Deals Of The Week: Merck/Parexel, Biotie/Synosia, Bristol-Myers Squibb/Pharmasset

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 http://invivoblog.blogspot.com.

The setback in Merck & Co.'s Phase III program for its anti-platelet drug vorapaxar and the annual J.P. Morgan health care conference dominated this week's biopharma news, but that wasn’t the only news of note.

Merck's star fell a notch or two after it unexpectedly announced serious clinical setbacks in its vorapaxar (TRA) program – one of the key assets from its 2009 acquisition of Schering-Plough (. Merck has been one of Wall Street's favorite big pharma companies this year because of the promise of its pipeline – which Schering assets helped to bolster – but the news caused its stock to drop 6.6% on Jan. 13, wiping out about $7 billion in market cap value – or enough to buy a whole universe of biotech companies.

Wall Street isn't quite ready to give up on Merck and question the entire premise for the Schering deal – as it has done with Pfizer Inc.'s acquisition of Wyeth. Analysts more often than not noted on Jan. 14 that Merck still has a promising pipeline, a small patent cliff, and a stock that retains some upside – but that upside is now slightly reduced. And it can ill afford more setbacks with some of the other risky late-stage projects that should deliver on news in 2011 – including an edgy arbitration against Johnson & Johnson over control of Remicade, the anti-inflammatory drug that got caught up in a battle over rights after Merck bought Schering-Plough in 2009.

Merck and other companies are still delivering on deals, many of which underscore the significance of emerging trends from 2010, including the importance of value in new product development and outsourcing (Merck and Parexel), increasing interest in industry-academic pre-competitive collaborations (Sanofi-Aventis/UCSF (Also see "Business And Finance, In Brief" - Pink Sheet, 17 Jan, 2011.) and early-stage cross-company collaborations (Bristol-Myers/Squibb/Pharmasset).

Merck/Parexel

Merck was one of the first companies to announce a strategy for bringing the low-cost biologic copies to market after U.S. health care reform provided a clearer regulatory path for biosimilars. It announced formation of a BioVentures unit in December 2008, with plans to have at least six biosimilars in development by 2012. It has kept close to the vest details of its target priorities, so far noting publicly only its interest in Amgen's granuloycyte colony-stimulating factors Neupogen (filgrastim) and Neulasta (pegfilgrastim).

Now, Merck has struck a partnership with clinical research organization Parexel International Corp. in which the CRO will conduct clinical trials for some of the big pharma’s biosimilar programs. True to form, however, the companies won't say which therapeutic areas their collaboration covers. "One of the things that was exciting for us is that we were able to build a deal structure with Parexel in which they are rewarded for performance," Merck BioVentures President Michael Kamarck told “The Pink Sheet” DAILY. "In the biosimilar arena, time is everything, so ... they will provide us with timeliness and efficiency in terms of execution of the trials."

Biotie Therapies/Synosia Therapeutics

An all-European “global leader” in central nervous system drug development will be borne out of the proposed €93 million ($120 million) combination of Finland-based Biotie Therapies and Switzerland-based Synosia Therapeutics, announced Jan. 11. Following Biotie's all-share acquisition of Synosia, the new combined entity will have nine CNS products in clinical development, including the Phase III alcohol-dependence product nalmefene, which is being developed by partner Lundbeck, and a Parkinson’s disease therapy and a movement disorder drug, being developed by Synosia in collaboration with Belgian company UCB Pharma.

Under the agreement, likely to close shortly after a shareholders meeting on Feb. 1, Biotie will issue 161,448,371 shares to the shareholders and warrant holders of privately owned Synosia. Shareholders in Synosia, which include Versant Ventures, Abingworth LLP, Novo AS and UCB SA, will end up with 50% of the new company. The agreement comes just in time for Biotie, which only had liquid assets of €8.9 million at the end of the 2010 third quarter.

The move gives a boost to a therapeutic sector which has seen companies taking divergent views on the prospects for CNS therapies – some, like GlaxoSmithKline PLC, have exited several areas of CNS research, will others, like Biogen Idec are making CNS a core focus.

Takeda San Francisco/Pieris AG

The antibody-focused North American subsidiary of Japan’s Takeda Pharmaceutical Co. Ltd., has agreed to license the protein scaffold technology of privately held Pieris AG to identify drug candidates around a target of Takeda’s choosing. Financial terms were undisclosed, although Takeda says it will have an option to advance at least one drug candidate on its own. Pieris maintains a proprietary library of recombinantly engineered lipocalins, proteins which bind with and transport a range of hydrophobic molecules. Those proteins, which it has named Anticalins, are the basis of the Takeda deal.

The company also licensed its Anticalin platform in a multi-target deal with Sanofi-Aventis and its vaccines division Sanofi Pasteur in September. Backed by venture investors including OrbiMed Advisors and Global Life Science Ventures, Pieris has its own pipeline as well, including a Phase I anti-VEGF candidate. Takeda established the San Francisco subsidiary in late 2007 to explore human antibody therapeutics.

Bristol-Myers/Pharmasset

Bristol Myers Squibb and Pharmasset have teamed up in a clinical partnership that marks the first cross-company collaboration to study two investigational oral drugs for the treatment of hepatitis C. The two firms announced plans to study Bristol's investigational NS5A replication complex inhibitor BMS-790052 and Pharmasset's nucleotide polymerase inhibitor in combination Jan. 10.

The deal is unusual in that drug makers generally do not collaborate on clinical trials for investigational drugs for competitive reasons, and tend instead to study combinations within their own pipelines or with at least one already marketed drug. Regulatory uncertainties and, perhaps just as important, cultural resistance, also present hurdles. But novel-novel combinations increasingly are viewed as the best way to treat certain serious diseases like cancer and hepatitis C, and in the current risk-sharing climate, they could become more common.

In hepatitis C specifically, the primary drug development focus is on combinations that could replace or reduce the use of the current standard of care, ribavirin and pegylated interferon (Roche's Pegasys or Merck's Pegintron), a regimen with a nasty side effect profile and limited efficacy. Bristol's decision to sign a clinical trial collaboration rather than in-licensing a polymerase inhibitor is interesting since the company recently acquired its hepatitis C partner ZymoGenetics to gain more control over the program.

"A clinical collaboration agreement was the right structure in this case," a Bristol spokesperson said. "It demonstrates our commitment to the goal of helping patients with HCV. We are willing to follow multiple strategies: in-house development, acquisition and now a clinical collaboration."

By Lisa LaMotta, John Davis, Paul Bonanos, Jessica Merrill, Wendy Diller