Deal Watch: Bristol Places Early Wager On Padlock's Autoimmune Potential

Regeneron and Bayer look to build on their past success collaborating in ophthalmology by partnering to develop an Eylea successor. Sun Pharma builds its portfolio with 13 products from Novartis.

"The Pink Sheet" regularly covers business development and deal-making in the biopharmaceutical industry. Below is a roundup of some of the most noteworthy transactions that occurred between March 19 and April 1. Deal Watch is supported by deal intelligence provided by Strategic Transactions.

Bristol/Padlock

In a takeout that happened a lot sooner than anyone expected, Bristol-Myers Squibb Co. is ponying up $225m between upfront cash and what are termed "near-term contingent milestones" to acquire privately held Padlock Therapeutics Inc. and its Protein/Peptidyl Arginine Deiminase (PAD) inhibitor technology platform.

The technology platform, which offers a new approach to battling autoimmune diseases such as rheumatoid arthritis, is still being considered a discovery program. No Padlock candidate has reached clinical development yet (Also see "Bristol Makes Major Investment In Padlock's Autoimmune Platform" - Pink Sheet, 23 Mar, 2016.).

In the deal announced March 23 and expected to close before the end of the second quarter, Bristol did not specify how much of that $225m comprised the up-front payment [See Deal]. There had been no previous collaborations between the companies, though other big pharmas had participated in Padlock's Series A funding; the firm raised $23m in December 2014, led by Atlas Venture with participation by Index Ventures, J&J Development Corp. and Merck KGAA's MS Ventures [See Deal].

In a same-day blog posting, Atlas partner Bruce Booth said that investor enthusiasm for Padlock was based on strong science that had yielded R&D progress "staggeringly fast." Based on research conducted at Scripps Research Institute by Paul Thompson and the late Kerri Mowen, Padlock's R&D efforts investigated the role of protein-arginine deiminases in autoimmune diseases, with a goal of developing therapies that inhibit the production of autoantigens as an alternative to traditional treatments that suppress the immune system.

The biotech's main work has been based on PAD intellectual property in-licensed last year from GlaxoSmithKline PLC, including GSK484, which targets PAD4, other compounds in multiple chemical series, assays, data and crystal structures [See Deal]. GSK got an equity position in Padlock and board observer rights under the transaction, but does not hold any downstream rights such as milestone payments or royalties on the IP transferred.

Padlock's strategy before the buyout had been to move the first candidates into clinical development by late 2017, co-founder and CEO Michael Gillman said in an interview. However, he noted, that timetable may be accelerated as Bristol takes over the program – which would be in keeping with the rapid progress Padlock has made in its discovery and preclinical work in the PAD area.

"This is a pretty new piece of biology and when we got started, we were convinced it was important, but we thought it was kind of obscure," he said. "As we started talking to pharma companies, particularly those that were active in autoimmune disease, we learned that they were very interested in this pathway, were persuaded of its importance, and in many cases had performed internal screens for inhibitors of these enzymes and not gotten much [from those efforts]."

"We made a lot of progress on the chemistry in a relatively short period of time," the exec continued, "and so as we started getting involved in some of these partnering discussions and people started to appreciate how advanced our chemistry was, that's what got everyone really excited before we were ready for them, in a way."

Bristol expects the deal to help it build in a growth segment. "This acquisition further strengthens and accelerates our immunoscience pipeline," a spokesperson said, which includes potential first-in-class and best-in-disease candidates in autoimmune disorders with a goal of producing long-term remission. "The company is building on learnings from extensive clinical and patient experience with Orencia (abatacept) to seek entirely new mechanisms that are both innovative and differentiated not only for RA, but other immune-system disorders where significant unmet medical need remains, including RA, lupus and inflammatory bowel disease."

No decision has been made yet, the spokesperson added, on whether Padlock's staff will be absorbed into Bristol. Gillman said discussions over the Padlock team's future role, if any, should take place over the next couple of weeks. The acquisition has been approved by the boards of both companies and Padlock's shareholders. The deal includes the possibility of other contingent payments to Padlock shareholders as high as $375m, although no additional details were provided.

