Creative partnerships

This article covers deals announced in January and February 2011, commenting on the companies that have been particularly active and some of the metrics and creativity around these agreements. Of the top 20 deals reported, 12 involved big pharma in moves to rebuild or bolster pipelines where they were 'retooling' or investing in late stage products.

Deal of the period
Perhaps one of the most notable deals of this period was the announcement of the strategic alliance between Boehringer Ingelheim (BI) and Eli Lilly. The alliance is in the hugely competitive diabetes field, in which 11 major deals were reported in 2010. The agreement covers four drugs, two from Lilly and two from BI. From the BI side are two oral diabetes agents; one a DPP-4 inhibitor (linagliptin), filed in US, EU and Japan, and the other a SGLT-2 inhibitor, in phase III, which could be first in class. From Lilly come two basal insulin analogues, both due to enter phase III in 2011. Also covered by this deal is the option to co-develop and co-commercialise Lilly's anti-TGF-beta monoclonal antibody. Lilly is paying BI an upfront payment of $387m. BI can receive up to $807m in success-based regulatory milestones for its products and Lilly $650m for similar milestones on its two basal insulin analogues. Should BI elect to exercise its option on the anti-TGF-beta monoclonal antibody, Lilly could receive an additional $525m in milestones. In this way the companies are playing to their strengths; Lilly providing the expertise in the disease and BI some much-needed muscle to strengthen Lilly's pipeline to provide a credible presence in a key disease area. This collaboration is by no means the first of its kind; GlaxoSmithKline (GSK) and Pfizer set up ViiV to combine efforts in HIV and AstraZeneca and Merck recently embarked on a landmark partnership to develop a combination therapy for cancer, with each contributing an investigational compound. It is likely that there will be more of this type of creative big pharma partnership.

Astellas and Valeant have both announced two licensing deals each, while Pfizer and GSK have been party to at least three deals. A number of these transactions are covered in this report.

Announcing two late stage deals, Astellas has paid out sizeable upfront payments. In the worldwide collaboration (excluding Asia) with Aveo Pharmaceuticals, Astellas will develop and commercialise Tivozanib (in phase III) for advanced renal cell carcinoma. Aveo will lead commercialisation in the US and Astellas in the EU. The total deal could net $1.4bn for Aveo; the upfront is $125m with the balance comprising a series of clinical and commercial milestones. Astellas Europe inked a deal with Optimer Pharmaceuticals for fidaxomicin to treat C.difficile for $224m, the $68m upfront representing 30 per cent of the headline amount. Similarly in Allergan's co-development and co-promotion deal with Map Pharmaceuticals, the upfront payment represents 38 per cent in a deal worth $157m. In this deal, Allergan is gaining co-promotion rights in the US to Map's Levadex (dihydroergotamine) re-formulated orally inhaled therapy for acute migraine (New Drug Application to be submitted in the first half of 2011) using Map's proprietary drug delivery mechanism, TEMPO.

These upfront payment levels contrast with the lower levels seen in the technology platform deals captured in this period, which are covered later in this article. Of the top 20 deals, eight were in the oncology and immuno-inflammation therapy areas and GSK was party to two of them. In a worldwide strategic alliance with GSK, Epizyme will use its HMT (histone methyltransferases) platform to search for epigenetic enzymes for personalised cancer therapies. GSK is paying $20m upfront, with up to $630m in milestones, with double-digit royalties. For a further $100m in upfront and milestones, GSK has been granted a worldwide exclusive licence by Immunotep for global development of antibodies that calm down activated T lymphocytes. The deal covers Immunotep's preclinical chimeric anti-LAG-3 (CD223) antibodies including Immunotep's drug candidate IMP731, initially expected to be tested clinically in 2012 for treatment of autoimmune diseases and prevention of transplant rejection. Other deals in these diseases were Amgen's option deal with Xencor, Astellas and AVEO, Servier's deal with Xoma and Pfizer's deals with Seattle Genetics and Theraclone Sciences.

Technology deals
Amid the noise surrounding patent cliffs and R&D programme cuts, Pfizer has been busy retooling, focusing on certain technologies to develop the next generation of products through a series of technology platform licensing deals for a total of $1.35bn. In the deal with Seattle Genetics, Pfizer gains access to Seattle's ADC (antibody-drug conjugate) technology with antibodies to a single oncology target. This technology targets only the cancer cells and reduces the toxic effects of chemotherapy and enhances anti-tumour activity. The upfront fee is $8m with another $200m for progress-dependent milestones (plus royalties on net sales).

Pfizer has also entered a multi-year R&D collaboration with Theraclone Sciences to use Theraclone's I-STAR technology to discover monoclonal antibodies against four undisclosed targets in oncology and infectious disease (two in each). I-STAR searches the human immune system to identify rare and powerful antibodies that might be used in treatment of multiple diseases. Theraclone will receive up to $632m in research funding and milestones plus royalties.

In January, Pfizer extended an existing collaboration with Santaris ($614m) for the 'locked nucleic acid' (LNA) technology for gene-silencing RNA technology. However, it remains to be seen how this collaboration may be affected by rumours that Pfizer intends to shut down internal oligonucleotide therapeutics development efforts.

Creative deal structuring can be used to cap the cost of failure or sub-optimal performance for the acquirers/licensers and maximise returns for the sellers/licensees if the products succeeds commercially.

Options
Options are one mechanism and Amgen recently took out an option to an exclusive worldwide licence to Xencor's XmAb5871, an Fc-engineered monoclonal antibody dually targeting CD19 and CD32b, when it completes phase II trials. It is currently in late-stage pre-clinical trials to treat autoimmune diseases. Specific details about the option cost are not known, but the combined cost of the option and upfront fees upon exercise will be $75m, with an additional $425m payable in milestones. In addition, in XOMA's deal with Servier, the territories have been carved up between the companies, but XOMA has an option to expand its rights in certain territories for a fee (undisclosed).

Contingent Value Rights (CVRs) are not new, but they have been in particularly high profile in the second biggest deal in biotech history (after Roche and Genentech); sanofi-aventis' (S-A) acquisition of Genzyme. The parties finally agreed terms for Genzyme's acquisition at $74-per-share, plus up to $14-per-share in CVRs to bridge the gap in expectations. This values Genzyme at $20.1bn, giving S-A a strong foothold in the orphan diseases space (Gaucher's and Fabry's diseases) with up to another $4bn in upside. The valuation gap between the parties mainly relates to Lemtrada, in phase III for multiple sclerosis. The CVRs have been linked to production targets for current products following contamination issues, regulatory and sales milestones for Lemtrada. It seems that this is a win-win position for both sets of shareholders. That said, options and CVRs are set to be increasing trends, at a time when it is becoming increasingly difficult to predict the regulatory hurdles and commercial landscape.

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