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Oncology remains leading field for deals and dollars

Despite financial pressures impacting the biopharmaceutical industry, oncology persists as a dominant dealmaking arena.
BY NUALA MORAN

n all the portfolio trimming, strategic reviews, R&D restructuring and shifts in therapeutic focus to which big pharma has subjected itself in response to productivity woes and expiring patents, not one of the major companies has announced a withdrawal from oncology. Indeed, cancer treatments continue to dominate pipelines across the board, from discovery to late-stage clinical development, accounting for more than a quarter of products in development and more than a quarter of deals. This is not to say that oncology has been entirely immune to either the convulsions the pharmaceutical industry has put itself through in the search for innovation or the price pressures stemming from government austerity measures. An analysis of 2012 dealmaking by therapeutic area, published by EP Vantage on February 19, highlighted some of the cutbacks in the field of cancer therapeutics. Although oncology remained by far the most popular field, like other indications it too experienced a decline in licensing activity in 2012 compared with in 2011. In total, EP Vantage tracked 51 oncology deals in 2012, against 93 in 2011, with overall deal value falling from US$6.71 billion in 2011 to US$5.3 billion last year. Perhaps more significantlyin terms of the outlook for hard-up biotechsthe value of upfront payments fell from US$622 million in 2011 to US$446 million in 2012, reflecting the earlierstage deals the industry is now striking to acquire access to new technology platforms and pools of innovation. However, what the figures strongly convey is the overall dominance of oncology, with the 51 deals putting the field well ahead of second-ranked systemic anti-infectives, which accounted for 33 of the 175 deals in the EP Vantage analysis. More remarkably still, total deal value in oncologyat US$5.36 billionaccounted for more than half of the total US$9.39 billion of all deals analyzed. Oncology was also well on top of the pile in terms of upfront payments; the US$446 million handed over on signing put this single field way ahead of 12 other therapeutic fields in the analysis. The other fields attracted a combined US$668 million. For comparison, systemic antiinfectives saw US$204 million changing hands on signing and a total value of US$774 million. In terms of total value of deals, musculoskeletal therapies ranked second to oncology, with 10 agreements worth a total value of US$1.66 billion. However, this is skewed toward one deal the second-largest overall of 2012which was

Galapagoss US$1.35 billion deal with Abbott Laboratories for an oral JAK1 inhibitor that Abbott hopes will be the successor to Humira, its world-leading anti-TNF- antibody treatment for rheumatoid arthritis.

Competition for oncology assets

Overall, six of the top ten deals in 2012 were in oncology, according to BioWorld. And whatever the ups and downs from one year to another, competition remains fierce for good assets, as exemplified by the case of the biggest oncology deal of 2012: Janssen Biotechs US$1.1 billion plus royalties licensing agreement with Denmarkbased Genmab. The worldwide commercialization deal for Genmabs anti-CD38 monoclonal antibody daratumumab came with a US$135 million upfront payment and the promise of double-digit royalties on sales. In addition, Janssen committed to paying all further costs for developing the product. Daratumumab is in Phase 1/2 trials for multiple myeloma, and there are plans for ten or more further clinical studies with protocols applying the antibody as a monotherapy and in combination with other drugs. In total, these planned studies will involve 3,500 patients. The agreement was a game changer for Genmab, bringing in sufficient cash for four years at their then-current burn rate. CEO Jan van Winkel said there was a lot of interest from other pharmaceutical companies in getting hold of the product, with term sheets rolling in up to the day before the Janssen tie-up was announced on September 5, 2012. For a good product, it is a sellers market, as illustrated by the number-two oncology deal of 2012: Endocytes agreement with Merck for EC145 (vintafolide). Ron Ellis, Endocyte president and CEO, said he signed the US$1 billion deal following a rigorous selection process to pinpoint the best partner. Vintafolide, consisting of folate linked to the vinca alkaloid cytotoxic drug desacetylvinblastine monohydrazide, is in Phase 3 development for the treatment of platinum-resistant ovarian cancer and a Phase 2 trial for treating nonsmall cell lung cancer. The mechanism of action of vintafolide means it is relevant to other cancers that express folate receptors, including breast, kidney and colon. To reach the headline US$1 billion figure, vintafolide will need to get approval in six cancer types, highlighting what a long, thin thread there is linking the overall value in blockbuster deals with the bottom line in the corporate accounts.

