Deals Of The Week: Celgene/Agios, Teva/Mersana, Hospira/Javelin ...

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. Visit the blog at ¹ http://invivoblog.blogspot.com.

It's been a week of monetary navel gazing, as laggards stateside booted up TurboTax and calculated their contributions to dear Old Uncle Sam while tea partiers condemned America's "gangster government," shouting their own version of "Show me the money." (Got health care with that?)

Who else was feeling taxed this week? How about OSI shareholders? Analysts expect Astellas' hostile-turned-friendly negotiations with the biotech will result in an offer closer to $60-a-share even if no white knight emerges. Certainly, it doesn't look like a majority of OSI shareholders will tender their shares without a little extra consideration.

Fabry and Gaucher disease patients seem ready to yell "Show me the drug!" The New York Times reports anger among Genzyme's most faithful constituency due to the continued shortfall in Cerezyme and Fabrazyme supply. Carl Icahn's blood pressure may be rising as well, given the arrangement Genzyme brokered with that other activist outfit, Relational Investors.

Let's not forget Novartis employees. David Epstein, head of global pharma for Novartis, gave his "help me help you" speech in a letter, announcing the second major reorganization of the U.S. pharma in less than a year.

It's always "show me the money" for biotechs on the prowl for deals and venture firms in fundraising mode. Early-stagers Third Rock Ventures of Boston joined the ranks of VCs on the money trail; SEC documents this past week revealed the firm wants to raise $400 million for its second fund. Meanwhile, the National Venture Capital Association released first-quarter venture numbers that show it's still a tough go for private biotechs looking for money.

Celgene/Agios: Agios won't be uttering the phrase "show me the money" for some time. Rather than tapping its VC backers - ARCH Venture Partners, Third Rock and Flagship - for a Series B or C, the company hitched its fate to Celgene in a deal reminiscent of Sanofi-Aventis' amended tie-up in November 2009 with Regeneron.

In exchange for $130 million, which includes what Agios execs called a "modest" equity investment, Celgene has an exclusive option at the end of Phase I to develop any drugs resulting from Agios' cancer metabolism research platform. Celgene can extend the undisclosed exclusivity period if Agios agrees, but it will have to provide additional funding for the privilege.

Agios will lead discovery and early translational development for all cancer metabolism programs, while Celgene controls and funds global development and commercialization of any licensed drugs. On each program, Agios could receive up to $120 million in milestones as well as sales royalties.

The deal is noteworthy for two reasons. First, it's the largest known alliance value so far this year, and all of the molecules are still preclinical. Second, it's unusual for a private company to ally itself so closely to one partner so early in its life-cycle. Agios' near-term fin-ancial future is secure, but now that it's tied to the hip of Celgene, its exit options are far narrower. In other words, if the initial public offering window doesn't re-open, who will show Agios' investors the money?

Teva/Mersana: Teva's new slogan ought to be "We're not just about generics anymore." Further proof of the Israeli giant's expansion into branded drugs came last week with the firm's April 13 alliance with Mersana, a privately-held biotech developing a novel analog of fumagillin, XMT-1107, for a variety of oncology indications.

Bio-bucks for the deal total $334 million, including development, regulatory, and commercial milestones, but the parties did not disclose the upfront for the Phase I-ready compound. Teva gains rights to '1107 in all indications worldwide except for Japan and will take over development costs.

Fumagillins, which inhibit angiogenesis by a pathway distinct from vascular endothelial growth factor, are a well-studied class of potential cancer molecules that also come with safety concerns (Takeda and Abbott abandoned their programs in the mid-'90s.) Mersana believes its flexible biopolymer conjugate technology solves the toxicity issues. A Phase I trial in all comers with refractory solid tumors is due to begin later this year.

Roche/Mendingo: It's good to be a diabetes device player, especially when pharma companies are on the prowl. Just weeks after Sanofi made a run at becoming an end-to-end diabetes provider by purchasing blood glucose monitor developer Agamatrix, Roche paid $160 million upfront plus $40 million in performance-based earn-outs to take out Mendingo, maker of the Solo micro insulin patch pump.

Mendingo already has 510(k) clearance for Solo, but the system is not expected to launch until 2012 because of manufacturing capacity limitations. The device will dovetail with Roche's Accu-Chek blood glucose meter and insulin pump offerings for diabetes management. As David Kliff of Diabetic Investor has noted, pharma companies see an opportunity to provide integrated solutions to the rapidly expanding diabetic population. One segment poised for growth is the patch pump market, which could jump more than 30 percent in the coming year, especially if the products are approved in Europe. In the U.S., Solo's main competition comes from Insulet, maker of the Omnipod patch pump.

Hospira/Javelin: When Hospira showed Javelin $141 million this week, Javelin ditched its potential acquirer Myriad Pharmaceuticals in favor of what Javelin management called "a superior proposal." Javelin, which submitted its pain drug Dyloject to the FDA in December and has an Oct. 3 PDUFA date, has been viewed as an increasingly attractive acquisition target - especially since Myriad's bid, also launched in December, was viewed by the Street as "underwhelming."

The original deal called for Myriad to acquire Cambridge, Mass.-based Javelin with stock, and it would end with Javelin stockholders owning 41 percent of the combined company. Hospira, however, offered $2.20 a share in cash, and it will pay more than $12 million in fees related to the break-up. Myriad had until midnight April 16 to respond with a superior offer, but analysts at Leerink viewed its noncommittal response as an indication that a sweeter deal won't be in the offing. For Hospira, the acquisition seems to make strategic sense, further building out its pipeline of specialty injectables.

- Ellen Foster Licking ( ² [email protected] ), Alex Lash ( ³ [email protected] ), Joseph Haas ( ⁴ [email protected] ), Jessica Merrill ( ⁵ [email protected] ) and Brooke McManus ( ⁶ [email protected] )