Each week, "The Pink Sheet" presents commentary on some of the week's most interesting business deals, contributed by the editors of the IN VIVO blog. Visit the blog at ¹ http://invivoblog.blogspot.com/ .

Much of the week's news flow was of a more clinical variety, including critical advisory committee meetings for both saxagliptin and liraglutide that provided information about how U.S. regulators are likely to think about Type II diabetes drugs being developed under the new guidelines. Brussels-based Solvay also confirmed April 1 that the diversified company is looking to sell off its pharmaceuticals unit. Among the potential buyers rumored to be interested is Sanofi-Aventis. Meantime Lilly signaled it could be a regular in this deal-making news column in coming weeks or months: although opposed to growth via mega-merger, CEO John Lechleiter did tell news media that the Indiana-based firm would consider spending up to $15 billion in pipeline-bolstering acquisitions. In short order, the pharma announced two smaller deals, one with Indian drug maker Zydus Cadila to access innovation on the cheap and the other with drug delivery firm Altea for a new vehicle for exenatide administration.

Lilly/Zydus Cadila: After striking collaborative research deals with India's Piramal Life Sciences, Jubilant Organosys and Suven, U.S. drug giant Lilly has added Zydus Cadila as its latest partner for drug discovery and development of new cardiovascular treatments. The deal is another example of Lilly's FIPNet strategy, in which the company aims to tap into interesting novel technologies and science while simultaneously hedging its risk by keeping the upfront monetary payments low. Under the deal, Lilly will provide Cadila Chemical starting points as well as expertise and feedback regarding toxicology, ADME, chemistry, biology, clinical and regulatory aspects as needed to increase the probability of success of the program. Cadila will work on the molecules, shepherding them through preclinical and early clinical stages of development, with Lilly having an option to license resulting molecules at the proof-of-concept phase. Lilly will pay Cadila potential milestone payments of up to $300 million, as well as royalties on sales if any of the compounds derived from the joint research program make it to market. Of all Big Pharma, Lilly has been aggressive in inking deals with Asian-based companies with potentially different ways of thinking about the drug discovery process in order to shore up its pipeline. Like its counterparts Piramal and Jubilant, Cadila has an interesting pipeline of its own, including a Phase II dyslipidemia compound, ZYH1, and a novel diabetes treatment, ZYH2.

Genzyme/Bayer: Genzyme acquired from its partner Bayer full rights to Campath (alemtuzumab), a humanized monoclonal antibody already approved as a first-line agent for treatment of B-cell chronic lymphocytic leukemia (CLL) and is in multiple pivotal trials for multiple sclerosis. As part of the deal, announced March 31, Genzyme also adds to its portfolio two other established oncologics, Fludara (fludarabine) and Leukine (sargramostim). According to Genzyme execs, the deal provides the Massachusetts biotech with roughly $185 million in revenue in 2009 and up to $700 million over the next three years. The two-part deal is structured without an upfront payment, limiting Genzyme's near-term out-of-pocket expenses. However, should Campath prove to be the MS blockbuster Genzyme anticipates, it will owe earnouts to Bayer totaling as much as $1.25 billion based on annual revenues over the next 10 years. In addition, Bayer may receive future milestone payments as a percentage of worldwide sales beginning in 2021 unless Genzyme exercises a $900 million buyout option related to the milestones. Earnouts for the oncology drugs aren't quite so generous: according to the deal terms, Bayer stands to receive up to $500 million for Fludara, Leukine and Campath based on annual revenue and up to another $150 million in milestones beginning in 2011 if certain undisclosed projections are met. In addition to limiting its monetary risk with this kind of earnout structure, Genzyme doubles the number of products in its oncology portfolio. The biotech also nabs necessary personnel, and as part of the arrangement Genzyme can acquire Bayer's new Leukine manufacturing plant in Seattle, once it is approved by U.S. regulators, for a price ranging from $75 million to $100 million. Meanwhile, in MS, Genzyme is not shouldering 100 percent of the ongoing development expenses associated with Campath: Bayer continues to pay one-third of the costs. The mAb is currently in two Phase III clinical trials for relapsing and remitting MS and could be approved for use in this indication by 2012.

