Merck Makes Insulin Play: Biotech Transactions Heat Up

Includes: CAH, MRK
by: The Burrill Report

By Marie Daghlian

Merck (NYSE:MRK) is betting that SmartCell’s pre-clinical glucose responsive insulin formulation will deliver as a breakthrough treatment for diabetes. The pharmaceutical giant is acquiring the Beverly, Massachusetts-based startup with technology from MIT for an undisclosed upfront payment and potentially more than $500 million in milestones for products resulting from the transaction.

SmartCells has developed a technology that makes it possible to automatically regulate the release of its insulin product based on the level of glucose in the blood. The technology could be used to control the release of other drugs in response to other indicators. If it is successful in the clinic, it has the potential to increase the control diabetics can have over their blood sugar levels compared with standard insulin therapies.

Up to this point, SmartCells has relied on funding from the National Institutes of Health and angel investors rather than venture capitalists, CEO Todd Zion told Xconomy in an interview. He noted that SmartCells had raised just $9.8 million since its founding seven years ago, with more than half of it coming in the form of NIH grants. Now that its once-a-day injectable insulin is ready to be tested in humans, it was time to look to a potential partnership or acquirer, he said.

For Merck, SmartCell’s insulin candidate adds a strong pre-clinical product to its diabetes pipeline. Its top-selling diabetes drug Januvia, which works by a different mechanism, had sales of $1.7 billion in the first nine months of 2010.

Merck’s acquisition of SmartCells was just one of several acquisitions in the week, which saw nearly $2 billion in M&A transactions. Of those, about half of them involved companies in China. In one of the larger deals, Cardinal Health (NYSE:CAH) acquired privately held Zuellig Pharma China, the largest pharmaceutical importer in the country, for $470 million. The deal extends the $99 billion health care services company’s presence into one of the world’s fastest growing healthcare markets.

Deals for the Week Ending December 3, 2010

Global Venture Financings
Company Location Amount Raised (USD M) Principal Focus
PhaseBio Pharmaceuticals Malvern, PA 15.0 Therapeutics-metabolic
Verdezyne Carlsbad, CA 15.3 Gene libraries
Histogen San Diego, CA 10.0 Regenerative medicine
EcoSynthetix Lansing, MI 7.2 Green chemicals
Adimab Lebanon, NH 4.0 Tools/Technology
Sage Science Beverly. MA 2.0 Tools/Technology
BeneChill San Diego, CA 0.6 Medical devices
Acylin Therapeutics Seattle, WA N/A Therapeutics-metabolic
SuperSonic Imagine Aix-en-Provence, France 44.8 Medical devices
Covagen Zurich, Switzerland 6.3 Therapeutics-inflammatory
Denator Gothenburg, Sweden 1.7 Tools/Technology
Indigix United Kingdom 1.5 Therapeutics-immunology
Sprint Bioscience Sweden 0.3 Contract Research
Regenesance Amsterdam. Netherlands N/A Therapeutics-neurology
Total Raised US 54.1
Total Raised Non-US 54.6
Company Funding/Contracting Agency Amount Raised (USD M) Principal Focus
Pharnext (France) OSEO Innovation 10.0 Alzheimer's
BioSystem Development (France) OSEO Innovation 8.7 Alzheimer's
AiCuris (Germany) Bio.NRW 1.1 Antibiotics
Neurokin (France) Agence Nationale de la Recherche 0.5 Neurology
Jiangsu Wuzhong (China) Jiangsu Provincial Science and Technology Bureau 1.8 Cancer
NanoBio Bill & Melinda Gates Foundation 6.0 RSV vaccine
Allon Therapeutics (Canada) Michael J. Fox Foundation 0.6 Parkinson's
Hybrigenics (France) OSEO 1.1 Cancer
Tolerx Cancer Vaccine Acceleration Fund 1.5 Cancer vaccines
Total Grants 31.3
Company Ticker Amount
Raised (USD M)
Financing Type
Theravance THRX 129.4 PIPE-GSK increases equity stake
Anacor Pharmaceuticals ANAC 10.0 PIPE
Medivir (Sweden) SSE:MVIR 41.0 PIPE
Chemaphor (Canada) TSX-V:CFR 0.2 PIPE
Rosetta Genomics (Israel) ROSG 2.5 PIPE
Lorus Therapeutics (Canada) TSX:LOR 1.5 PIPE
T-Ray Science (Canada) TSX-V: THZ 0.3 PIPE
Sequenom SQNM 96.6 Follow on
Omnicare OCR 500.0 Debt
China Medical Technologies (China) CMED 125.0 Debt
ConMed CNMD 250.0 Senior secured credit facility
Nymox Pharmaceutical NYMX 15.0 Equity financing
Cynapsus Therapeutics (Canada) TSX-V:CTH 0.1 Secured debentures
Pharming Group (Netherlands) Euronext:PHARM 28.4 Equity and debt financing by Socius
NON-US 199.0
Acquirer Target Deal Value
Axcan Holdings Eurand (Netherlands) 583.0 Specialty pharma
Merck SmartCells 500.0 Diabetes
Cardinal Health Zuellig Pharma China (China) 470.0 Supply/service
Sihuan Pharma (China) Dupromise Holdings (China) 371.0 Cardiovascular
Sumitomo (Japan) C&O Pharmaceutical Technology (China) 73.0 Pharmaceuticals
Transgenomic Clinical Data's diagnostic unit 15.4 Diagnostics
3SBio (China) EnzymeRx' Pegsiticase 6.3 Renal
Iris International BioMicro Systems 3.2 Tools/Technology
Source BioScience (United Kingdom) ImaGenes (Germany) 3.1 Genomics
Thermo Fisher Scientific Lomb Scientific (Australia) N/A Supply/service
Emerging Healthcare Solutions Celulas Genetica (Panama) N/A Stem cells
Insmed Transave N/A Respiratory
Shanghai Pharmaceuticals (China) China Health System (China) N/A Supply/service
Company/Licensee Company/Licenser Deal Value
Nostrum Pharmaceuticals IMTECH (India) 150.0 Cardiovascular license
Sigma-Aldrich Plasticell (United Kingdom) N/A Stem cell collaboration
GlaxoSmithKline (United Kingdom) Binnopharm (Russia) N/A Vaccine agreement
OncoTherapy Science (Japan) Immunovaccine (Canada) N/A Vaccine collaboration
Galenica (Germany) Fresenius Medical Care (Germany) N/A Renal care joint venture
Janssen Pharmaceutica (J&J) GE Healthcare N/A Biomarker collaboration
Takeda Pharmaceuticals (Japan) Baxter International N/A Vaccine license
Ascenta Therapeutics Ascentage Pharma (China) N/A Cancer collaboration
Private/Public Partnerships
Company Institution Deal Value (USD M) Focus
Bayer (Germany) Singapore Universities 11 Cancer collaboration
Bio-Reference Laboratories Massachusetts General Hospital N/A Diagnostics collaboration
Aileron therapetuics Scripps Research Institute N/A Chemistry platform license
Roche (Switzerland) Baylor Research Institute N/A Immunology partnership