the trend not to release the entire asset in the transaction, MacroGenics is retaining both development and commercialisation rights in major markets: Japan, China, Korea, Brazil and others, outside North America, the European Union, Australia and New Zealand. Breaking down the headline, this consists of $30m in licence fees, a possible $85m in pre-clinical milestones and up to $1bn in clinical, regulatory and commercialisation milestones. So, with the first price tag of >$1bn for the year, Gilead is following a safe path – Deal Watch reported similar deals clsed by Servier (Issue 27), Boehringer Ingelheim (BI) and Pfizer (both in Issue 6 – Oct 2010).
And yet more acquisitions!
Almost reaching the magic $1bn number at a headline value of $958m, Allergan continued to build its portfolio securing Levadex for migraine from MAP Pharmaceuticals. The deal is not fully closed however as the price agreed is now under scrutiny by some US law firms. We noted that last year, the women’s health field featured again after a long period with very little deal activity. Building on previously reported deals Watson paid $205m ($150m in cash up front and $155m in future milestones) for the Belgian company Uteron Pharma. This acquisition brings with it an IUD for long-term contraception (pending approval in Europe and phase 3 in the US) and Daifert an immunoassay kit for in vitro fertilisation. Watson continues to extend its women’s health franchise.
Picking up on several of last year’s deal trends, Zhejiang Hisun reported the closure of an exclusive option to access Celsion’s Thermodox (phase 3) in liver cancer for regional rights to the greater China territory (China, Hong Kong and Macau). This deal carried a headline value of $125m+.
Often finding a home for late stage assets can be a challenge as there can be a perception that good assets are snapped up early therefore there must be an inherent risk in anything un-partnered past the end of phase 2. So the deplyment of an option excluding third party access in this case allows Zhejiang Hisun time to determine the real risk before committing further to the product. This deal is for technology development and carries a $5m non-refundable payment.
In addition, the companies anticipate signing an exclusive option to a licence, which brings a $5m option fee and licence terms of a further $15m on exercise of the option; $55m near term milestone payments and $45m sales threshold payments, as well rising double digit royalties. The option strategy seems very prudent as Celsion has just announced that the phase 3 Study was not successful.
Again using an option to defuse perceived risk, AstraZeneca (AZ) has an option to acquire compounds from Orexo’s OX-CLI programme. During the option AZ will continue to research and evaluate OX CLI in respiratory disease. The deal between Daiichi Sankyo and Amplimmune also contains an option element as part of its collaboration on the first-in-class, pre-clinical fusion protein, AMP 110.
Of course a down side for options is then they are not exercised or taken up, as was the case in the Lilly and BI collaboration with BI electing not to pursue the insulin analogue LY 265541 under their collaboration agreement.
Although the active development for Cytos’ NIC 002 therapeutic vaccine for smoking cessation had ceased some time ago (phase 2 failure to meet primary end points reported in October 2009), Novartis has now formally returned the rights to Cytos and written off the asset. All is not lost however as work continues on the Novartis: Cytos collaboration for CDA106 in Alzheimer’s disease.
In a similar vein, Bristol Myers Squibb (BMS) confirmed that it had returned the rights to necitumumab (IMC-11f8) a next generation Erbitux in phase 3 for non-small cell lung cancer. BMS held rights to North America and Japan leaving Lilly sole global rights.
Continued NGO involvement
It was noted in our annual review that in the vacuum caused by the lower levels of VC investment, NGOs were stepping up to fill the space. First in this vein this year, the Wellcome Trust announced the investment of $200m initial capital into Syncona Partners LLP a new evergreen investment company. Syncona will make investments across healthcare – device, diagnostics and therapeutics – in support of both early and late stage companies.
The Wellcome investment was not an isolated case either; the Salk Institute received its largest ever donation – a$42m gift from the Helmsley Charitable trust given to form the Helmsley Center for Genomic Medicine – a research centre which will be dedicated to the decoding of common genetic factors underlying chronic human disease.
Early State Alliances
Following on from the theme we have reported previously, there were some early stage deals this month including alliances between pharma and biotechs and academic institutions. For example, Ultragenyx has in-licensed triheptanoin for long-chain fatty acid oxidation disorders from the Baylor Research Institute. No financial terms were disclosed.
AZ and Vanderbilt University announced a research collaboration agreement to identify drugs for treating psychosis and other conditions such as Alzheimer’s disease and schi zophrenia. Under the agreement, AZ has exclusively licensed rights to compounds developed by the Vanderbilt Center for Neuroscience Drug Discovery (VCNDD) that act on the M4 muscarinic acetylcholine receptor. Vanderbilt will receive an upfront payment, 2 years research funding as well as success-based milestones and royalties.
Repligen announced the signature of an exclusive worldwide licensing agreement with Pfizer to advance Repligen’s spinal muscular atrophy (SMA) programme.
This programme includes RG3039, a small molecule drug candidate in clinical development, as well as backup compounds and enabling technologies. Repligen will receive up to $70m from Pfizer with an upfront payment of $5m and future milestones of up to $65m plus royalties. SMA is an orphan neurodegenerative genetic disease that presents early in life.
Large Pharma Activity
In our Deal Watch Annual Review, we focused on those companies that have been particularly active; and one company noted amongst those was Novartis. So it was not surprising to see Novartis’s CEO commenting at J. P. Morgan that there is still an appetite for deals. Since then, it has been announced that Joerg Reinhardt is set to return as Director, whether this will have an impact on Novartis’s strategy is yet to be seen. Reflecting the move of companies into the broader healthcare arena, GSK signed up with GI Dynamics to secure access to EndoBarrier for use in diabetics; financial terms were not however disclosed.
Avoiding the Headlines?
Counter to the normal practice of publishing the biggest headlines possible, several deals were announced during the month with no values attached, or in the case of the Afraxis / Genentech deal and the Amplimmune / Daiichi Sankyo deal in the table, with only partial release of financial information.
In looking at deals and deal trends we have to be cognisant of the big picture. As far back as June 2011 we were speculating on how long the larger companies could sustain their size. Not counting the ongoing cost cutting measures, slimming down seems to be the order of the day. Abbott has spun out its pharma interest into Abbvie and the rumours abound that Pfizer is considering similar steps to streamline its business interests by de-merging, and Novartis may spin out vaccine business acquired through acquisition of Chrion in 2006. So watch this space!
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