Lilly/Amylin/Altea Therapeutics: At first, it looked like a sensible, if small, deal. Lilly/Amylin announced earlier this week a tie-up with Altea to develop a daily transdermal formulation of the GLP-1 analog exenatide (currently sold as a twice-daily subcutaneous injecttable, Byetta ). For an undisclosed upfront payment and total milestones, including post-approval, of up to $46 million, why not take a punt on an alternative delivery form? Lilly's competitor in the diabetes space, Novo Nordisk, made a similar move last year, signing up Emisphere Technologies to develop oral versions of its own GLP-1 candidates, committing $10 million in first-year payments. Despite the disastrous failure of Pfizer's inhaled insulin Exubera - a failure that demonstrated needles are not so bad after all, at least not if the alternative is a cumbersome inhaler - needles remain a problem for some. Not a big problem, but one perhaps worth spending a few tens of millions of dollars to find a way around. But despite the small amount of money on the table for Lilly and Amylin, we wonder if the exenatide partners still would be willing to sign the same deal next week given the FDA advisory committee's ruling on competitor GLP-1 analog Victoza. The panel was concerned by a possible risk of thyroid C-cell cancer based on safety signals observed in rodents that may blight the entire longer-acting GLP-1 class. And if once-daily liraglutide is long-acting, so surely will Altea's transdermal patch variety, "designed to be applied once per day to provide sustained levels of exenatide," according to Altea's press release. If this turns out to be a drug-class that's only safe in a short-acting form, clever sustained-release technologies will be redundant.

Sanofi/Kendrick: Sanofi seems to be slipping semi-secretively around the world with an open pocketbook - if one goes by the number of times its name crops up on wire services as a potential acquirer, and the number of times it actually enters into deals. In March alone, rumors spread that it is after the pharmaceutical business of the Belgian chemicals company Solvay SA, only days after it appeared to be interested in Indian vaccine maker Shantha Biotech, and weeks after it looked receptive to buying out Merck, its partner in an animal health vaccine joint venture, Merial. On April 2, however, Sanofi actually did a real deal, snapping up Laboratorios Kendrick, one of Mexico's leading generics manufacturers. Terms were not disclosed, but Kendrick had revenues of about $34.9 million in 2008 and employs about 400. Sanofi is already the largest pharmaceutical company in Mexico with 2,500 employees and $805 million in 2008 sales, and the eighth-largest generics player. The Kendrick acquisition will make it the leading generics player in what Sanofi characterizes as a branded generics market. As such, Sanofi plans to keep the Kendrick name and sales force, even as it figures out whether to retain its own generics brand name, Winthrop, in Mexico. The Kendrick deal follows Sanofi's much, much bigger acquisition of Zentiva ($2.6 billion), which has helped make the French drug maker the number-one branded generics manufacturer in some parts of Eastern Europe. Branded generics seem to be a high priority for Sanofi, and it's no wonder why. Eastern Europe and Mexico are among the fastest-growing generics markets worldwide and largely are constructed around branded generics, IMS Health reports. In 2007, for example, Mexico's generics sales were $11.5 billion, and could reach as high as $25 billion in 2012. And many Eastern European markets also have been growing at a rapid clip.

PPD/Magen: This week also brings news of the sale of a dermatology player, but not the big takeout many were expecting. In late March, reports surfaced that Stiefel Laboratories had hired Blackstone Group to seek offers - potentially as high as $3 billion - from interested parties. Now comes news that privately held Magen Biosciences, a Waltham, Mass.-based company focused on novel dermatology treatments, will be acquired by the contract research firm PPD for $14.5 million. The firm was founded in 2006 by a well-known group of biotech entrepreneurs and investors, including Rich Aldrich, founder of RA Capital, David Fisher, chief of dermatology at Massachusetts General Hospital, and Christoph Westphal, co-founder of Sirtris Pharmaceuticals. Having raised $17 million in seed and Series A financing from a syndicate of backers including ARCH Venture Partners, TVM Capital and Flybridge Capital Partners, the purchase price does not result in an exit for Magen's backers. In early 2008, Magen in-licensed for an undisclosed sum a number of derm compounds from Lilly that showed positive anti-inflammatory and antiproliferative results in preclinical studies. Those compounds were the primary reason for PPD's interest in the biotech. The buy-out gives PPD entrée into the suddenly-hot specialist field of dermatology. In a press release announcing the news, PPD CEO Fred Eshelman noted that dermatologic treatments generally have a "more straightforward path to regulatory approval." That's certainly part of the logic behind moves of another specialist drug maker, Valeant, which is trying to brand itself as a derm powerhouse with recent acquisitions of Coria Laboratories, Dow and DermaTech.

- Ellen Foster Licking (e.licking@elsevier.com), Melanie Senior (m.senior@elsevier.com), Wendy Diller (w.diller@elsevier.com), and Vikas Dandekar (v.dandekar@elsevier.com)

Deals Of The Week: Lilly/Cadila, Genzyme/Bayer, Lilly/Amylin/Altea ...

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