Deals Of The Week Searches For Meaning In Deal Break-Ups

Amid a dearth of private-sector deals, we review some of this year’s break-ups, take a closer look at the Leukemia & Lymphoma Society’s deal-making strategy and highlight two deals from the U.K.’s Cancer Research Technology, as well as a licensing pact between Adimab and Alector.

It’s been a ghoulish week for deal-making – only a small handful of deals made it onto our list of noteworthy new transactions.

We could not spot one, large or small, involving big pharma or specialty companies. Nor find any particularly compelling reason for the interlude. A number of the largest and most active deal makers are adjusting to new leadership and reorganizations, among them Shire PLC, AstraZeneca PLC, Bayer AG, Merck & Co. Inc. and Teva Pharmaceutical Industries Ltd.

Certainly, the abrupt resignation of scientist-executive Jeremy Levin as CEO of Teva was a management deal gone bad, leaving the world’s largest generics company adrift and its board of directors on the defensive against a bewildered and angry Wall Street (Also see "After CEO’s Abrupt Resignation, Teva Management Emphasizes Stability" - Pink Sheet, 4 Nov, 2013.).

That led us to reflect on business deals gone bad and – a trip to the virtual deal cemetery – Deals of the Week’s ‘No Deal’ designation. For the year to date, this column has tracked 10 noteworthy terminations, a figure that is in line with stats for the past three years.

It’s impossible, or rather meaningless, to speculate much about commonalities among these deals. It’s likewise impossible to extract trends based on, say, the ratio of deals that don’t pan out to those that do. Discarded deals covered a range of therapeutic areas and most involved a big pharma abandoning a biotech collaboration. But break-ups occurred at all kinds of points in time and at different phases of development.

A romp among the headstones:

• GlaxoSmithKline PLC pulled out of a licensing agreement with ChemoCentryx Inc. in September, over Crohn’s disease candidate vercimon following a Phase III miss; ChemoCentryx is trying to figure out why the GSK-led study failed while the Phase II succeeded (Also see "ChemoCentryx Regains Crohn’s Candidate Vercirnon From GSK" - Pink Sheet, 18 Sep, 2013.).
• Teva itself was the source of several “No Deals” in the course of the year, as its new CEO – now gone – and his management team undertook a pipeline review that resulted in handing back solid tumor therapy Rx 3117 to Rexahn Pharmaceuticals Inc.[See Deal]
• Also canned was the Israeli generics maker’s much larger, high-profile, four-year-old biosimilars pact with biologics manufacturer Lonza Group [See Deal], which is doing its share of soul-searching and dealing with its own management upheaval ( (Also see "Deals Of The Week: Tellingly, Teva And Lonza Part Ways" - Pink Sheet, 29 Jul, 2013.)).
• Amgen Inc. ended a 2009 collaboration around a type 2 diabetes program with Array BioPharma Inc.[See Deal].
• Perhaps the fissure with the biggest ramifications was AstraZeneca’s termination of a collaboration with partner Rigel Pharmaceuticals Inc. around the Phase III rheumatoid arthritis drug fostamatinib (Also see "Lackluster Fostamatinib Results Prompt AstraZeneca To Drop Rigel Deal" - Pink Sheet, 4 Jun, 2013.). Although that deal involved only one asset, it was expensive – AstraZeneca paid $100 million upfront – and emblematic of the pharma’s ongoing pipeline problems.

But we couldn’t bear to end the week on such a downbeat note, with an energetic meeting like Partnering For Cures about to begin Nov. 4 in New York. This meeting, funded by The Milken Institute, now in its fourth year, is a showcase for venture philanthropy and aims to bring together non-profit disease foundations, patient advocacy groups, investors and biopharma companies in order to look for ways to fund gaps in financial support of innovative medicines for deadly diseases (Also see "Venture Philanthropy: The New Venture Capital?" - Scrip, 1 Mar, 2007.).