Regeneron/Bayer

Regeneron Pharmaceuticals Inc. and Bayer AG are building on a partnership that has borne fruit for nearly a decade with the March 24 announcement of a licensing agreement to create a successor product to Eylea (aflibercept) (Also see "Regeneron/Bayer Partnership Seeks To Build Upon Eylea's Success" - Pink Sheet, 24 Mar, 2016.).

REGN910-3 combines the vascular endothelial growth factor (VEGF) trap molecule with nesvacumab, an experimental angiopoietin2 (Ang2) antibody. The combination therapy has completed Phase I testing and now a pair of Phase II trials are evaluating the co-formulated single intravitreal injection therapy for patients with either wet age-related macular degeneration or diabetic macular edema, the companies said.

The firms have been partnered on Eylea, which is approved in the same indications, but aflibercept begins facing patent expirations in 2017. The drug was first approved for wet AMD in November 2011, and added a second US indication of macular edema after central vein occlusion in 2012 (Also see "Regeneron Touts Potential Of Growing Eylea Franchise After Robust Q4" - Pink Sheet, 17 Jan, 2014.). The DME indication was added to the label in July 2014.

The ocular VEGF market has become highly competitive, and it will be a tough market to enter without a clear advantage. Eylea contends with Roche's Lucentis (ranibizumab) and Avastin (bevacizumab), but last year an NIH-funded comparative study showed that Eylea outperformed Lucentis and Avastin in DME – a difference that was considered clinically meaningful (Also see "Eylea, Avastin Both Get A Boost From NIH Comparative Study In DME" - Pink Sheet, 19 Feb, 2015.).

Bayer first licensed ex-US rights to aflibercept in October 2006, a deal that was expanded in 2014 with a collaboration to combine the VEGF blocker with rinucumab, a platelet-derived growth factor receptor beta (PDGFR-B) antibody in wet AMD [See Deal]. That combination therapy candidate, called REGN2176-3, is currently in Phase II.

Angiopoietins are a family of vascular growth factors discovered by Regeneron researchers. Preclinical data indicate combination therapy using angiopoietin-based therapy can promote the formation and maturation of ocular blood and lymphatic vessels. This means the REGN910-3 combination could influence the pathological development of new blood vessels as well as the permeability of blood-vessel walls in certain eye diseases.

"The Ang2 combination therapy allows us to explore and address multiple pathways that offer potential additional benefit to patients with devastating retinal eye diseases," a Regeneron spokesperson said. "Our preclinical data indicates some potential additional benefit for the combination therapy."

"Similarly, preclinical data suggests that combining PDGFR-β blockade with VEGF blockade by Eylea can provide advantages over inhibiting VEGF alone in the treatment of wet age-related macular degeneration," she added.

Bayer is paying Regeneron $50m up front under the new agreement, with up to $80m in development and regulatory milestones possible for the biotech. The companies will share global development costs for REGN910-3, with Bayer getting exclusive ex-US commercialization rights to the product. Bayer will share profits from ex-US commercialization, while Regeneron retains full US commercial rights with no profit sharing to Bayer.

In February, Regeneron reported blockbuster sales and continuing growth for Eylea, which begins facing patent expirations in 2017 (Also see "Regeneron's Eylea Soars, But Praluent Is Slow Out Of The Gate" - Pink Sheet, 9 Feb, 2016.). Domestically, the product brought in $746m for the quarter, up 44% year-over-year, with full-year US sales of $2.68bn, up 54%. Worldwide sales totaled $1.16bn for the fourth quarter, with ex-US sales up from $297m in 2014 to $413m in 2015. Global full-year sales were $4.09bn, up 47% from 2014.

Boehringer Ingelheim/Centrexion

Start-up Centrexion Therapeutics Corp. acquired three analgesics from Boehringer Ingelheim GMBH on March 30, which will strengthen Centrexion's existing chronic pain pipeline. The firm's lead is currently CNTX4975, an injectable trans-capsaicin in clinical trials for pain associated with chronic conditions.

The three candidates include CNTX6970, a selective cytokine CCR2 antagonist in Phase I for inflammatory pain; CNTX6016, a cannabinoid CB2 agonist for pain relief (IND-ready); and CNTX0290 (IND-ready), a selective somatostatin SSTR4 for chronic pain, with potential for use in inflammatory, nociceptive, neuropathic and mixed chronic pain [See Deal].

BI will now be able to shift its focus to key central nervous system areas including Alzheimer's, schizophrenia and depression. No financial terms were disclosed.

