Wednesday, December 23, 2009

And the M&A/Alliance Deal of the Year Nominees Are ...

OK readers, it's time to have your say! This year we've set up a special IVBDOTY web page where you can vote in all three categories. CLICK HERE TO GO TO THE VOTING BOOTH.

And so here, in no particular order, are your IN VIVO Blog 2009 M&A/Alliance Deal of the Year nominees. Please do comment on this post about any and all of these deals, and why you voted the way you did.

Johnson & Johnson/Elan: Johnson & Johnson's July purchase of Elan's Alzheimer's immunotherapy program (AIP) via a stock purchase plan that gives the health care giant an 18.4% stake in the biotech. And the deal's complicated structure helps both J&J and Elan hedge against risk. In return for roughly $1 billion in capital (slightly less after Elan got into a tussle with BiogenIdec about a potential change of control to Tysabri), J&J is creating a new co focused on Alzheimer's immunotherapy, with a near-term focus on the interesting, but still very risky Phase III antibody bapineuzumab. Elan benefits because it doesn't have to fork over all the upside to its Alz program, given the biotech retains a 49.9% stake in the newco and also has a 49.9% share in its profits or losses. Elan also also gets significant help funding bapi's development with this deal. With J&J committing another $500 million to the antibody's Phase III trials that molecule will have to rack up $1 billion in costs before Elan has to pay another penny.

GSK/Concert: GSK’s deal with Concert is representative of GSK's many option-alliances: flexible, low-cost, risk-mitigating, pay-for-performance-oriented and, frankly, we think just rather clever. It's also a very definite sign of the times. GSK paid $35 million up front (including $16.7 million in equity, another way to spread risk) for options on three projects, the most advanced of which started Phase Ib in November this year, the least advanced of which hadn’t even been selected at the time of the deal. GSK can opt into these programs at clinical proof-of-concept (or slightly earlier, at Phase I, for the lead). It’s risk-sharing deal content, too: Concert’s compounds are mostly deuterated versions of existing molecules, meaning it has replaced hydrogen atoms with deuterium atoms, creating new, patentable chemical entities that skirt existing IP and that may even be safer and/or more effective than the originals.
Astellas/Medivation: With pipelines flagging and the general push to look outside, the hottest targets/assets/technologies are still commanding value in competitive auction arrangements. In October Medivation announced a tie-up with Astellas to develop its Phase III prostate cancer drug, MDV3100 in a transaction worth $110 million up-front and biobucks of more than $650 million. Moreover, Medivation still keeps significant control of the development program--at least in the US, where the two firms evenly split costs. (Ex-US, Astellas picks up the whole tab for development and commercialization, providing tiered double-digit royalties in exchange for the privilege.) Astellas was a particularly active dealmaker in 2009, this deal hits a hot oncology target, and was an early sign that dealmaking upfronts are on the way back up.

GSK/UCB: The January deal in which GSK paid UCB $670 million for commercial operations in more than 50 non-core countries, as well as rights to sell some primary care drugs in those territories, captures so many of 2009's biggest trends: the land grab in emerging markets, the tug of regionalization versus globalization, the ongoing shake up in primary care, and diversification--the bluster of the big versus the commitment of the focused. On one level, the deal shows how two companies with very different strategies are reacting to the mania about emerging markets. GSK is looking to be a geographically diversified global provider of medicines at all price points to as many countries as possible—and says its far-flung infrastructure, deep pockets, and global expertise make it the go-to company for late-stage deal-making in emerging markets. UCB, on the other hand, is joining a small, but important group of biopharma that has chosen to intensify its focus rather than diversify. It recently repositioned itself as a spec pharma focused on CNS and inflammatory diseases and is extending that idea globally.

Abbott/Solvay: Abbott's $6.6 billion acquisition of Solvay's pharmaceutical unit follows a pretty straightforward plot line, but the clincher to the story is this: Abbott is buying the Belgian drug unit with cash, most of which is coming from overseas. It's a smart use of those funds since repatriating it would subject it to a hefty 35% tax. And while multinationals sidestepped a withdrawal of the overseas tax deferral by the Administration earlier this year, some in the industry still think the axe could fall, next year when the budget review comes around. The drug maker also adds more than $3 billion to its top line and gains full control over the blockbuster TriCor/TriLipix dyslipidemia franchise, a business Abbott has big plans for, and the addition of Solvay's drug unit also extends Abbott's geographic footprint, adds a branded generics business and provides entry into vaccines. (Ooh, diversification.)
Sanofi-Aventis/Regeneron: Biotechs often link their destinies to a Big Pharma big sibling, but few have gotten such sweet deals as Regeneron has with Sanofi-Aventis. Sanofi pays Regeneron $160 million a year in research funding through 2017 and can take over development of any antibody candidate at IND. Sanofi then funds clinical development, and if the candidates come to market, Regeneron splits profits (50/50 in the U.S., and a sliding scale from 65/35 to 55/45 in Sanofi's favor outside the U.S.). Regeneron reimburses Sanofi half the development costs from its share of the profits, which means no profits, no reimbursement. What's the catch? You tell us when you find one, at least from Regeneron's point of view.

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