Biotech Deal-Making Crosses Borders as Capital Markets Slide

by: The Burrill Report


Two noteworthy events and a possible trend shaped the past week in life sciences. First Ironwood Pharmaceuticals (NASDAQ:IRWD) became the first biotech to go public in 2010 [see story]. The company had hoped to raise upwards of $270 million through the sale of 16.7 million shares in the range of $14 to $16 a share. In the end, however, it priced its shares at $11.25 raising just $187.5 million. While this was a significant price cut, it managed to get its IPO done. How the company fares in the aftermarket will be a sign for other companies in the queue.
This happened during a dismal week for the U.S. capital markets, with the Dow Jones Industrial Average slipping into negative territory, falling below 10,000, down 2 percent for the week and 6 percent since the beginning of the year. The Nasdaq Composite Index slipped 1.5 percent during the week, down 7 percent year-to-date. It was the third straight week of declines as investors become increasingly wary of an economic recovery amid weak jobs data and continuing high unemployment numbers.
Deal activity was mostly cross border. In the biggest deal of the week, Cephalon (NASDAQ:CEPH) expanded into the generic drug business with its acquisition of Swiss drugmaker Mepha for $590 million. Mepha is owned by Germany's Merckle family that also owns Ratiopharm, another generic drug company currently a potential acquisition target. With the Mepha acquisition, Cephalon gains access to more than 120 products sold in 50 countries, potentially doubling Cephalon's global business. According to Reuters, Cephalon is looking for other acquisitions, especially in China.
There were two noteworthy cross-border partnering deals during the week. Spectrum Pharmaceuticals (NASDAQ:SPPI) entered into a licensing and collaboration agreement with Danish biotech TopoTarget for Belinostat, a novel histone deacetylase or HDAC inhibitor, currently in a registrational trial as a monotherapy for relapsed or refractory peripheral T-cell lymphoma, an indication in which it has been granted Orphan Drug and Fast Track designation by the U.S. Food and Drug Administration. Belinostat is also being studied in multiple phase 2 trials for various oncology indications as both a monotherapy and a combination therapy.
Under terms of the agreement, Spectrum licensed the rights to Belinostat for North America and India, and an option for China, in exchange for an upfront cash payment of $30 million, potential milestone payments of up to $320 million, and one million shares of Spectrum common stock based upon the successful achievement of certain development, regulatory and commercial milestones, as well as double-digit royalties on net sales of Belinostat. Spectrum and TopoTarget will jointly fund development activities, whereby clinical trial costs will be 70 percent borne by Spectrum and 30 percent by TopoTarget for new trials to be initiated.
GlaxoSmithKline (NYSE:GSK) entered into an exclusive licensing deal with private Austrian biotech Apeiron Biologics worth potentially $330 million. Under the terms of the deal, GSK gains exclusive rights to APN01, an early stage drug for the treatment of acute respiratory distress syndrome. Apeiron will get approximately $17.5 million upfront in cash and equity investments, and could receive as much as $330 million in developmental milestones plus royalties on any future sales. APN01 is a recombinant human angiotensin converting enzyme 2 or ACE2.
There were also a couple of interesting financings. UK genomics firm Oxford Nanopore Technologies raised $28 million from existing investors Lansdowne Partners, IP Group and Invesco Perpetual, new undisclosed U.S. institutions, and the company's DNA sequencing marketing partner Illumina UK, a subsidiary of U.S. genomics company Illumina (NASDAQ:ILMN). This is Illumina's second investment in Oxford Nanopore in the past two years, having invested $18 million last year. Illumina is betting that Oxford Nanopore, which is developing a disruptive technology platform for the electronic, label-free analysis of single molecules, will help it succeed in the race to $1,000 human genome.
Personal genomics company Navigenics raised approximately $18 million of funding. Procter and Gamble joined existing investors Kleiner Perkins Caufield and Byers and Mohr Davidow Ventures in the series C financing round. The Foster City, California-based company offers direct-to-consumer genetic tests that assess predisposition to various diseases. The tests are not for whole genome sequencing and have been the subject of a lot of controversy as to their usefulness.
Medco Health Solutions (NYSE:MHS), a leading provider of pharmacy and clinical research support solutions, announced that they were acquiring DNA Direct, based in San Francisco and another DTC genetic testing company. Financial terms were not disclosed.
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