Stemline Therapeutics/The Leukemia & Lymphoma Society

One of the few deals announced this past week involved one such venture philanthropy initiative. On Oct. 29, the non-profit Leukemia & Lymphoma Society and two-year-old biotech Stemline Therapeutics Inc. announced a partnership to speed up development of a cancer stem cell therapy, SL-401, for the treatment of acute myeloid leukemia and blastic plasmacytoid dendritic cell neoplasm. The latter is a rare hematological disorder with characteristics of both leukemia and lymphoma. LLS is committing more than $3 million to help develop the drug and support an educational program around BPDCN.

The drug has demonstrated efficacy in patients with advanced AML and BPDCN, including multiple durable complete responses in both indications, a greater than 80% overall response rate in BPDCN, and an improvement in overall survival of third-line AML patients relative to historic data, the companies said in a press release.

LLS wouldn’t provide much information about the compound or the deal, but it has a long track record in funding early-stage research in blood cancers and getting some of those projects into the clinic. It awards about $60 million in grants to academic investigators each year, and at any one time has about 300 grant-sponsored projects underway. Because of its close, long-standing ties to academia, LLS has deep expertise in science and a network of contacts that can facilitate progress of successful development programs, said Louis DeGennaro, the society’s chief mission officer and a scientist by training (Also see "With Capital Scarce, Charities Emerge As A Stronger Force On Start-Up Scene" - Pink Sheet, 1 Mar, 2009.).

The effort to bring industry closer into the LLS fold began after DeGennaro joined the organization eight years ago, when it had the broad grant program for academics but little else in place to facilitate getting promising research projects through what is referred to as “the valley of death.” About 10% to 15% of the projects it funded moved into development, but it was tough to do FDA-compliant studies in an academic environment, he recalled in an interview.

In 2008, DeGennaro started the society’s Therapeutic Acceleration Program to assist investigators and companies in filling in that gap, harvesting programs from its research portfolio as well as early stage programs under way at biotech companies that could be effective in treating blood cancers, but were not being developed because of economic or other concerns.

LLS provides these companies with non-dilutive capital, expertise and access to networks of key opinion leaders and contract research organizations; in exchange, the recipient company must agree to continue work on the project for a period of time after LLS funding has ended. The largest subsidy to date is $12 million, and the development timeline of interest is from late preclinical through Phase III.

LLS does not ask for equity or take a typical private-sector return; it seeks comparatively small milestone payments tied to approval of the drugs it funds in major markets, as well as a small royalty. The aim is to provide enough capital for companies to advance a compound to the point where they can attract private-sector funding. Nor does LLS retain intellectual property on the products it funds; it wants the asset to be unencumbered when its owners look for outside financing, he added.

One LLS relationship in particular, with Celgene Corp., continues to expand. About a year and a half ago, the organizations entered into a partnership, which Celgene is supporting, and which LLS and Celgene are administering. In its simplest terms, the partners use a grant program to vet and fund early stage research, and Celgene gets first right of negotiation for intellectual property coming out of the programs over a protected period of time. If it is interested, the big biotech then has the right to negotiate with the academic investigator and his or her institution. LLS does not participate in any deal Celgene works out.

Cancer Research Technology/Chroma Therapeutics & Nuevolution

Cancer Research Technology (CRT), the commercial arm of the charity Cancer Research UK, is accelerating its support of early biotech research with two separate deals announced within days of each other, with the U.K.’s Chroma Therapeutics Ltd. and Denmark’s Nuevolution AS.

With funding from the CRT Pioneer Fund (CPF), Chroma will move a lead molecule, a mitogen-activated protein kinase (p38) inhibitor, towards clinical trials, with the CPF receiving rights to further develop and commercialize any resulting products, CRT announced Oct. 31. Chroma attaches chemical motifs onto drugs that are freely transported into cells but then cannot exit. The therapeutic molecule then accumulates within tumor-associated macrophages, reprogramming them to attack tumors, the company explained. The deal is the third made by the $80 million asset-centric CPF, which was set up in 2012 by CRT, the charity, and the European Investment Fund (Also see "New $80 Million U.K. Asset-Centric Cancer Research Fund Set Up With EU, Charity Funding" - Pink Sheet, 29 Mar, 2012.).

