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Dermatology developments

Big pharma continues to offload its products in this field to mid-sized firms

Dermatology developmentsThis month's review focuses on deals announced in July 2011, which included an equal number of licensing deals and product and company acquisitions. The acquisitions have been covered because often the choice in gaining access to a technology or product is either to license or acquire and, based on current trends, acquisition seems to be increasingly popular. 

July saw a rash of dermatology deals including two acquisitions by Valeant Pharmaceuticals, one by Allergan and two licensing deals by Bayer and by Medicis, a US-based dermatology company. The divestments by Sanofi and Allergan, costing Valeant $900m, are further evidence of big pharma companies, with one or two exceptions, exiting the dermatology sector. 

Most big pharma companies entered the dermatology market with topical steroids based on molecules originally developed for other therapeutic areas. The low prices for established products and lack of new innovative prescription products in dermatology did not provide them with the growth they were seeking. In addition, the growth of cosmeceuticals and the registration of dermatology products as medical devices meant an increasing presence in the OTC sector.

Divestment deals
As a result, there have been dermatology product divestments by AstraZeneca, Bristol-Myers Squibb (BMS), Novartis, Pfizer and Roche. Roche adopted a novel approach in 2000 when it spun out its dermatology pipeline into a new company, Basilea. Other big pharma companies that retained their dermatology business and treated it as a separate company or business area included Sanofi's Dermik and Bayer's Intendis. The only one that sought to increase its dermatology business was GlaxoSmithKline (GSK), which bought Stiefel for about $3.6bn in 2009. Since then, GSK has treated the company as a separate business unit.

History seems to be repeating itself as companies are entering the dermatology sector by extending the indications of existing products into dermatology as they did with steroids originally. For example, products like Enbrel and Humira are now indicated for the treatment of psoriasis. It seems unlikely that the largest companies will re-enter the dermatology sector just because they have a presence in psoriasis, judging by the example of Johnson & Johnson, which sold its ortho dermatology business, but continues to market Stelara, a monoclonal antibody for psoriasis.

History seems to be repeating itself as companies are entering the dermatology sector by extending the indications of existing products

Apart from psoriasis, the dermatology sector consists mainly of mid-sized companies such as US companies Valeant, Medicis and Graceway, and European companies Almirall (which bought Hermal), Galderma, Leo, Meda and Pierre Fabre. These companies have benefited from the divestment of dermatology brands. For example, Meda acquired rights to Elidel from Novartis for $420m in April 2011 and in July licensed the rights to Valeant for North America for $76m upfront, plus royalties and milestones. The North American deal, combined with Valeant's dermatology acquisitions this month, may have been the source of the rumour that Valeant had made a bid for Meda.

Perhaps a more promising dermatology target for Valeant is Pharmaderm, the Nycomed company that combined Bradley (bought by Nycomed in February 2008 for $350m) and Fougera (Nycomed's US manufacturer of topical products). Today, Pharmaderm must feel left behind because, when Takeda acquired Nycomed in May 2011, the Pharmaderm business was not included. It is probably only a matter of time before Pharmaderm is acquired. Perhaps Valeant will go for a hat-trick.

Cash generation
The highest value deal in July, at $609m, was Astellas' sale of a family of medical use patents for DPP-IV inhibitors for the treatment of type 2 diabetes patents to Royalty Pharma, a company that "provides liquidity to royalty owners and assumes the future risks and rewards of ownership". 

Typically, these deals are made when the royalty owner is seeking to generate cash. In the case of Astellas, the patents were acquired as part of the OSI acquisition in June 2010. Other M&A deals in July included BMS's acquisition of Amira and Pfizer's acquisition of Icagen. Amira has a licensing deal with GSK dating from 2008. This raises an interesting licensing issue that is becoming increasingly frequent. What will be the impact of the acquisition on the licensing deal? For example, will BMS re-prioritise the Amira development resources in favour of BMS projects rather than those with GSK?

