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Diabetes favoured

Highlighting and analysing recent prominent agreements and likely future directions

Diabetes spelled with lettered cubes sitting on sugar cubesThe major deals in recent months follow the same trend as seen previously in this series, with big pharma accounting for two thirds of them. The chief deal makers for the May-June period are sanofi-aventis (S-A) with two deals and Ortho-McNeil-Janssen (OMJ) with two deals.

Diabetes is a hot area for deals at the moment. In the last two years, major pharma companies, including Eli Lilly, Amgen, AstraZeneca, S-A and Novo Nordisk have signed 18 diabetes product deals with biotech companies, five of which were completed in May and June.

The deal with the biggest headline value, at $1.1bn, which includes an upfront payment of $50m, is that between privately owned US company, TransTech Pharma, and Forest Laboratories. This deal covers glucokinase activators for type 2 diabetes, with the lead compound at the end of phase I. The deal value seems high compared to the other type 2 diabetes deals in the past two years, including the three other diabetes deals reported in the table. In comparison, the Metabolex/S-A deal, where the lead product is in phase II, has a headline value of $375m. Similarly, the Metabolex/OMJ and the Neurocrine/Boehringer Ingelheim deals, where the diabetic products are in preclinical development, have headline values of $330m and $235m, respectively, which are sums vastly different from the TransTech/Forest deal.

The TransTech/Forest headline value may be inflated by a number of milestone payments related to sales performance or development of new molecules of the same class. This deal also has a much higher headline value than the $340m (including a $75m upfront payment) deal Forest signed with Phenomix for a phase III DPP-4 inhibitor in October 2008 and which Forest terminated in April 2010 "for business reasons". The termination appears to have been reported first on April 20 in Forest's 8K US Securities and Exchange Commission (SEC) report, which is the same day as Phenomix announced positive phase III results from a six-month clinical trial. Just six weeks later, Forest signed the deal with TransTech. It would be interesting to see what termination provision was included in the Phenomix/Forest deal, but it appears Forest did not file a copy of the agreement with the SEC. Forest had had some correspondence with the SEC in early 2009 explaining why it had not filed certain licence agreements with the SEC. 

Options
There have been early stage deals reported where big pharma companies have licensed rights to discovery molecules or technologies as a way of supplementing their R&D programmes. Examples of these include S-A's $750m licence from Regulus of microRNA products for treatment of fibrosis, OMJ's $574m deal with Orexo for small molecules to treat respiratory disease and Oncomed's $428m strategic alliance with Bayer Schering Pharma (BSP) to discover, develop and commercialise novel anti-cancer stem cell therapeutics. Interestingly, the upfront payments for the more novel, high-risk technologies, such as stem cells and microRNA, were much higher, at $40m and $25m, respectively, than the $10m for Orexo's small molecule programme. As with many discovery and early stage deals, the terms include a number of options to ensure flexibility of development. For example, S-A has a three-year research collaboration with Regulus with the option to extend for two more years, an option to buy shares in Regulus and an option for a broader technology alliance, whereby Regulus has opt-in rights for development and commercialisation. 

Value
The objective of biotech companies, driven by their investors, to capture greater value by commercialising products they out-license to big pharma continues unabated in the Nordic countries and elsewhere. It is understandable that big pharma would agree to grant an option for a biotech company to co-promote in some countries (such as OMJ agreed with Orexo for the Nordic and Baltic States) because the option may never be exercised if the biotech company does not have the cash or terms cannot be agreed. However, it is less clear why OMJ gave exclusive commercialisation rights to Diamyd Medical for its GAD65 antigen-based therapy to treat type 1 diabetes in the Nordic countries, given the possible impact that Diamyd's pricing strategy may have in other EU countries. Another oddity, in terms of territory, is the retention by TransTech of rights in North Africa and the Middle East, while Forest has the rest of the world.

Biotech companies usually seek to narrow the product rights granted to big pharma to maintain the maximum flexibility in development and commercialisation. In contrast, big pharma companies, when licensing rights to molecules in clinical development, seek to include rights to other molecules with the same mechanism at the same time. Recent deals suggest that big pharma is winning. For example, Abbott's $575m deal with Neurocrine secured not only the rights to Elagolix at the end of phase IIb but also "all next-generation GnRH antagonists".  Similarly, S-A seems to have captured the rights to all Metabolex's GPR119 agonists, as well as the lead compound in phase II.

