Losing Biobucks as Pharma Reshuffles Its Deck

by: The Burrill Report

By Marie Daghlian

Three biotech companies regained rights to their programs this week as top pharmaceutical firms sharpened their R&D efforts to focus on core areas they feel offer the best chance of commercial success.

While Pfizer (NYSE:PFE) CEO Ian Read told investors he would be cutting as much as $1.4 billion in R&D spending this year [see story], Rigel Pharmaceuticals (NASDAQ:RIGL) announced that it would be regaining rights to its R343 program in allergic asthma because Pfizer had decided to exit its research and development in the allergy and respiratory therapeutic area.

The molecule was part of a 2005 licensing deal and equity investment that gave Pfizer access to Rigel's portfolio of inhaled small molecule syk inhibitors. One year later, Pfizer identified R343 as the lead product candidate for intrapulmonary delivery in the potential treatment of allergic asthma and paid Rigel a $5 million milestone payment.

The compound recently completed several early stage trials that Rigel is evaluating. It expects to design a mid-stage trial with R343 later this year. "It is rare in our business that one has the opportunity to develop an asset which is both promising and on which the research and development has been as well done as the package that Pfizer is transferring to us," says James Gower, chairman and CEO of Rigel. "R343 will now become Rigel's most advanced in-house project."

Pfizer was not the only Big Pharma reshuffling its deck. AstraZeneca (NYSE:AZN) decided not to exercise its option to license Targacept's (TRGT) experimental drug TC-5619, a highly selective alpha7 neuronal nicotinic receptor modulator, being developed to treat symptoms of schizophrenia and returned full rights to Targacept. AstraZeneca had paid $30 million in 2007 when the deal was struck, and if it had exercised the option it would have committed up to $212 million more based on milestones.

Targacept recently completed two mid-stage clinical trials of TC-5619, one in patients with schizophrenia and one in adults with attention deficit hyperactivity disorder. It is currently being evaluated as a potential treatment in Alzheimer's disease.

Targacept CEO J. Donald deBethizy had already expressed his company's plan to go it alone in schizophrenia if AstraZeneca opted out. "Our clinical results indicate the unique potential of TC-5619 to treat negative and cognitive symptoms of schizophrenia, a critical need not met by currently available treatments, and we are unwavering in our enthusiasm for the compound," he said. Burrill & Company, publisher of The Burrill Report, is an investor in Targacept.

The companies renewed their commitment on Targacept's TC-521, in late stage development as an adjunct treatment for major depression. In March, GlaxoSmithKline ended a potential billion-dollar drug discovery research collaboration with the biotech in neurology and pain.

Sanofi-Aventis (NYSE:SNY) walked away from a short-lived collaboration with Metabolex, returning rights to MBX-2982, a selective orally-active GPR119 agonist in mid-stage development to treat type 2 diabetes. Metabolex received an upfront payment at deal signing and was eligible for up to $375 million in milestone payments. Sanofi decided to take a one-time charge to terminate the agreement without giving a reason for its decision. It did say in a regulatory filing that it had seen data from a recently completed trial before making its decision. That trial did not have a negative outcome for safety or efficacy, according to Metabolex.

So far this year, Big Pharma has returned seven programs to its biotech partners as it has struggled to find new ways to deal with its lagging R&D productivity. The trend is likely to continue as companies seek to deal with the loss of revenue from patent expirations. Risk-sharing through option-based and back-end loaded deals is the order of the day. That means a bio-buck today is not what it was yesterday.