Inspiration’s Hemophilia Pact With Ipsen Gets Surprise Revamp

Inspiration Biopharma and hemophilia partner Ipsen have renegotiated their nearly three-year-old deal around two late-stage clinical assets. As part of the new deal, Ipsen has given up its option to buy Inspiration, providing the biotech with the opportunity – and the necessity – to find fresh financing from new backers in the coming months.

Ipsen has funded development of US-based partner Inspiration Biopharmaceuticals Inc.’s two promising hemophilia products through Phase III but on August 21 unexpectedly said it needs to share future development costs. The two companies consequently revamped their nearly three-year-old partnership to assure Inspiration’s independence and made further funding from the French biotech contingent on the smaller company attracting private investors in a very tight time frame.

The companies’ two experimental drugs are late-stage candidates and Inspiration’s key assets. OBI-1 is an intravenous recombinant porcine factor VIII (rpFVIII) medicine that Ipsen originally developed for treating people who either have hemophilia A or suffer from congenital hemophilia A and have acquired inhibitors to human FVIII. The other blood disorder asset, IB1001, is a recombinant factor IX (rFIX) for the treatment and prevention of bleeding in patients with hemophilia B.

Hemophilia is an increasingly attractive market for biopharmaceutical companies and competition is heating up in the space. The global rhFVIII market was estimated to be worth $3.8 billion in 2009, with 90% of sales in the developed markets and very high unmet medical needs in the developing markets, such as China. Experts currently estimate the total hemophilia market potential to be around $10 billion. (See Exhibit 1.)

That prize has attracted big players such as Novo Nordisk AS, Bayer AG, Pfizer Inc., Baxter International Inc., and Biogen Inc.

Ipsen and Inspiration signed their original partnership in early 2010. That established Ipsen as Inspiration’s sole financier and gave it the ability to acquire full control of the US hemophilia specialist, which moved to Cambridge, MA from California late last year.

Inspiration and Ipsen: The Original Alliance

In January 2010, Ipsen promised to provide Inspiration with up to $259 million in funding as part of the companies’ strategic partnership to create what they termed a “global leading hemophilia franchise.” The deal had Ipsen pay $85 million upfront for a 20% stake in Inspiration.

Under that deal’s terms, Ipsen gave Inspiration an exclusive, worldwide sublicense to the recombinant porcine factor VIII product OBI-1, in exchange for $50 million in convertible notes and a 27.5% royalty on future OBI-1 sales. It foresaw the successful development of OBI-1 as well as Inspiration’s recombinant factor IX product, IB1001, possibly earning Inspiration another $174 million in clinical and regulatory milestones.

For each milestone payment, Ipsen would receive a note convertible into Inspiration equity. According to Elsevier’s Strategic Transactions, as of August 2012, Inspiration had earned $145 million in milestone payments, and Ipsen’s stake in the biotech rose to 43.5% ([See Deal]). The deal entitled Ipsen to one member to the board of Inspiration and also gave it the ability to acquire full control of the biotech, provided certain trigger events occurred.

“The original deal in January 2010 was kind of an envisioned structured takeover of the company, and there was a process to get there,” says Inspiration CEO John Butler. “We’d hit milestones, we’d get a check and after we hit all the milestones, Ipsen would own 49%.”

But then things began to change. “Ipsen’s strategic focus changed. And while they are still clearly committed to Insipration, the need to fully own Inspiration changed and our financing needs changed as well. So shortly after I took over in October 2011, we started talking in light of these changes,” Butler says. Ipsen said the move was made necessary by Inspiration’s growing cash needs, which are higher than initially expected in the 2010 deal (See (Also see "In Seeking Focus, Ipsen Turns To Specialty Pharma Model" - In Vivo, 1 Sep, 2011.)).

Under terms of the new pact, Ipsen regains commercial rights to OBI-1, and gets commercialization rights to IX IB1001, in Europe, Russia, and the Commonwealth of Independent States, as well as specific Asia-Pacific territories and certain countries in North Africa. Inspiration remains responsible for worldwide development of the two late-stage products. Ipsen will make a $30 million up-front payment to Inspiration. Including this up-front payment, Ipsen could pay Inspiration milestones for a total amount of up to $200 million, of which $27.5 million are regulatory milestones and the remaining are commercial milestones. It’ll also pay a mid-teen royalty on its OBI-1 revenue and an undisclosed higher royalty on sales of IB1001. Ipsen also agreed to invest up to $20 million in Inspiration, dependent on whether the latter manages to raise additional external funding before September 30.