Merger opposition
Another licensee probably wondering what will happen in the future is Mundipharma, which signed a $360m deal with Allos in May and, two months later, found that Allos was being sold to Amag. The stock market took a negative view of the merger with a 15 per cent fall in the Amag share price and a 10 per cent fall in the Allos price. One of the Amag investors, the hedge fund MSMB, strongly opposed the merger and made a bid of $381m for Amag. However, the Amag board rejected the offer. The Amag shareholders will have 61 per cent of the combined company and apart from the management changes the combined company will seek to obtain annual cost savings of $55-60m. How these cost savings will affect existing projects remains to be seen, but in these situations, the licensees' ability to manage the future relationship and the terms of the legal agreement are paramount.

As usual, the high value licensing deals are dominated by big pharma companies, with BMS and Sanofi licensing platforms from Micromet and Rib-X for $493m and $205m, respectively, and BMS licensing a phase I antibody that blocks KIR receptors from Innate for $465m. The Innate deal is said to the biggest biotech licensing deal ever signed in France. One of the interesting things about these licensing deals is that the average upfront payment is about $20m, representing 9 per cent of the average headline deal value of $220m. Given that virtually all of these deals are early stage and the headline value is often inflated, the 9 per cent represents a relatively high percentage, but suggests that there is a benchmark entry fee of about $20m for a global deal. 

Unusual deal
One unusual deal was the licensing of a melanoma vaccine from BioSante by The John P Hussman Foundation. It was unusual because charitable foundations usually fund pharmaceutical research and development for products for diseases in developing countries. Large charities, such as the Bill and Melinda Gates Foundation and the Wellcome Trust, are very active in this area. In addition there were two deals by the Michael J Fox Foundation with Envoy Therapeutics and BioFocus to discover and develop new molecules to treat Parkinson's disease. For cash-constrained biotech companies, perhaps the charities represent a new source of development finance. 

 

Company/Partner Product/Technology Development status Headline ($m)

Product and company acquisitions

Royalty Pharma/Astellas Astellas divests diabetes patents and two drug candidates from OSI acquisition Development 609
Bristol-Myers Squibb/Amira BMS acquires R&D company developing drugs to treat inflammatory and fibrotic diseases Phase I 475
Valeant/Sanofi (Dermik) Valeant acquires  North American dermatology company (sales $210m) inc. factory in Canada Launched 425
Valeant/Johnson & Johnson (Ortho) Valeant acquires Ortho Dermatologic assets with sales of $150m inc. Retin-A and Renova Launched 345
Amag/Allos Amag merges with Allos, pays $268m to Allos shareholders Launched 268
Allergan/Vicept Acquires Vicept dermatology development company with rosacea drug Phase II 275
Recordati/Frik Ilac (a) Acquires Turkish prescription pharmaceutical distributor with sales of €62m Launched 130
Shionogi/Victory (b) Acquires Victory pain and anti-infective products including Naprelan and Moxatag Launched 127
Pfizer/Icagen Acquires remaining 89 per cent of Icagen, ion channel drug developer Preclinical 56
Dr Reddys/JB Chemical (c) Acquires 20 branded prescription products inc. Metrogel and Jocet Launched 35

Licensing deals

Micromet/Amgen Licenses BiTE antibody technology to develop three solid tumour targets Research 493
Innate/Bristol-Myers Squibb Licenses IPH 2102 antibody for cancer treatment, lead indication AML Phase I 465
Rib-X/Sanofi Licenses RX-04 antibiotic drug design platform. Rib-X retains US co-promotion rights Research 205
Vical/Astellas Licenses vaccine to control CMV in transplant recipients, Vical option to US co-promotion Phase II 130
Durect/Zogenix Licenses long acting injectable risperidone to combine with Zogenix needle-free system Preclinical 106
Trius/Bayer (d) Licenses torezolid antibiotic for skin infections Phase III 94
Lupin/Medicis Medicis (dermatology company) licenses formulation technologies and development  Preclinical 58
Biosante/Hussman Foundation Charitable foundation licenses melanoma vaccine Preclinical 39

The table covers the top 18 deals by headline value where the financial terms are publicly disclosed
Deals are for global rights unless otherwise indicated:
(a) Turkey, (b) US, (c) Russia CIS, (d) Asia (excluding Korea), Africa, Latin America.


Roger Davies

The Author
Roger Davis
is a consultant at Medius Associates

To comment on this article, email pme@pmlive.com


 



1st September 2011

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