Deals Of The Week: Sandoz/Fougera, Abbott/Action Pharma/Zealand, AstraZeneca/Axerion

New company Tolero helps MannKind de-risk a preclinical BTK inhibitor program in a “double-jointed” deal in which the “bio-bucks” eventually could flow in either direction.

[Each week, “The Pink Sheet” presents commentary on some of the week’s most interesting business deals, contributed by the editors of the IN VIVO blog.]

In a deal structure that perhaps could best be described as “double-jointed,” new company Tolero Pharmaceuticals Inc. has licensed exclusive worldwide rights to MannKind Corp.’s preclinical Bruton’s tyrosine kinase (BTK) inhibitor program, which Tolero believes could yield novel therapies for hematological cancers and inflammatory diseases.

MannKind, of course, is focused almost exclusively on its perennially troubled effort to develop a recombinant inhaled insulin product, Afrezza (Also see "MannKind Shares Game Plan For Tackling Afrezza's Complete Response" - Pink Sheet, 19 Jan, 2011.). The deal with Tolero puts development of the BTK compounds in the hands of the privately held, Utah-based biotech, but allows MannKind the ability to opt back in after Phase I if it likes what Tolero has uncovered. In the case that MannKind opts back, “bio-bucks” slated to go to MannKind under the deal would flow instead to Tolero.

“It’s a different model that we proposed and one that I think MannKind really liked,” Tolero Chairman and CEO Dallin Anderson said in an interview. “It aligned incentives and made our negotiation progress very smooth. I think us proposing a structure that de-risked the opportunity for MannKind and gave them a chance to still be involved down the road helped us with not only terms but also to get to an agreement that makes sense for both parties.”

Tolero will pay an upfront amount with the potential for development, approval and commercialization milestones going to MannKind, along with tiered royalties on any product sales. The parties did not disclose precise deal terms, but Tolero said the upfront and milestones could total $130 million. However, MannKind also retains the right to re-acquire the BTK assets at pre-specified terms up to 60 days after the conclusion of Tolero’s first Phase I study. If MannKind elects this option, it would assume all development and commercialization responsibilities and costs, with Tolero entitled to the potential earn-outs specified in the April 30 deal.

“BTK currently represents one of the most exciting therapeutic targets in oncology, and we feel that our collaborative approach to targeting BTK may uncover some novel utilities not yet fully realized,” Anderson said. Pressed for details on what those additional “utilities” might be, however, the CEO remained mum.

Much about Tolero remains unknown – founded in 2011 and based in Salt Lake City, the firm is not backed by venture capital or institutional investors. Anderson, who noted his background as having co-founded Montigen Pharmaceuticals Inc. in 2003 and then selling to SuperGen in 2006 at a significant multiple, would say only that his company is funded by a number of private investors [See Deal]. Its own programs, including two compounds – TP-0413 for cancer-related anemia and TP-0829 for B-cell malignancies – are slated to enter clinical development in the next year and derive from a discovery approach based upon single genetic alterations that drive cellular signaling pathway abnormalities.

Tolero also is not disclosing the specific source of its technology, although Anderson alluded to some research relationships with the academic community in Utah, specifically the University of Utah and Brigham Young University. The company’s website says it “seeks to target diseases from a pathway-centric approach by identifying and developing pathway-specific inhibitors and then identifying specific diseases (i.e., cancer subtype) and genetic backgrounds where these pathway inhibitors exhibit enhanced efficacy.”

TP-0413, which targets signaling involved in the regulation of serum iron levels, a pathway implicated in rheumatoid arthritis as well as cancer, is in advanced preclinical and IND-enabling studies, with a goal of beginning clinical development in the second half of this year. Tolero also hopes TP-0829 will move into the clinic early next year, with potential activity in non-Hodgkin lymphoma, chronic lymphocytic leukemia and multiple myeloma.

Elsewhere, it was a typically busy week on the biopharma deal-making front – let’s get caught up with the latest round-up of the Deals of the Week:

Sandoz/Fougera

Novartis AG’s generics unit, Sandoz International GMBH, announced May 2 that it will be acquiring Melville, N.Y.-based Fougera Pharmaceuticals in an all-cash transaction worth $1.53 billion that is expected to close some time in the second half of 2012. Fougera, which produced sales of about $430 million in 2011 and has about 700 employees, will make Sandoz the largest manufacturer of generic dermatology products in the world.

For Sandoz, the acquisition was “a strategic bolt-on with synergy potential,” said Jeff George, global group head, in an interview. According to Sandoz, once the acquisition is complete, the generic dermatology unit will take in about $620 million in sales globally, with most of that coming from the U.S. On the worldwide market, the company will compete with the likes of Allergan PLC, Mylan NV, Sanofiand Teva Pharmaceutical Industries Ltd.

