Pullan Consulting

Biotech Business Development Consulting

www.pullanconsulting.com and www.lindapullan.com

email:  lpullan@msn.com  805-558-0361

Issue #40, October 2009

Pullan's Pieces

Commentary on Science & Business of Drug Development

Analysis of Daiichi Arqule Deal – see www.pullanconsulting.com

Shifts in funding - Follow-on share offerings up, M&A down, Big Pharma licensing flat, Corporate VCs active earlier, VC funds down

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In the first 9 months of 2009, biotech firms have raised $5.7 billion through an assortment of 39 debt and share offerings.  There were 29 follow-on offerings of shares.  With improvement in the stock markets (with the NASDAQ biotech index up 39% since March lows), the pent up demand led to an increase in these fund raisings.  And it may be that the wave has just begun.  http://www.reuters.com/article/mergersNews/idUSN0532179320091007?pageNumber=1&virtualBrandChannel=0

M&A for biotech worldwide has fallen 84.6% this year to $8.4 billion, according to Thomson Reuters.  U.S. biotech merger activity is down 90.6%. The largest biotech deal of the year so far was BMS’s acquisition of antibody company Medarex for $2.4 billion, at a 90% premium. Also big were J&J's purchase of cancer company Cougar Biotechnology for $970 million and its $885 million purchase of an 18.4% of Elan.    http://www.reuters.com/article/mergersNews/idUSN0532179320091007?pageNumber=1&virtualBrandChannel=0

Big pharma companies are presumably seeing many more licensing opportunities as alternative funds are scarce.  But, Evaluate Pharma reported (October 9th) that for 2009 to date, the number of and dollar values of deals done by big pharma are roughly the same as in 2008.  Sanofi-Aventis has been most active, with 14 deals totally $266 million in upfront payments.  GSK, Merck and Bayer have all been active with 10 or more deals.  AstraZeneca struck the biggest deal so far with Nektar $125 million upfront and up to $1.5 billion in announced deal value. 

Big pharma may be using its corporate VC funds in part as an alternative to doing licensing deals.  They are filling some of the vacuum left by traditional VCs.  Pharma corporate VC funds are increasingly investing at earlier stages (where traditional VCs have not been investing) according to Evaluate Pharma reporting on a panel at BioPartnering Europe.  Martin Murphy, partner at MVM Life Science Partners, believes corporate VCs are now an absolutely essential source of funding at any investment stage and that significant financing rounds are no longer possible without them.  Alios Biopharma raised a $32M series A entirely from corporate venture arms of pharma companies.  (EP Vantage Point, October 14, 2009). 

VCs are finding it hard to get new funds as exits for their investors (IPOs and acquisitions) remain scarce.  In the first 3 quarters of this year, only 86 U.S. funds raised money, according to the Venture Capital Journal and the National Venture Capital Association.  If the trend is maintained, by year's end there will be somewhere between 104 and 118 new funds, down from 234 new funds in the bad old days of the dot-com bust of 2001.  The reduction in new funds raised will likely mean a reduction in VC firms, but perhaps this means fewer VCs making better investments in passionate companies   http://www.reuters.com/article/rbssEnergyNews/idUSN098659520091009 , http://www.pehub.com/52720/the-incredible-shrinking-venture-industry/ .

Big Pharma Continues to Innovate – Roche goes to Russia; GSK sets up Virtual POC unit

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Roche is tapping new territories to leverage an existing asset, heading to a Russian startup Viriom for development of a HIV drug.  Roche will be allowed to use the clinical data and retains rights in all other territories.  Viriom will pay Roche royalties on sales in its territories.  http://invivoblog.blogspot.com/2009/10/dotw-from-russia-with-love.html

GSK has set up a 6 person unit, headed by Dr. Allen Oliff, to produce (starting with candidates from GSK) Proof-of-Concept compounds (3 in 3 years) at substantially lower cost by outsourcings of chemistry, assays, drug metabolism and pk, and clinical trials (in China and India).  After Proof-of-Concept, the successes will be delivered by to GSK for further development.  No licensing costs will be involved.

