Oncology bias in pharma deals

The focus this month is on transactions announced during October, including both deals where financial terms were disclosed and notable ones where financials were not published. Deals included spin-offs, asset sales, business sales and collaboration extensions, interspersed with the more usual licence and acquisition transactions.

Servier announced a strategic alliance with Galapagos to develop novel small molecule therapies for cancer. This deal is heavily 'back-loaded' with upfront research access payments of only $3m, but up to $370m in milestones plus royalties, should Servier exercise its options to license (post pre-clinical development). Servier will fund the clinical development and commercialisation while Galapagos retains the rights to the US. As Servier does not have a sales presence in the US, this is an effective model for the company's partnering activities. The alliance follows a previously initiated strategic alliance between the companies to develop new therapies in osteoarthritis in July 2010.

Continuing the oncology theme, Merck Serono and Ono announced a collaboration in multiple sclerosis (MS) and oncology, in two separate agreements. The first grants Merck worldwide exclusive licence rights for the development and commercialisation of ONO-4641 outside Japan, Korea and Taiwan. ONO-4641 is a novel oral treatment for MS in phase II. Merck will pay $20m upfront.

The second licence agreement provides Ono with co-development and co-marketing rights for Stimuvax in Japan. Stimuvax is a therapeutic cancer immunotherapy designed to stimulate the immune system to target cancer cells that express the tumour antigen MUC-1. It is in phase III development for patients suffering from non-small cell lung cancer. Ono will pay Merck $7m upfront. This arrangement makes the most of each company's territorial strengths.

Following more than two years of wrangling, Onyx Pharmaceuticals and Bayer Healthcare have resolved their differences over rights to regorafenib under their 1994 oncology partnership. Onyx was suing, claiming regorafenib was a variant of Nexavar (sorafenib) (both oral multi-kinase inhibitors) and should have been treated as part of the companies' joint Nexavar project.  Onyx claimed regorafenib's molecular structure differed from Nexavar only in one atom. In contrast, Bayer argued that regorafenib, in phase III development for treatment of gastrointestinal tumours (fast-track status in the US) and metastatic colorectal cancer, was not covered by their original collaboration. It is also in trials for other cancers, including liver and kidney (for which Nexavar is already approved).

The partnership for Nexavar has been restructured (Bayer is buying the rights to Onyx's Japanese royalty stream for $160m) and they have entered into a new agreement for regorafenib, with Onyx receiving a 20 per cent royalty and co-promotion rights in the US. Confirmation that these terms will be preserved following any change in control of Onyx may be an attractive lure to potential suitors.

Pfizer has licensed the worldwide commercial rights of Neratinib, a phase II pan-HER inhibitor (potent irreversible tyrosine kinase inhibitor) in the neoadjuvant, adjuvant and advanced settings in HER2/ErbB2 positive breast cancer, to Puma Biotechnology. Pfizer will receive undisclosed milestone payments and royalties. Pfizer also inked a $340m deal for access to GlycoMimetics' GMI-1070 in phase II for vaso-occlusion associated with sickle cell disease.

RNA interference
RNA interference (RNAi) is an area that has suffered big pharma reticence lately, but a year after Roche announced it was moving out of RNAi, due to ongoing frustrations with the cell-specific delivery mechanisms, Arrowhead Research Corp is acquiring the RNAi therapeutic assets from Roche, including operations, facilities, employees, rights, licences and the delivery platform. Through this deal,  Arrowhead is now a fully integrated RNAi therapeutics developer with three primary siRNA formats. No financial terms were disclosed, but it is understood that Roche acquired a stake in Arrowhead and the rights to negotiate for certain future products, milestones and royalties on product sales.

In another deal in the RNA space, miRagen has made a microRNA pact with Servier for three candidates for cardiovascular therapy for $45m upfront and three years of financing. There is an additional $352m in milestones and double digit royalties payable to miRagen (totalling $1bn). MiRagen is working with microRNA, which are short, single-stranded RNA molecules that control the expression of genes and pathways. They represent a potential master switch for gene expression, which it is hoped can be targeted without the delivery problems that have stalled progress in this field.

Silence Therapeutics and miRNA Therapeutics have also signed a collaboration to evaluate delivery of novel microRNA Therapeutics, via Silence's AtuPLEX and DBTC delivery systems. No financial terms have been disclosed.

Casualties
A couple of deals have collapsed. Merck Serono's decision to return the rights to Safinamide (an alpha aminoaminde in phase III, as an add-on therapy to dopamine agonists or levodopa for dyskinesia in Parkinson's disease) to Newron Pharmaceuticals, triggered the termination of Biotie Therapeutics' acquisition of Newron. The ink was still drying a month after Biotie and Newron had announced the $45m deal, but with Newron's lead product tarnished, either Biotie changed its plans or Newron shareholders were unwilling to adjust their price expectations. Newron should receive a $2m termination fee from Biotie.

The $179m merger between oncology company, Allos Therapeutics and AMAG Pharmaceuticals announced in July, was terminated when AMAG shareholders rejected the deal (hedge fund investor, MSMB, opposed the merger and may have convinced enough other shareholders to reject the deal). AMAG will pay $2m to Allos to cover deal costs.

These examples demonstrate the importance of negotiating the terms of the deal 'non-complete' as keenly as the other deal terms.

Orphan interest
ViroPharma has signed another deal in the orphan drug space. It will acquire DuoCort Pharma for $34m upfront and a potential further $131m on achievement of certain regulatory, manufacturing and commercial milestones. DuoCort's product, Plenadren, approved in the EU on November 3, is a once daily, dual-release oral glucocorticoid tablet for the treatment of adrenal insufficiency. This announcement comes weeks after ViroPharma's deal with Intellect Neuroscience, to license the phase I molecule to treat Friedreich's ataxia, a rare genetic disease. With these two deals, ViroPharma continues to build a presence in the metabolic and CNS franchises for niche and orphan diseases.

Another noteworthy deal is Portola Pharmaceutical's collaborative R&D and licensing deal for the commercialisation of Syk inhibitors with Biogen Idec. Terms are an upfront of $36m, a $9m equity investment and additional payments of up to $509m based on the achievement of development and regulatory milestones. Biogen will lead the development and commercialisation for rheumatoid arthritis and lupus, while Portola will lead US efforts for select smaller indications as well as discovery efforts for follow-on Syk inhibitors. Portola retains an option to co-promote in the US. Worldwide costs and profits will be split by Biogen and Portola 75 per cent: 25 per cent, respectively. 

Finally, Abbott has announced the separation of its $18bn pharmaceutical business from its $22bn medical device business. This move reinforces the issue facing many, that investors remain unconvinced that pipelines are sufficiently robust to cope with the impact of impending patent cliffs. The market and shareholders took the news positively.

Note – all deals are worldwide unless otherwise indicated.
* excludes development and commercialisation rights in US; ** excludes commercialisation rights in US and Japan – potential total deal value of $1bn; *** business in Middle East and Africa, ONLY; + excludes development and commercialisation rights in Japan, Taiwan and Korea; ++ excludes development and commercialisation rights to certain products in the US; +++ co-development and co-marketing rights in Japan, ONLY; # original collaboration headline amount was $130m; ## termination fees; ### Puma announced completion of a $55m private placing upon deal announcement.

The Author
Bridget Lacey is a consultant at Medius Associates