Buying into technology platforms

Deals in oncology, and current drug industry agreements in general, over the past two years

have increasingly seen big pharma buying into the potential of technology platforms and in effect using innovative biotechs as an outsource arm of in-house discovery and development. The Endocyte deal also exemplifies how Merck and its peers now have a fixed strategy of developing companion diagnostics alongside cancer drugs. That was very much part of the attraction of vintafolide, which comes with an imaging agent, etarfolatide, that is used to identify folate receptorpositive tumor cells. When the deal was announced in April 2012, Peter Kim, president of Merck Research Labs, said, [This] underscores our strategy of building a portfolio of oncology therapeutics that employ a companion diagnostic to facilitate selection of those patients likely to respond to treatment. Part of the upside for Endocyte is that it kept ownership of etarfolatide and is now using the agent as the basis for building a commercial organization. Similarly, Isis Pharmaceuticals was in part attracted by the ability of AstraZeneca to select likely responders to its RNA interference drugs when the two signed a US$1 billion pact in December 2012. The partners highlighted their intention to use a personalized medicine approach in applying RNA interference to five oncology targets, with B. Lynne Parshall, COO of Isis, commenting that the collaboration would gain added value from AstraZenecas ability to develop biomarkers to identify which patients would benefit the most. Also on-par in headline-value terms among 2012 oncology deals was the US$1 billion agreement between Macrogenics and the French pharmaceutical company Servier, signed in September 2012. This built on a US$450 million deal between the two companies in December 2011. Underlining big pharmas appetite for access to robust and innovative technology platforms, Macrogenics had previously signed big-ticket deals with Pfizer, Boehringer Ingelheim and the Korean company Green Cross, and in January 2013 inked an agreement with Gilead Sciences. All these agreements focus on Macrogenicss DART (Dual-Affinity Re-Targeting) technology for generating bispecific antibodies. A fourth agreement, also worth US$1 billion, was signed between Oxford Biotherapeutics (OBT) and the Italian pharmaceutical company Menarini around a portfolio of ten antibodies discovered by the UK biotech. This is an early stage deal, but it lays the path for OBT to get products to market at a time when it is impossible to list on a public market or raise enough money privately to advance from discovery to approval. The deal with Menarini provides funding for OBT to take part in joint development and

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Moving into new antibody formats

