COVER STORYcompound still needs to prove its worthin a Phase III trial and make it through theregulatory gauntlet, but these days Exelixisis feeling lucky to be its sole owner.As they find themselves suddenly inpossession of a previously partnered drug,other biotech executives are pointing to theexample of Exelixis’ quick turnaround afterBMS’s exit. Big pharma companies, underpressure to improve profitability and productivity,are focusing drug developmentefforts on fewer diseases and fewer compounds.As their priorities shift, the companiesare backing away from high-profile drugdevelopment deals with biotechs. The challengefor their former partners is to keepthe momentum going—a feat that requiresfinancial mettle and clinical expertise notalways inherent to small companies.THE DISSOLUTION of these partnershipsis a direct consequence of the dramaticchanges in the pharmaceutical industry,says G. Steven Burrill, head of the life sciencesinvestment firm Burrill & Co. Goneare the days of “me-too” drugs and billiondollarblockbusters that address largeswaths of the population. Big pharma hashad to update its approach to R&D, andnow “they’re trying to move these oceanliners very fast into calmer waters wherethey have more sustainability,” Burrill says.Drug companies have lost their appetitefor the kind of high-risk, early-stagedeals they pursued in the past, Burrillsays. “They’d rather pay more later, whenthey’ve removed the uncertainty.” In somecases, that means letting go of partnershipsfor candidate drugs that seem too risky.Big pharma firms are also taking a hardlook at their development pipelines. Manycompanies have decided to work in fewertherapeutic areas, while also weeding outcompounds in clinical trials to focus onthose with the best chance of winning.The cuts can be ruthless. For example,not long ago Sanofi-Aventis had 128 compoundsin development, the company’sU.S. chief medical and scientific officer,Paul Chew, told reporters at a recent briefing.After what Chew called a portfolio“stress test,” that number is now down to58. “That’s allowed us to focus on what wefeel are the most viable candidates goingforward,” he said.Other companies have made similarchanges. In February, Pfizer said it was winnowingthe diseases it focuses on. The firmis ending research on allergy and respiratorymedicine, internal medicine, oligonucleotidesand tissue repair, and antibacterials(C&EN, Feb. 7, page 5).Last year, GlaxoSmithKline, amidsweeping R&D cuts, decided to end researchin certain areas of neuroscience. AstraZenecatrimmed nearly two dozen compoundsfrom its pipeline and abandoneddiscovery research in 10 diseases.In the stringent spending environment,breakups between big pharma companiesand their biotech partners are “going to happenmore and more,” says Daphne Zohar,managing partner of PureTech Ventures, aBoston-based life sciences investment firm.“Almost every company is making lists ofall their programs” as they prioritize theirresearch dollars, she says. “They have todraw the line somewhere. There are somegood programs that are going to get cut.”Even programs within priority therapeuticareas are at risk as organizations are overhauled.For example, a consequence of thevast layoffs at big pharma companies is thatprograms get transferred from one managerto another, notes Needham & Co. stock analystAlan Carr. “Whoever may have done thedeal up front may be gone, and someone elsehas inherited it,” he says. “You may not havea champion for that collaboration within thepharma partner anymore.”BREAKUPS High-profile biotech deals became casualties of big pharma’sshifting priorities.February <strong>20</strong>10: Merck/AnacorSchering-Plough paid $50 million for access to AN2690, a topical antifungal for infectionsof the nail. After acquiring Schering-Plough in <strong>20</strong>09, Merck & Co. returned therights to AN2690, which was on the brink of going into Phase III clinical trials. Ninemonths later, Anacor Pharmaceuticals completed an initial public offering.<strong>June</strong> <strong>20</strong>10: BMS/ExelixisIn late <strong>20</strong>08, Bristol-Myers Squibb paid $195 million for access to two cancer compounds:XL184, a small-molecule inhibitor of MET, VEGFR2, and RET, and the RAF kinaseinhibitor XL281. Exelixis received $45 million more in <strong>20</strong>09 and took in $17 million whenBMS decided to return the rights to XL184.October <strong>20</strong>10: Merck/AveoAveo Pharmaceuticals partnered in <strong>20</strong>07 with Schering-Plough, later acquired by Merck& Co., on the cancer compound AV-299. The deal included a $7.5 million payment and$10 million equity investment by Schering-Plough. At the time Merck returned the rightsto AV-299, Aveo had just received an $8.5 million payment based on the initiating of aPhase II study of the drug to treat lung cancer.February <strong>20</strong>11: Merck/GalapagosMerck & Co. and Galapagos signed a series of deals in <strong>20</strong>09 and <strong>20</strong>10 with the goal ofdiscovering small molecules against drug targets in diabetes, obesity, atherosclerosis,and inflammatory diseases. Galapagos received