But the most important change for potential investors was the removal of Ispen’s call option to acquire full control of Inspiration. “That was the most important aspect of the previous deal that needed to be removed to allow us to access outside capital,” Butler says.

Exhibit 1

Total Recombinant Coagulation Market (Factors VII, VIII, and IX)
Five companies sell recombinant coagulation products: Pfizer, Novo Nordisk, CSL, Baxter and Bayer. CSL in-licenses Bayer’s rFVIII and markets the product under the name Helixate, while Pfizer’s ReFacto is manufactured by Swedish Orphan Biovitrium.
Product (Marketer)	Market Share
Advate & Recombinate (Baxter)	32%
Kogenate (Bayer)	21%
Helixate (CSL)	7%
ReFacto/Xyntha (Pfizer)	7%
BeneFIX (Pfizer)	10%
NovoSeven (Novo Nordisk)	23%

Company data; Credit Suisse estimates

Both companies believe the new partnership structure will give Inspiration the leverage it needs to raise additional third-party financing and have enough cash to last until a potential equity offering in 2013.

The French biotech said the revamp has been worked out over the past three months. “There was urgency. We needed to agree on a deal that fits both companies’ needs,” says Susheel Surpal, Ipsen chief financial officer and the French group’s sole Inspiration board member. “Inspiration needed funding to cover them over this period while they’re talking to potential investors. It was important to us that we could agree on a new deal to allow that additional funding.”

But Inspiration has very tight timeframes within which to achieve its fresh funding from Ipsen. The $30 million already committed by Ipsen would take Inspiration through to the end of August, Surpal says. The additional Ipsen investment is broken into two parts. “They will receive $7.5 million from us in the form of a warrant and that would take them through to the end of September, which is the deadline for Inspiration to raise an additional $30 million from third-party investors, and if they do that, we will top up the $7.5 million with a further $12.5 million for a total of $20 million from Ipsen,” Surpal says. “What we’re asking is that they can raise at least $30 million from third parties by the end of September, so that would be $80 million in total over a period of three months.”

Asked whether the tight financing schedule was achievable, Inspiration’s Butler replied: “We need to finance the company so these timings are always tighter than you want them to be. Still, Ipsen is incredibly supportive for us to go out and find the funding and that kind of commitment from a strategic partner is very important to other potential investors.”

Achieving those external financing targets was made more difficult in July when FDA put two clinical trials evaluating IB1001 on clinical hold after patients were found to show antibodies against Chinese hamster ovary protein, which is the product’s host cell protein.

“Clearly that wasn’t planned for, and it creates more difficulties for both parties at this stage,” says Ipsen’s Surpal. “It creates problems and clearly wasn’t expected, but Inspiration is doing their utmost to address the issue.”

Ipsen currently has a 22% equity stake in Inspiration and convertible bonds which, if converted, would raise its holding to 43%.

Asked why Ipsen decided to surrender its option to fully control Inspiration, Surpal said that a key reason was to give Inspiration’s management under John Butler more options and more flexibility for the future. He also said Ipsen was not prepared to keep funding Inspiration by itself, but would not elaborate.

The new pact will see the number of Ipsen representatives on the Inspiration board jump to three, bringing the total number of board members to nine. “Ipsen will be nominating two independent, non-Ipsen employees. It’s not about more control for Ipsen but rather for greater strength on the Inspiration board to allow us to develop independently,” says Inspiration’s Butler. “We’re moving from a development stage company to a commercial stage company over the next 12 months and that demands new skills sets and experience in manufacturing, medical, financing, governance, and commercialization. These people will be bringing skill sets to help us do that.”

Ipsen already has found those two people, according to Surpal. One will be appointed in the coming weeks and the second next month, he said, but declined to name the two board recruits. “Both are very seasoned professionals who met issues such as those that could face Inspiration in the future in getting to full-blown commercialization, production of products in a short time frame in a competitive market.”

So what’s the next catalyst for Inspiration after its crucial funding round? “We’ll be finalizing a pivotal Phase III trial on our OBI-1 with a view to regulatory filings in the US and in Europe at the start of next year. Then we’re looking to resolve the regulatory hold on IB1001 but still aim to launch it in the US and Europe in the second half of 2013,” Butler says.

Editor’s note: this article originally appeared in the August 27 issue of “The Pink Sheet.”