Given the commercial and therapeutic success of anticancer antibodies, it is no surprise that they feature so largely in oncology deals. Having become comfortable with naked antibodies, big pharma is moving into other formats that offer features such as greater specificity or the ability to target two antigens simultaneously or carry a cytotoxic drug, and this shift toward new antibodybased constructs is beginning to be reflected in deal making. Bispecific antibodies with two antigen-binding sites are a case in point. As the deals with Servier and Gilead testify, one of the most attractive technologies in this space is Macrogenics DART platform. However, a bigger bispecific antibody deal in hard cash terms was Amgens US$1.16 billion acquisition of Micromet, which gave Amgen control of the BiTE (bispecific T cell engager) antibody platform. BiTE antibodies bind to T cells and then direct these immune effector cells to tumor antigens. The acquisition followed a US$976 million licensing agreement between the two companies, signed in July 2011, under which Rockville, Marylandbased Micromet was developing BiTE antibodies against three tumor targets. After becoming familiar with the technology, Amgen decided to bag the lot. Apart from the BiTE technology, this included a Phase 2 program in acute lymphoblastic leukemia and two Phase 1 programs in gastrointestinal cancers and solid tumors. Micromet was acquired despite the technology platform being encumbered by licensing agreements with big-name pharmaceutical companies, including AstraZeneca, Sanofi and Boehringer Ingelheim, which pointed to the potential diversity arising from the BiTE format. In another large deal involving bispecific antibodies, Celgene is calling on Sutro Biopharma of South San Francisco to develop both bispecifics and antibody-drug conjugates against two undisclosed targets. The agreement, announced in December 2012, has a headline value of US$500 million, with Sutro receiving what was described in a company press release as a substantial upfront payment. Although bispecific antibodies have been around since the 1990s, they were held back by unpredictability in manufacturing, inability to manufacture at scale, poor stability and short half-lives. A number of advances mean it is now possible to produce these constructs at scale, making them amenable to commercialization and drawing big pharma in to look seriously at different formats and explore the additional functionality they may offer over traditional monoclonal antibodies. One company that has attracted multiple discovery deals around bispecific formats is Adimab, with a roll call of partners that includes Roche, Merck, Novartis, Pfizer and Eli Lilly. Although not all the partnerships focus on oncology, this highlights big pharmas interest in accessing bispecific antibody platforms. Biotecnol is taking the multitargeting concept a step further with its Tribody scaffold format, which can accommodate three different binding

1993 16TH PLACE Gail MacKenzie Triple exposure of melanoma and carcinoma cell culture (125x) Technique: Fluorescence

FDA approval of the Bristol-Myers Squibb Cos melanoma treatment Yervoy (originally licensed from Medarex) is helping to establish new ground for the application of immunotherapy in the treatment of cancer.
commercialization. This creative alliance is transformational for us, said Christian Rohlff, CEO of OBT, when the tie-up was announced in October 2012. He noted that although pharma is cutting more early stage deals, payments typically are back-end loaded in the form of royalties and most biotechs cannot wait the 810 years it takes for a product to get to market. Not all the big-ticket oncology deals involved biologics. The fifth-biggest oncology agreement of 2012 arrived before the first week of the year was out, when Forma Therapeutics announced a 4-year, US$815 million discovery deal with Boehringer Ingelheim. This was in the form of US$65 million upfront and research funding, with US$750 million to come in precommercial milestone payments, for work on small molecule drugs targeting protein-protein interactions implicated in the development of cancers. Less than a week later, Forma followed up with a US$700 million agreement, this time with Janssen Biotech, to develop small molecule drugs against targets involved in tumor metabolism. Genentech in June 2011, which was a precursor to the Boehringer Ingelheim and Janssen Biotech deals. In the June 2011 deal, Genentech took worldwide rights to a single small molecule against a single cancer target. There were undisclosed upfront and milestone payments, and Genentech had the rights to buy out the product completely once it reached a particular stage of development. This gave Cambridge, Massachusetts based Forma the liquidity it needed to bridge through to the rest of the pipeline and sign the two higher-value, multitarget deals. Similarly, epigenetics specialist Epizyme struck an early stage deal with GlaxoSmithKline that brought in a US$20 million upfront payment. As a result, Epizyme, also based in Cambridge, Massachusetts, was able to triple its chemistry research and do more work on its epigenetics targets while maintaining ownership of its two lead programs. The additional chemistry outputs strengthened the companys research base, leading to a US$200 million deal with Eisai, sealed in January 2012. That further enhanced the appeal of Epizymes epigenetics technology, and in April 2012 it followed up with a third pact, signing up Celgene as a partner in developing personalized cancer therapies based on small molecule inhibitors of histone methyltransferases. The clever thing is that while the 3 deals brought US$135 million into the company, Epizyme retained all US rights to any products. The oncology deals highlight how biotechs can use big pharma deals with a long tail of milestone and royalty payments to build value in the short term. In turn, such agreements point to the fact that for many pharmaceutical companies, investing in early stage products or platform technologies is a chance to take a puntor perhaps more politely, carry out an experimenton research projects they cannot do in house.