roughly $30 million during the pact.March <strong>20</strong>11: Merck/PortolaMerck & Co. paid Portola Pharmaceuticals $50 million in <strong>20</strong>09 for the rights to the oralFactor Xa inhibitor betrixaban, a blood thinner in Phase II trials. Merck gave back thecompound as it was poised to enter Phase III studies.March <strong>20</strong>11: GSK/TargaceptIn <strong>20</strong>07, GlaxoSmithKline paid Targacept $35 million as part of an agreement to developsmall molecules targeting neuronal nicotinic receptors. The deal included the rights totwo pain-relief compounds, TC-2696 and TC-6499, which later failed to show efficacyin mid-stage trials. When the pact was dissolved, Targacept got back the rights to a leadmolecule for Parkinson’s disease.May <strong>20</strong>11: Pfizer/RigelPfizer licensed Rigel Pharmaceuticals’ portfolio of syk inhibitors in <strong>20</strong>05 and later selectedR343 as the lead candidate for inhaled allergic asthma. When Pfizer returned thedrug, it had been formulated for inhaled delivery and had completed Phase I trials.May <strong>20</strong>11: AstraZeneca/TargaceptAstraZeneca and Targacept teamed up in <strong>20</strong>05 to develop small molecules targetingneuronal nicotinic receptors, a deal that eventually included the schizophrenia treatmentTC-5619. By giving back the rights, AstraZeneca avoided making a $30 millionpayment and taking full responsibility for the drug.SOURCE: CompaniesWWW.CEN-ONLINE.ORG 16 JUNE <strong>20</strong>, <strong>20</strong>11
Indeed, in addition to the BMS-Exelixispartnership, several big pharma-biotechdeals—between Pfizer and Rigel Pharmaceuticals,AstraZeneca and Targacept, andMerck & Co. and Aveo Pharmaceuticals—have fallen by the wayside in the past year.The biotech partners who suddenlyfind themselves with a drug program backin-house face several challenges: how toconvince investors that the deal was terminatedfor strategic, rather than scientific,reasons; how to maintain a drug developmentprogram at the same pace and withthe same breadth as they did with the backingof a big pharma firm; and where to findthe money to continue the program in anefficient and expeditious way.“One of the things you have to be carefulabout as a biotech is that there’s a timestamp on value,” says J. Donald deBethizy,president and CEO of Targacept, which inthe past few months has had drug candidatesreturned by GlaxoSmithKline andAstraZeneca. If a biotech firm can’t movea compound forward quickly enough, orhas to shelve it due to lack of resources, hesays, “there’s a risk that the need for it willgo away, or that somebody else will discoverthe same thing and do it faster.”the reins. The antibody was in the midstof Phase II trials, making it “a much morevaluable program today,” Ezickson says.“And as a company, we are also in a muchbetter place in terms of our ability to movethis forward.”Whereas Aveo learned the clinical ropeswith Schering-Plough’s funding, Rigel benefitedfrom a partner that could take on aproject that was beyond its capacity. Rigellicensed its inhaled syk inhibitor programfor asthma and allergy to Pfizer in <strong>20</strong>05largely because it didn’t have the capabilityto develop the compound, explains Raul R.Rodriguez, the company’s president andchief operating officer. To be successfullyand safely delivered to the lung, the compoundneeded to be formulated as a saltYET BIOTECH EXECUTIVES point outthat they are getting back a more advancedcompound, developed largely on big pharma’sdime. Furthermore, their companieshave likely matured significantly since signingthe partnership, which for some firmsmay have been their first significant deal.For example, when Aveo partnered withSchering-Plough in <strong>20</strong>07 for the antihepatocytegrowth factor antibody AV-299, it wasthe first time a big pharma firm had sweptup one of Aveo’s internally discovered molecules.At the time, the antibody was still inpreclinical studies, and the deal was structuredso that Schering-Plough footed the billwhile the biotech pushed the drug throughclinical trials to treat lung cancer.Since then, “the world has changedsignificantly for us,” says Elan Ezickson,Aveo’s chief business officer. The companyhas gone public and has formed otherpartnerships that have brought in significantpayments. It also gained experiencefrom putting AV-299, along with anothercompound in its pipeline, through the earlystages of clinical development.Thus when Merck, which bought Schering-Ploughin <strong>20</strong>09, returned the rightsto AV-299 last October after a revamp ofits portfolio, Aveo was happy to take backSPOT BREAKTHROUGHS SOONERWITH FREESLATE HIGH THROUGHPUT RESEARCH SOLUTIONSDiscovery is all about making knowledge-based decisions fast. That’swhy Freeslate delivers automated platforms and reactors for microscaleexperimentation combined with powerful data management tools toenable dramatic gains in your R&D productivity and innovation. See whatyou’re missing at www.freeslate.com/breakthroughsWWW.CEN-ONLINE.ORG 17 JUNE <strong>20</strong>, <strong>20</strong>11
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