Wednesday, November 27, 2013

Happy Thanksgiving from Deals of the Week!

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why the post is called Deals of the Week ... (cont.)

As always, thanks for reading. Happy Thanksgiving!

Bayer/Algeta: Not quite a deal just yet, but we give thanks for the heads up this slow holiday week: On Nov 25 details began trickling out about Bayer's NOK14.8 billion ($2.4 billion) bid to buy Xofigo partner Algeta. The companies have high hopes for Xofigo, the recently launched prostate cancer therapy, and it's unsurprising that Bayer might move to control 100% of the potential blockbuster. The NOK336 per-share bid represents a 27% premium to Algeta's price before the brouhaha. Analysts expect Bayer to sweeten the bid for the Norwegian biotech -- of course they do! -- with which it has been partnered since 2009. For now, neither company is talking (someone's leaking, of course, but talking? Not so much). Not about the potential and probable deal anyway. Algeta's been out talking to analysts and investors during its recent Capital Markets days, pointing out its technological prowess and pipeline of assets beyond Xofigo. All that chatter might be helpful especially if Bayer decides it only wants Xofigo (sometimes the Bayer gets only part of you? Sorry). We'll have more in next week's issue of "The Pink Sheet". -- CM

Merrimack/Actavis: Merrimack Pharmaceuticals’ stock got a boost Nov. 26 from back-to-back announcements including encouraging Phase II data on one of its lead cancer drugs, the HER3 blocker MM-121, and a drug delivery technology deal with Actavis Inc. The stock closed the day up about 11% at $3.50, though that's only half what it debuted at in March 2012. Still that's some trick, considering one of the announcements was for a trial that didn't meet its primary endpoint. Most of the bump probably came from that Phase II data, which only trended in favor of MM-121 in patients with ER/PR+ and HER2- breast cancer, but suggested even better results in a subpopulation of patients with an undisclosed biomarker. That asset is partnered with Sanofi, which has seen its share of bad luck in its oncology pipeline lately, so the silver lining is particularly welcome. Meanwhile, the deal with Dublin-based Actavis offers revenue upside, the company said. Under the arrangement, Actavis will pay the cancer specialist $2 million upfront. In exchange, Merrimack will use its nanoliposomal technology platform to develop and manufacture various drugs for Actavis. It already uses the technology in some of its own drug candidates. Merrimack is eligible to receive another $13.5 million in funding and milestone payments tied to development, regulatory and sales milestones related to the first product to come out of the collaboration. It will also receive a double-digit share of profits on future sales of any commercialized products. -- Jessica Merrill

Egalet/Shionogi: Egalet Corp. will get access to cash ahead of a planned IPO in a deal with Shionogi & Co. Ltd. announced Nov. 26. The Danish specialty pharma will receive $10 million upfront from Shionogi, which has also agreed to buy approximately $15 million in common stock in a private placement to close with the IPO. In exchange, Shionogi gets rights to multiple oral abuse-deterrent hydrocodone opiod product candidates in preclinical development. Egalet specializes in abuse-deterrent technology and has developed two drug delivery systems that can be applied to multiple drug candidates. The deal will give Egalet some cash and breathing room as it prepares for the IPO while still allowing the company to retain its priority assets, two abuse-deterrent formulations, one morphine and one oxycodone, both in clinical development. In its registration statement filed with the Securities and Exchange Commission Oct. 16, Egalet said it had just $3 million in cash. Egalet could also receive $300 million in development and regulatory milestone payments and tiered royalties on sales, as well as $100 million in sales-based milestones. For Shionogi, the deal builds on the company’s existing presence in pain. The company manufactures the hydrocodone product Xodol, the oxycodone product Magnacet and several other pain therapeutics it acquired from Victory Pharma Inc. in 2011. On Nov. 19, Shionogi announced a licensing deal with Mundipharma International Ltd. under which Shionogi would sell Oxycontin Neo tablets, a tamper-resistant version of oxycodone, and an oxycodone/naloxone combination product in Japan. -- JM

SillaJen/Jennerex: The Korean CRO SillaJen is buying the cancer vaccine company Jennerex for up to $150 million (no specifics on the breakdown of payments have been disclosed). News of the deal came Tuesday from the french biotech Transgene, which is both a Jennerex shareholder as well as its partner in development Jennerex's lead vaccine Pexa-Vec, which did not meet its primary endpoint in a Phase IIb study in advanced liver cancer earlier this year. Transgene said that the companies' Pexa-Vec development and commercialization deal will "remain intact," with SillaJen taking over Jennerex's end of the bargain, and the companies plan to continue development of the GM-CSF vaccine in multiple other indications. SillaJen has been a partner and "major investor" in Jennerex since 2006, according to the latter company's web site.  -- CM

Myriad Genetics/Crescendo Bioscience: On Tuesday, Myriad Genetics expressed its desire to merge with fellow molecular diagnostics maker Crescendo Bioscience, under a three-year option it obtained as part of a $25 strategic debt investment in Crescendo in 2011. (We wrote then about how the deal strengthened Myriad’s expertise in protein-based testing and would potentially help diversify its revenues beyond oncology [Crescendo launched its Vectra DA rheumatoid arthritis test in November 2010].) The move by Myriad, which is subject to completion of due diligence, was triggered by Crescendo’s having reached a minimum revenue milestone set under the 2011 agreement: as noted in a November 27 Myriad 8-K filing, the purchase price will be based on a multiple of revenue determined by the revenue growth rate of Crescendo at the time of option exercise. If Myriad ultimately declines the option, Crescendo might opt for an initial public offering, an event that would allow Myriad to convert the debt to equity at the IPO price. An IPO would be tempting given the recent IPOs of several standout molecular diagnostics firms including Veracyte and Nanostring. -- Mark Ratner

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