Biotechs reformulate partnering strategies

The Forma deals indicate how biotechs have been forced to reshape their partnering strategies in the face of the dearth of private capital and limited opportunities for joining a public market. Although big pharma may have an appetite for early stage, preclinical deals, biotechs need to tread a thin line between taking in enough money to maintain momentum and selling the family silver to avoid ending up with unwanted commitments and an encumbered portfolio that will constrain value in the future. In the case of Forma, the issue was how to bring in cash without selling advanced assets and thus undermining the opportunity for an initial public offering if the markets turned. The conundrum was solved in an agreement with

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The rise of antibody-drug conjugates

The Tribody technology is early stage and has yet to attract big pharma attention, but in January Biotecnol announced a co-development agreement with Tokyo-based antibody specialist Chiome Bioscience. Earlier, in October 2012, Biotecnol signed a deal with Polytherics, based in London, to access its ThioBridge linker chemistry for attaching cytotoxic payloads to Tribodies. The two plan to test the potency of ThioBridge Tribody drug candidates in preclinical cancer models before jointly seeking partnerships for those that are most effective. Indeed, such antibody-drug conjugates (ADCs) are another offshoot of monoclonal antibodies that have of late become the focus of partnering deals. The breakthrough for this field came with the FDAs 2011 approval of Seattle Geneticss Adcetris for the treatment of lymphoma. Then in February, what looks to be a certain blockbuster, Roches Kadcyla, which adds a cytotoxic payload to Herceptin, won FDA approval in the treatment of HER2-positive metastatic breast cancer. Although both Adcetris and Kadcyla have dose-limiting toxicities, their approvals validate the moves other pharmaceutical companies have made into the field. As discussed, the December 2012 deal between Celgene and Sutro Biopharma involves development of ADCs in addition to bispecifics, and OBTs ten-target deal with Menarini includes ADCs. In a more recent example, Astellas Pharma sealed a US$300 million deal with Ambrx in which the latter company will advance ADCs against targets supplied by the Japanese pharmaceutical company. One of the inherent complications of formulating ADCs is controlling where the cytotoxic drug is sited on the antibody. ADCs must act like naked antibodies in circulation, with the linker remaining stable until the antibody is internalized by a tumor cell. Ambrx not only offers conjugation technology that makes it possible to precisely control where the drug is attached to the antibody but also has proprietary linker chemistry and drug payloads. The company claims this makes its ADCs safer than those generated with conventional, nonspecific conjugation techniques and allows for higher dosing. In house, Ambrx has used the technology to develop a HER2-targeting ADC for a partner whose name has not been disclosed. The positive sentiment around ADCs allowed another company, Celldex Therapeutics, to complete a public offering of shares in February 2013. The deal raised US$100 million, part of which will be devoted to a pivotal trial of its lead ADC product, CDX-011, in advanced breast cancers expressing the transmembrane glycoprotein NMB antigen, against which CDX-011 is targeted. In December, Celldex reported positive results in the Phase 2b trial, paving the way to the offering.

2003 1ST PLACE Torsten Wittmann Filamentous actin and microtubules (structural proteins) in mouse broblasts (cells) (1000x)Technique: Fluorescence

Microtubule-destabilizing vintafolide was at the center of the number two oncology deal of 2012, Endocyte Inc.s agreement with Merck.
Images courtesy of Nikon Small World 2007 IMAGE OF DISTINCTION James Resau Human breast carcinoma (40x) Technique: Confocal

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Roches Kadcyla and Celldex Therapeutics CDX-011, two antibody drug conjugates developed for the treatment of breast cancer, exemplify a recent interest in deals concerning the next generation antibody technology.