Breast Cancer Whole Genome Sequenced – not like AML story

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       Previously (Pullan’s Pieces #30 on www.pullanconsulting.com ), I summarized the findings of gene copy number analysis of the hematological cancer, ALL, which suggested that that relapse is often not further mutation of the diagnostic clone, but rather that effective treatment of the diagnostic clone leaves a small number of cancer clones ready to expand upon new mutations.   

A new analysis of lobular breast cancer reaches very different conclusions about the possible fundamental mechanisms of cancer progression. After extensive overlapping sequencing to identify mutations at the single nucleotide level, S.P. Shah et al, found 32 protein-altering mutations in the metastatic breast cancer tissue that were not present in the same patient’s healthy tissue.  They then used the same technique on the sample of the primary tumor taken 9 years earlier at diagnosis.  In this primary tumor, they found only 11 of the 32 mutations they had identified in the metastatic tumor and of those 11, 6 were found in only a minority of the cells of the primary tumor.  The 5 mutations found in the majority of primary tumor cells were all previously unknown. Although some of the mutations could be due to radiation and chemotherapy and some of the mutations may be mere “passengers” carried along with other changes rather than those driving the tumor growth, the findings suggest that the primary tumor was very heterogeneous, and continued to evolve.  We still have a long way to go to understand solid tumors. http://www.nature.com/nature/journal/v461/n7265/full/nature08489.html  http://www.medpagetoday.com/HematologyOncology/BreastCancer/16347   

US Patent Office drops rules restricting number of number of claims and continuations

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The rules that the US Patent Office had created to reduce the burden of examinations (discussed in Pullan’s Pieces #19, August 2007) included a limit on the number of claims an inventor can make, and limited "continuations," procedures that allow inventors to update filings.   GSK sued on the grounds that the substantial rules changes were beyond the authority of the patent office.   The implementation of the so-called Final Regulations was delayed while the case worked its way through the court.  Now the Patent Office has dropped the rules and asked the court to dismiss the suit.  http://www.reuters.com/article/governmentFilingsNews/idUSN0853775620091008.  

“How Personalized Medicine Could Change Oncology Deals” at BioEurope (Monday November 2^nd)

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Client News:  Neumedicines gets a big grant.  Zenobia gets covered by Neurotech Insights.

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Neumedicines has gotten a 2nd government grant to help advance its molecule HemaMax for radiation protection.  http://www.genengnews.com/news/bnitem.aspx?name=64912066&source=genwire .   

Neumedicines also has a new proprietary protein HemaMaxII that has similar properties and is being developed for chemotherapy- and radiation-induced thrombocytopenia.  Neumedicines is seeking a partner for clinical and commercial development.  If you would like to learn more, please just let me know. 

Zenobia Therapeutics had a good interview with folks from the investment newsletter Neurotech Insights http://www.neuroinsights.com/newsletter/parkinsons.html .  The full story is available to subscribers, but if you would like to learn more about the fragment-based lead discovery work of Zenobia on the Parkinson’s target LRRK2 or on other targets, please just let me know. 

Help after the deal is signed?

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Although it is a widely accepted industry best-practice to identify and address the operational aspects of a partnership before signing a deal, the realities of deal execution can prove to be quite challenging.  Typically, the day-to-day responsibilities of a collaboration fall into the hands of colleagues not directly involved in the negotiation.  Furthermore, once a deal is inked, people can be reluctant to raise issues for fear of casting a negative shadow on the relationship.  Plus, partners often have contrasting communication, cultural, and operational styles, as well as differences in expectations.  Such differences take up a disproportionate amount of time and attention, and can often lead to project delays and frustration on both sides. 

For companies actively involved in licensing, it may be beneficial to turn to an outside advisor to ensure critical issues are raised and that systems are identified to help the partnership run smoothly.  Steven Roy, co-founder of Entropy2Action Consulting and former head of Amgen’s Department of Alliance Management has extensive experience in working with collaborations of all sizes.   Steven’s insight and guidance could prove extremely valuable in getting a new partnership off to a running start, or perhaps getting an existing one back on track.  If interested in learning more, feel free to contact Steven directly at (303) 859-2072. 

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Email or Call to chat about how Pullan Consulting can help you with all aspects of partnering!

Pullan Consulting

Linda M. Pullan, Ph.D.

Biotech Business Development

www.pullanconsulting.com and www.lindapullan.com

e-mail: lpullan@msn.com

805-558-0361

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