Deal volume
Most deals take around six months to complete, from start to signature, though there are plenty of exceptions. Some can take weeks and others, years. Given the variability in deal timing and taking into account the internal controls and decision-making processes of big pharma, how likely is it that a biotech company could sign two deals with big pharma companies within a week? Research undertaken for this article suggests it is not as unusual as may be expected. Metabolex signed a $330m deal with OMJ on June 22 and three days later signed a $375m deal with S-A. There is also the example of the mere 24-hour gap between the signature of the Neurocrine $575m deal with Abbott and the $235m deal with Boehringer Ingelheim. Was this timing by accident or design? If it was by design, Neurocrine may have hoped that announcing two deals would have a positive effect on its share price. If so, it was correct. The share price increased by 16 per cent and remained at that level. In contrast, the single deal announcement by Diamyd caused an initial 28 per cent surge in its share price, but three weeks later the share price was only 3 per cent up on its level prior to the deal announcement. The worst performance was recorded by Cypress; its share price declined by nearly 40 per cent after its announcement of the $385m in-license of a schizophrenia product from BioLine.

Regional deals
The six regional deals are split between North America and Europe. As expected, the deal values are generally lower than those for the global deals, with the highest headline value at $366m in the Galapagos/Servier deal where Servier is granted global rights excluding the US. Similarly, BioLine has granted Cypress North American rights for $365m. Another feature of the regional deals is that, with one exception (Galapagos), all the licensed products are in phase II or later clinical development. This reflects the strategy of many regional players such as Biovail, Norgine and Sigma-Tau. When licensers are dealing with regional companies, the licensers need to bear in mind what the future of the company may be. For example, Kyowa Hakko Kirin (KHK) signed the $65m deal for Biovail to register and commercialise istradefylline for Parkinson's disease in North America on June 3. Then, 18 days later, Biovail announced a merger with Valeant. KHK may well be asking Biovail if discussions were ongoing with Valeant when Biovail signed the deal with KHK and how the Parkinson's disease products in the Valeant portfolio will be marketed alongside istradefylline.

High level royalties
High level royalties are always eye catching and the royalty quoted as "equal to 41 per cent of net sales" payable by Sigma-Tau for a licence to register and commercialise Dyax's ecallantide in Europe is no exception. Bearing in mind that Sigma-Tau has paid $5m upfront in cash and equity and could also be paying $100m in development and sales milestones, as well as regulatory approval and commercialisation costs, these financial terms are certainly memorable.

 

Licenser/Licensee

Product/Technology (Global rights unless stated)

Development status

Headline ($m)

TransTech Pharma/Forest Labs

Glucokinase activator
platform for type 2 diabetes

Lead compound end phase I

1105

Regulus Therapeutics/sanofi-aventis

MicroRNA products for fibrosis

Discovery

750

Diamyd Medical/Ortho-McNeil-Janssen

GAD 65 antigen based
therapy for type 1 diabetes

Ongoing phase III

625

Neurocrine Biosciences/Abbott Labs

GnRH antagonist for
endometriosis-related pain

End phase IIb

575

Orexo/Ortho-McNeil-Janssen

Small molecules for COPD and asthma

Discovery

574

Oncomed Pharmaceuticals/Bayer Schering

Anti-cancer stem cell therapy platform

Discovery

428

Ascenta Therapeutics/sanofi-aventis

Tumour cell apoptosis
compounds for cancer

Start pre-clinical

398

Metabolex/sanofi-aventis

GPR 119 agonist platform for type 2 diabetes

Lead compound
ongoing phase II

375

Galapagos/Servier

Novel compounds for
osteoarthritis (Global ex US)

Discovery

366

BioLineRx/Cypress Bioscience

North American rights to schizophrenia product

End phase IIb

365

Metabolex/Ortho-McNeil Janssen

Compounds for the
treatment of type 2 diabetes

Preclinical

330

Neurocrine Biosciences/Boehringer Ingelheim

GPR 119 agonists for type 2 diabetes

Preclinical

235

Durect/Hospira

Long acting bupivacaine (US and Canada)

Ongoing phase III

213

Tranzyme Pharma/Norgine

Ulimorelin for GI dismotility (Europe, ME, ANZ, Africa)

phase II

158

Dyax/Sigma Tau

Ecallantide for hereditary
angiodoema (Europe, ME)

Approved US

105

Kyowa Hakko Kirin/Biovail

Istradefylline for Parkinson's disease (US and Canada)

Pre-registration

65

Vivalis/Sanofi Pasteur

Platform for human
monoclonal antibodies

Discovery

45

ElexoPharm/Merck & Co

Aldosterone synthase targets for cardiovascular disease

Discovery

42

Adeona Pharmaceuticals/Meda

Flupirtine new indication (fibromyalgia) US Canada Japan

Marketed

18



The Author

Roger Davies is a consultant at Medius Associates

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

20th October 2010

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