Making and Breaking Biotech Deals

by: The Burrill Report


Celgene (NASDAQ:CELG) beefed up its blood cancer pipeline with the acquisition of privately-held Gloucester Pharmaceuticals for $340 million in cash plus $300 million in future U.S. and international regulatory milestone payments. Gloucester’s cancer treatment Istodax was approved by the U.S. Food and Drug Administration in November for the treatment of cutaneous T-cell lymphoma in patients who have received at least one prior systemic therapy. The drug has also been granted orphan drug status in the U.S. and Europe for the treatment of non-Hodgkin's T-cell lymphomas. Gloucester Pharmaceuticals investors include Prospect Venture Partners, Rho Ventures, ProQuest Investments, Apple Tree Partners and Novo A/S. Celgene expects to complete the acquisition in the first quarter of 2010.
Pharmaceutical companies continue to evaluate their pipelines. This week, several companies struck new deals while others ended some long-standing collaborations. GlaxoSmithKline (NYSE:GSK) ended its oncology collaboration with Cytokinetics (NASDAQ:CYTK), agreeing to complete phase 1 studies before giving back the biotech its potential treatment for advanced, refractory solid tumors. Eli Lilly (NYSE:LLY) and Isis Pharmaceuticals (ISIS) ended their five year collaboration on a second generation antisense compound that had recently completed phase 1 trials in oncology. Isis is paying an undisclosed amount to Lilly to take the compound back in-house. Lilly retained the option to have the right of first negotiation to opt back into the compound if it reaches phase 3 studies. And Genentech, a wholly owned subsidiary of Roche (OTCQX:RHHBY), gave rights back to Seattle Genetics (NASDAQ:SGEN) to dacetuzumab, an anti-CD40 antibody in development for non-Hodgkin's lymphoma and multiple myeloma. Roche also recently ended partnerships with GenMab (OTC:GNMSF) and Actelion (OTCPK:ALIOF).
Sanofi-aventis (NYSE:SNY) continued its strategy to partner with biotech companies with the announcement of an agreement with privately-held Cambridge, Massachusetts biotech Alopexx Pharmaceuticals that includes an option for a license on a first-in-class human monoclonal antibody for the prevention and treatment of S. aureus, S.epidermidis, E. coli, Y. pestis (the bacterium that causes plague) and other serious infections. This new antibody is currently in preclinical development and has the potential to serve as an alternative to antibiotics without leading to bacterial resistance.
Under the terms of the agreement, Alopexx will bring the product into phase 1 clinical trials during 2010, with an option for an exclusive worldwide license for Sanofi-aventis at that point in time for development and a commercialization license of the product. Alopexx will receive an upfront payment and research funding from Sanofi-aventis and is eligible for development, regulatory and commercial milestone payments which could reach $375 million in total, as well as royalties on sales of products commercialized under the license and collaboration.
Seattle biotech ZymoGenetics (ZGEN), which just recently decided to end its inflammatory discovery programs in a major restructuring, has licensed its fully-human anti-IL21 monoclonal antibody, as well as broad intellectual property rights covering IL-21 mAb and the development of other IL-21 antibodies to Novo Nordisk (NYSE:NVO). The IL-21 mAb is a pre-IND candidate for the treatment of autoimmune and inflammatory diseases. Novo Nordisk in-licensed intellectual property rights to IL-21 antibodies outside North America in 2001 and now has worldwide rights.
Under the terms of the license, Novo Nordisk will pay ZymoGenetics $24 million upfront. ZymoGenetics is also eligible for milestones of up to $157.5 million as development of the drug advances, plus royalties on net sales. ZymoGenetics also has a right to co-promote the IL-21 mAb product in the U.S. if the company contributes to phase 3 clinical development costs. ZymoGenetics retained the option to fund a portion of phase 3 clinical development costs in exchange for an increased royalty rate on U.S. sales and U.S. co-promotion rights. If ZymoGenetics exercises the option, it would pay a fixed fee of 10 million dollars together with 15% of the costs of phase 3 clinical trials, and royalties on US sales would increase from single to double digits.
GlaxoSmithKline Biologicals, a unit of GlaxoSmithKline, formed an alliance with Austrian vaccine maker Intercell to accelerate the development and commercialization of needle-free, patch vaccines for travelers' diarrhea and pandemic influenza, as well as other potential future patch vaccines. Under the terms of the agreement, GSK will pay Intercell $$49.5 million upfront. GSK will also make an equity investment of up to $123 million through a staggered shareholding purchase option of up to 5 percent in Intercell.
Two Chinese life science companies completed initial public offerings in the United States this week. Shenyang-based China Nuokang (NASDAQ:NKBP), which develops, manufactures and sells blood and heart-related products, offering priced at $9 per American Depository Share, lower than the expected $10 to $12 range. The company sold 5 million ADS, raising $45 million. Shareholders in the company include Anglo China Bio-technology Investment Holdings, Sequoia Capital China Growth Fund and affiliated funds, Britain Ukan Technology Investment Holdings Limited, and HBM BioMed China. Britain Ukan and HBM BioMed China each sold part of their stake in the company. China Nuokang plans to debut on the Nasdaq under the symbol "NKBP". Underwriters, led by Jeffries & Co., have the option to purchase an additional 750,000 ADSs.
Beijing-based Concord Medical Services Holdings Limited (NYSE:CCM), an operator of the largest network of radiotherapy and diagnostic imaging centers in China in terms of revenues and the total number of centers in operation in 2008, priced its initial public offering of 12 million American Depositary Shares at $11 per ADS, raising approximately $119.5 million. The ADSs are expected to begin trading on the New York Stock Exchange on December 11 under the symbol "CCM." Morgan Stanley, J.P. Morgan Securities, and China International Capital Corporation Hong Kong Securities Limited acted as joint bookrunners for the offering. The underwriters have been granted a 30-day option to purchase up to an additional 1.8 million ADSs to cover over-allotments, if any.
Finally, Microsoft (NASDAQ:MSFT) is moving to strengthen its position in electronic medical records. The company announced that it plans to buy Sentillion, a healthcare software company based in Andover, Massachusetts. Sentillion specializes in technology for keeping electronic patient records secure and private. According to the company, its software is used by more than 1,000 hospitals and 500,000 caregivers across North America and Europe. Sentillion's investors include Newbury Ventures, Polaris Venture Partners, Split Rock Partners, Merrill Lynch Ventures, Wall Street Technology Partners, Intersouth Partners, and First Consulting Group. The terms of the deal were not disclosed.

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