Summer Ends with Biotech Buying Spree

by Marie Daghlian

Biotech shoppers made some big bets as the summer drew to a close, capped off by Biogen Idec's (BIIB) bid to acquire all of the outstanding shares of Facet Biotech (FACT) for $14.50 per share in cash, a 64 percent premium to its closing price the previous day. Biogen first conveyed its interest in Facet on August 17, offering to buy the company for $15 per share. The offer was rejected a week later. In a letter sent to Facet's Board of Directors, Biogen Idec's President and CEO James Mullen expressed disappointment that Facet had chosen to announce a collaboration with Trubion Pharmaceuticals (TRBN) on a leukemia drug on the day they were to discuss Biogen's all cash proposal. He also noted that the Trubion deal reduced Facet's value. Facet's shares have dropped almost 19 percent since the deal was announced on August 28. It will be interesting to see how shareholders feel about the proposal.

With a stagnant drug market in Japan, pharmaceutical companies there have been aggressively expanding globally. This week Dainippon Sumitomo Pharma announced that it will acquire U.S. specialty pharmaceutical company Sepracor (SEPR) in a cash tender offer of $23 per share, representing a 27.6 percent premium over Sepracor's closing price on September 1. The $2.6 billion deal is expected to close by the end of the year. Sepracor will become a wholly owned subsidiary of DSP, retaining its brand name and maintaining its operations in Massachusetts and Canada.

The acquisition of Sepracor will give DSP a broad presence in the United States, including a 1,300 person sales force, and a strong portfolio of central nervous system drugs. DSP recently reported positive late stage clinical trial data for its anti-psychosis drug, lurasidone, which it hopes to launch in the United States by 2011.

Danaher Corporation (DHR) signed an agreement to acquire the Analytical Technologies division of MDS (MDZ), which includes a 50 percent ownership position in Applied Biosystems/MDS Sciex joint venture, a mass spectrometry business, and a 100 percent ownership position in the former Molecular Devices, a bioresearch and analytical instrumentation company. In a separate, but related transaction, Danaher also announced that it has signed a definitive agreement with Life Technologies (LIFE) to acquire the remaining 50 percent ownership position in AB SCIEX, a leading designer and manufacture of mass spectrometers. When the deals are completed, Danaher will own AB SCIEX and Molecular Devices outright. The total purchase price for the combined transactions is $1.1 billion. The acquired businesses will operate within Danaher's Medical Technologies segment, expanding annual revenues by more than $650 million. The acquired businesses will increase Danaher's life sciences and diagnostics annual revenues to more than $2 billion.

Denmark's LEO Pharma boosted it dermatology pipeline with an agreement to buy out Peplin for $287.5 million. Privately-held LEO will also extend Peplin a loan to continue operations until the close of the acquisition, which is expected by the end of the year. Peplin’s lead product candidate, PEP005 Gel, derived from an Australian weed, is currently in Phase III clinical trials for actinic keratosis, a common pre-cancerous skin lesion, on both head and non-head locations. Peplin plans to complete the trials by the end of the year and plans to file a New Drug Application in mid-2010.

Peplin has gone through a lot of changes in the past couple of years. The company was originally based in Australia until an investment from MPM Capital in 2007, when it moved to Emeryville, California. The company, publicly traded in Australia, withdrew a planned U.S. IPO in June 2008.

Abbott Laboratories (ABT) increased its presence in vision care with the acquisition of ophthalmic medical device company Visiogen for $400 million in cash. The acquisition will give Abbott Visiogen's next-generation accommodating intraocular lens technology to address presbyopia for cataract patients.

Visiogen's accommodating intraocular lens, called Synchrony, is a significant advancement in artificial lens technology. Synchrony has received CE mark designation and has been available commercially in Europe since January 2009. It also is currently under review by the U.S. Food and Drug Administration. Abbott entered the vision care segment in February 2009 with its acquisition of Advanced Medical Optics.

Thermo Fisher Scientific (TMO) is acquiring German in vitro diagnostic company B.R.A.H.M.S. for $470 million. Privately-held B.R.A.H.M.S. is a leading provider of specialty in-vitro diagnostic tests based on its patented biomarkers for sepsis, cardiovascular and pulmonary diseases, as well as intensive care treatments and prenatal screening.

Buyouts weren't the only order of the day during the week. Privately-held PTC Therapeutics has leveraged its GEMS technology for small molecule drug discovery into collaborations with several biopharmaceutical companies. This week PTC and Roche (RHHBY.PK) entered into R&D collaboration which could be worth as much as $1.9 billion to PTC in the long haul.

The exclusive research collaboration and licensing agreement is for the development of orally bioavailable small molecules utilizing PTC's GEMS technology. The collaboration focuses initially on four central nervous system disease targets to be jointly selected. Under the terms of the agreement, Roche will pay PTC $12 million upfront and fund the company's research efforts. PTC is also eligible to earn up to $239 million in research, development, regulatory and commercial milestone payments for each target. PTC would also receive up to double digit royalties for all products resulting from this collaboration. Roche has the option to add four targets to the collaboration across therapeutic areas, for additional cash payments.

GEMS is PTC's novel and proprietary technology platform for the identification of small-molecules that modulate post-transcriptional control mechanisms. Compounds identified through the GEMS technology target processes that act through the regulatory regions of messenger RNA molecules. PTC has successfully employed the GEMS technology in drug discovery programs in oncology, infectious diseases, cardiovascular diseases and neuromuscular disorders. The most advanced compound identified through the GEMS technology is PTC299, a small-molecule inhibitor of VEGF expression currently in Phase II clinical trials for oncology.

Separately, PTC Therapeutics said that Celgene (CELG) has exercised its option to collaborate on advancing drug discovery efforts on an oncology target addressed through the application of GEMS technology. In September 2007, Celgene made a $20 million equity investment in PTC, which included an option for an exclusive research agreement. Under the terms of the research collaboration agreement, PTC will receive substantial milestone payments for achieving certain discovery, development, regulatory and commercial objectives.

Cancer medicines are all the rage for pharma companies these days, driving many pharma/biotech partnerships. Bayer Schering Pharma signed an $800 million global agreement with Algeta for development and commercialization of Alpharadin for bone metastases. The Norwegian biotech's first-in-class alpha-pharmaceutical, based on radium-223, is currently being evaluated in a global late-stage clinical trial in men with hormone-refractory prostate cancer that has spread to the bone.

Under the terms of the agreement, Algeta will get $61 million upfront and is eligible for milestones. Algeta retains an option for up to 50 percent co-promotion with Bayer in the United States under a profit-share arrangement. Bayer will commercialize Alpharadin globally and pay tiered double-digit royalties on net sales in markets where there is no co-promotion. Bayer will also contribute a substantial majority of the costs of future development of Alpharadin as a treatment for bone metastases resulting from HRPC and from other cancer indications, and will fully fund any additional late-stage trials.

Finally, life sciences IPOs are slowly coming to life. China's largest pharmaceutical products distributor, Sinopharm Group, is set to raise up to $1.13 billion in an initial public offering of shares in Hong Kong, according to a term sheet seen by Reuters. Sinopharm is reportedly selling 545.7 million H-shares at a price ranging from HK$12.25 to HK$16 apiece with an over-allotment option to issue additional shares representing 15 percent of the offering, the term sheet showed. Shares are expected to be priced on Sept. 15 and trading is expected to begin on Sept. 23. UBS AG and Morgan Stanley are joint bookrunners of the deal. Citigroup and Deutsche Bank are the joint leads.

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