In its collaboration with venture-backed Nuevolution announced Nov. 4, CRT will identify and select promising biological targets against which Nuevolution will then screen “hundreds of millions” of diverse small molecules for anticancer activity. Nuevolution’s technology uses DNA to label the small molecules that bind to proteins. CRT’s discovery laboratories then will use other assays to select the most promising molecules for future development, with the molecules becoming the subject of further deals made between CRT and Nuevolution.

The Danish company already has attracted collaborations with big pharma heavyweights like Boehringer Ingelheim GMBH, Novartis AG and Merck. It is backed by a group of Scandinavian VCs, including SEB Venture Capital, Sunstone Capital, Industrifonden, SLS Invest, Novo Ventures and Innoventus Life Sciences.

Adimab/Alector

The formation and financing of Alzheimer’s disease-focused Alector LLC ties what its founders call “unique biological insight” with the prolific antibody discovery platform of Adimab LLC – and demonstrates private investors’ appetites for making distinct bets on discovery and development opportunities (Also see "Adimab Inside: Polaris, Orbimed Back Antibody Attack On Novel Alzheimer’s Biology" - Pink Sheet, 31 Oct, 2013.).

Alector, which announced an undisclosed amount of Series A financing Oct. 31, is the second R&D-focused biotech to spring in part from Adimab’s antibody-discovery engine. The company is not a spin-off of Adimab; instead it holds a license to Adimab’s technology and aims to exploit novel biology elucidated by co-founders Asa Abeliovich and President and CEO Arnon Rosenthal.

The terms of the deal between Adimab and Alector are extremely flexible. In the near term, Alector will cover fee-for-service costs associated with Adimab’s discovery process. But it essentially accesses Adimab’s antibody-discovery technology for free. Downstream, there are different flavors of project-specific licensing options depending on Alector’s financial and strategic priorities. These range from heavy upfront and milestone deals that are royalty-free through to all-royalty deals which are back-end loaded.

Alector and Adimab are separate companies, but the new company is part of the Adimab family tree. Alector’s chairman and co-founder is Tillman Gerngross, co-founder and CEO of Adimab, and co-founder of Arsanis LLC (a similar Adimab-offshoot in the infectious diseases space) and other companies (Also see "Arsanis Biosciences GMBH" - Scrip, 26 Nov, 2012.). Adimab Co-founder and Chief Operating Officer and Arsanis director Errik Anderson is also an Alector co-founder. And Alector’s backers – the company simultaneously announced an undisclosed Series A financing – are Adimab investors Polaris Venture Partners and Orbimed Advisors; Polaris general partner Terry McGuire and Orbimed general partner Carl Gordon, both Adimab directors, also sit on the Alector board.

Numab/Sucampo

Yes, there’s another “No Deal” this week. The Zurich, Switzerland-based company Numab AG announced Oct. 29 that it had reacquired rights to an investigational bispecific antibody fragment, ND003, from its collaborator, Sucampo AG, a subsidiary of Sucampo Pharmaceuticals Inc., and intended to develop the compound further as an inhaled therapy for severe asthma. Further financial details of the agreement were not disclosed.

The two companies entered into a multi-target collaboration in 2011, just months after Numab was founded, aimed at discovering high-affinity antibodies with sub-picomolar affinities against difficult-to-reach targets. Sucampo would retain exclusive commercial rights to any potential products identified, in return for research funding and other potential payments.

Numab says it is now raising Series A financing to advance ND003 and another compound, the potential anti-inflammatory ND007, to the next value inflection point. ND003 is expected to be administered by inhalation, thereby attacking lung-resident eosinophils that play a role in severe asthma but are difficult to reach with systemic-administered antibody-based products, the Swiss company noted. ND003 targets interleukin-5 receptors on eosinophils, rapidly depleting their number.