Fougera, previously Fougera Pharmaceuticals Inc., was the dermatology business of Swiss-based Takeda Nycomed AS before it was acquired by Takeda Pharmaceutical Co. Ltd. for $13.6 billion in 2011 (Also see "Takeda Boosts European, Emerging Markets Footprint With $13.6B Nycomed Buy" - Pink Sheet, 19 May, 2011.). Takeda decided to pass on the U.S.-based part of the business because it lacked expertise in dermatology and was uninterested in building out the assets.

Since the Takeda takeover, Fougera has remained the asset of private investors – Nordic Capital, DLJ Merchant Banking (a Credit Suisse Group affiliate) and Avista Capital Partners. The acquisition by Sandoz gives those investors a good return with a multiple of about 8.8 times the company’s 2011 earnings before interest, taxes, depreciation and amortization (EBITDA) of $173 million.

Abbott/Action Pharma/Zealand

Abbott Laboratories Inc. boosted the renal pipeline of its soon-to-be-separate pharma division AbbVie by acquiring worldwide rights to Action Pharma AS’ AP214, a Phase IIb drug designed to treat acute kidney injury that can occur during cardiac surgery (Also see "Abbott Adds To Renal Pipeline In Deal With Action Pharma" - Pink Sheet, 3 May, 2012.). Unlike most licensing deals for pipeline assets, Abbott obtained rights to the drug for a single payment, a $110 million cash transaction that won’t be followed by milestone or royalty payments. (Abbott has made this type of bet at least once before, paying PanGenetics BV $170 million upfront for a Phase II anti-NGF asset in 2009 (Also see "Abbott Joins Race To Develop Nerve Growth Factor Antibody With PanGenetics Deal" - Pink Sheet, 12 Nov, 2009.)).

Yet there’s one complicating factor: Denmark-based Action had developed the drug using structural peptide technology licensed from Zealand Pharma AS, another Danish company. In the new arrangement, Action rather than Abbott will pay Zealand DKK 62 million ($11 million), and Zealand is due a royalty in the low single digits if Abbott commercializes the drug. The old agreement between Action and Zealand has been terminated.

Abbott will begin a second Phase IIb study on the drug this fall. No treatment has yet been approved for acute kidney injury in patients who have undergone cardiac surgery. Abbott already holds ex-U.S. rights to Phase III chronic kidney disease candidate bardoxolone, licensed in September 2010 from Reata Pharmaceuticals Inc., as well as atrasentan, an internally developed Phase II endothelin-receptor antagonist in diabetic kidney disease (Also see "Abbott Pays $450MM Up-Front For Rights To Reata's CKD Drug" - Pink Sheet, 23 Sep, 2010.).

AstraZeneca/Axerion

AstraZeneca PLC’s new virtual neuroscience drug discovery and development unit reached its first partnership agreement May 1, with a licensing and co-development pact centered on preclinical antibodies for Alzheimer’s disease discovered by Axerion Therapeutics Inc. (Also see "MedImmune’s Alzheimer’s Antibody Partnership With Axerion Showcases Virtual Neuroscience R&D Operation" - Pink Sheet, 2 May, 2012.). No financial terms were revealed, but Axerion will receive an upfront payment and research and development funding and be eligible to earn milestones and sales royalties if any compound reaches market.

The New Haven, Conn., biotech will work with MedImmune LLC, the biologics subsidiary of AstraZeneca, to optimize and develop antibodies that block the binding of amyloid-beta oligomer to cellular prion protein (PrP-C) in the brain. MedImmune has bought into Axerion’s program, in-licensed from Yale, in the hope that this approach could yield a disease-modifying therapy for one of the most challenging indications currently targeted in drug development (Also see "Axerion Therapeutics Inc." - Scrip, 1 Jul, 2010.).

The Axerion partnership is AstraZeneca’s first since it announced plans during a quarterly earnings call Feb. 2 to streamline much of its R&D function, including going to a virtual model in neuroscience (Also see "AstraZeneca Goes Virtual In Neuroscience R&D As Part Of Workforce Reduction" - Pink Sheet, 2 Feb, 2012.). At the time, R&D President Martin Mackay said the pharma’s goal was a “leaner, simpler, more innovative organization with a lower and more flexible cost base.”

