Replies to post #121767 on Biotech Values

[DewDiligence]

What’s amusing (and ignorant) is that you often hear investors say ABT’s drug business is just Humira.

[biomaven0]

Bardoxolone Methyl could be one of the biggest drug most people don't know that much before phase III.

What is really weird about this drug is that I believe it was originally tried as a cancer drug - that didn't work out too well except that they noticed improved kidney function in some of the patients. Talk about serendipity.

Peter

[DewDiligence]

ABT Inks New $400M Deal with Reata

[This is among the largest up-front amounts ever paid in a biotech deal for compounds not yet in clinical development, and what makes it even more of an outlier is that ABT is acquiring only 50-70% of the commercial rights to the various preclinical compounds. Other deals of such magnitude for compounds not yet in clinical development include MRK’s acquisition of GlycoFi in 2006 (#msg-11018747) and MRK’s acquisition of Rosetta Inpharmatics in 2001 (http://www.forbes.com/2001/05/11/0511rosetta.html ).

One reason for the high deal price: ABT knows Reata well, having paid it $450M up-front in a 2010 deal for the ex-US/ex-Asia rights to Bardoxolone, which was then in phase-2 (#msg-54747777) and is now in phase-3 (#msg-64332248). (One has to wonder if ABT couldn’t have done better by acquiring Reata outright instead of inking two deals with cumulative up-front cash of almost $1B.)

ABT will presumably issue a PR on the new deal Monday morning.]

http://online.wsj.com/article/SB10001424052970203518404577092823436353782.html

›DECEMBER 12, 2011
By JONATHAN D. ROCKOFF

Abbott Laboratories is paying $400 million to Reata Pharmaceuticals Inc. for rights to molecules showing early promise treating chronic diseases like rheumatoid arthritis and multiple sclerosis, the companies said Sunday.

The deal, a risky gambit by Abbott to bolster its drug pipeline, is among the largest between a pharmaceutical company and a small biotechnology company to secure rights to multiple compounds that haven't been tested yet in humans, according to a database of such transactions kept by Elsevier Business Intelligence.

The agreement extends Abbott's relationship with the closely held Irving, Texas, company. Last year, Abbott paid Reata $450 million for international rights—excluding Japan, China and certain other Asian markets—for Reata's drug bardoxolone methyl, an agent now in late stage or phase III human testing for chronic kidney disease [#msg-54747777, #msg-64332248].

The new pact covers hundreds of Reata molecules that work the same way and attack the same targets as bardoxolone, a fact that the companies say reduces the risk of the transaction. Abbott believes bardoxolone has blockbuster potential—meaning it could achieve annual sales exceeding $1 billion—and could reach the market by 2014.

Under the terms, the two companies will split the costs of developing the molecules and any profits from selling them, except for rheumatoid arthritis, for which Abbott will take 70% of the costs and profits.

The compounds are called antioxidant inflammation modulators because they spur the release of antioxidants while suppressing the body's inflammatory response, each thought to be involved in a range of diseases, also including Parkinson's and chronic obstructive pulmonary disease.

"That goes to why we think and Abbott thinks there is a very broad potential application," Warren Huff, Reata's chief executive officer, said in an interview. The companies expect the first compound covered by the transaction to enter human studies in 2012.

Abbott's pharmaceuticals side, which will separate from the company's medical products business by the end of next year, needs a strong pipeline. Its top-seller Humira, a rheumatoid arthritis therapy expected to have $8 billion in sales this year, will likely face heavy competition soon from a Pfizer Inc. pill under development. In addition, Humira's U.S. patent expires in late 2016.

Major drug makers often wait to buy the rights to compounds from a biotechnology firm until the molecules have been tested in humans. Without this clinical testing, there isn't much data to support the viability of the compounds, increasing the riskiness of any deal.

Due to the uncertainty, upfront payments for these so-called pre-clinical deals average about $15 million, compared with almost $40 million for a drug in phase II development, according to Elsevier's Strategic Transactions Database. The previous biggest upfront payment for pre-clinical compounds, Elsevier says, was the $130 million that Celgene Corp. paid upfront to Agios Pharmaceuticals Inc. last year (2010) for cancer drug candidates. [Elsevier is excluding technology-platform deals, such as the two MRK acquisitions mentioned in the prologue of this post.]

Elsevier projects there will be roughly 100 link-ups this year between big firms and small biotechs over the pre-clinical assets.‹

[DewDiligence]

ABT longs and prospective longs may want to catch the Reata webcast at JPM:

http://finance.yahoo.com/news/Reata-Pharmaceuticals-Present-prnews-107583315.html?x=0

Bardoxolone is probably the most important compound in ABT’s pipeline, and the two companies have an even newer collaboration inked a month ago (#msg-69825162).

[DewDiligence]

ABT is amassing an impressive pipeline in kidney disease.
They have (ex-US) Bardoxolone in phase-3 (#msg-64332248),
Atrasentan in phase-2 (#msg-71379136, http://www.clinicaltrials.gov/ct2/show/NCT01399580 ),
and have now added AP214, a drug from a private Danish company
in phase-2b for which ABT is paying $110M for worldwide rights.
The $110M is an all-in figure; there are no milestone payments or
royalties. (These programs will become part of AbbVie after the split.)

http://finance.yahoo.com/news/abbott-acquire-action-pharmas-investigational-133000711.html

›Abbott to Acquire Action Pharma's Investigational Compound, AP214, in Phase 2b Development for Prevention of Acute Kidney Injury

Thu, May 3, 2012 9:30 AM EDT

ABBOTT PARK, Ill. and AARHUS, Denmark, May 3, 2012 /PRNewswire/ -- Abbott (ABT) and Action Pharma A/S, a privately owned company, today announced that they have entered into an agreement in which Abbott will acquire AP214 from Action Pharma.