Underlining big pharmas push into ADCs are several other deals, including Mersana Therapeuticss potential US$270 million collaboration with Endo Pharmaceuticals, based

around Mersanas Fleximer conjugation technology. Meanwhile, ImmunoGens TAP prodrug technology, which is used in Kadcyla, has also been licensed to Eli Lilly, Sanofi, Bayer and Amgen.

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sites. This makes it possible to combine T cell recruitment and dual-antigen targeting, opening up the potential to address tumor heterogeneity and tumor drug resistance. For example, the North Brunswick, New Jersey company has generated a Tribody targeting both the EGFR and HER2 tumor antigens.

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Seattle Genetics has the potential to earn more than US$3 billion in milestone payments under ADC license agreements with partners including Abbott, Bayer, Daiichi Sankyo, GlaxoSmithKline, Millennium and Pfizer.

Cancer immunotherapies begin to deliver commercial returns

Long-running attempts to activate the adaptive immune system to fight cancer have finally begun to bear commercial fruit with the FDAs approval of Dendreons Provenge for treating prostate cancer and Bristol-Myerss melanoma treatment Yervoy. These two are increasingly seen as the bridgehead to a fourth category of oncology treatments, which will see cancer immunotherapy added to surgery, radiotherapy and chemotherapy. In response, the oncology field is becoming a focus of partnering deals, with a recent example being Celgenes tie-up with the gene-therapy specialist bluebird bio, announced in March 2013. In the US$225 million-plus deal, bluebird will be applying its technology to genetically modify a patients own T cells, priming them to target and destroy tumor cells. Such modified cells, known as chimeric antigen receptor (CAR) T cells, were also the subject of an alliance between Novartis and the University of Pennsylvania, announced in August 2012, which aims to build on an academic trial in which CAR T cells were used to treat acute lymphocytic leukemia. The modified T cells must be prepared for each patient, and as part of the agreement, Novartis is putting money into a Center for Advanced Cellular Therapies to specialize in the discovery, development and manufacturing of adaptive T cell immunotherapies. The researchers at University of Pennsylvania claim to be the first to demonstrate successful and sustained control of tumors using genetically modified T cells, and trials of CAR T cells are underway in other leukemias, and lymphoma, mesothelioma, myeloma and neuroblastoma. In this case, no financial details were given; however, the university granted Novartis an exclusive worldwide license to its modification technologies and will be entitled to milestone and royalty payments. In another cancer immunotherapy deal that closed in 2012, Colby Pharmaceutical, a privately owned company based in San Jose, California, acquired the immunotherapy assets of MannKind, including a Phase 1 melanoma vaccine that uses intralymph node injection to target cancer antigens directly at T cells. In a Phase 1 study, repeated intralymph node injection for administration of antigens was well-tolerated and generated strong immune responses. Colby will pay MannKind upfront and milestone payments linked to the development, approval and commercialization of products up to a value of approximately US$140 million, with MannKind also eligible to receive tiered royalties on sales of products.

Oncology deals at the grass roots

It is the big-ticket deals that titillate, and though the BioWorld top ten records the megadeals and

