In Deals With Respivert And Orexo, J&J's Respiratory Push Gets Going

J&J acquired respiratory drug discovery firm Respivert and licensed two respiratory preclinical research programs from Orexo.

Johnson & Johnson showed it is serious about respiratory drug development June 1, announcing two separate deals that will enhance its efforts in the space. The company announced the acquisition of the privately-held UK drug discovery company Respivert, gaining access to several potentially first-in-class drugs for asthma and chronic obstructive pulmonary disease, and licensed two research programs from the Swiss drug developer Orexo.

Both deals include research programs in preclinical development, and so their value to J&J will play out over the long-term. J&J isn't currently known for its respiratory prowess. The market for asthma and chronic obstructive pulmonary disease is a business led by longtime leaders like GlaxoSmithKline ( Advair ), Merck ( Singulair ), Novartis ( Foradil and Xolair ), AstraZeneca ( Symbicort ) and Boehringer Ingelheim ( Spiriva ).

But J&J is looking to become a leader in what is a competitive and fast-growing area of drug development. The company's internal research efforts have yielded a pipeline of biologic and oral therapies for respiratory diseases. The tumor necrosis factor inhibitor Simponi (golimumab) and the anti-interleukin12/23 Stelara (ustekinumab) are both in Phase II development for sarcoidosis, an inflammatory disease that can affect the lungs. CNTO 888, a CC chemokine ligand 2 (CCL2) inhibitor is in Phase II studies for idiopathic pulmonary fibrosis. Other large and small molecules are in early development, J&J said.

Pulmonary R&D is led by Centocor scientists, and ultimately, respiratory drugs will fall into Centocor Ortho Biotech's Immunology Therapeutic Area.

With the two latest deals, J&J is expanding its respiratory research efforts beyond its walls. "These announcements show that we remain focused on continuing to build [and] strengthen a new pulmonary franchise by accessing science and identifying strategic collaborations to bring innovative treatments to patients in need," the company said.

Respivert Adds Potential First-In-Class Opportunities

With the acquisition of Respivert, J&J gains several early-stage inhaled small molecules that could be potential first-in-class opportunities, as well as an experienced respiratory research team. J&J said the team was an attractive element of the acquisition, one that will enhance the company's pulmonary infrastructure and scientific expertise.

Respivert's two lead drugs, RV-568 and RV-1088, are narrow-spectrum kinase inhibitors. The drugs - which have a unique profile of anti-inflammatory activity according to J&J - are moving into clinical development for severe asthma, COPD and cystic fibrosis. The drugs could offer a new treatment option to patients with severe lung disease who are insensitive to inhaled corticosteroids.

The clinical development of the candidates will be led by Respivert in collaboration with scientists at Centocor, the firms said. Respivert will maintain its research and discovery presence at the Imperial BioIncubator at the Imperial College of London.

The startup was originally funded with £13 million in August 2008 financed by Advent Venture Partners, Fidelity Biosciences, Imperial Innovations and SV Life Sciences. The company was founded by two GSK alums, CEO Garth Rapeport, who previously headed GSK's Center of Excellence for Drug Discovery (CEDD) for respiratory and inflammatory diseases, and Head of Drug Discovery Peter Strong, who also worked in GSK's respiratory CEDD and later as a consultant. Peter Barnes, head of respiratory medicine at Imperial College London, was also a co-founder.

While the terms of the transaction weren't disclosed, at least one investor, Imperial Innovations Group, said the price was attractive. "We took the opportunity to take an exit because the price was right," Imperial Innovation's CEO Susan Searle said. Imperial announced that it received £9.5 million in cash from the sale of its 13.4 percent stake in Respivert, reflecting a 4.7 times return on investment. While Searle cautioned that the sale to J&J was a "complex" deal structure, based on Imperial's return, it would appear the value of the deal is somewhere in the ballpark of £73 million, or around $100 million.

Orexo Licensing Collaboration Brings Oral Drug Candidates

The licensing deal with Sweden's Orexo is for two research programs that address a different segment of the asthma and COPD market, the opportunity for oral treatments. Under the arrangement, J&J gains worldwide rights to Orexo's OX-CLI and OX-ESI programs. Both are preclinical research programs from which no specific drug candidate has yet been selected and both target enzymes in the body that break down arachidonic acid, which can cause inflammation.

The OX-CLI program targets leukotriene C4 synthase, which could eventually result in a once daily non-steroidal tablet, a medication that could replace inhaled Advair for the control of asthma and COPD, according to Orexo. The OX-ESI program targets 15-lipoxygenase and is aimed at treating asthma from the point of inflammation.

In addition to those two programs, the agreement also allows J&J to add a third internal program against an undisclosed target. J&J didn't reveal details of that program, but said it is unrelated to Respivert.

The Orexo agreement, conducted through J&J's Ortho-McNeil-Janssen Pharmaceuticals affiliate, will run for three years, with an option for J&J to extend the alliance and funding. Under the initial terms, J&J will provide Orexo with up to $21.5 million in research funding, including a $10 million upfront payment. The total potential value of the deal for all three programs in multiple indications is $564 million, plus additional sales milestones.

Orexo Senior VP and Head of Corporate Development Robin Wright said the companies expect to have a drug candidate from each program in the clinic by the early-part of the three-year alliance. "We would expect the first drug to get to the market somewhere around 2017/2018," he said.

Orexo will be responsible for the programs through drug selection, at which point J&J will become responsible for all further development.

For Orexo, a listed company focused on pain and inflammation, the deal further strengthens the company's cash position. Novo Growth Equity invested about $30 million in the company in March (Also see "European Specialty Pharma is the Focus for Novo Growth Equity - Again" - Pink Sheet, 16 Mar, 2010.). The company believes it has enough cash now to see it through to profitability. The Swedish group is generating revenues from drugs like the cancer pain treatment Abstral (sublingual fentanyl), available in Europe and pending with U.S. regulators, and Edluar , fast-dissolving tablet versions of zolpidem. All of its marketed drugs are sold by partners.

-Jessica Merrill ([email protected])