Pharma deals during March 2013

Our analysis of deals for the month of March illustrates a mix of licences, early and later stage collaborations and acquisitions being announced as the first quarter 2013 drew to a close.  As usual we focus on deals with financial terms disclosed but we will also comment on some interesting trends of note. 

The importance of good alliance management
Heading this month's deal table is the recent transaction between existing partners Lundbeck and Otsuka Pharmaceuticals in which Otsuka gains co-development and co-promotion rights in the US, Canada, East Asia including Japan, major European countries and Nordic countries to Lu AE58054, a phase II stage selective 5HT6 receptor antagonist for Alzheimer's disease.

Lundbeck will receive 18 per cent ($150m) of the $825m headline value as an upfront payment with downstream milestones based on regulatory and sales targets. Otsuka will also share development expenses as Lu AE58054 progresses later this year into its pivotal clinical programme comprising several studies and over 2,500 patients. The first phase III study in patients with mild-to-moderate Alzheimer's disease will assess Lu AE58054 as an adjunct treatment to donepezil.

The Lu AE58054 deal comes out of an already successful relationship between Lundbeck and Otsuka. In 2011, the companies announced the formation of an alliance to collaborate on the development and commercialisation of up to five early and late stage CNS compounds in development.

At the end of February, the FDA approved Abilify Maintena (aripiprazole), an intramuscular extended-release depot formulation for the treatment of schizophrenia and the first commercialised product to evolve from this alliance.  As part of the alliance deal terms, Lundbeck is obliged to make a milestone payment to Otsuka of $100m upon approval. A few days later, Otsuka and Lundbeck announced that they were expanding their relationship to include co-promotion of Abilify swallowable tablets, oral solution, orally-disintegrating tablets and the intramuscular rapid injectable in 14 European countries, as well as the co-promotion of Abilify Maintena in the US.

The key element of the 2011 deal, which was worth $1.8bn, was its creative structure so that the companies shared not only development risk but also commercialisation risk.  This was an innovative deal and for success relied heavily on a good working relationship between the companies at all levels. This certainly seems to be paying off.

Large pharma divesting and out-licensing – later stage products 
This month saw a number of large pharma divestment and out-licensing activities. This is an area that can often be overlooked as most large companies tend to be busy focusing on in-licensing and bolstering their pipelines. 

Novartis has sold the rights to Cardioxane, a cardioprotective agent used to prevent cardiotoxicity resulting from anthracycline chemotherapy in patients with advanced and/or metastatic breast cancer to Clinigen Group. Paying $33m (approximately 3x annual sales), Clinigen's plan is to revive sales of Cardioxane, which was initially approved in 1992.

Takeda and Astellas have both sold certain territorial rights to products to smaller companies wishing to establish a global presence. Splitting up the rights to a product may be a necessary and even attractive part of a small company's commercial strategy as it grows, for example to generate value from an asset in territories in which the company has no future commercialisation plans.   However, strategies change and evolve and the ability to regain those rights may very much depend on the relationship with the partner. 

NPS Pharmaceuticals acquired back from Takeda the rights outside North America to teduglutide, an orphan drug for adult short bowel syndrome and rPTH 1-84, which is approved for osteoporosis in Europe. The rights were originally licensed to Nycomed before its acquisition by Takeda. In return Takeda will receive NPS stock valued at $50m and will also earn a milestone payment in cash or stock in the first calendar year that combined worldwide net sales of both products exceed $750m.

This transaction enables NPS to establish itself as a global player in rare diseases. The company is preparing to launch teduglutide as Gattex in the US later in 2013 and is also planning to submit a biologic license application to the FDA for PTH 1-84 for adult hypoparathyroidism.

Paying $25m upfront in cash, Cubist Pharmaceuticals is buying the rights to ceftolozane in certain Asia-Pacific and Middle East territories from Astellas. Cubist obtained the rights, outside of these territories, to develop and commercialise ceftolozane/ tazobactam through its acquisition of Calixa Therapeutics in 2009. Calixa had previously acquired the rights to ceftolozane and other products that incorporate ceftolozane excluding these territories from Astellas. With the completion of this transaction, Cubist now owns worldwide rights to develop, manufacture, and commercialise the combination of ceftolozane and tazobactam. This combined intravenous therapy is currently undergoing phase III clinical trials as a potential first-line treatment for complicated intra-abdominal and urinary tract infections caused by certain Gram-negative bacteria, including multi-drug resistant Pseudomonas aeruginosa. 

