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/ .

GlaxoSmithKline/Apeiron: GSK continues to access early-stage innovative programs through small, back-end weighted licensing agreements. This week the big pharma inked a deal with privately owned Apeiron worth $17.5 million in upfront cash and equity for full rights to the biotech's Phase I biologic for acute respiratory distress syndrome (ARDS), an adverse event associated with sepsis, trauma, and post-operative complications that affect approximately 1 million people annually in emerged markets (² Also see "GSK Hunts for Novelty By Paying £11m To Apeiron In A Respiratory Deal" - Pink Sheet, 3 February, 2010.).

Glaxo could be on the hook for another £207 million in development milestones as well as sales royalties should Aperion's asset, APNO1, a recombinant human angiotensin converting enzyme-2, succeed in three indications. Although this is far from big money for GSK, the upfront payment exceeds the £10 million Apeiron has raised from Austrian and European grants and angel backers. (Apeiron is one of a growing number of companies eschewing VC.) GSK's respiratory CEDD, one of the half-dozen semi-autonomous therapeutic area-focused units comprising GSK's R&D operations, gets credit for the deal. But it may have its hands full when it comes to APN101's development. Track records of drugs for similarly complex and associated conditions such as sepsis show why the unmet medical need remains high (³ Also see "Son-Of-Xigris Goes to Biotech--Where it Belongs?" - In Vivo, 1 June, 2007.?).

Cephalon/Mepha: Generics, that low margin, but inherently stable business, remain a sexy proposition for dealmakers. If there are any doubts, look no further than Cephalon's purchase this week of the private Swiss generics firm Mepha for $590 million.

One year after it launched the option-to-acquire party with its $100 million bid for ⁴ Ception, a privately held biotech developing the Phase IIb/Phase III reslizumab for the rare autoimmune condition eosinophilic esophagitis, now Cephalon is talking up diversification and internationalization (Or is that internationalisation?). "This is about growing top-line and bottom line, and generating cash," Cephalon CEO Frank Baldino said on a conference call announcing the deal.

Indeed, like other Big Pharmas, including Pfizer, Cephalon's late-stage pipeline is thin and the specialty pharma faces revenue pressure given the 2012 genericization of its juggernaut, Provigil . It's also about building a European commercial infrastructure. Thanks partly to Mepha, 30 percent of Cephalon's global sales will now be ex-U.S. Bidding for Mepha, owned by Germany's Merckle family and sister to ratiopharm, another generics firm on the auction block, was apparently competitive. Still the ultimate price tag for the deal was just 1.5 times Mepha's 2009 sales.

Medco/DNA Direct: On Feb. 2, the pharmacy benefits manager Medco announced the acquisition of privately held DNA Direct, a decision support services for payers, providers, and patients to help ensure the appropriate use of more than 2,000 available genetic and molecular diagnostic tests. Financial terms of the deal were not disclosed.

Five-year-old DNA Direct, which had backing from Firefly Investment and Lehmi Ventures, will become a wholly owned Medco subsidiary and its current president, Ryan Phelan, will remain at the helm. The deal was apparently driven by Medco's need to bolster its commercial side rather than its R&D capabilities (⁵ Also see "Medco Buys DNA Direct To Bolster Its Personalized Medicine Business" - Pink Sheet, 2 February, 2010.).

DNA Direct charges fees only for its consulting services; it does not make money on the tests it recommends and supplies to individuals. The company started out focused on the consumer, but has shifted to a business-to-business model in which it helps health plans choose appropriate genetic tests for their physicians and members - a good fit with Medco's personalized medicine program. The deal comes approximately three years after Medco reorganized the front end of its pharmacy operations into Therapeutic Resource Centers, a network of six sites each focused on one disease. Medco is not the only PBM to tap into the burgeoning genetic counseling market. In November, CVS Caremark announced a partnership with genetic benefits manager Generation Health ⁶ Also see "PBM Power Behind Pharmacogenomics: CVS Caremark Launching Program" - Pink Sheet, 16 November, 2009.

Abbot/Pierre Fabre: Abbott continues to look for alliances or acquisitions in high-growth therapeutics areas, this week inking a deal for Pierre Fabre's preclinical antibody targeting the cMet receptor, h224G11. cMet's definitely a target that's caught Big Pharma's attention. Late last year, Novartis ponied up $150 million (plus $60 million in near-term milestones) to acquire Incyte's Phase III JAK 1/JAK2 inhibitor and its Phase I oral cMet inhibitor. In that transaction, acquiring rights to the late-stage JAK1/JAK2 inhibitor clearly drove the deal economics, so it's a bit surprising to discover Abbott is paying $25 million upfront, plus two years of research expenses and undisclosed milestones to get its hands on Pierre Fabre's not-yet-studied-in-humans mAB. Under the terms of the collaboration, Abbott will be responsible for all further development of h224G11, which has shown promising results in treating a range of solid tumors (including prostate, lung and gastric cancers), and the mediation of chemotherapy resistance. The addition of h224G11 bolsters the Big Pharma's oncology pipeline, which also includes a PARP inhibitor and a monoclonal antibody targeting a unique epitope of the epidermal growth factor receptor. Beyond oncology, other priority therapeutic areas include cardiovascular disease, immunology and pain. Late last year Abbott paid $170 million to acquire PanGenetics' antibody for chronic pain, which targets nerve growth factor.

- Ellen Foster Licking ( ⁷ e.licking@elsevier.com )

Deals Of The Week: GSK/Apeiron, Cephalon/Mepha, Medco/DNA Direct...

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