Deals in development

This year's deals landscape is not typified by a single market-defining transaction, but rather - in a trend similar to last year - by many large alliances. Thomson Pharma's newly expanded Liscensing and Business platform includes in excess of 400 deals established in 2007.

The billion dollar opportunities, highlighted over the past few years by GlaxoSmithKline's purchase of Genmab's ofatumumab and AstraZeneca's capture of AtheroGenics's succinobucol, have become much more familiar. The major players are looking to boost their portfolios with both late stage drug programmes and early stage platforms.

Novartis and Schering-Plough have been most prolific, with AstraZeneca, Pfizer, Merck & Co and Boehringer Ingelheim all contributing to a busy and expensive year of partnering. This is good news for smaller companies such as Ablynx, Antisoma, Renovo, Oxford Biomedica and Intercell.

Novartis' portfolio

Novartis started its acquisition spree in earnest in April 2007 with the procurement of two phase II programmes: Antisoma's ASA-404 ó a vascular disrupting agent that has been evaluated in patients with lung cancer, prostate cancer and ovarian cancer; and Cytos Biotechnology's NIC-002 ó a therapeutic vaccine for the potential treatment of nicotine dependency.

Roche was developing ASA-404 between November 2002 and August 2006 but opted out of this development; paving the way for Novartis's capture. Novartis agreed to pay its partner USD 75m upfront, USD 25m upon the initiation of a phase III trial (planned for early 2008), and downstream milestones and royalties.

Dependent on the launch of the drug and back-ups in several indications, this could drive the overall value of the deal up to almost USD 1bn. The deal that brought NIC-002 to the Novartis portfolio could be worth up to USD 486m to Cytos, which received USD 28m upfront.

In addition to the deals with UK-based Antisoma and Swiss counterpart Cytos, Novartis also established a notable deal with Zurich-based vaccine specialist Intercell. This granted its partner exclusive access to its IC-31 adjuvant for use in influenza vaccines, as well as options to participate in the post phase II development of unpartnered vaccine programmes.

Intercell stands to make nearly USD 500m from the influenza virus vaccine alone. This is in addition to further revenue on opt-in programmes (USD 150m per product) and on the use of the adjuvant in other areas (up to USD 80m). This is the second deal between these two companies; the first was in June 2006, when Novartis joined the development of Intercell's Japanese encephalitis vaccine, IC-51.

Schering-Plough's pipeline

Schering-Plough significantly enhanced its late stage portfolio in 2007, with the acquisition of several candidates. It doubled its phase III anticancer portfolio, with Novacea's high-dose capsule formulation of calcitriol, DN-101 (Asentar), joining its farnesyl protein transferase inhibitor lonafarnib (Sarasar) at the market end of the pipeline.

Novacea granted Schering-Plough rights to the programme in May, in return for USD 72m upfront (comprising stock, R&D funding and a license fee), future milestones worth up to USD 380m and royalties on sales.

Following the agreement, Schering-Plough committed to commercialising the drug globally and agreed to evaluate it for earlier stage prostate cancer. Novacea had already initiated the phase III portion of a II/III trial in patients with advanced prostate cancer and subsequently submitted a protocol amendment to the Food and Drug Administration (FDA) to allow it to increase the enrolment size from 900 to 1,200 patients.

Schering-Plough's other late stage acquisitions included Alk-Abello's allergy immunotherapies such as Grazax ó a grass pollen allergy vaccine tablet for which a series of European launches started in November 2006 - and similar candidates for house dust mite allergy (phase III) and ragweed allergy (phase I).

The North American rights deal, valued at about USD 250m, was preceded by an ex-European alliance between the companies for which Schering-Plough declined its option in December 2003.

AN-2690 and AV-499 also joined the Schering-Plough pipeline and represent significant potential revenue generation for Anacor Pharmaceuticals (USD 625m) and AVEO Pharmaceuticals (USD 460m) respectively. AN-6293 is a phase II antifungal agent for onychomycosis and Schering-Plough expects to initiate its phase III trial in 2008. AV-299 is a monoclonal antibody against hepatocyte growth factor. Its clinical evaluation as an anticancer agent is expected in 2008.

Pfizer and AstraZeneca

Pfizer's primary focus in the alliances it forged in 2007 appears to be on the analgesic field. It acquired a series of preclinical TRPV3 antagonists in a deal potentially worth USD 195m to its Massachusetts-based partner ó Hydra Biosciences ó and partnered Icagen, which could receive up to USD 400m, to develop compounds that modulate three specific ion channels. Another major alliance in the analgesic arena this year was Otsuka Pharmaceutical's acquisition of the US rights to Sativex, a tetrahydrocannabinol/cannabidiol buccal spray, from GW Pharmaceuticals in February.

Pfizer's other notable deal covers apixaban ó Bristol-Myers Squibb's phase III oral factor Xa antagonist (and razaxaban follow-on candidate) for thromboembolic disorders. Under the terms of this agreement, Bristol-Myers Squibb could receive up to USD 1bn from its partner for the phase III candidate.

