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Big Pharma Deal Dynamics Move to Center Stage

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By Cormac Sheridan
Staff Writer

VIENNA – Astrazeneca plc’s Marc Dunoyer made his scheduled appearance at a plenary session on transformational dealmaking during day two of the BIO-Europe 2013 meeting here at the Messe Wien Exhibition & Congress Center.

The printed conference guide did not have his correct title, however. The London-based drugmaker’s erstwhile executive vice president, global portfolio and product strategy, became its chief financial officer last Friday. In keeping with his newfound responsibilities, Dunoyer adopted a disappointingly cautious stance on the subject under discussion, while pledging that the company, which reported lackluster third quarter results last week, is “working on restoring scientific leadership and growth.”

That restoration process includes a hefty dose of M&A as Astrazeneca has been one of big pharma’s busiest dealmakers this year, having completed the acquisitions of Amplimmune Inc., Spirogen Ltd. and Pearl Therapeutics Inc. in recent months, for a combined $985 million up front plus another $1.1 billion in potential milestones.

At the same session, James Sabry, Genentech Inc.’s global head of partnering, suggested that the extent to which the “relatively frothy” initial public offering (IPO) market for U.S.biotechnology companies will influence the dealmaking dynamic with big pharma is not yet clear. Market uncertainties remain. “I’m not convinced yet we have a liquidity-positive market yet for biotechnology companies.” That will become more obvious in the coming months, as IPO lock-ups expire and the true trading performance of the 2013 stock exchange debutantes becomes apparent.

But when asked if the newly listed – and newly funded – biotechnology firms have less need of large partners now, he was adamant: “Partnering is an obligate step.” he declared. The public markets will not fund companies to go it alone in the way that they did previously. However, the cash influx has made biotech firms more confident during deal negotiations, he observed.

The rush to the IPO market this year has had an impact on the pace of dealmaking, however, as many smaller companies simply do not have the bandwidth to pursue a listing and a large licensing deal at the same time. But Sabry also revealed the factors that influence the “cadence” of the dealmaking process from the big biotech or pharma side. “It’s basically a tactical and a strategic question,” he told delegates. Tactical maneuvering can happen in parallel with strategy considerations related to what else is going on inside a company, which may not be apparent to its would-be partner. It is a two-sided coin. “That cadence game – and it is a game in many respects – can be played on the biotech side as well,” he said.

Genentech, of South San Francisco, has maintained a business development arm that is separate from that of its parent company, Roche AG, of Basel, Switzerland. The only requirement, Kevin Sin, head of oncology business development at Genentech, told BioWorld Today, is that they do not compete with each other on deals. When the two organizations do encounter each other they generally can determine where a deal should best reside, based on factors such as expertise, having relevant tools or platforms and the partner’s preference. “Usually that sorts it all out for us.”

Genentech, therefore, is still open to partnering opportunities in Europe as well as the U.S. Sin cited its recent strategic alliance with Oxford, UK-based Immunocore Ltd. to develop immunotherapy biologic drugs based on the latter’s ImmTac monoclonal T-cell receptor (TCR) technology as a “prime example” of the kind of deal involving novel science it is interested in pursuing. “I think you see opportunities like that scattered throughout Europe.”

Many European firms have, however, adopted low-risk, low-tech strategies that are easier to execute when cash is tight. Still, Sin noted, that those incremental approaches now carry increasing levels of commercial risk. “The price that payers are going to be willing to pay for incremental improvement – it’s not going to be very high,” he said.

Roche’s re-entry into antibiotics development this week is noteworthy, given big pharma’s disenchantment with the area over the past decade or more. The low cost of antibiotics, combined with constantly shifting regulatory goalposts, led to a wholesale exit from the area by big pharma. The prospect of improved reimbursement – combined with an already improving regulatory landscape – is a key issue underpinning its CHF500 million (US$548 million) licensing deal with Allschwil, Switzerland-based Polyphor Ltd. (See BioWorld Today, Nov. 5, 2013.)

Antibiotics suffer from perverse incentives, as their cost has been traditionally quite low while good antibiotic stewardship calls for limited use. Several moves are afoot in Europe and the U.S. that could alter the economics of antibiotic development by offering drugmakers extended exclusivity on antibiotics or even by offering tradeable vouchers that could be applied to other drugs.

Even so, Roche is unclear at this point how it will be reimbursed should the drug, POL7080, which targets multidrug-resistant gram-negative infections, reach the market. “There will be value in a new antibiotic like 7080,” Alex White, its global head of partnering in infectious disease, inflammation, ophthalmology and specialty care, told BioWorld Today. “We envisage that the value will be captured somehow.”

The meeting continued Wednesday.