Sun Pharma/Novartis

Sun Pharmaceutical Industries Ltd. is entering the Japanese pharma market by acquiring a bundle of 14 established prescription brands from Novartis AG‘s local subsidiary, in a move that echoes a similar transaction between Takeda Pharmaceutical Co. Ltd. and Teva Pharmaceutical Industries Ltd. last year.

A subsidiary of the Indian generics-focused firm will buy the therapeutically diverse portfolio – which has combined annual revenues of around $160m – for $293m in cash (Also see "Sun Enters Japan Through Divested Novartis Portfolio" - Scrip, 29 Mar, 2016.). Novartis will continue to carry out distribution activities for the products in Japan for a defined period until all relevant marketing authorizations are transferred to Sun.

The brands "will be marketed by a reliable and established local marketing partner under the Sun Pharma label," and this (undisclosed) partner will also take over distribution of the brands, Sun said. Neither firm disclosed the details of the individual products being transferred.

The March 29 transaction follows on from the similar divestment by Takeda of a portfolio of mature branded drugs, although these are being moved over to a new minority-owned joint venture being set up in Japan this April with Teva, rather than being fully divested (Also see "Takeda Lays Out Teva JV Impact, Confirms Blopress Transfer" - Scrip, 28 Dec, 2015.).

Speculation has been swirling since late last year that Sun was looking to do a deal for selected products in Japan, probably involving Novartis. Some other Indian firms, notably Lupin Ltd., are gearing up for a stronger push into Japan and the wider APAC region, helped by past and planned acquisitions (Also see "INTERVIEW: Lupin Gears For APAC Push, Japan Generic Consolidation" - Scrip, 1 Dec, 2015.).

Noting that the $73bn Japanese pharma sector "is a market of strategic interest for us," Sun's managing director Dilip Shanghvi hinted that the Novartis deal could be used as the foundation for an expanded Japan portfolio in the future.

Mature, long-listed branded products in Japan are often caught in a trap of low growth and regular price reductions under the country's biennial drug price revision scheme, being unable to benefit from either higher premiums for new innovative products or from the growth for outright generics.

The generic sector has been growing strongly in Japan under the shepherding of policies that provide doctors and pharmacists with various fee incentives, and patients' lower co-payment costs. The government has set an official target for generics to account for 80% by volume of the substitutable sector by March 2021.

Generics currently account for close to 50% by volume and around 27% by value of the total Japanese prescription market, although starting prices for first generics are being lowered as part of pricing policy changes next month.

Sun also is in the process of digesting Ranbaxy Laboratories Ltd., the Indian operation it acquired from Japan's Daiichi Sankyo Co. Ltd. for $4bn in early 2015 and which made Sun the world's fifth-largest generics group by sales, as well as India's largest drug firm [See Deal].

Xenoport/Dr. Reddy's

Dr. Reddy's Laboratories Ltd. licensed exclusive US development and commercialization rights on March 28 to XenoPort Inc.'s XP23829, a prodrug of monomethyl fumarate (MMF), for all indications. The orally available fumarate analog recently completed a Phase II trial for moderate-to-severe chronic plaque psoriasis. Fumaric acid ester compounds have shown immunomodulatory and neuroprotective activity.

In exchange for the US license, Dr. Reddy's will initially pay $50m ($47.5m up front and a $2.5m clinical trial materials transfer fee), up to $190m in regulatory milestones, up to $250m in post-commercialization milestones, and tiered double-digit royalties up to the mid-teens on net US sales (Strategic Transactions estimates 10%-16%) [See Deal].

Dr. Reddy's plans to first advance XP23829 in the psoriasis indication and may also potentially develop the compound for relapsing forms of multiple sclerosis. In October 2015, XenoPort announced that it would seek a partner to develop XP23829 in order to focus all its efforts on its Horizant (gabapentin enacarbil), approved in the US for restless legs syndrome and post-herpetic neuralgia pain, and in clinical development for alcohol use disorder.

Dr. Reddy's Promius Pharma LLC subsidiary, which focuses on dermatology and neurology therapeutics, markets Scytera (coal tar) for psoriasis, and last April submitted an NDA for DFD01, a corticosteroid for psoriasis; the current deal, its largest alliance to date, further strengthens the company within this therapeutic area.