AP214 is in development to prevent acute kidney injury (AKI) associated with major cardiac surgery in patients at increased risk and has further potential in adjacent indications. AP214 is a hormone analogue that targets both systemic inflammation and cellular death (apoptosis) caused by hypoxia (lack of blood flow) that can occur during surgery. In September 2011, Action Pharma announced positive Phase 2b top-line results evaluating the efficacy, safety and tolerability of AP214. Abbott plans to conduct another Phase 2b study, which is expected to begin later this year.

This acquisition will enhance Abbott's pipeline in renal care. Abbott has two investigational treatments in development for chronic kidney disease (CKD). Bardoxolone, a first-in-class anti-oxidant inflammation modulator that activates Nrf2, a pathway involved in the progression of CKD, is in Phase 3 development with Reata Pharmaceuticals. Atrasentan, a compound discovered by Abbott scientists, is being evaluated in a Phase 2b study in patients with diabetic kidney disease.

"Clinical experience with AP214 in cardiac surgery patients suggests that it has the potential to be the first compound specifically approved to prevent acute kidney injury, a long-standing unmet need in the medical community," said John Leonard, M.D., senior vice president, pharmaceuticals, research and development, Abbott. "This acquisition complements and broadens Abbott's late-stage renal care pipeline and builds on our existing experience in treating kidney disease."

"We are very excited about the sale of AP214 to such a prominent global health care company as Abbott, which has key development competencies to continue the development of this drug candidate for the benefit of patients and physicians in the renal therapeutic area," said Ingelise Saunders, CEO of Action Pharma. "We also wish to thank our shareholders for their continued support of Action Pharma."

Under the terms of the agreement, Abbott will acquire all global rights to develop and commercialize AP214 for the prevention of AKI and other relevant indications. Abbott will provide a cash payment of $110 million to Action Pharma and will be responsible for funding all future development and commercialization activities regarding AP214. No later milestone payments or royalties will be paid to Action Pharma. Abbott expects to incur a one-time specified item in the second quarter of 2012, related to this payment.

In 2003, Action Pharma in-licensed Zealand Pharma A/S' (ZEAL) SIP® technology for use with pro-opiomelanocortin derivatives. As part of the agreement between Abbott and Action Pharma, Action Pharma's original licensing agreement with Zealand Pharma regarding the SIP® technology is cancelled, and superseded with a new agreement between Abbott and Zealand Pharma (see separate announcement from Zealand Pharma) regarding the SIP® technology. Upon the closing of the Abbott and Action Pharma transaction, Action Pharma will make a one-time payment to Zealand Pharma of $11 million. Zealand Pharma will also be entitled to a low single-digit royalty on Abbott's future global sales of AP214 (referred to as ZP1480 by Zealand Pharma). Since 2003, Action Pharma has solely developed AP214 to its current clinical status.

Back Bay Life Science Advisors provided strategic advisory services for Action Pharma prior to and throughout the transaction.

About Acute Kidney Injury Associated with Major Cardiac Surgery

Acute kidney injury (AKI) is known to be associated with increased short- and long-term mortality and co-morbidity, as well as prolonged hospitalization and permanent decline in renal function. Currently there are no pharmaceuticals on the market for the treatment or prevention of AKI associated with major cardiac surgery.

About Action Pharma A/S

Action Pharma is a privately-owned Danish biotech company. Action Pharma has for almost ten years focused on developing novel drug candidates targeting melanocortin receptors and bring these to the stage of clinical proof of concept for subsequent partnering. Action Pharma has a strong investor base of leading European investors, including Sunstone Capital, Global Life Science Ventures, SLS Invest, InnovationsKapital, Incuba Venture, and Oestjysk Innovation. For more information, please visit www.actionpharma.com.‹

[DewDiligence]

Potential competition for ABT/Reata’s Bardoxolone:

http://www.astrazeneca.com/Media/Press-releases/Article/20121008--astrazeneca-and-ardelyx-announce

AstraZeneca and Ardelyx today announced a worldwide exclusive licensing agreement for Ardelyx’s NHE3 inhibitor programme, including the Phase 2-ready lead compound RDX5791, for the treatment of complications associated with end-stage renal disease (ESRD) and chronic kidney disease (CKD). NHE3 is the sodium–hydrogen antiporter 3, a protein essential in the absorption of sodium in the intestines.

Ardelyx has evaluated RDX5791 in a Phase 2a clinical trial in constipation-predominant irritable bowel syndrome (IBS-C) and in two Phase 1 clinical studies in healthy subjects for its ability to divert sodium absorption in the gastrointestinal tract. Through its unique mechanism of action, RDX5791 is believed to decrease the absorption of dietary sodium and thus divert sodium excretion from the kidney (urine) to the faeces, sparing the kidney and the cardiovascular system from unhealthy exposure of both sodium and fluid accumulation. On this basis, the companies plan to develop RDX5791 for use in ESRD and CKD in addition to IBS-C, and intend to evaluate possible development in other diseases that are a consequence of sodium and fluid overload.

Under the terms of the agreement, AstraZeneca will pay $35 million up front, with development milestones of $237.5 million and milestones related to launch and commercialisation, as well as tiered, double-digit royalties. AstraZeneca will assume the subsequent development costs and Ardelyx will conduct clinical trials in Phase 2. As part of the transaction, Ardelyx has secured an option to co-promote the product in the US, subject to agreed limitations. Additional financial details were not disclosed.

This is far short of the blockbuster deal ABT inked with Reata for the ex-US rights to Bardoxolone in 2010 (#msg-54747777), which had $450M (!) up-front; however, Bardoxolone was already in phase-2 when the ABT-Reata deal was inked, while RDX5791 is merely “phase-2 ready.”