Mid-Cap Biotech Stocks Steal the Limelight

Marie Daghlian

Pharmaceutical companies continued their recent biotechnology buying binge in the hunt for innovation, while mid-cap biotech stocks stole the limelight on Wall Street.

This article published with permission from The Burrill Report.

Several novel therapeutic collaborations spiced up a busy week of deals that continue to underscore the pharmaceutical industry’s thirst for biotech innovation. Swiss biotech Synosia Therapeutics entered into a strategic partnership in neurology with Belgian pharma group UCB S.A. that is potentially worth $745 million. Their deal involves two compounds, both of which are in Phase II clinical development as treatments for Parkinson’s disease, and reinforces UCB’s strategic focus on neurology and immunology.

Under the terms of their agreement, Synosia granted UCB a license for exclusive, worldwide rights to the development compound SYN-115 and rights to a second compound, SYN-118, for non-orphan indications. UCB is making an equity investment of $20 million in Synosia as part of a series C funding round. Because of the strategic nature of the alliance, two representatives of UCB will join Synosia’s board of directors. Synosia will also receive an undisclosed upfront payment and is eligible for regulatory and commercial milestone payments of as much as $725 million across both compounds.

Synosia will be responsible for development of both compounds through proof-of-concept, after which UCB will take over late-stage development and commercialization. The agreement also allows for additional compounds from either company’s pipeline to be brought into the collaboration on terms that will be similar but must be negotiated.

Synosia obtained development rights to SYN-115, an orally-bioavailable drug that enters the brain and activates regions with motor and non-motor function, for all indications from Roche Holding AG in 2007. SYN-118 is marketed as Orfadin for the treatment of hereditary tyrosinemia by Swedish Orphan. Synosia obtained rights form Syngenta for its clinical development and commercialization in all non-orphan indications.

Elewhere, Exelixis Inc. (NASDAQ: EXEL) of San Francisco entered into two new collaborations that will net the biotech $60 million upfront with its long-time partner Bristol-Myers Squibb Co. (NYSE: BMY) and amended two existing agreements. In the first collaboration, Exelixis is granting Bristol-Myers an exclusive license to its small-molecule TGR5 agonist program, including backups. In the second agreement, the companies will collaborate to discover, optimize, and characterize small-molecule ROR antagonists. The companies also made minor amendments to their XL281 and liver X receptor agreements. In addition, Exelixis decided to opt-out of further co-development of XL139 under their cancer collaboration and will receive an accelerated milestone payment (Read more about the collaborations here.)

Besides a combined upfront payment of $60 million, Exelixis is eligible for potential development and approval milestone payments of up to $250 million on TGR5 and $255 million on the ROR antagonists. The biotech will also be eligible for sales performance milestones, and royalties from any therapeutics that arise from the programs. Exelixis is granting rights to the ROR program in exchange for Bristol-Myers waiving rights to receive a third investigational new drug candidate as agreed to under an existing 2006 oncology collaboration. After Exelixis opts-out of further co-development of XL139, Bristol-Myers will receive an exclusive worldwide license to develop and commercialize, and will have sole responsibility for the further development, manufacture, and commercialization of the compound.

TGR5 promotes the secretion of GLP-1, a hormone that affects multiple metabolic pathways, and has the potential to be complementary to the use of DPP-4 inhibitors for the treatment of diabetes. ROR is a member of the nuclear hormone receptor family that is expressed in multiple cell types including T-cells. Small molecule antagonists of ROR inhibit production of pro-inflammatory cytokines and have broad potential as novel anti-inflammatory compounds. Exelixis shares were at $4.56 early Monday; Bristol-Myers shares traded at $27.19.

In another deal, Cambridge, Mass.-based ImmunoGen Inc. (NASDAQ: IMGN) will get $45 million in upfront fees in an antibody-conjugate deal with Novartis AG (NYSE: NVS). The company will use its TAP technology to discover and develop targeted anticancer therapeutics using antibodies to several antigen targets picked by the Swiss company. For each target that results in an anticancer therapeutic, ImmunoGen may receive milestone payments up to $200.5 million, plus royalties on product sales. Novartis will be responsible for the development, manufacturing, and marketing of any products resulting from the collaboration.