The pharma giant could also record revenues over USD 1bn from AstraZeneca for the phase III type II diabetes candidates, saxagliptin and dapagliflozin. AstraZeneca acquired the ex-Japanese rights to the dipeptidyl peptidase IV inhibitor and the sodium glucose cotransporter Type II inhibitor in January.

Silence Therapeutics and Palatin Technologies also joined AstraZeneca's list of partners in 2007 with the aim of developing therapies for respiratory disease and obesity, respectively. Silence and AstraZeneca established a three-year research alliance in July 2007, in a deal potentially worth upwards of USD 400m to the European small interfering RNA (siRNA) specialist, should candidates against five proprietary AstraZeneca targets be developed.

Palatin granted AstraZeneca access to its melanocortin-4 receptor agonist programme in January 2007 and may earn over USD 300m for the metabolic disease candidates.

Other selected highlights

Based on the major transactions to date, hot therapy areas for deals are pain, diabetes and cancer. The purchase of the phase III cancer vaccine TroVax, by sanofi-aventis from Oxford Biomedica, and of the phase II mTOR inhibitor, deforolimus, by Merck & Co from ARIAD Pharmaceuticals, underline the importance of cancer therapies to the pipelines of the major companies. There have, however, also been several significant transactions in other therapy areas.

The developing relationship between nanobody specialist Ablynx and Boehringer Ingelheim is a big story this year. The German giant recruited the Belgian firm in January to develop nanobodies (therapeutic proteins based on single-domain antibody fragments) against Alzheimer's disease targets. The USD 265m deal was dwarfed in September when the companies established a second alliance, covering more therapy areas and up to 10 candidates, each of which could generate USD 170m in milestones for Ablynx.

Shire's capture of Renovo's avotermin (Juvista), a phase II injectable recombinant transforming growth factor beta-3 formulation for wound healing, could cost it over USD 825m.

This, coupled with the USD 2.6bn acquisition of New River Pharmaceuticals in April, makes 2007 an expensive year for the firm. The New River acquisition allows Shire to realise the full economic benefits of lisdexamfetamine (Vyvanase), New River's ADHD therapy which both companies developed and launched.

In addition to its ARIAD Pharmaceuticals deal, Merck & Co also made significant alliances with Kinemed and Surmodics. Kinemed could realise up to USD 70m from Merck on each of the potential 10 investigational candidates that could emerge from its agreement. Surmodics is also in line to receive revenues in the region of USD 300m on its phase I triamcinolone acetonide formulation and other I-vation-formulated drugs for retinal diseases.

Cytokinetics, (OSI) Prosidion and Xenoport can also boast major partners. Cytokinetics may see about USD 750m if Amgen takes an option on its phase II cardiac myosin activator CK-1827452, and Xenoport can expect upwards of USD 640m from GlaxoSmithKline for its phase III restless legs syndrome candidate, gabapentin enacarbil. (OSI) Prosidion could see significant revenues from Eli Lilly for the phase I glucokinase activator PSN-010.

The rest of the year

Thomson Pharma's historic deals data for 2005 and 2006 indicate that the second half of 2007 could be quieter than the first. Indeed, the last quarters of each of the previous two years have generated the fewest number of deals. However, in each year we have observed some significant activity right at the end of the year.

AstraZeneca and GlaxoSmithKline ended 2005 and 2006 with their respective captures of AtheroGenics's succinobucol and Genmab's ofatumumab in blockbuster deals. Already October has seen some significant activity in the fields of cancer (OSI Pharmaceuticals/AVEO Pharamceuticals) and infectious disease (Tripep/Inovio Biomedical, GlaxoSmithKline/Anacor Pharmaceuticals) and we look forward to providing a most comprehensive year of licensing data.

Steven Tear is managing editor in the drug information department at Thomson Scientific. This article is based on data from the database at www.thomsonpharma.com

Table 1: Selected deals of 2007 and their approximate potential values.

Primary Company	Partnering Company	Potential Deal Value in USD	Therapy Area	Drug
Ablynx	Boehringer Ingelheim	>2.8bn	Immunology, Oncology, Respiratory	Up to 10 candidates
Bristol-Myers Squibb	AstraZeneca	1.35bn	Type II diabetes	saxagliptin and dapaglifozin
ARIAD Pharmaceuticals	Merck & Co	>1.1bn	Cancer	AP-23573
Bristol-Myers Squibb	Pfizer	< 1bn	Thrombotic disorders	apixaban
Antisoma	Novartis	>890m	Cancer	ASA-404
Renovo	Shire	>825m	Wound healing	avotermin
Kinemed	Merck & Co	>705.5m	Atherosclerosis	Up to 10 candidates
Cytokinetics	Amgen	>725m	Heart failure	CK-1827452
Oxford Biomedica	sanofi-aventis	>690m	Cancer	TroVax
Xenoport	GlaxoSmithKline	>640m	Restless legs syndrome	gabapentin enacarbil
Anacor Pharmaceuticals	Schering-Plough	>625m	Onychomycosis	AN-2690
Intercell	Novartis	>540m	Infectious diseases	Influenza vaccine
Novacea	Schering-Plough	>452m	Cancer	DN-101