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 http://invivoblog.blogspot.com.

As the last days of 2010 fast approach, already there is a sense that change is in the air in biopharma land, Dick Clark is packing up his office, making way for Ken Frazier, described by some Merck staffers as "visionary." In the meantime the abrupt departure of Pfizer's Jeff Kindler has industry's tongues ... well, wagging.

Kindler's hefty severance package suggests he may well have been pushed from the Pfizer nest. Regardless, it would appear that Ian Read, who takes over as the CEO of the world's biggest pharma, may find himself the agent of change – whether he wants to be or not (Also see "Pfizer Watchers Try To Read New CEO's Next Moves" - Pink Sheet, 13 December, 2010.).

And in other changes, here are the Deals of the Week:

Cephalon/Mesoblast

This week’s tie-up between Cephalon and Mesoblast shows stem cell technologies can garner hefty upfront dollars. Cephalon is spending $130 million upfront to develop and commercialize the Australian biotech Mesoblast's adult mesenchymal precursor stem cell therapies for multiple indications, the companies announced Dec. 7. In addition, Cephalon has agreed to pay regulatory milestones of up to $1.7 billion, with a hefty percentage of that amount deliverable upon U.S. regulatory approval of selected products.

In exchange, Cephalon is getting exclusive worldwide rights to co-develop and commercialize products in several indications: congestive heart failure, acute myocardial infarction, Parkinson's disease, Alzheimer's disease, and, furthest along, products for augmenting hematopoetic stem cell transplantation in cancer patients.

The large upfront is striking given the early stage of Mesoblast’s technology; also striking is the equity component – Cephalon is buying a 19.9% stake in the Aussie firm for $220 million. It certainly demonstrates Cephalon’s commitment to the technology. A spot- check of Elsevier's Strategic Transactions database indicates big stem cell deals are still the rarity: the 2008 Genzyme/Osiris alliance, which gave the smaller biotech $75 million in upfront money, is the only one that comes close. For Cephalon, the Mesoblast alliance is part of its ongoing strategy to amass biologics capabilities via the deal table. Other examples: Ception, Bioassets and Arana Therapeutics.

GlaxoSmithKline/MeiRui

Rumors that GlaxoSmithKline was pursuing MeiRui have become a reality. On Dec. 8, the Big Pharma announced it was acquiring the Chinese urology firm from stakeholders Pagoda Pharmaceuticals and Allergon for approximately $70 million, as it further deepens its commitment to this important emerging market. Among MeiRui's leading products: Prostat for benign prostatic hyperplasia and Sheniting for overactive bladder syndrome.

As part of the transaction, GSK, the maker of Avodart, gets not just products but also MeiRui's established sales and marketing platform and a manufacturing facility in Nanjing City, Jiangsu Province, China. Completion of the transaction is expected by the end of 2010, subject to regulatory approval. Ahead of the deal's announcement, consultants told sister publication PharmAsia News just why a GSK/MeiRui marriage made sense. GSK already has four urology products registered in China: Fortum, Augmentin, Zinacef and Timentin. But deeper relationships with Chinese key opinion leaders would undoubtedly help its commercial efforts in the Middle Kingdom, especially as it looks to launch its most important urology product, Avodart.

MeiRui certainly helps with that ambition, given its ties to the China Urology Association. MeiRui stands to benefit as well. It has been trying to take Prostat over-the-counter, so Glaxo's considerable OTC expertise should be attractive. Building an emerging markets presence is an important piece of GSK's evolving strategy, and most every other big pharma, for that matter. The MeiRui take-out shows the firm's preference for bite-size acquisitions that can be bolted on to existing businesses isn't waning anytime soon.

Geron/Angiochem

Geron will pay $35 million upfront to license Angiochem’s novel peptide technology that helps transfer oncology drugs across the blood brain barrier. The deal – which consists of a $7.5 million cash payment and a $27.5 million stock issue due to occur on Jan. 5, 2011 – gives Geron worldwide rights to Angiochem’s technology linking peptides. These molecules target the LRP-1 receptor with tubulin disassembly inhibitors, disrupting mitosis in tumors.

More specifically, Geron gets rights to a drug now known as GRN1005, a derivative of the common chemotherapy paclitaxel, slated to enter Phase II trials to treat brain metastases by the second half of 2012.

Furthermore, Geron and Angiochem will collaborate on projects that conjugate the same peptide technology with telomerase inhibitors, which inhibit an enzyme crucial to cell division, in an effort to transport those compounds into the central nervous system. Geron already has several telomerase inhibitors under investigation. Unspecified milestone payments, royalties and a share of any sublicensing revenues will also be due to Angiochem as the projects advance toward commercialization. Angiochem may be due additional cash upfront if fluctuations in the price of Geron’s stock drive the equity component’s value below $27.5 million.

Pfizer/Morphosys

Partner-driven bonanza for MorphoSys this week. Not only did the German antibody player secure a technology transfer deal with Pfizer via its newly acquired Sloning BioTechnology unit, but it also announced three other partners have filed to begin Phase I clinical trials with MorphoSys-designed antibodies. That means lots of milestone payments, and triple validation of the HuCAL technology.

It seems those partners believe MorphoSys' rhetoric that HuCAL is "one of the most powerful methods available for generating fully human antibodies." The German group now boasts 13 partnered HuCAL programs in the clinic, declaring the associated milestone payments "an important source of revenue." Eat your heart out, Genmab! That humbled Danish antibody group is also upping its partner-generated revenue with a new "networked" strategy; question is, whether its technology (much of it licensed originally from Medarex) will prove as popular.

The Pfizer/Morphosys deal isn't that sexy, certainly not in terms of what was disclosed (nothing, financially, that is). Sloning's Slonomics technology platform for making highly diverse gene and protein libraries will be installed at Pfizer's Rinat subsidiary; MorphoSys gets an upfront payment and annual license fees.

Check out MorphoSys' same-day ad hoc announcement for some clues on the size of those payments: it's increasing its 2010 financial guidance ("mainly as a result of the achievement of revenues from additional commercial activities, resulting from the acquisition of Sloning") to anticipate FY revenues of €91-94 million (up by €4-5 million) and operating profit of €13-16 million (rather than €7-9m).

By Ellen Foster Licking, Wendy Diller, Melanie Senior, Paul Bonanos

Deals Of The Week: Cephalon/Mesoblast; GSK/MeiRui; Geron/Angiochem…

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