ImmunoGen’s TAP technology uses monoclonal antibodies to deliver one of its proprietary cancer-cell killing agents specifically to tumor cells. There are currently seven TAP compounds in development with partners that include Novartis, Roche’s Genentech unit, Amgen Inc. (NASDAQ: AMGN), Bayer Group’s Bayer Schering Pharma, Biogen Idec Inc. (NASDAQ: BIIB), Biotest AG, and France’s Sanofi-Aventis S.A. Most recently, the U.S. Food and Drug Administration refused Roche’s request to grant accelerated approval for T-DM1, its most advanced drug candidate. ImmunoGen’s shares were trading at $7.99; shares of Novartis were at $59.72.

And Pfizer Inc. (NYSE: PFE) made its first major acquisition since it acquired Wyeth in early 2009 -- the $3.6 billion cash acquisition of Bristol, Tenn.-based King Pharmaceuticals Inc. (NYSE: KG), representing a 40 percent premium to its closing price when the deal was announced. The deal expands the New York drug giant’s pain-relief and pain-management profile, and provides the company with immediate, incremental diversified revenues generated by King's extensive portfolio of specialty pharmaceuticals and generics. The boards of both companies have agreed to the merger and it is expected to be completed by the end of 2010 or early 2011. (Read more about the acquisition here.) Pfizer shares were trading at $17.67; while King’s shares were at $14.18.

In other market moving news:

Biotech stocks remained in positive territory last week, with most major firms logging small gains. Celgene Corp. (NASDAQ: CELG) shares rose after it closed its acquisition of Abraxis BioScience. The $2.9 billion cash and stock deal, which was announced in June, will help the Summit, N.J., company expand its array of cancer treatments. Abraxis has one approved drug, Abraxane, a breast cancer treatment that has potential to be used as a treatment for other kinds of cancer. Celgene’s shares were trading at $59.68.

Biotech’s mid-cap companies stole the limelight this week, however. Leading the group’s gainers was SIGA Technologies Inc. (NASDAQ: SIGA), based in New York, with its shares vaulting 54% to an all-time high after the company revealed that it expected to be awarded a U.S. government contract to supply 1.7 million treatment courses of its smallpox drug for symptomatic individuals exposed to smallpox. The base contract is worth about $500 million in revenue, but could hit as much as $2.8 billion if all contract options are exercised, the company said. Its shares were at $14.09.

Alexza Pharmaceuticals Inc.’s (NASDAQ: ALXA) shares plunged after the FDA notified the Mountain View, Calif., company that it would not approve AZ-004, which is being developed for the rapid treatment of agitation in patients with schizophrenia or bipolar disorder. Biovail Laboratories International, the subsidiary of Ontario’s Valeant Pharmaceutical International Inc. (NYSE: VRX), entered into a collaboration and license agreement with Alexza in February 2010 for the U.S. and Canadian rights to commercialize AZ-004. Alexza intends to meet with the FDA in the near future to discuss steps necessary to address the agency’s concerns. Alexza’s shares were at $1.33, while Valeant’s shares were at $26.40.

BioSante Pharmaceuticals Inc. of Lincolnshire, Ill., said it had enrolled the 2,500th woman in a late-stage cardiovascular and breast cancer safety study of its testosterone-gel treatment LibiGel. LibiGel is being developed for the treatment of female sexual dysfunction, specifically, hypoactive sexual desire disorder in menopausal women, for which there is currently no FDA approved product. The company plans to submit the drug for FDA approval next year.

"This milestone gives BioSante our first opportunity potentially to declare completion of enrollment in the safety study," stated Michael Snabes, M.D., Ph.D., BioSante's senior vice president of medical affairs. BioSante’s shares were at $1.66.

Allergan Inc. (NYSE: AGN) shares jumped after the Irvine, Calif., company said it received approval from the FDA to market its Botox to combat chronic migraine headaches. Its shares were at $72.89.

And Alkermes Inc. (NASDAQ: ALKS) said it received FDA approval to market its Vivitrol drug for the treatment of people addicted to opioid painkillers. The Cambridge, Mass., company’s shares were at $14.84.

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