Large pharma out-licensing – earlier stage assets
This month, both AbbVie and Merck & Co entered into collaborative agreements to out-license rights to certain development assets to smaller biotech partners. Financial terms were not disclosed for either deal but it is encouraging to see large pharma placing assets externally for further development, while retaining a longer term interest.

The deal between AbbVie and Receptos covers the out-licensing of a phase I stage humanised anti-interleukin-13 antibody called RPC4046. Receptos will conduct a phase II proof-of-concept study in Eosinophilic Esophagitis, an orphan indication in the US. AbbVie holds an exclusive option to enter into a global co-development collaboration for RPC4046 with Receptos following results of the planned phase II study and regulatory discussions with the FDA. If the co-development option is exercised the companies will equally share the costs of the phase III programme with Receptos having co-promotion rights in the US and AbbVie holding sole commercial rights ex-US. Receptos will also be eligible for double digit royalties on net sales outside of the US.

Merck & Co has sold to Cerecor, a US neuroscience company, the rights to develop and commercialise catechol-O-methyltransferase inhibitors (“COMT inhibitors”) for CNS indications. Cerecor will evaluate more than 2,000 molecules generated by Merck and select lead candidates for clinical development. The financial terms were not disclosed but they include milestone payments and royalties back to Merck.     

Platform discovery deals 
During March, we saw the trend in platform deals continuing with AstraZenenca (AZ), UCB and Celgene being prominent in buying into biotech expertise. As is often the case, platform deals can have big headline values but the detail illustrates that the dollar numbers relate to multiple targets and programmes and all these have to be successful for the biotech to receive the full value publicised. Normally the upfront payments on platform discovery deals can be quite modest, for example in our analysis of certain platform deals from 2012 we noted that the upfront payments ranged from 1.4 per cent to 8 per cent of the total deal value with the majority being in the 1.4 per cent to 2.5 per cent range.  Whilst these deals usually include ongoing R&D funding, they tend to be back-loaded. 

In its $420m five-year alliance with Moderna Therapeutics, AZ is making an upfront payment of $240m for the discovery of messenger RNA (mRNA) therapeutics. The rationale behind mRNA therapeutics is that stable mRNA will be translated in vivo to produce native proteins for therapeutic effect, a novel but unproven approach. This alliance gives AZ exclusive access to Moderna's mRNA therapeutic platform to select any target of its choice in cardiometabolic disease in addition to selected oncology targets.

Moderna could also receive an additional $180m for the achievement of three technical milestones. Under the agreement, AZ has the option to select up to 40 potential mRNA products for clinical development and Moderna will be entitled to development and commercial milestone payments and royalties on sales in the high single to low double digit range.

And finally, acquisitions
As part of the continued strengthening of its clinical pipeline, Shire made two further acquisitions this month. The first was the acquisition of Premacure, a Swedish company that is developing a phase II stage protein replacement therapy for the prevention of the rare disease, retinopathy of prematurity. Financial terms were not disclosed but Shire will make an upfront payment and then certain contingent payments based on the achievement of development and commercial milestones.

Shire's second acquisition of the month was also in the field of ophthalmology bringing  SARcode Bioscience for $160m plus additional milestones with its phase III stage product Lifitegrast for dry eye disease.

Lifitegrast is a small-molecule integrin antagonist that is currently undergoing three phase III clinical trials. In order to meet the costs of developing Lifitegrast, Shire has stated that it is conducting a prioritisation review of its portfolio, which may mean that certain other development assets will have to be put on hold. However, ophthalmology is increasingly an area of interest in the industry with potential for growth as the global population ages; it is estimated that around 25m people have dry eye disease in the US alone.

Unless noted all transactions are for global rights
*  US, Canada, East Asia including Japan, major European countries and Nordic countries
**  Japan
†  Outside North America
††  Certain Asia-Pacific and Middle East territories
‡   US
‡‡ EU and certain other European countries (including Switzerland and Norway)