the EP Vantage data focuses on deals around products in Phase 1 to Phase 3, deal making in oncology is spread across the spectrum. From collaborations with academic partners around a single compound to technology platform or target biology deals with biotechs, financial backing for biotech startups is available from the venture capital arms of big pharma and the acquisition of whole companies. As discussed, one area of particular focus for big pharma over the past two years has been to end its innovation drought by buying into earlier stage, academic research. At the same time, the shortage of venture capital for startups is forcing technology transfer operations to advance projects further than in the past, with the aim of getting them into the sort of shape that will fit into the bottom end of a pharmaceutical companys pipeline. One of the most progressive operators in this respect is Cancer Research Technology (CRT), the technology transfer arm of Cancer Research UK, Europes largest oncology research charity. There definitely is a hunger in pharma to take things on earlier, and thats because biology is kingand lack of biology is the reason [pharma] has not been successful of late, said Keith Blundy, CEO of CRT. A case in point is CRTs most recent deal with Janssen Biotech to identify drugs that block the unfolded protein response (UPR) cell signaling pathway, through which cells accommodate the stresses of unfolded or misfolded proteins. The appeal for Janssen is access to the drug discovery and biology expertise of Cancer Research UKfunded scientists. The initial aim is to develop treatments for multiple myeloma, in which the UPR pathway is very active. However, a number of other cancers also rely heavily on the same pathway, opening up the potential for wider application of any compounds that are effective in multiple myeloma. In the program, Cancer Research UK and Janssen are together funding up to 25 scientists, with Janssen providing further funding to support the research at The Institute of Cancer Research in London. Janssen will pay future milestones and royalties and will lead the clinical development of any potential drugs. In terms of what early stage research is of interest to big pharma, fashions change: two years ago cancer metabolism was popular; more recently epigenetics and immune modulation have come to the foreground. Often these fashions are driven by a breakthrough piece of science that promises to remove obstacles in a particular field, Blundy said. Although this is the best time theres ever been for striking deals, CRT collaborations and licensing agreements come in many different formats. There are all kinds of different models, using resources and inputs on both sides of the partnership. At this stage of development, you have got to be flexible, Blundy said. This flexibility extends to reversing the natural order of things and taking in programs from big pharma for further development, an approach Blundy says is attracting increasing interest from the industry. As an example of the kind

of innovation it is possible for pharmaceutical companies to access through this channel, in January this year Cancer Research UK began the first adaptive/personalized clinical trial of its kind in a Phase 1 study of AZD0424, a program owned by AstraZeneca. In the first phase, the trial will recruit up to 30 patients across all solid tumor types. Later, the design of the trial will be adapted, enabling the study to diverge into three separate, personalized arms. Each will test AZD0424 in different combinations, alongside standard or other experimental treatments, in specific patient populations. AZD0424 works by blocking Src and ABL1, two proteins that play a role in cell growth and angiogenesis and are overexpressed in cancer cells. Cancer Research UK carried out preclinical development of AZD0424 through its Clinical Development Partnerships, a joint initiative between its drug development office and CRT to put drugs that otherwise would not be developed by pharmaceutical companies through early phase clinical trials. Under this scheme, companies keep the background rights to their programs while Cancer Research UK does the spadework of early development.

Familiarity breeds bigger families

It is not unusual for partnerships to morph into acquisitions once a pharmaceutical company gets conversant with a technology platform and familiar with a partner, as Amgens acquisition of Micromet highlights. Earlier oncology deals drove two other large acquisitions in 2012, with GlaxoSmithKlines US$3.6 billion acquisition of Human Genome Sciences (HGS) being the biggest. Although the two were in the thick of a twentyyear partnership agreement, things turned difficult in the lead-up to this ultimate deal, with HGS deploying hard-to-get tactics. In the end, the fact that the two had a marketed product, the lupus drug Benlysta, and other clinical-stage programs in common, made HGSs posturing futile: any other company acquiring HGS would have been in an enforced partnership with GSK. A second partnership was more amicably consummated in March 2012 when Dainippon Sumitomo acquired cancer stem cell specialist Boston Biomedical. Dainippon paid US$200 million upfront, with a promise of US$540 million in clinical development milestones plus a further US$1.89 million in sales milestones to come on sales of marketed products. The acquisition came less than a year after Dainippon signed up Japanese rights to BBI608, Boston Biomedicals lead anticancer program, in a deal with a headline value of US$170 million. As these examples illustrate, partnering deals can have a huge effect on future value. They can be deliberately deployed to groom a biotech as potential acquisition target or become a poison pill that deters outside interest. Oncology dealmakers take note.

Nuala Moran is a freelance science journalist. She is Staff Writer for BioWorld and a contributor to Nature Biotechnology.

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