Merck/Trevena

Pennsylvania-based Trevena Inc. announced May 2 that Merck & Co. Inc. will be the latest company to utilize its G-protein coupled receptor (GPCR) biased ligand platform. The company hopes to identify ligands that turn on only some biological responses, instead of a whole variety of biological responses, by using what it terms "biased ligands.” The company said that Merck, through a subsidiary, has signed on to use the technology to research biased ligands against an undisclosed receptor. Financial details of the transaction were not disclosed.

Trevena, which raised a $35 million Series B round in 2010, has other research under way, including its mid-stage lead compound, a drug meant to treat acute heart failure called TRV120027 (Also see "With $35 Million B Round, Trevena to Push GPCR-Targeted Program into Phase II for Acute Heart Failure" - Pink Sheet, 14 Jul, 2010.). GPCRs are protein structures that wind across the cell wall, crossing the cell membrane seven times, and common drug targets. When a ligand binds to a GPCR's extracellular part, it triggers a response inside the cell.

Gilead/AnaptysBio

On the heels of inking a partnership with Celgene Corp. in April, AnaptysBio Inc. has signed a fifth major pharma partner for its antibody discovery platform (Also see "AnaptysBio Makes Deal With Celgene For Antibodies" - Pink Sheet, 13 Apr, 2012.). This time it is Gilead Sciences Inc. that wants access to AnaptysBio’s SHM-XEL platform for antibody discovery.

The companies announced a partnership to develop novel antibody therapeutics May 1. Gilead will pay an undisclosed upfront fee and pay development milestones and royalties on sales of any drugs that emerge from the partnership.

AnaptysBio’s technology platform uses the natural biological process by which antibodies are generated, somatic hypermutation (SHM); the company claims its technology can create antibodies with different antigen-binding regions and better binding affinities. Its other pharma partners include Merck, Roche and Novartis.

Hologic/Gen-Probe

Women’s health-focused Hologic Inc., a developer and supplier of diagnostics, imaging and surgical products, is buying molecular diagnostics provider Gen-Probe Inc. for $3.7 billion in cash, to be paid for largely by taking on debt. Adding Gen-Probe’s automated instrument platforms gives Hologic critical mass in the molecular diagnostics market.

Hologic already owns a molecular diagnostics platform: the Invader technology it acquired when it bought Third Wave Technologies Inc. for $580 million in 2008 (Also see "Hologic Gains HPV Test Technology In $580 Million Third Wave Purchase" - Medtech Insight, 16 Jun, 2008.). That gave Hologic an entrée into the molecular testing space, including its own HPV test – a broadening of Hologic’s core focus in women’s health, which includes mammography and, via its merger with Cytyc Corp. in 2007, cervical and breast cancer diagnostics (Also see "Cytyc Together with Hologic: There's a Certain Logic " - In Vivo, 1 Jul, 2007.). Gen-Probe gives the company the automation and menu to grow the diagnostics market more quickly – by implication, something that the Third Wave acquisition failed to do.

A buyout of Gen-Probe has been in the air since April 2011, when Bloomberg reported that the company retained Morgan Stanley & Co., seeking a buyer. What’s unclear is why Hologic made its move now. There’s speculation that the deal foreshadows a weakness in Hologic’s business. “Based on their forward-looking diligence [statements], that does not appear to be the case,” says Piper Jaffray & Co. analyst Bill Quirk.

Clinical adoption of new Hologic’s tomosynthesis breast-imaging platform appears to be keeping pace with expectations. It brought on the Gen-Probe business as “one of the elements in building diagnostics so that it performs like [the] breast health [business], not so that it makes up for [it],” Hologic CEO Robert Cascella told investors. Post-acquisition, 50% of Hologic’s revenues will be in diagnostics, 38% in women’s imaging and 12% in surgical.

Royalty Pharma/Fumapharm

Royalty Pharma announced May 2 that it acquired an interest in the earn-outs payable to former shareholders of Fumapharm AG, which includes an interest in Biogen Inc.’s multiple sclerosis candidate BG-12, for $761 million in cash. Based in New York, Royalty Pharma says it is the industry leader in acquiring royalty interests in approved and late-stage pharmaceuticals, including interests in Abbott’s Humira (adalimumab), Pfizer Inc.’s Lyrica (pregabalin) and Genentech Inc.’s Rituxan (rituximab).

Biogen bought out Fumapharm in 2006 for $215.5 million and with it the German company’s lead product, psoriasis drug Fumaderm (fumaric acid esters) as well as BG-12 [See Deal]. In April, Biogen announced positive data from the Phase III CONFIRM trial, its second pivotal study in relapsing-remitting MS. The compound was filed for approval in RRMS at FDA in February and with the European Medicines Agency in March.