[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.]

To rehash the event of this week: the Supreme Court ruled 5-to-4 to uphold the constitutionality of the Patient Protection and Affordable Care Act June 28, including the mandate requiring individuals to have health insurance.

The decision seems favorable to the pharmaceutical industry and may have surprised a few in the industry who already were scheming ways to get back the billions spent on that excise tax to the federal government in 2011. “The Pink Sheet,” DAILY provided an initial review, making the point that many changes already were set in motion by the passage of the act itself ([A#14120628004]). Given that the Supreme Court decided in favor of the act, the outcome probably won’t have a direct impact on the sector’s fundamentals.

The pharma industry stands to benefit from the expected increase in insured patients. The Centers for Medicare & Medicaid Services project about 22 million newly insured patients, and that spending on prescription drugs by public and private payers will increase 8.8% in 2014 over 2013 – the year major coverage expansions under the ACA are scheduled to begin – compared to 4.1% growth if it had not passed ([A#14120613003]).

Still, there’s no guarantee of the volume trends newly insured patients will deliver when it comes to pharmaceuticals. “The actual volume upside may be lower and more modest then some expect,” wrote Barclays Capital analyst Anthony Butler in a June 28 note. A significant portion of the uninsured are believed to be young people who may not use health care services or pharmaceuticals. “The addition of these segments into the coverage pool through the individual mandate may be a smaller net positive from the volume perspective for the pharma sector than some have expected,” Butler said.

Merck Serono/Compugen

The corporate venture arm of Germany’s Merck Serono SA is collaborating with Compugen Inc. to establish a new company, Neviah Genomics, to discover, develop and market novel biomarkers for drug toxicity, with the aim of bringing a product to market within a few years Also see "Merck Serono Ventures, Compugen Team Up On Drug Toxicity Biomarker Start-Up" - Pink Sheet, 26 June, 2012.. The Neviah collaboration, announced June 25, is the first investment under Merck Serono Ventures’ Israel Bioincubator program, established by Merck Serono in 2011 with initial funding of €10 million over seven years.

Compugen, a Tel Aviv-based biotech with a pipeline of preclinical protein therapeutics and monoclonal antibodies, will bring its predictive discovery technologies to the partnership. The deal is structured so both Merck Serono Ventures and Compugen will be shareholders in Neviah, which will have its own board that will determine how any product profits will be distributed. Compugen also will earn royalties from product sales.

Further financial details were not disclosed, including the amount of Merck Serono’s initial investment. The companies have worked together as part of a 2008 partnership to co-develop CGEN855, a GCPR peptide investigated in inflammatory disease [See Deal].

Lilly/PrimeraDx

Massachusetts-based PrimeraDx Inc. has entered into a multi-year collaboration with Eli Lilly & Co. to develop companion diagnostics for several unspecified clinical candidates. Neither terms nor timelines were disclosed. The alliance initially will focus on oncology.

PrimeraDx, a specialist in quantitative real-time PCR, will develop multiplexed assays using its proprietary ICEPlex system which is capable of simultaneous detection and quantification of numerous target types such as mRNA, miRNA, SNPs and DNA.

Founded in 2004, and formerly known as Primera Biosystems, Inc., the company sells instrumentation, software, assays and consumables. It targets the clinical lab space, including large academic research centers, reference laboratories and bio-pharmaceutical companies. PrimeraDx is backed by venture investors including Abingworth Management Ltd., InterWest Partners LLC, CHL Medical Partners, MPM Capital, Burrill & Co. and the Malaysian Technology Development Corporation. Its last raise was a $20 million series C in September 2009 [See Deal].

Celgene/Inhibrx

Drug discovery firm Inhibrx has signed a notable partner, announcing June 27 that Celgene Corp. has licensed a preclinical antibody program. The target of the program was not disclosed. The potential value of the deal is $500 million, including upfront, clinical and regulatory milestones. Inhibrx, based in La Jolla, Calif., is focused on the discovery and development of novel drugs for cancer and inflammatory disease.

Merck/AstraZeneca

Merck & Co. Inc. and AstraZeneca PLC have agreed to work together for another two years after extending a nearly 30-year joint venture that otherwise would have ended in September Also see "Merck/AstraZeneca Stay Tied To Each Other For Another Two Years" - Pink Sheet, 27 June, 2012.. The companies announced an agreement to extend their longstanding partnership June 27 after coming to terms that could benefit both parties.

The original partnership dates back to 1982, when Sweden’s Astra AB tapped Merck to market its proton pump inhibitor drugs in the U.S. Nexium (esomeprazole), which is expected to post dwindling sales once losing patent protection in 2014, and Prilosec (omeprazole), which is now sold as an over-the-counter medication, remain the only drugs still under the agreement.

AstraZeneca now will have the option to buy the remainder of Merck’s stake in the drugs in the first quarter of 2014 for $347 million plus an amount equal to 10 times Merck's average 1% annual profit allocation in the partnership, which AstraZeneca estimates to be about $80 million. The price paid by AstraZeneca also could include the net present value of up to 5% of future U.S. sales of the painkiller Vimovo (naproxen/esomeprazole).

While the extension of the deal will have no immediate effect on AstraZeneca’s earnings, it will help Merck deal with the patent expiration of the blockbuster allergy drug Singulair (montelukast) by adding $200 million in revenues to the 2012 top line.

Biogen Idec/Isis

Antisense drug discovery platform operator Ionis Pharmaceuticals Inc. has partnered prolifically over the years. Its latest deal with Biogen Inc., announced June 29, is the second collaboration between the two companies, an arrangement to develop and commercialize a treatment for myotonic dystrophy type 1. The disorder, also known as Steinert disease, is a form of muscular dystrophy that afflicts adults.

Biogen Idec will pay $12 million upfront to enter the collaboration, but could pay much more over time if it licenses the drug at the end of Phase II. The deal includes $59 million in milestone payments prior to licensing, as well as up to $200 million for a licensing fee and further clinical milestones.

The companies will attempt to develop a drug that repairs a repeating defect in the coding of the dystrophia myotonia-protein kinase gene that results in abnormally long strands of RNA, leading to buildup in cells. Isis and Biogen already have an alliance in spinal muscular atrophy, revealed in January Also see "Biogen Strikes A Deal With Isis For Antisense Technology" - Pink Sheet, 4 January, 2012..

Sanofi/Oxford

The U.K.'s Oxford BioMedica PLC announced June 29 that it has earned a $3 million option exercise payment from Sanofi, which has decided to acquire the worldwide license to a pair of Phase I/II gene-based treatments discovered by Oxford. Under the terms of an agreement signed in 2009, Sanofi has acquired rights to develop, manufacture and commercialize StarGen for Stargardt disease and UshStat for Usher syndrome type 1B [See Deal]. Oxford discovered and developed both candidates using its proprietary LentiVector platform technology.

Deals Of The Week: Merck Serono/Compugen, Lilly/PrimeraDx, Biogen Idec/Isis

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